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#I kind of qualified it as I was saying that.
In my head I filtered, I think really for the back half of the year we expect earnings growth.
So, I don't want to ---+ I want to clarify.
I'm not saying Q3 and Q4 each, but for the back half of the year, for sure, based on the earnings guidance that we've reaffirmed today.
Thank you for the opportunity to clarify that.
If you're talking in particular about the women's casual category, I would say we'll begin to see some progress in the fall season a little bit with our late fall introductions, and into spring of next year.
We're, frankly, trying to accelerate that timetable.
So ---+ but I'm just giving you our current view.
Yes.
Sorry.
Before you ask the next question, what I'll say is that with the challenges we've had in the active lifestyle part of the business and the declines, candidly, we've had in the outside athletic part of the business, the performance outdoor ---+ with seven consecutive quarters of strong growth in performance outdoor now represents over 60% of Merrell's overall business, with about 30% being the lifestyle product and then far less than 10% being outside athletic.
So, as we continue to deliver growth and performance outdoors, can have an increasingly positive impact on the brand's overall results.
But what I will say ---+ full stop on that point ---+ the next point is, for the brand to get back to the level of growth that we have experienced in the past and that we intend to get the brand back to, which is the consistent high single-digit to low double-digit growth, that trend of performance outdoor ---+ being a bigger and bigger part of the business for Merrell ---+ needs to reverse and the lifestyle part of the business needs to regain footing ---+ no pun intended ---+ which is kind of what <UNK> said.
So, that is the goal going forward, and we are working really hard at making sure the lifestyle product is singing to both retailers and consumers.
Yes, we continue to see great performance on the men's side in boat.
That never really slowed down that much.
It was more of a stable business.
It's certainly refreshing to see women's boat pick up and deliver some growth.
We are seeing the new women's boat product and there's a bigger pipeline coming for fresh new product in the women's boat category, so we feel very good about the boat category.
We also feel especially good about vulcanized, which had a significant uptick in Q1 and a number of other areas, including boots.
So, I would say Sperry's ---+ one of the reasons why we have confidence looking into the back half is the fact that the response we've had back from retailers and consumer panels on category extensions for Sperry has been very, very positive, especially in the boot arena.
And, <UNK>, I know you rely heavily on SportScan data, and we use more MPD.
The March MPD data for Sperry turned positive mid-single digits, which was very encouraging to see after several quarters in a row of negative results from MPD for Sperry on the sell-through.
So, we're seeing a turnaround in the brand's performance at retail, not just what we're shipping in but actually what is being purchased by consumers.
Thanks.
I would say ---+ you're talking specifically about a couple of retailers in the family channel, <UNK>.
I would say it was ---+ in Q1, it was helped but it would be, overall from North American sales, low single digits, maybe 3% or 4% range.
I don't have the exact figure ---+
I'm sorry, it was a few million dollars.
The brand still would have grown double digits, <UNK>, even without that expansion of distribution.
<UNK>, as we've discussed before, historically, Sperry's had a very good business in the family channel but, quite frankly, before the acquisition is shortly thereafter they didn't probably have adequate discipline or product segmentation.
That required us, really, to take a couple of steps back and then, as we're reentering now a couple of those retailers, we're doing so on the understanding they are going to be less promotional.
But, most importantly, there's going to be a strict product segmentation strategy that we put into place.
Yes, we usually don't comment on that, <UNK>, obviously.
We've got a pretty disciplined approach to reviewing our brand portfolio.
As you know, over the years, we've shed a few businesses and a few smaller brands, and we look at that on a routine basis.
But, certainly, with respect to the four newest brands that we acquired, we're very comfortable with their performance and potential.
Yes, as you know, it's always a bit hard to measure precisely the impact on marketing spend and other investments behind the brand.
I would say, with respect to Sperry, which is our primary focus ---+ one of our primary focuses in 2015, a good chunk of the mid-teens reported and constant-currency growth for the brand in Q1 relate to the new brand platform.
It's hard to measure that precisely, but I don't think we would have been there without our investment behind the brand and a focus on the brand.
I think the new brand platform and the Odysseys Await ---+ executions under that platform have been very well received by retailers.
That kind of acted to reenergize the brand and the entire boat silhouette category.
And so, we believe we're getting a very good return right now.
It's just difficult to measure it with any kind of precision.
What I will say, <UNK> ---+ I think we've had this conversation but if not, if it wasn't you it was someone else ---+ but, when we were evaluating the decision to invest incrementally behind the Sperry brand, we looked at where the brand was and where we all agree the brand would trend ---+ how it would trend if we did not change the brand platform and the brand message.
And then we looked at what the brand team was willing to sign up for in terms of revenue growth and profit growth, if we invested the incremental investment dollars.
And it was clear that it was a positive net present value investment opportunity if we could deliver on what the brand team thought they could deliver.
And, so far, they're tracking at or above what the commitment was nine months ago.
So we feel good about where we are.
Could I say exactly where the brand would be if we weren't making any incremental investment.
No, we can't say it with precision, but we feel confident that we're getting a return on the investment dollars.
Sure.
Yes, <UNK>, I really separate that into two buckets ---+ the US market and the world.
As you know, most of the world buys their shoes in US dollars, and we've seen a very strong appreciation of the US dollar over the last year.
So, we're seeing our ability to pass on price increases domestically ---+ I won't say easier, but easier to understand, especially when it's coupled with the marketing expense and new exciting product.
Internationally, it's a little bit of a different situation, especially in those countries that have had a significant weakening of their currency.
So, our international distributors are hedging a little bit more.
They're focused on some lower price point products, maybe more in the good, better categories as opposed to the best categories.
They're also passing on some price increases, and we're working with several of our partners on local sourcing, which helps mitigate the currency situation.
So it's really the US market that has a different set of criteria versus the rest of the world right now.
And I will add to that, <UNK>, just quickly that, from my perspective as CFO ---+ and we're all mindful of the power of revenue growth that comes via price increases, particularly if you're not selling any [shoe repairs] because of the price increase, because that flows right down the P&L with very little incremental cost to go against it.
But revenue performance, at the end of the day, is a combination of unit volume growth and what you're doing on the pricing side.
But, I prefer revenue growth to come from additional sales price increases because that's more powerful impact to the bottom line.
But the reality is, it comes from both.
And so, a brand like Sperry, in FY15, will deliver us revenue growth via both significant price increases, supported by the marketing program, as well as unit volume increases.
Good morning, <UNK>.
Yes.
To answer your last question first, the most pressure will be on Q2.
Our outlook for the full fiscal year hasn't really changed.
We probably had a little bit better gross margin performance in Q1 than we had expected.
I think gross margin will be down, as I said, in Q2.
But, for the full fiscal year, we expect gross margin to be about where we thought it was going to be when we gave our initial guidance back in February.
Yes, I would think, <UNK> that, one, we expect our cancellation rate to be down this entire year.
Our inventories were down almost 10% in Q1.
We have been very disciplined there.
We think inventories are balanced at retail.
And so we think our cancellation rate, one, is going to be down.
On the other hand, we've had some significant shifts in order windows, which probably accounted for a bit of a spike up in our order backlog when the 10-K was filed, especially in the boot and rubber arenas across a number of our brands.
It was just, frankly, we were required to take a view and place earlier, as were our retailers.
So, that's accounted for some of the spikes you're probably seeing in our 10-K filing.
And I will say, as we expected, post-filing of the 10-K, our backlog has moderated, as we expected, because that was not indicative of what we thought our full-year revenue growth was going to be.
So, it has moderated, but we still feel we're in a good spot as it relates to the back-half revenue growth that's reflected in our revenue guidance.
I think, given the timing of the future orders, at-once business ---+ it would be reasonable to expect it to be a little down, that's what we're forecasting versus prior year, because a lot of the orders have come in earlier and so it might be less.
Obviously, a big portion of at-once business in Q2 and Q4 is going to be a function of sell-through as well you get the fill-in orders that come through.
So, similar to prior year, but maybe given the order book going into the last three quarters of the fiscal year, maybe net-net a little down.
I would say, I hate to mention weather, but I would say after we finally got a spring here on the East Coast and in the Midwest and in a good chunk of the country, we have seen a pickup in business and certainly at-once [a pair of] spring offerings.
Yes, I think as I said the Sperry stores were, on a comp basis, probably our best performing segment across our fleet.
So, in that respect, it was good, but any mall-based operation and, as you know, with the weather the outlet arena has been ---+ it was really suffering in Q1 and a bit into Q2 here.
So, we would have preferred a positive comp-store increase for Sperry in Q1.
It was down low-single digits, which is pretty good, but the performance was actually pretty good especially when you consider the traffic was off substantially more than that.
The brand had a very solid, if not very strong Q1, <UNK>, with boat shoe up double digits, vulcanized product up over 20%.
The boot business, obviously in the first part of the quarter more so than the latter part of the quarter, up very strong double digit continuing the results that the brand delivered in Q4.
But I will say that you're talking about the divergence between our overall brand revenue, which is primarily wholesale driven versus our comp-store sales performance, I would say as someone noted earlier in a question, we did have an easier comp in Q1.
Retail inventories were quite high going into Q1 last year as we had a really tough Q4.
So there were far more order cancellations in Q1 last year and fewer outgoing shipments that we were comping against this year, which helped drive that mid-teens quarterly revenue growth.
And that would be probably the primary difference or point I would make in terms of trying to explain the difference between the overall revenue growth and the comp store performance.
I understand.
I think it was primarily a traffic issue in Q1.
Thanks, <UNK>.
I will tell you we're in a pretty benign sourcing environment right now.
Certainly petroleum-based components, the prices on those components have eased.
Leather is still high by historical standards but has also eased a little bit in the 5% to 8% range here over the last couple of months.
So, most of the increases we're seeing now are labor increases ---+ labor and overhead increases.
And, although we, for the year, expect to see some overall price increases across our hundred million pair of sourced product, it's a reasonable benign environment, I would say right now, with the labor increases kind of offsetting some of the savings in the component side.
And I will say, <UNK>, that we work very hard to mitigate the impact of cost increases.
But I tend to not look at cost increases in a vacuum, or look at selling price increases in a vacuum, but look at those two in tandem.
And, in the quarter, the gross margin benefit from selling price increases across the brands in our portfolio was more than double the negative impact of product cost increases.
So, that was a big contributor to the overall gross margin performance in the quarter.
It's pretty difficult to quantify.
We've got a number of agreements, a number of countries, a number of regions in the works across our four newest brands, and I would say the international rollout here has met our expectations and we believe it's going to continue to meet our expectations.
But it's almost impossible to identify when specific agreements are going to be signed and the marketing process begins.
But I would suggest that the revenue benefit in 2016 internationally for the Boston-based brands will come more from the agreements that we have signed in 2013, 2014 and to a lesser extent 2015, and less from any new agreements we might sign over the balance of this year or the first part of 2016.
Yes, I would say for Caterpillar remains very strong in Asia Pacific, but we've also seen some large businesses build fairly quickly on Keds and Saucony.
And so, as a region ---+ I know we keep reading articles that there's a slowdown in Asia Pacific, and China's only posting an anemic 7% GDP growth rate, and this and that, but for our brands certainly Asia Pacific is a sweet spot right now and we expect that to continue.
Yes, as I said before, we probably only had $10 million of the impact on the revenue side in Q1.
For us, I would say the situation is back to normal.
I'm told the situation is going to be completely back to normal for Long Beach and other ports in the next several weeks.
Of course, now we've got some picketing going on by truckers on ---+ with a disagreement over their status whether they're independent contractors or shouldn't be considered employees, but we're monitoring that very carefully, we'll keep an eye on that, but right now we don't think that's going to have any kind of material impact on our performance.
I would say, <UNK>, about half of the inventory decline might be related to the port situation, with the remainder of the inventory decline driven by the retail stores that we closed at the end of last year.
And just overall aggressive inventory management, just moving out the inventory that is classified as close out.
If you look at our balance sheet you also see our accounts payable are down year over year, and that relates to just the delay in the receipt of inventory which, at the end of the quarter, would have actually, obviously, caused inventory to go up and cause accounts payable to go up.
So we receipted that in the first part of Q2.
D&A, about 50 million plus or minus; the tax rate would be similar to the guidance we provided last quarter, 27.5%; and CapEx, in the $45 million range plus or minus ---+ and what was the last, other point.
Share count.
Share count of 101.6 million will be our guidance for the full year, weighted-average shares outstanding.
On behalf of Wolverine World Wide, 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 27, 2015.
Thank you and good day.
