Q4 2021 Steven Madden Ltd Earnings Call
Good day and thank you for standing by welcome to the Q4 and full year 2021, Steve Madden LTV earnings Conference.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. Please be advised that today's conference is being recorded to ask a question. During this session you will need to press star one on your telephone if you require any further assistance. Please press star.
Zero I would now like to hand, the conference over to your Speaker today, Danielle Mccoy director of corporate development and Investor Relations. Please go ahead.
Thank you Phebe and good morning, everyone. Thank you for joining our fourth quarter and full year 2021 earnings call and webcast.
Before we begin I'd like to remind you that our remarks that follow.
Including answers to your question.
These statements that we believe to be forward looking statements within the meaning of the private Securities Litigation Reform Act.
Forward looking statements are subject to risks that could cause actual results to materially differ from those expressed or implied by such forward looking statements.
These risks include among others matters that we have discussed in our press release issued earlier today.
We make with the SEC.
We disclaim any obligation to update these forward looking statements, which may not be updated until our next earnings call.
Orderly earnings conference call if at all.
The financial results discussed on today's call are on an adjusted basis, unless otherwise noted a reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release.
Joining the call today are Ed Rosenfeld, Chairman and Chief Executive Officer, and Zane <unk>, Chief Financial Officer with that I'll turn the call over to Ed.
Thanks, Danielle good morning, everyone and thank you for joining us to review, Steve Madden fourth quarter and full year 2021 results.
We delivered outstanding results in the fourth quarter with revenue, increasing 38% and diluted EPS, increasing 125% compared to pre pandemic fourth quarter 2019.
Capping a record year for the company, it's our operating margin reached 14% and diluted EPS increased 28% compared to two.
2019.
Our success in 2021 was the result of the extraordinary efforts of our employees and their disciplined execution of our strategic initiatives and we are confident that our continued focus on these initiatives positions us for strong growth and value creation going forward.
Our number one initiative and the one that underpins all of the others is continuing to deepen our connection with our consumers.
We're doing this first and foremost by winning with product by.
By utilizing our proven model, which combines talented design teams, a test and react strategy and an industry leading speed to market capability.
We are delivering trend right product assortments that are enabling us to outperform the competition and take market share most notably in our Steve Madden Dolce Vita brands.
Looking ahead to 2022, our top priority will remain unchanged continuing to deliver innovative and on trend product that resonates with our consumers.
We are also supporting this great product with enhanced marketing and engagement with our consumers. This.
This includes larger brand campaigns like our Madden burst campaign in fall of 2021 as well as the always on digital marketing and Influencer activities that have been instrumental in our e-commerce growth and we will continue to invest in this full funnel approach in 2022.
As we sharpen our focus on our core consumers and strengthen our connections with them.
Our progress on our next strategic initiatives driving our direct to consumer business led by digital.
Our DTC segment drove the company's growth in 2021 with DTC revenue, increasing 52% from 2019 and operating margin expanding from three 9% in 2019 to 17, 5% in 2021.
E Commerce, which now represents over 50% of our DTC business led the way with revenue, increasing 89% versus 2020, and 181% versus 2019 as our ongoing investments in talent digital marketing insight enhanced enhancements continue to pay dividends.
Our brick and mortar business was strong as well with revenue trends accelerating each quarter throughout the year and global brick and mortar comp store sales, increasing 9% for the full year compared to 2019.
As we look to 2022, while we are mindful of the difficult difficult comparisons in this segment. We are confident that the actions. We have taken the last two years have resulted in the DTC business that is fundamentally stronger than it was prior to the pandemic.
We can continue to drive top and bottom line gains and DTC channels.
Our next key strategic initiative is expanding our business outside of footwear.
Over the last several years, we made significant investments in building the Steve Madden brand handbag business and we are reaping the rewards from those efforts Steve.
Steve Madden handbag revenue increased 18% in 2021 compared to 2019, driven by exceptional performance in DTC channels, and we are poised for another year of double digit growth in 2022.
In apparel, our BB Dakota, Steve Madden business continues to see strong sell throughs and increased open to buy commitments at its key wholesale customers.
Based on the momentum we have and the significant long term opportunity, we see for Steve Madden apparel, we have decided at the time is right to transition from the BB Dakota, Steve Madden co branded label to just the Steve Madden label for fall of 2022.
Initial response from wholesale customers to this change has been very positive and we are targeting revenue growth in the apparel category up nearly 50% in 2022.
Another of our key priorities and one of our largest long term growth opportunities is growing our international business.
April 2021 margin important milestone in our international development. When we acquired the remaining interest that we did not already own in our European joint venture.
Europe has been our fastest growing market in recent years and our momentum there has only accelerated since we took full ownership in the region.
For the year, the Europe business, we acquired grew 57% versus 2020 and 91% versus 2019.
Leading the way.
Our EMEA region to reach $100 million $100 million in annual revenue for the first time.
While some of our other international markets remained down to 2019 for the year due to lingering COVID-19 impacts we are positioned for double digit gains across all key markets in 2022 and believe our international business can be a significant driver of revenue and earnings growth for the company for years to come.
And even as we drive DTC product category expansion and international growth. We also continued to focus on strengthening our core U S wholesale footwear business.
While revenue in this business was still under significant pressure in the first half of 2021, our sell through performance was strong throughout the year and eventually our wholesale customers reacted with a significant acceleration in orders in the back half.
Our second half U S. Wholesale footwear revenue was up 12% to 2019 or 17% excluding revenue from the discontinued Kate Spade license in 2019.
Our two largest brands drove this performance, Steve Madden brand U S. Wholesale footwear revenue was up 30% in the back half compared to 2019, including a 42% increase in Steve Madden Women's and Dolce Vita delivered a 43% increase to 2019.
Based on our continued momentum and sell through performance as well as the relatively easy comparisons we faced in the first half we are confident that we can drive double digit growth in our core U S wholesale footwear business in 2022.
Finally, we continue to make meaningful progress on our corporate social responsibility initiatives as we work to minimize our negative environmental impacts and maximize the positive impacts we have on our people and our communities.
Highlights from the last year included the launches of our full plan it by Steve Madden and Steve Madden Kids adaptive collections, our partnerships with Howard University and the Fearless fund the establishment of the Steve Madden Foundation for charitable, giving and most recently the launch of rebooted and re Vita resale marketplace.
For Steve Madden, Dolce Vita that will extend the average life of our products and keep them out of landfills, marking an important initial step in our journey towards circularity.
Going forward continuing to advance our CSR goals and ensuring that CSR is embedded in everything we do.
Main a critical part of our strategy.
So overall 2021 was an incredible year for Steve Madden, we delivered record results and we made meaningful progress on the key strategic initiatives that position the company for strong and sustainable revenue and earnings growth for years to come.
And now I'll turn it over to Zane to review, our fourth quarter and full year 2021 financial results in more detail and provide our initial outlook for 2022.
Thanks, Ed and good morning, everyone.
Our consolidated revenue in the fourth quarter was $578 5 million, a 63, 9% increase compared to 2020.
And a 37, 9% increase versus 2019.
Our wholesale revenue was $410 5 million.
<unk> 56, 1% compared to the prior year and up 38% compared to 2019.
Wholesale footwear revenue was $303 2 million, a 61, 9% increase from 2020, and a 29, 9% increase from 2019.
In the U S. Steve Madden brand revenue was up more than 50% to 2019, and Dolce Vita revenue increased more than 90% compared to 2019.
Private label was also strong partially due to orders that we were able to pull forward from Q1 2022.
Outside the U S. Europe was once again to highlight with revenue more than tripling from the comparable period in 2019.
Wholesale accessories, and apparel revenue was $107 2 million.
41, 7% to last year.
And up 33, 3% versus 2019.
Strength was broad based with Steve Madden and Cline Betsey, Johnson and private label handbags, as well as BB Dakota, Steve Madden apparel, all recorded revenue increases of more than 40%.
2019.
In our direct to consumer segment private suite.
Alright, previously called retail segment.
Revenue was $164 7 million.
91, 3% increase compared to 2020.
And a 62, 9% increase compared to 2019.
Both e-commerce and brick and mortar channels saw outstanding performance.
E Commerce revenue grew 82% compared to 2020 and 144, 9% versus 2019.
Our brick and mortar stores global comp store sales increased 24% compared to 2019 with domestic stores delivering a three 1% comp gain.
We ended the year with 214 brick and mortar retail stores, including 66 outlets.
As well as six e-commerce websites and 17 company operated concessions in international markets.
Turning to our licensing and first class segments.
Our licensing royalty income was $2 9 million in the quarter compared to $3 million last year and $3 1 million in 2019.
First cost Commission income was zero point $4 million compared to zero point $9 million last year and $1 6 million in 2019.
Consolidated gross margin was 41, 2% in the quarter.
Expanding 300 basis points from the prior year.
340 basis points compared to 2019.
Wholesale gross margin was 31, 8%.
Third to 28, 3% last year and 29, 2% in 2019.
The improvement compared to 2019 was the result of higher average selling prices and lower markdowns, partially offset by increased freight rates and the non renewal of GSP.
Direct to consumer gross margin was 63, 5% compared to 65, 6% last year and 61, 6% in 2019.
The increase of 2019 was driven by a reduction in promotional activity, which more than offset the headwinds from increased freight expense.
Operating expenses were $151 5 million in the quarter compared to $109 2 million last year and $125 7 million in 2019.
As a percentage of revenue operating expenses were 26, 2% in the quarter compared to 30% in 2019, reflecting.
Reflecting expense leverage on the increased revenue.
Operating income for the quarter was $86 9 million or 15% of revenue.
From $25 6 million or seven 3% of revenue last year and $33 million or seven 9% of revenue in 2019.
Our effective tax rate for the quarter was 18, 3% compared to 13, 3% in 2020.
Six 3% in 2019.
Finally, net income attributable to Steve Madden Ltd for the quarter was $70 4 million or <unk> 87 per diluted share.
From $21 8 million or 27 cents per diluted share in 2020.
And $32 2 million or <unk> <unk> per diluted share in 2019.
Now I would like to briefly touch on our full year results.
Total revenue for 2021 increased 55, 3% to $1 9 billion from $1 2 billion in the prior year and increased four 4% from $1 8 billion in 2019.
Net income attributable to Steve Madden Ltd was $203 7 million or $2 50 per diluted share.
For the year ended December 31 2021.
<unk> to $51 8 million or <unk> 64 per diluted share for the year ended December 31 2020.
$162 8 million or $1 95 per diluted share for the year ended December 31 2019.
Moving to the balance sheet, our financial foundation remains very strong.
As of December 31, 2021, we had $263 5 million of cash cash equivalents and short term investments and no debt.
Inventory totaled $255 2 million compared to $101 4 million last year and $136 9 million in 2019.
Note that due to the global supply chain disruption in transit inventory was up 159% compared to 2019 and represented approximately 59% of our inventory at quarter end compared to approximately 43% at the end of fourth quarter of 2009 2019.
On hand inventory was up 32% compared to 2019.
Our capex in the quarter was $2 million.
During the quarter, we repurchased approximately 1 million shares for $48 5 million.
Which includes shares acquired through the net settlement of employee stock Awards.
For the full year.
Purchased approximately two 8 million shares for $123 2 million, which again includes shares acquired through the net settlement of employee stock Awards.
The company's board of directors approved an increase in the quarterly cash dividend to <unk> 21 per share an increase of 40% from the previous quarterly dividend.
The dividend will be payable on March 25, 2022 to stockholders of Frankfurt as of the close.
Close of business on March 11, 2022.
When combined with share repurchases and the dividend, we returned $172 $3 million to shareholders in 2021.
Turning to our outlook.
We expect revenue to increase 10% to 13% compared to 2021, and we expect diluted EPS to be in the range of $2 73 to $2 83.
In term of seasonality revenue and earnings are expected to be less back half weighted than they were in 2021.
The revenue and earnings split between first half and second half is expected to be similar to 2019.
Now I would like to turn the call over to the operator for questions operator.
Yes.
Thank you.
A reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from Amelia Leon of BPI. Please proceed.
Thanks, and good morning.
Really great results in a tough environment.
I was hoping we could just talk a little bit more about the.
The.
About the guidance that you just issued and maybe a little bit more color on how the cadence.
Revenue should flow I think you said first half to second half should be more similar to 19, maybe just help us understand the inputs into that.
And also similarly.
How are you thinking about the puts and takes on gross margin.
Particularly with freight costs, both air and Ocean.
And how youre envisioning, the markdowns of whole price mix.
Play out for this year. Thank you.
Great Good morning Camilo.
Thanks for the kind words about the performance.
In terms of the guidance.
And the seasonality I think that.
Zane really said it first half second half split both revenue and earnings I think it's best to look to.
2019.
2000, the comparisons to 2021.
Are obviously impacted by.
The unusual seasonality, we had last year.
And.
The fact that the business was accelerating throughout the year.
If you look at revenue growth compared to 21 Youll see it decelerating.
Each quarter.
Just based on the comparisons.
In terms of the.
Puts and takes on the gross margin.
Yes.
There are a lot of moving parts there.
You alluded to but overall.
Were forecasting gross margin for 'twenty two to be about flat to 'twenty one.
So.
There is.
A lot of sort of puts and takes there I think you asked about the promotional activity.
We do we have built in.
Some expectation of some normalization in promo activity, meaning.
Meaning a little bit more than we saw in 2021 not.
Not back to pre pandemic levels, though so there's a little bit of pressure built into the forecast.
From that.
There's also a little bit of pressure built in from Fob price increases that we're seeing.
The freight impact is approximately neutral to 2021, obviously that was a big.
Sure.
A significant amount of pressure in 2021, and we've assumed that that does not abate, but there's no incremental pressure for the full year of 2022.
And then we've offset some of these pressures.
Through our price increases that we have that we've implemented to help that.
Helpful.
No. That's very helpful. And then just to clarify there is no assumption of the GSP being renewed in this initial outlook right.
Correct.
And what is it about 80 basis points last year impacted our consolidated we had about 50 basis points.
Got it perfect and then just a follow up.
This is Vince.
<unk> for the GSP.
The bill passed in the house.
Mainly along party lines and has it been pushed back to the Senate now so they are currently a reconciling.
Two bills the one that the Senate passed several months ago and the one that the house passed on February 4th I believe.
Hopefully that doesn't take very long, but as of right now given that it was straight.
Straight down party lines, we think that it may take a little bit longer than.
And we were hoping for.
Got it.
Has retroactive benefits.
Both the Senate version under House version hop retroactive benefits.
Yes, that's on the America competes Phil.
Should should get to.
And then just a final question on international given the strength that you are now seeing in the ownership of the European business.
Of course, notwithstanding can you help us understand where the margin international versus U S today, and how that progression so unfolds.
Yes, if you look at the international business overall, it's still.
It's still not as the operating margin is still a few hundred basis points below the U S. But we do see that improving.
And we expect to narrow that gap over time.
Got it all the best guys. Good luck great results again.
Thank you.
Thank you.
Next question comes from Paul with Jeff of Citi. Please proceed.
Hi, This is Kelly crago on for Paul Thanks for taking our question.
Just curious about your inventory position and the inventory levels are up almost 90% versus 2019, which I assume is to get ahead of some of the supply chain delays out there. So curious if you could elaborate on your strategy there and any comments you could make on the current state of the supply chain and if you have any visibility at all into the situation.
Moving at this point.
Yes, good morning Kelly.
Yes.
The inventory.
<unk> identified the reason for the increase there is related to the supply chain disruption.
And as <unk> articulated in the prepared remarks, it's really the in transit.
That inventory that's driving the <unk>.
Big increase in inventory on hand inventory at the end of the year was up 32%, which.
We're very comfortable with it keep in mind, we just reported sales our revenue up 37% for the quarter and also remember that the DTC again compared to <unk> 19 here that the DTC is a much larger percentage of the overall mix and that carries a heavier oil.
Requires more inventory so so comfortable with the on hand, the in transit is what's up a 159%.
And that's because of the extended lead time. So we're working on transit time of about 70 days now on average compared to about 30 days.
Back in 2019, our pre Covid and.
Just do the math 70 divided by 30 was at 133% so without any increase in the business. The transit in transit inventory should be up 133%.
Just on the transit time, and then obviously, we've got the business growing as well so feel very comfortable about the inventory position.
And.
We're doing what we need to do in this in this environment.
And just any comment on this.
Why chain situation and how youre thinking about the visibility into an improvement or are you seeing any sort of signs of QE.
We think an improvement in the first half of this year.
No we're not we're really.
I haven't seen any meaningful improvement that lead times are still extended.
He is still expensive.
But.
The good news is that we've been dealing with this for a while now so we built this into our planning calendars.
And we think that we are prepared to be able to.
To meet the demand and to deliver product in first half.
Got it and then just curious about your comments on the DTC business.
Great to see how strong that business has been just curious where DTC EBIT margins to today versus historical and relative to the wholesale business is this something that you.
Do you believe is sort of a driver of EBIT margin expansion longer term at this point.
Yes, I mean, it's a pretty.
It's been a pretty incredible story for us the improvement that we've been able to.
To deliver in the DTC business.
Over the last couple of years compared to 2019, the business was up on the topline over 50%.
And thats with actually a slightly smaller store base than we had in 2019.
And but.
More pertinent to your question, what's been really exciting is the improvement in the operating margin. So again it was sub 4% in 2019.
And we delivered a 17, 5% operating margin in 2021.
So that that.
It's pretty exciting and really.
Is it meaningful.
Sort of drives a meaningful improvement to the overall operating margin of the company and what we can achieve.
As an overall company going forward.
Got it best of luck. Thank you. Thanks.
Thanks, Kevin.
Thank you.
Our next question comes from Susan Anderson of B Riley. Please proceed.
Hi, good morning, Thanks for taking my question.
I was wondering maybe if you could give some thoughts on just the SG&A margin and SG&A for this year. It looks like maybe based on your guide it could deleverage a little bit if that's correct and then also if you could just talk about the puts and takes there.
Yeah, no. It's a good question so.
As I mentioned, we're looking for flat gross margin and I think you can see in the guide at least at that.
At the mid to high end of the guide we're looking at essentially flat operating margin. So that implies that SG&A as a percentage of revenue was also is also flat.
So I think you mentioned potential deleverage that would be maybe at the very low end of the guide we'd be seen a little bit of deleverage, but at the mid to high Youre looking at essentially SG&A as a percentage of revenue being flat and.
I'm glad you brought it up because <unk>.
Typically.
Looking at the 10% to 13% revenue growth that we have forecasted we pride ourselves on our ability to control expenses with that kind of revenue growth, we would typically be seen SG&A leverage.
The reason that we're expecting that to be neutral to 'twenty. One 'twenty. Two is because there is about a couple hundred basis points of <unk>.
SG&A headwinds that we're having to offset.
In 2022.
To get to get to that neutral and that's really in about.
Four buckets there.
First is.
Benefits that we received in 2021 that we're not going to anniversary in 2022, so that would be things like some cares act and other.
Government benefits in international markets that we got in 'twenty one.
That would be rent.
Abatements and concessions that we got in 2021.
Okay.
I think the second bucket is the <unk>.
Recovery in 'twenty, one happened faster than we anticipated and so there was a period, there where that revenue had come back.
But our salaries and corporate in our retail payroll, but what I would call unsustainably low levels, we were running the unsustainably lean and so we have had to reinvest.
And people and so that's the second bucket.
Third would be we're going to continue to really invest in marketing and so youre going to see marketing as a percentage of revenue go up again in 2022.
And.
And again this is not just.
Performance marketing on the digital side. This is top of funnel brand marketing as well and we think.
We think thats, an investment worth making and then the last one is smaller but we haven't assumed that some travel comes back.
Think it's time to get back and see our customers and see our international regions.
It's not going to go back all the way to where it was pre pandemic, but we've got that line item coming back as well, so putting that altogether, but a couple of hundred basis points of headwinds.
Then we do get some leverage on the growing on the remainder of the expenses. There is some of the fixed expenses to get us back to neutral for the year.
Great. That's very helpful. And then if I could just add a follow up I'm just curious wholesale it was obviously very strong in the fourth quarter are above <unk>.
Expect that trend to continue this year and if you could give any color just on the orders youre seeing for spring and fall.
There is any risk of cancellation there either.
Late deliveries are just wholesale lines kind of reordering.
Yes, the momentum in the wholesale business is very good our sell through performance has been has been very strong.
We are taking share and our key customers in our key brands and.
<unk>.
For the year.
We think the wholesale business can be up.
Double digits low double Steven.
Even mid teens.
In terms of first half versus second half, it's certainly going to be stronger than first half again because of the easier comparisons.
And what was the last part of your question.
Cancellations.
If there is any with data late deliveries or just wholesale.
And I guess.
In the back half being weaker should we still expect that to be positive growth.
I think the back half certainly not positive in Q4 I think.
It was a pretty special quarter, we just had in Q4, so at least as of now we're going to plan in Q4 down in terms of overall risk of Kent, but still up in Q3 by the way.
In terms of risk of cancellations.
But there is always some risk of that but we don't see.
We're not terribly concerned about that just given the incredible sell through performance, we're having and the demand from the consumer for our products right now.
Okay, great. Thanks, so much thats very helpful. Good luck this year.
Thank you.
Thank you. Our next question comes from Erinn Murphy of Piper Sandler. Please proceed.
Great. Thank you good morning, I wanted to circle back to the direct to consumer margin and really parse out the gross margin in particular, I mean do you feel that 65% range is sustainable going forward.
And then any expansion is going to come more from SG&A leverage just help us think about what could expand the margins from that 17, 5% rate you achieved.
Yes.
In terms of the gross margin.
Certainly this year, we're going to we're going to plan that.
Approximately flat.
Over time is there is there some room, there maybe a little bit, but but 65 is pretty good. So so we want to be cautious about how much we anticipate we can grow that over time.
On the operating margin.
I wanted to be clear, where we are.
Not forecasting operating margin expansion in DTC. This year in fact, where we built into the guidance a little bit of.
Of contraction there.
Maybe 50 60 basis points something like that.
And again Thats attributable to the SG&A headwinds.
That I laid out earlier.
Okay, Great. That's Super helpful. And then I guess you did talk about the overall DTC top line continuing to grow at all it's just the bottom line dollars is what is E com looking like within that.
Within that segment.
For 'twenty two I mean, we do believe that that could be double digits again, obviously moderating from the incredible growth. We've seen last couple of years, but double digits great.
Great and then I wanted to pivot to your comments earlier on apparel can you just remind us how big that business today and as you I think you said in the fall youll be removing the bvd.
<unk> name and just call it Steve Madden.
That garnered incremental accounts.
Terms of the potential placement for that product.
Yes, so in terms of the overall business I think we were probably somewhere between 45 and $50 million in may.
Maybe not quite $15 million in 2021, and as I said, we're targeting to get close to 50% growth for 2022 and part of that growth does come because of the.
The wider opportunity that we see under the Steve Madden brand some additional accounts.
That are excited about it or something and some accounts that are just giving us.
More doors expanded assortment et cetera because of the.
The new positioning for both.
Great and then just last question on the marketing dollars.
It sounds like Youre doing some kind of slashing. Your campaigns. This year is that going to be mostly focused on the Steve Madden brand or are there other brands within the portfolio that you are leaning in in a deeper way this year. Thank you.
Yes.
The majority I mean, the vast majority of the dollars are devoted to Steve Madden.
And obviously, that's warranted because of the how much bigger it is in the other brands, but we're also investing in Dolce Vita and <unk>.
Betsey Johnson as well because both of those brands have really nice momentum in.
And we want to continue to engage with our consumers there too.
Great I'll, let someone else have been thanks, so much thanks.
Thanks Erin.
Thank you.
Our next question comes from Laura Champine of loop capital. Please proceed.
Thanks for taking my question and congratulations on a nice thing for the year and good guidance. Mike. My question is about the top line guidance.
That timber 13% growth you're looking for this year.
How much of that do you expect to.
Come from price mix as opposed to units.
It's a good question.
We've raised prices.
I would say, it's really varies by by brand and.
In product, but it's anywhere from I would say, 5% on the low end to 12% on the high end.
So that's a good that's a good chunk of.
The overall revenue growth is coming from AUR NASP.
Got it thank you.
Thanks, Thank you.
Our next question comes from Tom <unk> of Wedbush Securities. Please proceed.
Hey, good morning, everyone. Thanks for taking my question.
Just to follow up on the DTC.
I think I just want to make sure I got it.
Ducks in a row here I think you said that.
Yes.
LOE this year, but you do have.
Pretty pretty tough compares and youll, probably in a slower growth rate.
Okay than wholesale.
Can you kind of like contextualize that a little bit like you answer it.
That's helpful.
As you grow with like anything like that would be helpful.
Yes, DTC overall, we're forecasting mid to high singles.
In terms of overall revenue growth again thats with.
Double digit E com, and obviously slower bricks and mortar.
Got it and how about <unk>.
Store count should we expect.
We expect a couple of store openings this year.
Sure.
Yes, Youll see the store count go up a little bit that's not that's not the U S. The U S will be about about flat.
But we are opening a.
A handful of stores in international markets.
Got it thanks Ed.
Thank you.
Thank you. Our next question comes from Sam Poser of Williams trading. Please proceed.
Good morning, Thanks for taking my question.
Just a few things one can you talk about how you where you are with production outside of Asia.
The timing.
Hello of that business and I've got a few.
Few more as well.
Yes.
Sam as you know we've talked about moving.
Approximately half of the Steve Madden women's product.
Outside of China too.
In Mexico, and Brazil for fall of 2021.
And we're trending in a very similar place for spring 'twenty two.
What was the I didn't hear the follow up question about Q4.
I didn't ask about Q4 I guess the other question is this.
How long.
This upcoming over by boat, how long, it's taking longer but how long is it sitting on the dock now like how quick can you pick it up one.
It's been unloaded.
Well there are delays there too, but I think when we're talking about the.
30% to 70, we're trying to incorporate that.
The entire transit time.
Got you and then.
Airfreight.
That you had.
Your airfreight what percent or how much incremental airfreight did you have in 'twenty one.
So.
If you compare to 2001 to 19, and it's really in our DTC that we do most of the area and its low single digits in wholesale I think there was a little increase there but.
We ended 21 at around 30% and that was compared to 17% airfreight.
In 2019 is that right, yes, that's correct yes.
And can you tell us what those incremental dollars.
A lot I don't know because.
No I don't know that off top my head, but.
Between the increase in the percentage that were ARINC and the increasingly in the.
Airfreight per unit it was significant.
Let me ask you this how many how many basis points could it impact gross margin negatively for the year.
And Rita and DTC or in the consultant in total in total.
But overall freight we've added about 240 basis point negative impact versus <unk> 19 in 'twenty one.
And so theoretically in 'twenty, we should see hopefully that come way down in 'twenty, three which that should be a positive flow through.
To your gross margins you might not get it all back because of other issues, but that should be exceptionally positive.
In fiscal 'twenty.
We don't we don't think so we built.
Again.
The freight impact in 'twenty, two we have built as new <unk> and the forecast is neutral to 2021.
Again, we're going to fly we intend to utilize less air freight, but the air freight rates, given where they are today, particularly given compared to where they were in the early part of 'twenty, one theres going to be a negative rate impact.
So overall the air freight.
It doesn't give us any incremental benefit.
What about 23 like next year.
<unk>.
When searching.
Yes, yes.
Certainly hopeful that we get a benefit in 'twenty three.
Okay and then.
Just when modeling 2023 benefit and we're hopeful that we will get that just keep in mind that the contracts when they get negotiated they run April through April .
So what that means is.
Even in 2023, if youre negotiating in this environment today, you are probably not going to get great rates and in 2023. The first part of it will be.
Impacted by the freight increases.
But I mean, if youre using less there.
If you're using a lot less of it that's still health.
But the point is the need for airfreight should go way down once hopefully once these courts get cleared out.
Great.
That's correct.
The Ocean, we do a lot more of our consolidated units via Ocean as you know so that's a big driver as well.
Alright, well, thanks very much continued success.
Thanks, Tim.
Thank you. Our next question comes from Jay sole of UBS. Please proceed.
Great. Thanks, so much and I just wanted to follow up on the BB Dakota, Steve Madden News.
<unk>.
What's your vision for the apparel business for Steve Madden, obviously, 50% growth for 'twenty to 'twenty two is a pretty big number I mean.
When you think about three to five years, what would you like to see the company accomplished.
Good question Jay.
I think what we're focused on right now is we just want to have great products that our customers love.
And I wanted to be.
And important I wanted to be hot.
Because of a better term.
It's not about hitting our revenue target. It is about is it.
About having great products that are exciting for our customers and if we do that the numbers will take care of themselves.
Hmm.
Obviously theres a lot of good distribution with wholesale partners online.
Is that the distribution strategy going forward I mean, do you want to have a more of a physical presence within the company's own channels, where do you see as the distribution strategy for apparel going forward.
Well, we do want it to be important.
Steve <unk> Dot com.
I think.
As far as our own bricks and mortar stores, if I put it in a handful of doors, but our stores really are not are not built to carry apparel. So that would be if we ever do that that would be a much longer term strategy. So it is going to be wholesale in Steve Madden dot com for the near term.
Got it.
Signs you have the Steve Madden brand has brand permission from the consumer to to sell apparel, obviously, everybody knows footwear and obviously you mentioned how hard you've worked on handbags to build that into a really big strong growing business, what about apparel I mean do you.
What you've learned over the past couple of years I mean, how confident do you feel that the consumer is ready to buy Steve Madden apparel.
Yes, we've been at this a couple of years with the co branded line.
<unk> been selling it.
The success in the wholesale channel and we've also been doing.
Monitoring what's going on at <unk> Dot Com and obviously, what we've seen it gives us the confidence to.
To take BB Dakota, often to end to go full force with <unk>. So we're excited about it we understand we've got it.
I could tell you, but we got to show you and that's what we intend to do.
Got it okay. Thank you so much.
Thank you. Our next question comes from Dana Telsey Telsey Group. Please proceed.
Good morning, congratulations on such a nice fourth quarter.
A couple of things as you think about just the current trends did Ami common pack deal in January and you're seeing that recovery is we're hearing from others and then when you think of the shape of 2022, and you talked about flat gross margins and flat SG&A is there any other shaping or cadence that we should think is.
We go through 2022, thank you.
Thanks Dana.
Yes, we did see like just about everybody else a bit of a slowdown in January and then we've seen a nice.
Rebound in February which we do.
Tribute to.
Sure.
The trajectory of AUM a crime.
In terms of that.
The cadence.
Look I think we tried to.
To give you a sense for the split of revenue and earnings for first half back half some color around gross margin and.
And SG&A as a percentage of revenue so.
I think thats about it.
I don't have anything else for you.
And then I think you gave a little color on Q4 as well for the wholesale alright.
Yes.
Alright.
And price increases how are you thinking about price increases this year.
Is it does it differ by category timing of price increases and how much of the headwinds whether freight or product cost is it April to offset.
Yes.
It does vary.
Based on the brand and the product and we're trying to be thoughtful and surgical about it but the range is anywhere between sort of 5% to 12%.
And.
We've really got those implemented for spring.
That is how we are able to achieve the flat gross margin for the year.
In the context of the headwinds that we're seeing on fob cost and assuming some normalization of promo activity et cetera.
Thank you.
Thanks Dana.
Thank you. Our next question comes from Steve Marotta of C. L King and Associates. Please proceed.
Good morning, Ed and Danielle and you mentioned earlier in your prepared remarks that there was a private label pull forward from <unk> into <unk> can you talk about that magnitude I'm basically trying to reconcile the size of the beat in the fourth quarter with not a lot of let up in the supply chain.
I'm trying to understand the differential between original guidance.
The beat with the exception of the pull forward from private label.
Yes.
Yes.
I think when we were on the last call, we talked about $30 million moving from Q3 into Q4, and then we anticipated that may be $20 million was going to was going to fall out.
From Q4 into Q1, I think that what ended up being a little bit better than we anticipated because of some of this pull forward of private label, we still probably 15 million bucks that that fair.
Fell out so.
But that's a net number so we had.
More than that in branded goods that moved out from Q4 into Q1, and then private label offset that as we pulled forward some.
Yeah.
Okay. That's helpful and just reiterating the comments about sourcing from Central and South America. There is no material variance expected in 2022 versus <unk> 21 is that correct.
Correct Okay.
Thank you very much.
Yes.
Thank you I would now like to turn the conference back to you Ed Wilson for closing remarks.
Great well, thanks, very much for joining us this morning, and we look forward to speaking with you on the next call have a good day.
Thank you.
This concludes today's conference call. Thank you for participating and you may now disconnect.
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Good day, and thank you for standing by welcome to the Q4 and full year 2021 Steve Madden L. P earnings conference.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. Please be advised that today's conference is being recorded.
To ask a question during the session you will need to press star one on your telephone if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Danielle Mccoy director of corporate development and Investor Relations. Please go ahead.
Thanks, Phebe and good morning, everyone. Thank you for joining our fourth quarter and full year 2021 earnings call and webcast.
Before we begin I'd like to remind you that our remarks that follow including answers to your questions.
These statements that we believe to be forward looking statements within the meaning of the private Securities Litigation Reform Act.
Forward looking statements are subject to risks that could cause actual results to materially differ from those expressed or implied by such forward looking statements.
These risks include among others matters that we have discussed in our press release issued earlier today in filings, we make with the SEC.
We disclaim any obligation to update these forward looking statements, which may not be updated until our next quarterly earnings conference call if at all.
Financial results discussed on today's call are on an adjusted basis unless otherwise noted.
Reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release.
Joining the call today are Ed Rosenfeld, Chairman and Chief Executive Officer, and Zane <unk>, Chief Financial Officer with that I'll turn the call over to Ed.
Thanks, Danielle good morning, everyone and thank you for joining us to review, Steve Madden fourth quarter and full year 2021 results.
We delivered outstanding results in the fourth quarter with revenue, increasing 38% and diluted EPS, increasing 125% compared to pre pandemic fourth quarter 2019.
Capping a record year for the company as our operating margin reached 14% and diluted EPS increased 28% compared to 22 2019.
Our success in 2021 was the result of the extraordinary efforts of our employees and their disciplined execution of our strategic initiatives and we are confident that our continued focus on these initiatives positions us for strong growth and value creation going forward.
Our number one initiative and the one that underpins all of the others is continuing to deepen our connection with our consumers. We are doing this first and foremost by winning with products.
Utilizing our proven model, which combines talented design team a test and react strategy and an industry, leading speed to market capability, we're delivering trend right product assortments that are enabling us to outperform the competition and take market share most notably in our Steve Madden and Dolce Vita brands.
Looking ahead to 2022, our top priority will remain unchanged.
<unk> to deliver innovative and on trend products that resonates with our consumers.
We are also supporting this great product with enhanced marketing and engagement with our consumers.
This includes larger brand campaigns like our Madden burst campaign in fall of 2021 as well as the always on digital marketing and Influencer activities that have been instrumental in our e-commerce growth and we will continue to invest in this fall funnel approach in 2022.
As we sharpen our focus on our core consumers and strengthen our connections with them. It's fueling our progress on our next strategic initiatives driving our direct to consumer business led by digital.
Our DTC segment drove the company's growth in 2021 with DTC revenue, increasing 52% from 2019 and operating margin expanding from three 9% in 2019 to 17, 5% in 2021.
E Commerce, which now represents over 50% of our DTC business led the way with revenue, increasing 89% versus 2020, and 181% versus 2019 as our ongoing investments in talent digital marketing insight enhanced enhancements continue to pay dividends.
Our brick and mortar business was strong as well with revenue trends accelerating each quarter throughout the year and global brick and mortar comp store sales, increasing 9% for the full year compared to 2019.
As we look to 2022, while we are mindful of the difficult difficult comparisons in this segment. We are confident that the actions. We have taken the last two years have resulted in the DTC business that is fundamentally stronger than it was prior to the pandemic and then we can continue to drive top and bottom line gains and DTC channel.
Yes.
Our next key strategic initiative is expanding our business outside of footwear.
Over the last several years, we made significant investments in building the Steve Madden brand handbag business and we are reaping the rewards from those efforts.
Steve Madden handbag revenue increased 18% in 2021 compared to 2019, driven by exceptional performance in DTC channels, and we are poised for another year of double digit growth in 2022.
In apparel, our BB Dakota, Steve Madden business continues to see strong sell throughs and increased open to buy commitments at its key wholesale customers based on the momentum we have and the significant long term opportunity we see for Steve Madden apparel, we have decided the time is right to transition from the BB Dakota, Steve Madden co brand.
The label to just the Steve Madden label for fall of 2022.
Initial response from wholesale customers to this change has been very positive and we are targeting revenue growth in the apparel category of nearly 50% in 2022.
Another of our key priorities and one of our largest long term growth opportunities is growing our international business.
April 2021 margin important milestone in our international development. When we acquired the remaining interest that we did not already own in our European joint venture.
Europe has been our fastest growing market in recent years and our momentum there has only accelerated since we took full ownership in the region.
For the year, the Europe business, we acquired grew 57% versus 2020 and 91% versus 2019.
Leading the way for our for our EMEA region to reach $100 million $100 million in annual revenue for the first time.
While some of our other international markets remained down to 2019 for the year due to lingering COVID-19 impacts we are positioned for double digit gains across all key markets in 2022 and believe our international business can be a significant driver of revenue and earnings growth for the company for years to come.
And even as we drive DTC product category expansion and international growth. We also continued to focus on strengthening our core U S wholesale footwear business.
While revenue in this business was still under significant pressure in the first half of 2021, our sell through performance was strong throughout the year and eventually our wholesale customers reacted with a significant acceleration in orders in the back half.
Our second half U S. Wholesale footwear revenue was up 12% to 2019 or 17% excluding revenue from the discontinued Kate Spade license in 2019.
Our two largest brands drove this performance, Steve Madden brand U S. Wholesale footwear revenue was up 30% in the back half compared to 2019, including a 42% increase in Steve Madden Women's and Dolce Vita delivered a 43% increase in 2019.
Based on our continued momentum and sell through performance as well as the relatively easy comparisons we faced in the first half we are confident that we can drive double digit growth in our core U S wholesale footwear business in 2022.
Finally, we continue to make meaningful progress on our corporate social responsibility initiatives as we work to minimize our negative environmental impacts and maximize the positive impacts we have on our people and our communities.
Lights from the last year included the launches of our floor plan it by Steve Madden and Steve Madden Kids adaptive collections, our partnerships with Howard University and the Fearless fund the establishment of the Steve Madden Foundation for charitable, giving and most recently the launch of rebooted and re Vita resale marketplaces.
For Steve Madden, and Dolce Vita that will extend the average life of our products and keep them out of landfills, marking an important initial steps in our journey towards circularity.
Going forward continuing to advance our CSR goals and ensuring that CSR is embedded in everything we do will remain a critical part of our strategy.
The overall 2021 was an incredible year for Steve Madden, we delivered record results and we made meaningful progress on our key strategic initiatives that position the company for strong and sustainable revenue and earnings growth for years to come.
And now I'll turn it over to Zane to review, our fourth quarter and full year 2021 financial results in more detail and provide our initial outlook for 2022.
Thanks, Ed and good morning, everyone.
Our consolidated revenue in the fourth quarter was $578 5 million, a 63, 9% increase compared to 2020.
And a 37, 9% increase versus 2019.
Our wholesale revenue was $410 5 million up.
<unk> 56, 1% compared to the prior year and up 38% compared to 2019.
Wholesale footwear revenue was $303 2 million, a 61, 9% increase from 2020, and a 29, 9% increase from 2019.
In the U S. Steve Madden brand revenue was up more than 50% to 2019, and Dolce Vita revenue increased more than 90% compared to 2019.
Private label was also strong partially due to orders that we were able to pull forward from Q1 2022.
Outside the U S. Europe was once again to highlight with revenue more than tripling from the comparable period in 2019.
Wholesale accessories, and apparel revenue was $107 2 million.
Up 41, 7% to last year and up 33, 3% versus 2019.
Strength was broad based with Steve Madden and Cline Betsey, Johnson and private label handbags, as well as DVT Dakota, Steve Madden apparel, all recorded revenue increases of more than 40%.
2019.
In our direct to consumer segment private fleet.
Obviously called retail segment.
Revenue was $164 7 million.
A 91, 3% increase compared to 2020.
And a 62, 9% increase compared to 2019.
Both e-commerce and brick and mortar channels saw outstanding performance.
E Commerce revenue grew 82% compared to 2020, and 144, 9% versus 2019 and.
In our brick and mortar stores global comp store sales increased 24% compared to 2019 with domestic stores delivering a 31% comp gain.
We ended the year with 214 brick and mortar retail stores, including 66 outlets as.
As well as six e-commerce websites and 17 company operated concessions in international markets.
Turning to our licensing and first class segments our.
Our licensing royalty income was $2 9 million in the quarter compared to $3 million last year and $3 1 million in 2019.
Gross gross commission income was zero point $4 million compared to 0.9 million last year and $1 6 million in 2019.
Consolidated gross margin was 41, 2% in the quarter.
Expanding 300 basis points from the prior year and up 340 basis points compared to 2019.
Wholesale gross margin was 31, 8% compared to 28, 3% last year and 29, 2% in 2019.
The improvement compared to 2019 was the result of higher average selling prices and lower markdowns, partially offset by increased freight rates and the non renewal of GSP.
Direct to consumer gross margin was 63, 5% compared to 65, 6% last year and 61, 6% in 2019.
The increase to 2019 was driven by a reduction in promotional activity, which more than offset the headwinds from increased freight expense.
Operating expenses were $151 5 million in the quarter.
<unk> $109 2 million last year, and $125 7 million in 2019.
As a percentage of revenue operating expenses were 26, 2% in the quarter compared to 30% in 2019, reflecting expense leverage on the increased revenue.
Operating income for the quarter was $86 9 million or 15% of revenue.
Up from $25 6 million or seven 3% of revenue last year and $33 million or seven 9% of revenue in 2019.
Our effective tax rate for the quarter was 18, 3% compared to 13, 3% in 2020 and six 3% in 2019.
Finally, net income attributable to Steve Madden Ltd for the quarter was $70 4 million or <unk> 87 per diluted share.
Up from $21 8 million or <unk> 27 per diluted share in 2020.
And $32 2 million or <unk> 39 per diluted share in 2019.
Now I would like to briefly touch on our full year results.
Total revenue for 2021 increased 55, 3% to $1 9 billion from $1 2 billion in the prior year and increased four 4% from $1 8 billion in 2019.
Net income attributable to Steve Madden Ltd was $203 7 million or $2 50 per diluted share for the year ended December 31, 2021, compared to 51 8 million or <unk> 64 per diluted share for the year ended December 31 2020.
And $162 8 million or $1 95 per diluted share for the year ended December 31 2019.
Moving to the balance sheet.
Our financial Foundation remains very strong.
As of December 31, 2021, we had $263 5 million of cash cash equivalents and short term investments and no debt.
Inventory totaled $255 2 million compared to $101 4 million last year and $136 9 million in 2019.
Note that due to the global supply chain disruption in transit inventory was up 159% compared to 2019 and represented approximately 59% of our inventory at quarter end compared to approximately 43% at the end of fourth quarter of 2020 19.
On hand inventory was up 32% compared to 2019.
Our capex in the quarter was $2 million.
During the quarter.
Purchased approximately 1 million shares for $48 5 million.
Which includes shares acquired through the net settlement of employee stock Awards.
As for the full year, we repurchased approximately two 8 million shares for $123 2 million, which again includes shares acquired through the net settlement of employee stock Awards.
The company's board of directors approved an increase in the quarterly cash dividend to <unk> 21 per share an increase of 40% from the previous quarterly dividend.
The dividend will be payable on March 25, 2022 to stockholders of record as of the close of business on March 11 2022.
When combined with share repurchases and the dividend, we returned $172 $3 million to shareholders in 2021.
Turning to our outlook we.
We expect revenue to increase 10% to 13% compared to 2021, and we expect diluted EPS to be in the range of $2 73 to $2 83.
In term of seasonality revenue and earnings are expected to be less back half weighted than they were in 2021.
The revenue and earnings split between first half and second half is expected to be similar to 2019.
Now I would like to turn the call over to the operator for questions operator.
Thank you.
A reminder to ask a question you will need to press star one on your telephone to withdraw your question.
Austin press the pound key please standby, while we compile the Q&A roster.
Our first question comes from Amelia Leon of BPI. Please proceed.
Thanks, and good morning.
Really great results in a tough environment.
I was hoping we could just talk a little bit more about the.
About the guidance that you just issued and maybe a little bit more color on how the cadence.
Revenue should slow I think you said first half to second half should be more similar to 19, maybe just help us understand the.
The inputs into that.
So similarly.
How are you thinking about the puts and takes on gross margin.
Particularly with freight costs.
Both air and Ocean, and how Youre envisioning, the mark down to whole price mix.
Will play out for this year. Thank you.
Great Good morning Camilo.
Thanks for the kind words about the performance.
In terms of the guidance.
And the seasonality I think that.
Zane really said it first half second half split both revenue and earnings I think it's best to look.
2019.
2000, the comparisons to 2021.
Are obviously impacted by.
The unusual seasonality, we had last year.
And.
The fact that the business was accelerating throughout the year.
So if you look at revenue growth compared to 21, Youll see it decelerating each.
Each quarter.
Just based on the comparisons.
In terms of the.
Puts and takes on the gross margin.
Yes.
There are a lot of moving parts there.
You alluded to but overall.
We are forecasting gross margin for 'twenty two to be about flat to 'twenty one.
So.
There is.
Yes.
The puts and takes there I think you asked about the promotional activity.
We feel we have built in.
Some expectation of some normalization in promo activity, meaning.
Meaning a little bit more than we saw in 2021.
Not back to pre pandemic levels, though so there's a little bit of pressure built into the forecast.
From that.
There is also a little bit of pressure built in from Fob price increases that we're seeing.
The freight impact is approximately neutral to 2021, obviously there was a big.
A significant amount of pressure in 2021, and we've assumed that that does not abate, but that there's no incremental pressure for the full year of 2022.
And then we've offset some of these pressures through our price increases that we have that we've implemented so hope that's helpful.
Yes, that's very helpful. And then just to clarify there is no assumption of the GSP being renewed in this initial outlook right.
That's correct.
And what's it about 80 basis points last year.
The consolidated we had about 50 basis points.
Got it perfect and then just a follow up.
This is vincent.
<unk> for the GSP.
Bill passed in the house.
Mainly along party lines and has it been pushed back to the Senate now so they are currently a reconciling.
Two bills the one that the Senate passed several months ago and the one that the house passed on February 4th I believe.
Hopefully that doesn't take very long, but as of right now given that it was straight.
Straight down party lines, we think that it may take a little bit longer than.
And we were hoping for.
Got it.
Has retroactive benefits.
Both the Senate version under House version hop retroactive benefits.
Yes, that's on the America compete spill.
Should should get to.
And then just a final question on international given the strength that you are now seeing in the ownership of the European business.
Core's notwithstanding can you help us understand where the margin.
National versus U S today, and how that progression so unfold.
Yes, if you look at the international business overall, it's still.
It's still not as operating.
Operating margin is still a few hundred basis points below the U S. But we do see that improving and we expect to narrow that gap over time.
Got it all the best guys. Good luck great results again thank.
Thank you. Thank you.
Thank you. Our next question comes from Paul with Jazz of Citi. Please proceed.
Hi, This is Kelly crago on for Paul Thanks for taking my question.
Just curious about your inventory position and inventory levels are up almost 90% versus 2019, which I assume is to get ahead of some of the supply chain delays out there. So curious if you could elaborate on your strategy there and any comments you could make on the current state of the supply chain and if you have any visibility at all to the situation.
Moving at this point.
Yes, good morning Kelly.
Yes, I think the inventory.
Identified.
The reason for the increase there is related to the supply chain disruption.
And as <unk> articulated in the prepared remarks, it's really.
In transit inventory Thats driving the.
Big increase in inventory on hand inventory at the end of the year was up 32%, which.
We're very comfortable with it keep in mind, we just reported sales our revenue up 37% for the quarter and also remember that the DTC again, comparing to 19 here that the DTC is a much larger percentage of the overall mix and that carries a heavier.
<unk> requires more inventory so comfortable with the on hand, the in transit is what's up a 159%.
And thats because of the extended lead time. So we're working on transit time of about 70 days now on average compared to about 30 days.
Back in 2019 are pre COVID-19 .
Just do the math 70 devalued by 30 was at 133% so without any increase in the business. The transit in transit inventory should be up 133%.
Just on the transit time, and then obviously, we've got the business growing as well so feel very comfortable about.
The inventory position.
And.
We're doing what we need to do in this in this environment.
And just any comment on this.
Fly chain situation and how youre thinking about the visibility into an improvement or are you seeing any sort of signs of QE.
<unk> can improve that in the first half of this year.
No we're not we're really.
I haven't seen any meaningful improvement that lead times are still extended.
Great.
Expensive.
But.
The good news is that we've been dealing with this for a while now so we built this into our planning calendars.
And we think that we are prepared to be able to.
To meet the demand and to deliver product in first half.
Got it and then just curious about your comments on the DTC business.
Great to see how it John that this is Ben.
Curious, where DTC EBIT margin for today versus historical and relative to the wholesale business is this something that.
Hi.