Wolverine World Wide, Inc. (WWW) Q1 2020 Earnings Report, Transcript and Summary

Greetings and welcome to Wolverine World Wide Inc First Quarter Fiscal 2020 Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Paul Feyen. Please go ahead sir.

Good morning and welcome to our first quarter 2019 conference call. On the call today are Blake Krueger, our Chairman and Chief Executive Officer and President; and Mike Stornant, our Senior Vice President and Chief Financial Officer. Earlier this morning, we announced our financial results for the first quarter 2019. The release is available on many news sites or it can be viewed from our corporate website at wolverineworldwide.com. If you would prefer to have a copy of the news release sent to you directly, please call Francesca Filandro at 646-677-1814. This morning's press release and comments made during today's earnings call included non-GAAP disclosures. These disclosures were reconciled with attached tables within the body of the release. During our call, we are providing adjusted financial results, which adjust for the impacts of environmental and other related costs and environmental cost recoveries, business development-related costs, re-organization costs and cost associated with the COVID-19 pandemic and foreign exchange rate changes. I'd also like to remind you that predictions and projections made during today's conference call regarding Wolverine World Wide and its operations are forward-looking statements under U.S. securities laws. As a result, we must caution you that as with any prediction or projection, there are a number of factors that could cause actual results to differ materially. These important risk factors are identified in the Company's SEC filings and in our press releases. With that being said, I'd like to turn the call over to Blake Krueger.

Thank you, Paul. Good morning everyone and thanks for joining us. I would like to open this morning by saying I have never been more proud of our company and our people. I would like to thank our global team and key partners for their exceptional leadership, perseverance, and collaboration as we continue to address the unprecedented event, the COVIT-19 pandemic. Our first priority has been the health and safety of our teams and communities around the world. I'll talk in more detail about this later but wanted to first express my sincere gratitude for these efforts as we weather the near-term challenges and position the company to win as the new normal take shape. Turning to the business. Earlier this morning, we reported first quarter revenue of approximately $440 million and adjusted earnings per share of $0.28. These results reflect the downturn in our business during March, which was driven by the pandemic. Leading up to that point, our revenue and earnings were trending in line with our expectations for the quarter. At the very onset of the current crisis, we divided our plans and responses into three timeframes, the next 90 days, the remainder of 2020, and 2021 forward. We quickly developed a playbook that has served us well and consists of six fundamental sets of action. Number one, safety first. Protect our teams and our communities. We've been very lucky here so far. Number two, maintain and enhance our balance sheet, liquidity, and strong financial position. Mike will have more details on this in a moment, but we've been very active here. Number three, adjust our infrastructure for speed and organize for the future. Number four, accelerate our online strategy. This involves our owned e-commerce businesses as well as the online businesses of our pure play and wholesale customers. Number five, focus on newness and product stories and messaging. And number six, position the company to take advantage of the opportunities that will exist in the new normal. This approach has certainly helped us make fast decisions and guided our action plans over the last six weeks. We continue to reassess our playbook each week and we'll undoubtedly modify and tweak it over time. Our team has been proactive and we moved quickly to navigate the ongoing impact of this health crisis on our global business. We have successfully remained open for business despite the unique restrictions and limitations imposed in many countries. Our supply chain is fully operational, including our distribution centers around the world, and we continue to service our consumer demand in those channels that remain open. During the first quarter, our owned e-commerce business grew over 17% and has steadily accelerated with our global e-commerce business and demand up over 100% in the last two weeks. In 2019, the U.S. online channel, which includes our own e-commerce sites and the online business of our wholesale customers represented about 40% of our total U.S. distribution. Many of these third-party sites are currently operational and our own sites are performing very well. As a result, we would expect that our combined U.S. online business will grow this year and represent somewhere between 50% and 60% of our U.S. revenue in 2020. Soon after the pandemic hit, we implemented a comprehensive set of measures to lever our agile business model and bolstered the company's financial strength. We created a flatter organization design by removing the group hierarchy not only to help reduce overhead costs, but also importantly to further enhance our ability to react quickly in uncertain times. We have adjusted the flow of inventory in line with expected future demand. We have also implemented compensation changes, including salary reductions of 25% to 35% for the company's management team through the remainder of 2020, I'm taking a 50% reduction and have also significantly reduced director compensation over the same timeframe. We've also made stock awards to a broad range of management employees. Finally, we were forced to furlough some team members in our retail stores and offices who were idled as a result of the shutdowns and business slowdown. Most of the furloughs are short term or rotational in nature. We have moved quickly to protect and stabilize our team while still positioning the company effectively for the near-term challenges and future opportunities. In short order, we reduced expenses, heightened our inventory discipline, and significantly increased the company's liquidity. Our business model has proven capable of generating cash and earnings and compromised environments before, and we expect the company to once again deliver healthy operating cash flow in 2020. Mike Stornant will have more details on our sustainable liquidity position in a couple of minutes. While ensuring the company is on sound footing, we also reached out to support our communities. We donated 35,000 protective N95 mass to a local hospital group here in our home state of Michigan, and our Chaco brand converted it to repair and custom footwear operations to the production of masks for frontline healthcare professionals. We have also donated thousands of pairs of footwear to healthcare workers and first responders and continue to support the Two Ten Footwear Foundation's efforts to help those in need within our industry. Our efforts to support our communities, especially first responders will continue. We believe we are in a strong position to navigate the pandemic headwinds due to our efficient and flexible business model, our ability to act and adapt quickly to today's challenges, our hard pivot and strategic focus on digital and e-commerce, the strength of our brand portfolio, and finally the experience of our teams and leadership. There will be plenty of market share in other opportunities as the pandemics subsides, and we expect to emerge from these events an even stronger company poised to take advantage of these opportunities. I will offer some further insights into the strength of our current business model and near-term strategies. But first, let me briefly review the performance of our brand groups in Q1. Starting with the Wolverine Michigan Group. Reported revenue was down 18.1% to the prior year and down 17.6% on a constant currency basis, reflecting the sweeping impact of the pandemic. Following mid-teens growth in Q4, Merrell started Q1 on track with expectations but finished down low-double digits to the prior year. While Wolverine and Cat took significant market share during the quarter in the U.S. work category, Wolverine was down high teens compared to the prior year and Cat finished down double digits. Chaco was also down double digits, and the smaller brands in the Michigan Group also saw declines related to the pandemic. I'm pleased with the strong momentum Merrell achieved in Q4, and we saw this strength continue into the first two periods of this year. For the quarter in total, merrell.com grew nearly 25% and sales are up triple digit so far in period four spurred by new products like the Bravada, a sneaker hiker hybrid in the performance category, and the Juno sandal collection in the Lifestyle segment. Like Merrell, Wolverine, Cat, and Chaco all grew their respective e-commerce businesses at a strong double-digit pace for the quarter. On wolverine.com, the new I-90 DuraShocks product outperformed the brand's expectations and became its top seller. On catfootwear.com, the new Excavator Superlite, Cat’s take on superior toughness in a lightweight product, was the brand's top seller, outpacing strong core Work styles. Trending lifestyle products like the Intruder and CODE styles also performed very well for Cat. Finally, on chacos.com, the new Chillos sandal became the brand's biggest launch in several years. Moving to the Wolverine Boston Group. Reported revenue was down 11.1% to the prior year and down 10.6% on a constant currency basis. Coming off mid-teens growth in Q4, Sperry finished Q1 down double-digits to the prior year. For Saucony, high double digit growth to start the quarter helped the brand deliver double digit Q1 growth, an impressive performance in this global retail environment and further evidence that the brand has regained its momentum. Sperry grew its DTC business high single digits in the quarter with e-commerce and stores both up to the prior year. The brand’s new PLUSHWAVE technology has been selling well and delivers exceptional lightweight comfort in the brand’s most loved icon. In addition, Sperry's partnership with John Legend kicked off during the quarter and is beginning to create excitement in key categories, including boat. Saucony was our top performing brand in the quarter fueled by the powerful combination of innovative new product and a focus on consumer connections through e-commerce. Saucony.com grew strong double digits driven by the recently launched award-winning Triumph 17 and Guide 13. Both franchises utilize the brands new power run plus midsole cushioning technology, which delivers enhanced flexibility, fit, durability and the energy return while weighing one third less than comparable models. A healthier distribution strategy and sales mix again resulted in a meaningful triple digit basis point expansion of gross margin for the Saucony brand. I'll now take a few moments to discuss our perspective on the macroeconomic environment and additional details on how the company will leverage its strength to succeed moving forward. We have been actively engaged with our global partners to track and respond to the impact of this pandemic at various phases of outbreak, containment and recovery. Every market is different, but those countries that were affected early, like China and certain countries in Europe provide some insight for how things may progress in later developing markets, like the U.S. In addition to this global perspective, I am also personally sitting on a counsel of business executives, health leaders and medical experts, advising our state governor on the timing and protocols for opening Michigan's economy. At the moment, I expect the U.S. recovery will be gradual with various states and regions reopening on somewhat different timetables and with certain industries and businesses returning to work before others. While we can all learn from each other, I doubt there is a single playbook that will be applicable across industries, types of facilities, countries or global regions. While the current global retail environment will improve as consumers return to work and stores reopened, we anticipate that there will be a measure of lasting impact. I would not, however, bet against the U.S. consumer as things stabilize. We expect consumer behavior and shopping preferences will shift and that distribution models will need to change in line with this new landscape. Our nimble and efficient operating model mitigates risk and provides key advantages in this dynamic environment. We have a diverse portfolio of brands with over 1,000 years of brand equity, a strong and growing digital and e-commerce competency, an agile global distribution network that we have built over many decades, covering around 170 countries and which is not dependent on a single brand distribution channel or region; a robust and flexible supply chain and a great team with deep industry experience and the proven ability to act quickly and adapt to changing demands on the business. Our focus on the consumer and digital and e-commerce, over the last several years, is now providing a competitive advantage for the company. Consumers have started to spend even more time online and our brands were able to pivot quickly to engage them digitally, providing a way to shop online, but also authentically connecting with them to build stronger long-term affinity. We have prioritized full price selling in our owned e-commerce business, with a focus on improved newness and storytelling to capture the consumer's interest during their increased time at home and online. For example, when Chaco announced that it would be converting its repair and custom sandal operations to the production of masks and also introduced new product with sharply focused storytelling, these actions drove almost triple-digit increases in chaco.com. We have similar examples in Merrell, Saucony and the rest of the portfolio. The consumer is looking for newness and an optimistic brand message and outlook. In addition to our digital competency, we believe the core product categories our brands are known for also position us well with today's consumer. Given the uncertain retail landscape, we believe being brand owners represents a distinct advantage for the company, especially when product offerings are at accessible price points. We are focused on offering consumers a steady flow of fresh, innovative product and have carefully recrafted our brand and product stories to resonate with the consumer in this dramatically changed environment. We are fortunate to have many brands focused on health and wellness, outdoor, running activities and home comfort. We also offer excellent product in the work, tactical and professional segments across all first responder categories. Merrell, Saucony, Sperry and Chaco are all ideally positioned as leading brands in hiking, running and water activities; and Wolverine, Cat, Merrell, Bates and HYTEST are all leading brands in the work, tactical and professional categories. These latter categories tend to be more need-based purchases that typically perform better in times when consumer discretionary spending is tight. Our business model is built to deliver earnings and cash flow under incredibly challenging conditions, as we have proven in past times of recession and market disruption. Our diversified portfolio of brands, product categories and channels of distribution, coupled with our broad geographic reach, all serve to mitigate risk and a relatively low fixed cost structure and nimble supply chain provides significant efficiency and flexibility to adjust in times like these. The company is on strong footing to face the challenges of the near-term and to win as the new normal develops. Before I hand it over to Mike, I want to say again how incredibly proud I am of our team and our people. They have acted with tremendous urgency and a genuine team mindset as we have responded to the pandemic and its impact. As a result of their hard work and dedication, we expect the company to deliver significant positive cash flow, once again, in 2020 and to emerge even stronger. With that, I'll now turn the call over to Mike Stornant, our Senior Vice President and Chief Financial Officer, who will provide additional commentary on our performance in the first quarter as well as provide more details on our game plan for the rest of the year. Mike?

Thanks, Blake. And thanks to all of you for joining us on the call today. I would like to start by briefly echoing Blake's comments regarding our team. This company is made up of committed and resilient people, and we have seen the very best of them over the last several weeks. Their response to the current challenge has been incredible. I am very grateful for their commitment and for the extra effort everyone has put forth. On today's call, I will provide more details on our first quarter results, and then share an update on how the company has responded to the current situation. Revenue for the first quarter was $439.3 million, down 16.1% compared to the prior year or down 15.6% on a constant currency basis. The strong momentum established in Q4 of 2019, including mid-teens growth from our two largest brands, DTC growth of 25% and over 10% growth from our international business, was interrupted in Q1 by the onset of COVID-19. Revenue and profit trends were on plan for the first two months of the quarter before the impact of this pandemic. March was initially expected to be the strongest month of the quarter based on our order book and the normal progression of our DTC businesses. Widespread shutdown of retail stores in many key markets, including the closure of our owned stores, had a significant impact on March revenue. Despite quarterly growth of over 17%, our owned e-commerce business suffered declines for much of March, before recovering nicely, starting late in the quarter. Despite the unexpected and rapid decline in March revenue, our strong business model showed resilience and delivered very good gross margin and earnings for the quarter. Gross margin for the first quarter was 41.4%, slightly better than planned. The impact of new tariffs had a 70 basis point negative impact on gross margin compared to last year. Adjusted selling, general and administrative expenses of $151.6 million were lower than the prior year by over $11 million, reflecting our ability to adjust quickly to an unplanned downturn in the business. Adjusted operating margin was 6.9%, a result of the abrupt erosion of conditions within the quarter and its impact on revenue. The adjusted effective tax rate of negative 0.4% was unusually low, due mainly to the favorable resolution of an outstanding foreign tax matter. Adjusted diluted earnings per share of $0.28, $0.29 on a constant currency basis, were just short of our previous guidance, despite the significant impact of this pandemic. Let me shift to the balance sheet. Inventory was $405.3 million, up only 8.4% versus the prior year. When excluding inventory from new businesses, Saucony Italy new stores and our joint venture in China, inventory grew only 5%. Cash used in operating activities in the quarter was $76.6 million, a $56 million improvement compared to the prior year. At the end of the first quarter, the company had $472.6 million of cash on hand, nearly $400 million more than last year. In response to the impact of COVID-19, we are focused on strong liquidity, the health of our balance sheet and generating maximum operating cash flow over the next 24 months. We have taken several critical actions to support these priorities, which I will share now. Our balance sheet was very strong entering 2020, including a clean inventory position. During the first quarter, we took quick action to increase the company's liquidity through a series of important measures. We drew down the remainder of our revolving credit line, a total of $367 million. We also initiated a review of other financing options to access more cash, including amounts available under our current credit facility. We reduced future planned inventory receipts by approximately $300 million, retaining orders on the most critical new and core products. This quick action underscores the flexibility of our supply chain and will enable the preservation of cash, while reducing future exposure related to excess inventory. We now expect inventory to be down at least $40 million by the end of 2020. We postponed $25 million of capital expenditures until business conditions stabilize and suspended share repurchases for the remainder of the year. We've extended payment terms with various suppliers, including our factory partners. In addition to cash preservation measures, we have quickly adjusted our cost structure to align with a conservative view of future demand based on an uncertain recovery path. Within two weeks of the pandemic's impact, we took decisive action to reduce operating expenses by approximately $100 million for the rest of 2020, while creating a new go-forward infrastructure that reflects the future needs of the business. Our ability to take such quick and meaningful action is a testament to the flexible nature of our operating model and the relatively low fixed cost structure of the business. After the recent adjustments, over 70% of the company’s cost structure would be considered variable, with less than $430 million of semi-fixed cost. As recently announced we’ve implemented selected compensation changes for the company's leadership team and management and have furloughed some team members. We have also flattened our leadership structure to reduce costs and make the organization more nimble. We have reduced other discretionary costs and continue to negotiate with landlords on our long-term lease arrangements. During this time, we have sharpened our focus related to marketing spend and digital activities based on the growing strength of this channel and on other revenue-driving tactics to optimize marketing efficiency. This approach has delivered excellent results so far in Q2, including over 100% increased demand for our owned e-commerce business over the last two weeks. The disciplined cost reductions and other liquidity measures will result in over $500 million of cash preservation and $150 million to $200 million of operating cash flow in 2020. Many of the actions taken will also benefit future years, and we are beginning to turn our attention to additional measures that will further strengthen the company's liquidity and strong cash generation. At the end of Q1, total liquidity was approximately $1.2 billion, including un-committed incremental borrowing capacity of approximately $760 million under our existing credit facility. Our bank-defined leverage ratio was 2.64 times at the end of the quarter, well below the 4.5 times ratio required by our covenant agreement. Based on our current projections we expect to be well within our leverage ratio requirements and in full compliance on current debt covenants for the remainder of the year. The current uncertainty created by the global pandemic means that visibility to a recovery path remains limited. There are many factors outside of our control and this makes it very difficult to provide specifics on our outlook for the second quarter and beyond. As a result, we will not provide an update to our guidance for the year and we will revisit this when conditions stabilize. We can say that recent decisions and our proactive approach have put the company in a healthy financial position, with very strong cash flow projected for the full year. We project that our combined e-commerce and third-party online businesses will represent between 50% and 60% of the company's U.S. revenue this year. And this channel is expected to grow nicely in Q2 and for the full year. Also based on the timing of recovery for certain markets and the nature of our third-party distributor model, we expect our international business to perform better than our traditional U.S. wholesale distribution. We expect our Merrell and Saucony brands to perform relatively well in this environment, given the nature of their product offerings. We also expect relatively good results from our work brands. The volatile demand environment has put a premium on operational excellence and our diversified business model. These are both strengths of our company and will greatly mitigate future risk, a stabilizing factor in today's uncertain marketplace. Our portfolio of brands serve many different core consumers and offer several important performance and lifestyle product categories that are relevant for this time. Our broad geographic reach lessens the potential impact of regional headwinds they may develop in any given market. Within the U.S. market our penetration in the healthy online channel continues to grow, while our reliance on other wholesale channels is well-diversified with no single channel representing more than 15% of the total. In addition, the company's relatively low fixed and capital expense structure is very efficient and enables flexibility to adjust quickly, as evidenced by immediate actions taken in the first quarter. Our supply chain is nimble and will allow us to adjust to demand without significant risk to our gross margin profile. Our wholesale distribution model, relatively small owned retail footprint and focused on eCommerce channels results in lower capital needs, reduced inventory costs, and very few lease commitments. Likewise, our network of international distributors enables broad reach around the world with very limited inventory and capital investment and an efficient operating structure. Internally, our shared service and matrix organizational design cultivates functional centers of excellence and creates expense synergies that are leveraged across the business. I've been with the company for over two decades and have witnessed our ability to weather difficult times. The current circumstances may be unique, but our incredible response is nothing new. We have a team with experience, toughness and discipline. This sound operational foundation is going to serve us very well over the coming months. And I am very confident in our ability to emerge from this crisis as an even stronger company. Thanks for your time this morning and we will now turn the call back to the operator.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question comes from the line of Jim Duffy with Stifel. Please proceed with your question.

Thank you. Good morning everyone. Hope you guys are doing well? And nice job with the call, and thanks for all the thoughtful perspective on the business. Blake, I wanted to start big picture. Crisis has a way of accelerating change and industry structure. You waved a hand to this with your macro commentary. What's Wolverine's vision for what the industry will look like on the backside of this pandemic? And how are you positioning to strengthen your competitive position in that landscape?

I think it really varies region by region around the world. And obviously the U.S. is trailing by a month or a couple of months, China and some other regions. I think as the U.S. market comes out of this, you are going to see an impact on brick-and-mortar retailer – retail for sure. You're going to see the consumer probably accelerate a shift to online buying, including categories that were a little slow paced at first, food at-home delivery for essentials, that sort of thing. So, I think some retailers that are going to emerge from this are going to have a much smaller brick and mortar footprint. I think the world will – companies that have not already scrambled to embrace digital, social, and e-commerce, will do so. Some of the companies like us that have been focused on this for some time will certainly have an advantage here. So, it’s hard today. I don’t have a crystal ball and predict everything that’s going to incur or might change a year or two out, but I think there’s going to be quite a few changes in consumer behavior in the overall brick and mortar environment for sure.

Okay, thanks. And more near-term focused, can you talk about how you’re planning inventory receipts for the balance of the year? How you’re thinking about merchandise assortments to balance newness versus managing risks and the promotional strategy to manage inventory levels?

Yes. I would say, on some of that, so the current situation is unprecedented, but we’ve been around here and the Great Recession and financial collapses and dot-com collapse and some other things. So, the first thing we did very early on, early in March, we decided to start to shut off the inventory spigot. The second thing we did was start to communicate on a weekly basis with our key retail customers because every one of them is in a slightly different position. Most brick and mortar stores have closed in the United States, but the e-commerce businesses largely remain open, and a few retailers still remain open. So, we tried to kind of draw the line and then take an immediate look forward as to what the retailers thought they might need as we finish off the year. So that involved on our part shutting off of the supply chain, our reissuing orders on new product, core items, things that our retailers thought they were specifically going to need, and generally working closely with our factory base to minimize the impact. Probably on the inventory side, Q2 will be the hardest quarter for retail, in general, here in the United States. It will probably be the quarter where we have our highest inventory increases for the year. But we moved quickly to keep that in line and make sure that we’re in a good position in Q3 and Q4 this year.

I would add to that, too, Jim, that you recall, most of our brands in the portfolio have a very strong mix of core and carryover inventory. So the fact that our portfolio is highly fashion-oriented or even weather- or seasonally oriented, we do definitely have some spring and summer merchandise that we’re holding right now for retailers that will probably hang on to for next season, for the next spring and summer seasons. But fundamentally, the nature of our business in that high carryover rate, which is probably over 65% across the board, means that the clean inventory we started the quarter with, the cancellations that Blake’s talked about on some of the fringe items, is really going to make our inventory fairly healthy and fairly valuable to the market, I think, going forward. We’ve taken cancellations to keep inventories in the channel as low as they can be, although they’re elevated right now for sure with all the closures, but we’ve worked closely with our retailers on that. And so, I think that the combination of actions we’re taking and just the nature of our inventory would say that we’re not going to be as exposed to markdowns and promotions maybe as you might think, although we’re certainly anticipating some of that in the back half of the year.

Very helpful. Thank you, guys, and good luck.

Thanks, Jim.

Thanks.

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

Good morning and hope you all are staying safe. I guess the first question is just a continuation of the last. As it relates to just the current promotional activity in the U.S. market, can you just talk a little bit more about what you’re seeing in the industry relative to past recessions or periods of significant challenges? And then what is your expectation as you go throughout the summer for just the overall promotional activity given your comments on Q2 inventories?

Yes. I think – well, it’s not a secret, inventories are high at retail and – both private label and for branded products. So, we’re seeing promotional levels today that probably are greater than those that we saw during the Great Recession in 2008, 2009. We probably would expect some of that promotional activity to continue for a little while here. Interestingly enough, it’s just the opposite approach that’s working for us today on our own e-commerce business. So yes, we have things on sale. Yes, we’re overstocked on a few items brand by brand. But fundamentally, we’ve taken a full-price approach and a keen focus on newness in product and the messaging to the consumer to pivot on our messaging to the consumer in this environment. For us, that is – that’s delivering a high degree of success. So, we do see some retailers out there that I won’t say it’s panicked promotion time, but that’s how it feels to us. But then again, there are retailers out there that are dealing with cash flow issues, liquidity issues, balance sheet issues that we are not as the company. So we don’t like it, frankly, as brand owners. But from a logic standpoint, we understand it. And what was the second part to your question?

No. I just am curious how – you answered it. Yes. So I guess the second question I have, just if we could just unpack Q1 a little bit more. I don’t know if it’s – that’s down 16% decline, if you wanted to look at Jan-Feb together versus March, just so we can understand kind of the run rate of the business exiting March. And then I recognize you’re not guiding the P&L, but the EBIT flow through in Q1 wasn’t as bad as we would have expected on a down 16%. So it maybe just some of those expense kind of pivots you’ve talked about. But just curious, I guess, Mike, for you, is that the level of kind of flow through we should assume for Q2 once we kind of rebalance the top line for Q2?

Yes. I think it’s the mix, everything changes. I mean, we only – well, let me answer the Q1 question first. I mean as I mentioned in my comments, March was going to be the strongest month of the quarter for us as we had planned it. It would be – based on our outlook, it was going to be about 40% of the full quarter, and we started to see some real softness. I know stores didn’t close until maybe the middle of the quarter per se, but the traffic levels, the declines we were seeing in e-commerce and other trends really started to magnify, maybe early March, first week of March or so. And that – those were the reads we were getting from the wholesale channel. We started to see delays and cancellations at that point. So I’d say March was going to be our biggest month. It had the most impact, obviously. So the declines that we saw there on revenue were sort of in line with what we would have expected. As it relates to the flow through, we only really had a couple of weeks to adjust on certain expense and kind of just managing through on cash flow and managing the business in the latter part of the quarter. Obviously, our margins in our e-comm business are really strong. Our operating profit, our operating margin delivery on that vertical business is also very strong. It’s accretive to our overall margins. So that – as that mix continues to strengthen, we’ll – that’s going to be a positive for us going forward. But we have puts and takes, frankly, Erinn, for our each quarter that are different. So the flow through and the margin profile – the operating margin profile for each quarter will also be different. But I’d say the actions that we took in March, the expense reductions that we announced today, as it relates to compensation-related costs, discretionary expenses like T&E, some of our advertising reductions and redeployment, those are going to flow through for the balance of the year as well. There’ll be benefits in the back half of the year as well on those same cost reductions. But I wouldn’t necessarily take the Q1 EBITDA flow through to be representative of the rest of the year, at least, not by quarter.

Okay, okay. And then just last clarification. I guess you’ve talked about April triple-digit growth in e-comm, at least, for the last two weeks. Is it fair to assume that just given the uptick in e-comm, is the overall run rate of the total business in April better than that of the last week of March? Or is the brick and mortar still – or is it not fully offsetting or not fully starting to improve?

Yes. I think for the market as a whole, April will be very challenged for the U.S. market. And I think stores are going to remain close for virtually the entire month, maybe a few will start to open up at the end of this month. I guess, for the market as a whole, we have seen the stimulus checks that have gone out, seem to have had a pretty good impact on the footwear industry and the footwear sector. That is encouraging. And for us, though, we see our continued focus on digital and e-commerce is continuing to pay dividends into April and throughout the rest of the year, right?

Definitely benefiting from the shift in the consumers’ access to retail. But we want to be super clear. We think Q2 is going to be the toughest quarter for us in terms of revenue growth based on the fact that we have a shutdown in most markets around the world. So while we’re benefiting from that shift on our own online business and seeing some lift with our third-party online business as well, as we mentioned, Q2 is going to be our most challenging quarter, at least, as it’s projected out this year.

Thank you very much. Thanks for the context.

[Operator Instructions] Your next question comes from the line of Jonathan Komp with Baird. Please proceed with your question.

Yes. Hi, thank you. Maybe, just a follow-up, is there any layer willing to even just put broad brackets around what you’ve seen for kind of total sales. So far in April, just to give a baseline that we can make assumptions off of? And then curious, just any thoughts on the state of the order book. I’m more curious how you’re planning inventory for the rest of the year, but just curious how customers are reacting? And how you plan to adjust the business thinking out to fall holiday in terms of the order book?

Yes. I would say for April, it’s difficult and probably impossible to give you any guidance in that regard right now. We do know what we know, obviously, and that’s that our e-commerce business continues to perform. And then we have a few retailers with some brick and mortar that are open. A few – one or two sporting good players, the farm and fleet channel largely remains open right now. But that’s about all the insight we can give you on April right now. We do know that state-by-state, some of our retail customers are planning to open a few stores at the end of this month. And hopefully, that will accelerate on into May and June. With respect to our order book, that obviously remains in the state of flux. I would say the main thing we’re doing there is we’re trying to overcommunicate with our retail customers right now to get a view on their business. I think they are all also searching for answers and trying to navigate this environment. So it’s a little bit murkier there than it might otherwise be. But we’re trying to certainly adjust our order book. We’ve already adjusted our inventory position and supply chain inflow. Our supply chain right now is fully operational. There’s plenty of capacity. So we feel we’re in a pretty good position to quickly adjust when the retailers begin to have some additional clarity on their business.

Okay, understood. Thank you. And then just one follow-up on the comments about the e-commerce mix. When you look at the U.S. business, at about $1.5 billion of revenue in 2019, could you maybe just clarify how much of that was your owned e-commerce versus third-party e-commerce? And then, are you expecting to see similar types of growth rates for your third-party e-commerce partners that you're seeing in the company channel?

I would say right now, our own e-commerce business has been outperforming the e-comm businesses of a number of our third-party customers, either pure plays or our wholesale customers that have e-commerce business. I think that gap has narrowed a little bit with the stimulus checks starting to hit the bank accounts of U.S. consumers. But certainly our e-commerce business has been a leader and a standout here. And we're trying to do what we can in terms of inventory flow, stories, digital content to help that business of our traditional customers. With respect to 2019, our e-commerce business domestically was about $230 million. The collective e-commerce businesses last year of our customers would have been bigger than that. I don't have the figure right in front of me, but it would probably been 1/3 bigger than that. So we think that channel, obviously, in this environment, is going to accelerate, and that acceleration is going to continue.

Okay. Very helpful. Thanks, and best of luck.

Thank you.

Your next question comes from the line of Dana Telsey with Telsey Advisory. Please proceed with your question.

Good morning, everyone, and hope everyone is safe and healthy. As you think about your expense structure, how do you break down the fix versus variable component? And how do you see that changing in the future? And then I believe you were speaking about price increases sometime in the June 2020 period. Does that get delayed or pushed back now? And do any new product introductions and style introductions, how do you think about those going into the remainder of the year. Thank you.

Sure. I’ll cover the fixed versus variable. Obviously, it’s one of the factors, I guess, attributes of the business model we have that I think is going to be especially important in the coming months and the coming quarters. We have a very highly variable supply chain structure. As you know, we don't own factories, we source everything from third parties. So over 95% of our product costs are really variable costs related to third-party inputs. So that's important to know. We mentioned in the call today that including some of the costs that we have in the business to support our supply chain and global operations group and then other costs, fixed – what we would call semi-fixed costs in the brands or within our corporate structure, that's been reduced to about $430 million after all the reductions that we took this year. So $430 million of what we'd call semi-fixed costs. So overall, in terms of the total cost structure of the company, over 70% of that would be variable costs. So I think a very nimble structure as we kind of deal with the concerns and risks and uncertainty of demand in the future, we feel like we can adjust pretty quickly. And as Blake said, on the supply chain side, we can do the same. We’ve now readjusted with the opportunity for accessing more capacity if demand materializes in the back half of the year. So a very nimble structure. On the new styles and that, I'll let Blake kind of speak to, kind of, our focus there. I do want to say, as we've focused our production needs in the back half of the year, we have been very careful to protect where we think each brand has important new product to introduce, whether that be through online channels or through their normal distribution channels to make sure that, that product is still flowing. And obviously, our strong position on core inventory carrying over from the first quarter will help us to be able to lean on that as we focus a little bit more intently on newness.

Yes. Dana with respect to price increases, those were communicated much earlier to our customers. We don't anticipate any big withdrawal from that, from our policy, from our decisions there. So I think to a large extent those prices are going to flow through as originally indented. And with respect to style introductions, I guess, in the current environment, certainly, short and midterm, we’re focused on continued newness. What do we need to do to feed our online business? What do we need to do to make the online businesses of our pure-play customers and our wholesale customers exciting and fresh? So that’s our number one focus right now. Certainly, we’ve had a few retail customers that have come to us and said, listen, "Some of your newness in my stores, I’m going to probably have this newness in my stores in spring/summer 2021. So they are sitting on some inventory there in the warehouses, in their stores or in-flowing in, and they can only digest so much in their physical stores. On the other hand, we know from our experience right now that the consumer is really responding to newness in a different message. So we’re not going to slow down anything there. We’re going to continue to feed the – our e-commerce business and the e-commerce business of our partners. And we’ll be able to – given our supply chain, we’re going to be able to adjust here as we know more a month or two from now.

And one quick follow-up. As you think of your channels of distribution with wholesale and your own retail excluding, e-commerce – the e-commerce channel, how do you think of doors in wholesale and your own retail operations? Is there opportunity either for store resets in terms of occupancy costs? Is it relocations? And how do you think about rent? And then on your wholesale channel, for third parties, how do you think of the big department stores versus the other independents that you service? Thank you.

Yes. Maybe your latter part of your question first. We’re very diversified. We don’t have – if you set aside the online business, we don’t have a single channel that’s 10% of our overall revenue. Probably, our online channel is approaching 15%, maybe 20% or more this year. But setting that aside, even in the U.S., for example, department stores would be in mid-single digits to high single digits of overall across all of our brands of our revenues. So we have only a handful at most of customers that would reach 4%, 5% of our overall sales. And our distribution channels are wide and pretty evenly balanced. So from our standpoint, anyway, we think that mitigates risk and puts us in a pretty good position. We do know – we do expect there’ll be some retailers that will be coming out of this crisis with fewer doors. We do know that there’s a few retailers that are highly leveraged and that could present some unique challenges for those retailers. So we’ve built some of that into our plans as we look ahead, certainly for the rest of this year. With respect to our own retail fleet, we have about 90-plus stores today. They’re all closed here in the United States. They may start to reopen state by state over the next month or two. I think the current crisis has the potential to alter the traditional relationship between tenant and landlord. I think you’re going to see a growing trend to more a percentage rent deals and not fixed rent deals. There’s going to be – we’re all in this together, right? And we’re not a big player, obviously, in brick and mortar retail, but the landlords and the brick and motor store operators are all in this together. But I think you’re going to see some interesting dynamics in that regard here over the next nine or 10 months.

Thank you.

Your next question comes from the line of Matthew Degulis with KeyBanc Capital Markets. Please proceed with your question.

Good morning. Thank you for taking our questions. And I hope you are all did well. On the cash flow, obviously, it’s very impressive you’re expecting those strong positive numbers this year. I was wondering if you could talk through and if it’s possible to bracket some of the order book and monthly cash burn assumptions behind your operating cash flow projection for the year.

Well, on the order book side, Blake referenced that already. I mean we’re obviously seeing that change daily, and we’re working really closely with our key accounts there, Matthew, to solidify the demand, but also to monitor and work to correct as we go forward. There’s still a lot of uncertainty in the market. And so – and we recognize that, and we recognize the backlog in order book now is maybe slightly less informative than it would be in normal times. As it relates to cash flow, we had a – as normal in the first quarter, we had a use of cash in Q1. It was significantly better than it was a year ago. When we think about the next three quarters, we would expect Q2 to be sort of a neutral quarter with improvements in each of Q3 and Q4 from a cash flow standpoint. Much of that’s being driven off the benefits that we’ll get later in the year as the cancellations of incoming receipts that we talked about start to crystallize in the inventory in Q3 and Q4. So Q4 will be our strongest cash flow quarter, and Q3 will be very positive, while Q2 will be sort of neutral.

Okay. Thanks. And you mentioned before for states that are beginning to reopen their economies, you plan on reopening the stores there soon. So can you talk about that process on deciding to reopen a store? And how quickly can you reopen a store after you decide to do so?

Yes. I think stores can open on a fairly quick – whether it’s our stores or the stores of our customers, fairly fast pace. But it really depends state-by-state. And as we’ve learned here in Michigan, there’s vast differences just within a single state in how the COVID-19 has had an impact. So we think it’s going to be sporadic. We think retail stores in the U.S. will start to reopen here a few at the end of this month. Every state has a slightly different playbook. I guess if I want a haircut or a tattoo, I’ve got to go down to Georgia this weekend to get that. But – but Michigan is taking a pretty thoughtful approach based on the facts, based on the data, based on health advice. On the other hand, we all know that there’s going to be no vaccine here likely for 12 months, maybe 18 months. So the economy is need to – has to be reopened in a thoughtful manner. I think when retail reopens, you’re going to see the use of a lot of PPE. You’re going to see a lot of gloves. You’re going to see a lot of face masks. I do not think we’re going to get to the stage where a few countries have around the world, where you have to go to a police station and get signed letter before you can go to the grocery store or fill – put gas in your car, go to a pharmacy. So I think we’re going to be a little more open than that. But I think this is going to be a gradual process for our market. I think you’re going to see it build here in May and June. But we are also looking at – as you know, we have pretty extensive operations in Europe. Those countries are probably a month or two or maybe a little bit more ahead of us. Stores are starting to reopen in various parts of Europe. But again, there’s been different approaches country by country. But I think the world here is going to find a way to reopen the economy. I think it’s going to be a bit gradual. It’s not going to open with a bang. It’s not going to be a flip of a light switch that’s going to change things immediately. But the world needs to get back to work because lives are being destroyed certainly by the virus, but they’re also being destroyed by the complete shutdown of economy. So I think we’re going to see a balanced approach. Again, whenever in my career, I bet against the U.S. consumer, I’ve been wrong. So again, coming out of this crisis, I wouldn’t necessarily bet against the U.S. consumer.

Thank you.

Your next question comes from the line of Chris Svezia with Wedbush. Please proceed with your question.

Good morning, everyone. Thanks for taking my questions. First, just on the international side, maybe some color about what you're seeing more specifically in some of those European markets or subsidiaries? And I guess more specifically, how your distributor partners are reacting, their inventory levels, et cetera? Just some color about what you're seeing there?

Yes. Internationally, I would say Europe was probably our standout region in Q1, driven a lot by a very good performance by Merrell, excellent performance by Saucony, and some good growth across some of our other smaller brands, but primarily Saucony and Merrell. Italian stores are starting to open up as we speak. Markets are starting to open up. As you know, the UK, France, Spain and Italy were pretty severely impacted. I know that kids are going -- starting to go back to school in Denmark. Sweden, for example, really never shut down their economy in total. But that's a unique population and a unique country in that regard, smaller country, and Germany is starting to open up. France, at the moment, is -- remains in a pretty tight lockdown state. But I think the European markets will reopen differently country by country. And they're starting to do that already. We also have looked to China. As you know, we have a joint venture in China. And certainly, that was delayed a few months, but the China market is also starting to reopen. The stores there are not back to normal pre-crisis levels when it comes to their volumes. But the consumer is out. There's a lot of PPE in the marketplace. Malls are starting to get some traffic again. But again, the consumer in China is taking a little bit of a gradual pace to come back to brick and mortar anyway. Online in China remains very strong, like it is for us. Our distribution partners, just to answer that part of your question, many of them have been with us for 30, 40, 50 years. Most of them tend to be very large preeminent businesses in their markets. Certainly, they're facing some of the same challenges we are. But I think, overall, our international distribution network is going to hold up pretty good in this environment.

Okay. And just on the overall sort of order book and the cancellations you've taken on inventory commitments. Just a level of visibility when you talk to your retail partners, whether U.S. or globally, where do they sit at this point? In other words, had they canceled receipts into fall? Or are they just focused on spring/summer? In other words, how far out have they gone in your communication with them cutting those receipts and as a result of that, you've cut on the supply chain side, incoming product?

Yes, I would say, we tried to be proactive on their behalf. Right now, they're in – it's only April. We're still in the middle of this, in our market here in the U.S., they're learning every week, what may be to expect in the future, but the future is a little murky for them. They don't know when their stores are going to be fully operational. And a lot of them are sitting on a lot of inventory, whether it's consumer, soft goods, or other goods. So we're trying to keep and have a newness and freshness for them when they open. We know they're going to need some of that. On the other hand, a lot of them are going to have to clear some inventory that has built up here before the shutdown. So it's murky right now a little bit on their start. We try to be proactive to help them on the supply chain side. And we'll know a lot more certainly in a month or two for our market. We used to have plenty of time to get back into business on any additional demand for – especially for late Q3 and Q4 at this point, Chris. And so, I mean, that's just really important to appreciate that we took a dramatic approach on cancellations of our own production, but it doesn't have to be permanent, but we obviously needed to move quickly, so that we could be responsive to any downside risks. In general, at the moment, the risk of having too much is greater than the risk of not having enough. And that settlement is probably going to exist for a period of months.

Right. No, I'd rather have you cut more now and chase, if necessary, I guess, a general observation. Final question. Just on the $200 million in operating cash flow up, I think previously you're talking about $150 million, what drove the increase? And I guess, Mike, more specifically, what are the drivers? Working capital, you mentioned inventory down $40 million at year end, obviously, that's a plus to that operating cash flow? Any other color you can give about some of those other working capital items or what drives that $200 million?

Sure. Yes. Obviously, we've got some cost reductions, some expense reductions that play into that. The way we're managing our working capital, not just inventory. We're obviously extending terms with our factories and some other key vendors on our payment term, which is helpful to the overall working capital management. We have a number of other initiatives going on, that between when we’ve initially announced the cash flow outlook a couple of weeks ago, we've been able to, I guess crystallize those and stabilize those projections. So we're a little more confident than we were a couple of years – or a couple of weeks ago on some of those numbers, so why we've slightly raised our outlook there. But fundamentally, it's a multipronged approach, Chris. And the good news for us again, is we have a number of things that we can influence and that can be influenced quickly, that'll have a positive impact on our cash flow. We're also starting to look, obviously into 2021 now, right? So we, as Blake said in his comments, the second kind of timeframe we were focused on in our sort of our management plan here was the remainder of 2020, which is reflected in this cash flow outlook. And now we're beginning to think about the other measures we'll take for next year to continue to manage working capital, to pivot our investment strategies around us in the even stronger e-commerce platform to work more closely with our international partners on their distribution plans and on their business models for 2021. So we'll obviously be able to provide more insight into that in future quarters that just kind of rest assured we're looking well beyond 2020 right now, as it relates to the health and ongoing positive cash flow for the business.

Understood. Thanks very much and all the best.

Your next question comes from the line of Mitch Kummetz with Pivotal Research. Please proceed with your question.

Yes, thanks for taking my questions. I guess I've got a few. I've hopefully we do this quickly. Just on closeouts, I'm curious, are you guys not expecting a lot more spring/summer closeouts this year than last? I mean, you've orders canceled on you, but then you've canceled receipts and Mike, you made the comment that I think like 65% of your lines are carried over. So I'm just wondering if you don't expect that to be in – maybe as much of an issue in this quarter.

Well, it wasn't in Q1 or right now in Q2 for the same reasons, most of the typical retailers that would handle our closeouts are also shut down right now. So that's something that we'll evaluate once that particular channel opens up again, that typically isn't a strong online business or an online channel. So it'll be wait and see, but as far as our inventory is concerned, I think again came into the quarter with pretty clean inventories. We've been managing that very closely. The way, we would typically think about it a style that might be on the last innings of its lifecycle might change a little bit, as we think about spring/summer merchandise. So to Blake's point, we may be carrying some of that product over in the spring/summer, a little longer than we normally would. So that would also reduce our exposure there. So in our outlook right now, we wouldn't expect closeouts to be significantly higher than they were a year ago. But that's all obviously very dependent on what transpires over the next three or four months as it relates to the retail channel.

Got it. And as much of your wholesale customer base at risk, I mean, are you guys pulling back on some accounts that you might view at risk and any changes in terms of your allowance for doubtful accounts? And then I have one last quick one.

I think on the credit side, we've been very, very, very aggressive there, very conservative in terms of the way we're thinking about credit risk, managing those terms where we can. As you know, we've been, over the last couple of years, very, very careful with respect to our distribution. Even in those department stores or other channels that maybe aren't as strong, we've been focused on the best and most productive stores within those chains. But yes, we definitely expect there to be some more risk in that area. We took some additional reserves in the first quarter to cover that or some of that, at least, where we have visibility. But I mean, Blake said it before, we just have such a diverse distribution of – in our U.S. market for our wholesale business, it's – and it's – the strongest categories for us are the online channel, the family channel, which is doing relatively well, and we expect to continue to do relatively well; and sporting goods and outdoor retail, which in this particular environment, we think, again, will be a stronger channel. So those – that's where we're mostly focused and frankly see less exposure or less risk. Our exposure to department stores is well below 10% in terms of our overall mix.

Go it. And then lastly, you spoke to the relative strength of Merrell, Saucony and Work. And I know that you don't typically speak to the size of those businesses individually, just given your – how you breakout the segments. But given these sort of unusual circumstances, I was hoping you might be able to size those for us, maybe like 2019 revenues. I know Merrell is your biggest business, Saucony is, I think, Number 3, but maybe some more specific numbers around those would be helpful, just to give them context.

Those are certainly our three largest businesses. You have the order correct. I'm not sure that we wouldn't normally give out that level of detail, and I'm not sure any numbers in 2019 are going to be that much relevant for this year, maybe a little bit more so for 2021. So they're our three largest businesses. I would say on the Work side, I had, frankly, expected to see some additional softness in the Work category, given the oil and gas situation around the world and here in the United States. And that is – that's an area where we've been kind of pleasantly surprised how that business has held up, maybe it's been some of the more rural stores staying open. Certainly, it's higher demand by any number of first responder categories. But that business held up pretty darn well in the Q1, better than, frankly, we thought it was going to do given oil and gas. And that's across, as you know, our Merrell brand, but Wolverine and Cat and Bates and any number of our brands.

Yes. And as we've said before, that's 15% of our global revenue in that particular category. So it's definitely under pressure like every other category, but as a relative trend, we're seeing some really positive signs there. So I think, overall, we're very happy with the categories and the consumer target that our brands kind of focus on right now based on the current situation.

Got it. All right. Thanks guys.

Thank you, Mich.

Your next question comes from the line of Will Gaertner with Susquehanna. Please proceed with your question.

Hi, guys. Thanks for squeezing in here and I hope you guys are all staying safe and healthy as well. I guess, can you just give us some more color on why you made the leadership changes? And how you think that will help the brands recover once we're on the other side of this crisis? And then – and I guess connected to that, what if any other brand leadership changes have you made other than what you've announced? Thanks.

Yes. Will as you know, I’ve had the Boston-based brands reporting directly to me since June of 2019. And that was a little bit of a purposeful experiment and I think, we saw a number of benefits from that. So getting rid of our formal group hierarchy was something that was in the mix for some period of time. Maybe it was accelerated a little bit by the COVID-19 crisis, but we've had that in the mix for some period of time. We just saw a number of advantages of not just myself, but the senior management team, getting closer to our brands. The message was clear. The direction was clear. The back and forth was more immediate, whether it was me or Mike or several other of our senior people. So that decision to eliminate the kind of our formal group structure and to elevate three of our brand people to our most senior management team, our executive leadership team, that would be Joelle and Chris Hufnagel and Tom Kennedy. I think that's going to pay benefits for, certainly, over the last six or eight months, I saw that, as I made for the most part weekly trips to Boston and dealt directly with our brands and our brand leaders in Boston. That's the primary reason we did it, more nimble, more quick, faster, speed and clearness of strategies and direction. And we have had some other management changes in addition to that structure that we laid out in our formal press release, Bornie Del Priore is going to be leading both the Keds brand and the Kids Group for us out of Boston; Gillian Meek is going to be departing the company, probably at some point here in the future; Kate Pinkham, who started – as you know, started out in our CIMI area, that's consumer intelligence – Consumer Insights/Market Intelligence Group, she's going to be leading Hush Puppies. She's done a tremendous job in Hush Puppies, as Head of Marketing for over a year; Greg Tunney is going to be leaving the business. We moved Chip Coe from Chaco to Cat Footwear and moved up Todd Gordon, somebody who's been with the Chaco brand for many, many years. And then we elevated Seth Cobb to run Bates. So we've had a number of other changes and switches of seats, I guess, that have occurred related to those bigger organizational changes, things we've been thinking about for some period of time.

Great. And just one other follow-up. Can you just – I think you guys crossed over a bit, but just talk about payment terms that you're giving to the retail partners. Are you extending the...

Well, it's a case-by-case basis, Will. I mean, it has a lot to do with whether they're still open for business or not. It has a lot to do with the commitments they're making on future deliveries and other things. We do not have a one-size-fits-all approach to that. I will say, I think we've been very – we partnered with all of our key customers and all of our key partners to try to balance the challenges here as much as we can. And we've been working with all of them to find the right recipe for that as we move forward. I would also say it's something that we believe will change once the retail landscape or the retail marketplace opens back up. And we'll continue to monitor that almost on a regular weekly basis or monthly basis at the very least. So we have a, I guess, pretty customized approach depending on which account we're dealing with.

Great. Thank you.

Thanks Will.

Your next question comes from the line of Steve Marotta with CL King & Associates. Please proceed with your question.

Good morning. Blake and Mike congratulations on your stamina. Nice and long call. I’ll ask only one question. I'll keep the balance for our off-line conversation. From a direct e-commerce and wholesale partner e-commerce penetration, what was that number in fiscal 2019? Again, on a global basis, your direct e-comm and wholesale partner e-comm penetration in fiscal 2019?

It was about 40% of our U.S. – or U.S. – total U.S. business last year. So...

Okay. I’ll take it off. Thank you.

Thanks.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Paul Feyen for closing remarks

On behalf of Wolverine Worldwide, I'd like to thank you for joining us today. As a reminder, our conference call replay is available on our website at wolverineworldwide.com. The replay will be available until May 22, 2020. Thank you, and good day.