Good afternoon, ladies and gentlemen, and thank you for standing by. And welcome to the Deckers Outdoor Corporation Third Quarter 2012 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded. Before we begin, I would like -- also like to remind everyone of the company's Safe Harbor policy. Please note that certain statements made on this call regarding the company's expectations, beliefs and views about its future financial performance, brand strategies and cost structure are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995.These statements relate to the company's anticipated revenues, expenses, earnings, gross margin, capital expenditures, brand strategies and cost structures, as well as the outlook for the company's markets and the demand for its products. The forward-looking statements made on this call are based on currently available information because its business is subject to a number of risk and uncertainties, some of which may be beyond its control, actual operating results in the future may differ materially from the future financial performance expected at the current time. Deckers has explained some of these risks and uncertainties in its earnings press release and in its SEC filings, including the Risk Factors section of its Annual Report on the Form 10-K, and its other documents filed by the SEC. Listeners are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to publicly release or update the results of any revisions to forward-looking statements. I would now like to turn the conference over to President, Chief Executive Officer and Chair of Board of Directors, Mr. Angel Martinez. Please go ahead, sir.

Well, thanks, operator. And welcome to everyone joining us today. With me on the call are Zohar Ziv, Chief Operating Officer; and Tom George, Chief Financial Officer. Clearly, the third quarter was more challenging for the UGG brand than we anticipated from a top line perspective. Before getting into the specifics of our third quarter numbers, I first want to touch on some of the short-term challenges that we faced this year and our tactics to address these challenges, as well as a broader discussion about the UGG brand. As you know, after increasing 30% in 2011 over 2010, our sheepskin cost were up another 40% in 2012. As you also know, we've implemented programs to help mitigate the impact of higher sheepskin and raw material costs, including selectively raising prices. Based on sell-through patterns in our own retail stores, reports from our major wholesale accounts and industry data, we began to believe as the quarter progress that our price increases over the past 2 years had pushed us above the consumer's price value expectations for the UGG brand, a concerned that we voiced on past earnings calls. The push back to the higher price points was compounded by warm weather. 2012 is the warmest year on record in the United States since recordkeeping began in the 1800s. We believe that this fact combined with the recessionary conditions in Europe and general economic uncertainty and the growing trend of buy now, wear now has pushed back the start of the brand key selling season at retail this year. The good news is we were in a position to react quickly to the price resistance as a result of the decreases in our product cost for fall '13 that were finalized in mid-September. As these negotiations were unfolding and we gain…

Thanks, Angel. Today's earnings release contains a good amount of detail about our third quarter sales and earnings, including sales by brand channel and geography. Therefore, I'm going to limit my discussion, primarily to gross margins, operating expenses, the balance sheet and guidance. Gross margin for the third quarter was 42.3% compared to 49% in the third quarter last year, which was in line with our expectations and guidance. The 670-basis-point decline is primarily attributable to an increase in product cost, as well as lower European margins for UGG and Teva brands. Total SG&A expense for the quarter was $99.7 million or 26.5% of net sales, compared to $112.2 million or 27.1% in net sales a year ago. Several factors led to the SG&A decrease, including lower performance-based compensation related expenses, lower legal spend versus a year-ago and the positive impact from foreign exchange rate fluctuations. This was offset by $6.9 million of additional expense-related to our retail operations, most of which is for the 29 new retail stores that were not open during the third quarter, last year. Operating expenses were below expectations, primarily due to a shift in marketing expenses to the fourth quarter, which accounted for roughly $3.4 million, lower sales-related expenses, lower retail expenses, lower depreciation and lower compensation-related expenses. Operating income for the third quarter was $59.6 million compared to $90.7 million last year. The decline reflects the lower sales figure combined with the pressure on gross margin from higher product cost and a lower mix of international sales versus a year ago. We recorded income tax expense of $15.9 million in the third quarter compared to $28.3 million in the third quarter last year. Third quarter diluted earnings per share of $1.18 was higher than our guidance and compares to $1.59 a year ago.…

Thanks, Tom. The recent pickup in sales trends at both wholesale and recent is encouraging, and we expect momentum will continue to build as we approach our business selling -- busiest selling period of the year. This year has been the most challenging period of my tenure as Chief Executive Officer. We've dealt with significant headwinds on several fronts that have pressured sales and margins and like we have done in the past, we've acted quickly to try to mitigate the risk to the business. As a reminder, we've already taken steps to mitigate our exposure to sheepskin through new raw material innovations and product diversification. We have lessened our dependency on classics with the introduction of compelling new fashion and casual collections that are less sensitive to the weather and we've helped smooth out some of the seasonality in our business and offset some of the recent margin pressure with the acquisition of Sanuk. This is one of the many reasons I'm confident that when we look back on 2012 and the years ahead, these results will be viewed as a notable and positive turning point in the company's history, a time during which we exploited rather than surrender to forces seemingly outside of our control to build the next generation Deckers as we drive toward increased profitability and enhance shareholder value. The key here is to build from our strength. The strength of our brand portfolio, the year-round in iconic styles that are in our current lineup today, as well as those I've seen in the near-term pipeline. Our strong relationships with major retailers and independent accounts. The growth potential in our direct-to-consumer channels in emerging regions. The tangible potential for increased efficiency across product life cycle and supply chain and finally, and most importantly, the preference and emotional connection that consumers have with our brands gives me great confidence as does the strength and the vitality of the Deckers organization with a highly evolved systems and processes and the passion and tenacity of our people to drive excellence across brand, channels, regions and functions. Now we're not where we need to be but we are confident that we're moving in the right direction for the long term. Thank you. Operator, I'll now be happy to take questions.

[Operator Instructions] And we'll now take our first question from Erinn Murphy with Piper Jaffray.

Angel, I was hoping you could maybe talk a little bit more just about the pricing adjustments. It is helpful to see that -- the detail you gave but just curious kind of longer-term, how confident are you that this is maybe more just a one-time cut versus a multi-quarter adjustment. And then in the adjustments you've just made, you can you speak a little bit more about any impacts you're seeing in conversion?

Yes, we do see this as a one-time situation. I was always concerned that $200 was the ceiling, for example, on the Classic Tall. And if the consumers out there that are telling us that as much as anything. They -- especially in these economic times. So we're also confident that given some improvements that we've made in supply chain and in new processes, as I mentioned, that we should be able to hold margins where they need to be and still maintain the appropriate price points for our products. The other thing that's going on is that there's a lot of innovation happening. And in 2013, you're going to begin to see that. Some of it in the spring, the bulk of it in the fall, which would also allow us to introduce new product at lower price points, new products at a more accessible price points for the first-time UGG purchaser, so I think that's very important. What was the other question?

Conversion.

Have you seen any conversion impact on just the lower pricing even though it's just been about 1 month, 1.5 months.

Yes, it's a little early but not only from our own stores, which is actually hard information but yes, we have seen improvements in conversion. And we've had anecdotal information from our retailers that they have seen improvements in conversion as a result of the lower price points.

Okay. And then just a quick follow-up as you're talking about maybe introducing some more entry-level price point into the mix next year, how are you engineering margins for that product? Will it be essentially a margin neutral or how should we be thinking about that if you are seeing a mix shift towards a slightly lower price point next year?

Yes, it's a combination of a lot of different types of products. So it's across-the-board. In the end, it will probably be margin neutral to slightly up, it just depends on the kind of product, the type of innovation, we're very, very conscious of our margin objectives and we're being very aggressively innovative to drive those goals home.

And we'll take our next question from Mitch Kummetz with Robert W. Baird. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Maybe a question for Tom. Tom, could you just walk us through how you get to kind of the implied UGG growth in the fourth quarter. If you guys were down, seeing flat for the year, which if my math is correct, that's 6% increase on the fourth quarter. I know you're already addressed the comp, you're seeing comp down 11%. But can you maybe just sort of take that brand in Q4 sort of a wholesale, retail, eCommerce and just kind of give us a sense as to how it rolls up to 6% growth?

Yes, yes, Mitch. I think the best way to describe that is maybe even give you a little frame of reference even from the prior guidance, what kind of changes we made there. I think the retail, when you look at the difference between the old guidance and the new guidance, there is roughly $70 million to $80 million of decline in sales, about $30 million of that is related to retail and about 2/3 of that is related to bringing down the comp assumption based on the trends we saw in the third quarter and the balance of the retail as related to the non-comp stores. And then pricing, at this point in time again, early. We want to -- it's early to make a call on conversion relative to the improvement pricing. It was about $7 million to $10 million of the brand down relative to the old guidance and then the wholesale and distributor business globally is a takedown of about $40 million of that. And about three quarters of that is on the domestic wholesale side. And the balance, about $10 million is related to Europe as we continue to be concerned about levels or reorders and cancellations in that market. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then also maybe just along these same line, some companies are talking about they're giving you sort of a whether assumption, they're expecting normal weather or similar weather to a year ago, is there a whether assumption which is kind of baked into your guidance on Q4 and then also can you maybe talk about how you're thinking about cancellations, reorders, closeouts and Q4 relative to a year ago, where I know you have some issues with regard to those areas.

The weather, I think, the best way to approach that is I think a normal weather still, somewhere between as warm as it was last year and as cold as it was 2 years ago. That being said, how we -- are our comp guidance of a negative 11% is only about a 10% improvement relative to the third quarter. So if we do get some colder weather, then there may be some opportunities there. I can't commit to that pretty early. We have seen some improved trends but still pretty inconsistent. As far as the wholesale side of the business, we feel with the recent price adjustments that we have mitigated some of the risk that we're concerned about relative to cancellations so there's not a lot of cancellations that being built into the guidance for the fourth quarter. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then just one last quick one. In terms of your fourth quarter gross margin outlook, I mean, it's come down for 4 points. How much of that was due to the impact of the price adjustments. Can you give us some sense I mean, Angel, you referred to the styles that you've taken down price on. Can you give us some sense as to what percentage of the overall UGG business those styles represent just so we get a sense how much that's had an impact?

The impact relative to price adjustments on the fourth quarter is pretty significant. That is roughly 1/3 of the brand down in the margin for the quarter and in terms of mix, I'll answer that question. The fourth quarter is shifted more towards classic product and some of the other quarters and as a result of that, the price decline, the price change has a significant, more of an impact in the fourth quarter that it would have other quarters. For example, in the third quarter, the price decline was about $3 million to $4 million. In the fourth quarter, it's closer to $7 million to $10 million.

And we'll now take our next question from Omar Saad with ISI Group.

Angel, you spend some time in your prepared remarks talking about some consumers studies of the UGG brands and the insights they gave you. Can you talk about what the -- some of the core elements of the loyal consumers who do respond positively in those surveys, what it is they love about the brand and what draws them to the brand, what brings them back, and how do you as a company do a better job leveraging that going forward as you think about how to build this brand holistically.

Well, pretty consistently, the core consumer has what we would consider an emotional connection to the brand. It's about luxurious comfort. And I've said this for a long time, the UGG brand became fashionable but at its core, it's a comfort brand. So this is the consumer who really gets accustomed to the feeling of the brand, almost as an emotional release. And we've seen this validated in our research over and over such that she is, and typically she is, we all know, to the point where the UGG brand, once it's in her closet as either slippers or classic and increasingly in other styles, tends to be a replacement purchase. And we have, in markets where we've been operating a long time, we have consumers who, as I've said many times and research has validated, they buy UGG on an annual basis consistently to replenish what they had in their closet. Now, over the last 2 years, the impetus to buy the brand in many parts of the country is driven by weather. So when you don't have a cold weather, you don't have the same level of impetus. We're not at the top of mind. And I think that, that's a clear indication from the results that we see. Whenever we had a little spike in colder weather, our performance at retail improves dramatically. From the point of view of leveraging this information, you're starting to see it in a couple of different areas. Our efforts in eCommerce direct-to-consumer, social networking, digital marketing are all very specific to this attitude around this consumer. We're increasingly able to pinpoint her behavior, pinpoint where she shops, pinpoint where she likes to spend time, and begin the process of being very calculated as to where we put our marketing dollar. So that's just an ongoing sort of insight that we're getting that we're honing as each season progresses. It also gives us the ability to be a heck of a lot more flexible than we were in the past with our targeted media, and this allows us, combined with the ability that we have to change messages and images on Demandware, which is our platform for eCommerce, it's given us tremendous flexibility. And the name of the game here in terms of this consumer is to intercept her in all the places that validate and reinforce where she would expect to find the UGG brand and also to give her opportunities to discover the brand if she is not a core user. So the prospect component of this, which are women who have indicated an interest in purchasing UGG and just haven't done it yet, which represents over 20% of the U.S. population of women, those -- that's another key important part of this effort. Knowing who she is, knowing how to reach her, knowing when to reach her. Those are all really essential parts of the effort going forward with the marketing efforts that we're making.

Okay. That's helpful. And just to be clear, it's luxurious comfort, it's not the sheepskin that's the core element, or the sheep's fur, or is it the combination of the 3?

The primary vehicle to deliver this feeling of luxury and comfort is the shearling, it's the sheepskin. And there's a tactile component that translates into an emotional reaction. And this is a core element of the classic line of products. That's why in most of the products you see from UGG, there's always at least a small amount of shearling, a small tactile representation. Even if we're doing shoes in which the ankle -- rather the heel color lining is sheepskin or the foot bed or some other parts, there's a touch point of the shearling. And that's important for the brand. That's part of what validates the brand as authentic.

And then a question for you and/or Tom. The revenue guidance for the fourth quarter, what's different in this -- what's going to be different in the fourth quarter from the third quarter in terms of it's going from a negative high-single digit sales number to more of a positive mid-single digit. What's the change here, especially given these kind of pullbacks in the pricing that you're shipping -- you're making your shipments out?

Yes. I think the -- relative to the difference between what's going to happen in the fourth quarter relative to the third quarter is we did have some pressures on our business in the third quarter and we did have those negative retail trends. But we feel that at this point in time, early in the quarter, what we are projecting, some improvement, roughly a 10% improvement on the total retail comps for the fourth quarter. And then we've got more marketing programs in the fourth quarter as well vis-à-vis the third quarter, and the pricing really that's currently in our projections, we've got pricing impact of about $7 million to $10 million of pressure on the fourth quarter. That being said, maybe there will be some opportunity to get some increased volumes with that price change. So -- and then I think another thing to point to is eCommerce business continues to exceed plan, continues to be well over the prior year, and we see a lot of eCommerce opportunities still in the fourth quarter.

And we'll now take our next question from Jessica Schoen with Barclays Capital.

On the price adjustment for -- in the U.S., I was wondering if you could discuss the decision not to make that price cut in the international regions, and if it could potentially have a similar positive impact on demand that you expect to see from the adjustment domestically.

In the international markets, our pricing did not go up. They kept -- they were relatively flat to last year. So the real issue was the U.S. market, and that's where we had the consumer pushback more so than any of the other markets.

Okay, understood. And then on the sheepskin pricing for next year, if I understand correctly, fall 2013 is when you expect to see the ease in the pressure of those costs. And just to think about big picture, what else we can expect to drive the different puts and takes in margins that could also impact how things go next year.

We're still involved in our planning process. One thing to think about is obviously, we made these price changes now. That's 1 thing to consider for the margin. Internationally, still a little bit early there in the planning process in terms of what we may want to do with pricing there. Let's get through the fourth quarter and see how pricing behaves so to speak in the international markets. More Sanuk growth is going to help gross margin. And at this point in time, with our current plans for more retail stores, how profitable those are, that could be a put on the gross margin for next year as well. But again, I just caution everybody, let's get through this fourth quarter, we'll have a better perspective in terms of what next year's margins will be, what our G&A spend will be, as well as our store opening plans. So I think that's what I can say right now at this early stage of the game.

We'll now take our next question from Jim Duffy with Stifel, Nicolaus. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: I'm hoping you can share some perspective on historically, what type of linearity you've seen on UGG's sell-through by month? Is it possible to ballpark in any quantifiable terms the relative contribution of each of the months across fourth quarter?

Again, what we've seen recently is a high correlation even on a weekly basis in the wholesale channel and our own retail stores, given all these factors we talked about of. When the weather turns in the right direction, there's some good sell-through not only with our wholesale customers but also our own retail stores. Our eCommerce business doesn't seem to be weather-sensitive. I think another thing for the fourth quarter that you get a higher correlation of sell-through as you get closer and closer to the holidays. That's something there. So... Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: So tell me, historically, is December been 50% of sales, less than 50% of sales, 75% of sales? How much of it is weighted towards the final month of the quarter?

I'd say it's more skewed to obviously November and December. And it can really load up, especially when you consider our direct-to-consumer business growing and our eCommerce business. Once you get past Thanksgiving, you'll get a pretty decent-sized ramp. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then, I'm curious about the adjustments you made to inventory deliveries for the fourth quarter. How much lead time do you need to influence that? At what point did you make the decision to temper receipts of inventories for the fourth quarter?

That's been -- well, obviously when you work in a supplies chain, you're constantly evaluating things like that. So that's been sort of a gradual process as we've seen the year unfold. And that will continue. Like I said, we're going to monitor the fourth quarter very closely. And based on the fourth quarter, that will -- can have some further inputs in terms of how we throttled back or throttled down receipts going forward. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: You didn't answer the question. How much lead time would you need to throttle back receipts?

I'd say it's getting shorter, but closer to maybe 4, 4.5 months.

We'll now take our next question from Howard Tubin from RBC Capital Markets.

So Angel, as you look at everything that's kind of going on in the business and when you look at your wholesale distribution in the U.S., do you feel it's -- the brands are kind of appropriately positioned? Would you, in a perfect world, like to maybe clean up distribution in the U.S. and ramp down some of your wholesale customers, or would you rather kind of expand wholesale customers, or keep it just the same?

Well, I think there's obviously an opportunity with the expansion of our direct-to-consumer business to take a look at what we might consider marginal distribution. And so that's clearly part of our analysis and our assessment. We certainly don't think we need more distribution. We think that in total, we have the right number of points of distribution, but it's just the quality of some of that distribution needs to be aggressively evaluated. And we'll continue that process. I think one of the things that's interesting in this particular period is that you really start to understand who those retailers are, who value the brand for the long-term versus those who are in it for just a short-term gain. And we're paying very, very close attention to all of that behavior, so that may have some bearing on our decision-making going forward.

Got it. And how do you feel about inventory currently in the channel, kind of based on current sell-throughs, do you think retailers are over-inventoried and there's a risk of them getting more promotional with the brand, or are they -- or are inventories in the channel pretty much in line with current sell-throughs?

Well, I think inventory in the channel is pretty much in line with expectations, again, looking toward a slightly more normalized year. If we're sitting here in mid-November, early December, and it's 75 degrees in New York City, we're going to be over-inventoried in the channel, I can guarantee you that. So I think retailer have brought in the appropriate amount of inventory based on last year, which was not a good year for weather. So we're kind of just sitting here waiting on cold weather. I mean I hate the -- that's what drives me nuts, it's just sitting here with this, watching the weather report everyday. It's kind of I feel -- and I know what it's like to be in the ski resort industry.

And we'll now take our next question from Scott Krasik with BB&T Capital Markets. Scott D. Krasik - BB&T Capital Markets, Research Division: Angel, you sort of alluded to it, I think 2 questions ago about the distribution. But relative to the 72% of the in-line inventory that you have earmarked for deliveries, I mean if you see cancellations, do you have a different way of handling closeouts this year? Will you react by potentially cutting customers off? I mean, how are you treating the inventory that you have earmarked for delivery if cancellations increased?

Well, as Tom said, it's high-quality inventory, number 1. So this isn't -- the inventory that we are talking about is not fashion-sensitive. So as we've done in the past, because we do have good relationships with the right people to liquidate some of it, that is more seasonal, and we also have the ability to migrate some of that product into 2013 as we've done in the past. And of course, as I've said, there may be some retailers that really don't value the long-term opportunity to sell UGG, and they'll demonstrate that in how they behave, and we'll pay attention. Scott D. Krasik - BB&T Capital Markets, Research Division: Yes, I know. I appreciate that. And then, Tom, I think or at least the message that you guys are trying to get across on the call is that you're trying to be very flexible whether it's an inventory store opening's expenses. So maybe sort of how flexible do you think you really are in your expense structure? I know you don't want to give FY '13 SG&A guidance, but what type of flexibility do you think you have?

Historically, you've seen the number there, there is a fair amount of fixed cost in the structure. But that being said, the fourth quarter, let's get through it and see the challenges or the opportunities there, and everything, in our mind, is up for grabs for evaluation reviews, zero-based approach, those kinds of approaches to get competitive and work on our margins. So that, I think, that's the best way to answer that. In the inventory, I just want to follow up on that earlier question on the call. I mean, there is like 4 to 5 months lead times, but that's something that we've already been considering, what kind of first quarter receipts that we're going to receive. We evaluated some of those, some of the risks and adjusted the inventory receipts, talked to the factories in the third quarter even on some of these things. So we're -- store openings as well. We -- the current thought, given the returns on capital of these stores, is to open up a similar amount next year. That being said, we're not committed for much more than a handful of additional stores at this point in time as we speak. So there's a lot of flexibility on the store opening schedule as well.

And we'll take our next question from Camilo Lyon with Canaccord Genuity.

Angel, so just trying to parse out some of the weather influence. Maybe you could share some of the warmer weather climate UGG sales in the California region or in the Florida region, and maybe give us an indication as to the demand trends for the brand where weather doesn't influence that purchasing behavior.

Certainly, yes. We haven't seen a falloff in demand for the brand in the warmer market. So that's been a good thing. And I think generally speaking in the market, well, California is a little different because it gets very -- it's cool at night here. Even year round, it's cool at night. And so people wear it as a comfort shoe in the evening. So it's not unusual, and you've probably seen that as you've traveled around California. So there is a slight difference in terms of utilization of the product. On the East Coast generally speaking, it's humid in the summer, humid at night. You're not thinking of a shearling boot or a slipper. So there is that. But we've answered that because of the product innovation. There's a lot of spring product that is much more appropriate for warmer climates. It's quite thin, low pile sort of shearling. We've got different., coming there are different innovations for breathability. So all of that is in the works. And our goal really is to focus as much on the comfort component of the brand as on the perceived weather component of the brand. And the 2 things have to be equal from a product development and technical innovation point of view. And that's what we're doing. You've already begun to see a lot of that with the spring line, which performed -- has been performing quite well. We'll continue to do more of that, and I think the -- some of the innovation we have in mind that is already implemented should give us more flexibility to design product that's appropriate for almost any climate.

Okay, great. And maybe shifting gears a little bit, can you talk about any changes you might be seeing in the competitive landscape as it relates to the UGG business? It seems like there is -- we've seen new entrants coming into the category. And you really haven't had much competition for the past few years. So if you could share any insights there, that would be great.

Well, actually we've had a lot of competition in the past year that's been in the form of counterfeit and been in the form of knock-offs. And that does represent a significant amount of competition outside of the U.S. as much as in the U.S., more so in markets like China, for example. So we've gotten pretty good at addressing those issues and going after those folks. And that type of competition is sort of -- is insidious obviously, because they are trading on our intellectual property. When it comes to competition of other people in the sheepskin business, what we find is that the -- I'm not -- I've never, for a minute, believe that we would have this category to ourselves. I think there's always competition in the marketplace, and that's the power of the brand. The most important thing we have to focus on is the power of the brand. And that's why we've been really prioritizing the marketing efforts that we've been making. Even in many cases where people are confronted with a competitive product at a lower price point, they purchase the UGG product at a higher price point because of the perception of quality and durability, et cetera. So -- and there is something different about our sheepskin. I mean, there's something different about how our product feels. We intend to continue exploiting opportunities and innovation, design, product quality. And as we have demonstrated with this price adjustment, we're very sensitive to the consumer price-value relationship that exists. So our brand has to offer a variety of price points to consumer so they can access the brand according to their opportunity. Now, that doesn't mean we're going to go down market and low-quality product, but it means that any reasonable -- a good quality product that can be UGG will address it in price points going forward because we don't feel that it's wise to give all that market share up to people who would trade on what we've already done and then come in and undercut us with inferior quality. So we intend to really pursue that aggressively, but not -- never compromising the quality of what we're doing.

Okay. And then just lastly for Tom, what would cause you to open fewer retail stores next year? Why would you need to see to pull back on that 30 or so that you talked about, since you only committed on a handful?

I think there will be a lot of factors we evaluate, but one of them be in the fourth quarter depending on how we finished the year off. And let's say, we have some worse-than-expected comps and the weather's cooperated, I think that's something that we'll have to consider seriously when evaluating future store opening plans.

And just lastly, can you remind me the split between international and domestic new store openings for next year of that 30?

We haven't -- I think we're stuck at -- we're still on the planning stages on that. A year ago, the thought was maybe 2/3 of that would probably be international and 1/3 domestically, but we're still evaluating that as well.

And we'll go next to Chris Svezia with Susquehanna Financial Group.

I have a question. I just want to understand the comp projection for the fourth quarter. I just want to make sure I have this correct. So you're expecting your comps to be down 11%, but, Tom, you're making some comments that you expect it to be up 10%. I'm a little confused by the logic.

Let me clear that up. Yes, I mean, the third quarter comp was down about 13%, and at this point in time from a -- given the inconsistency we've seen in the business so far, we want to be cautious, and we've modeled an improvement of 10% on that negative 13%. So that gives you roughly a negative 11% comp.

Oh, I see what you're saying. Okay. I mean, with all the pricing reductions you've done and the changes, when you look at your company-owned retail business, you made some comments the weather has changed, you've seen some improvement. Can you share a little more color about what you're seeing, Because I think that's important. And if you're seeing any improvement whatsoever, why still such a dramatic negative comp for the fourth quarter? Against an easy comparison, if we look over 2-year stack basis, it's implying a very, very kind of negative trend in that fourth quarter. So I'm just -- maybe you could talk about that a little bit.

Yes, I mean, it's early in the quarter. The results today although better, have been inconsistent. They seem to be more weather-dependent than we've historically seen. It's not an execution thing. It's not an operation thing, it's not an availability of inventory thing, it's just early in the quarter, and we want to be cautious from that point of view.

Okay. And then just on the wholesale business, when you mentioned on the inventory, you said that you weren't anticipating any cancellations, or could you just clarify that comment on the cancellation rate for the fourth quarter in the wholesale business? You made some comments about pricing reductions and therefore you didn't have cancellations, I just wanted to understand.

Some of the -- another element on the background relative to adjusting prices was to be cautious about what cancellations may occur in the fourth quarter, so that, that was also another decision factor in the price change. So to this point in time, there's still i.e. in the footwear business, there's an opportunity for cancellations. But given where we're at right now, we haven't really modeled any cancellations of any significant -- any significance into the fourth quarter guidance.

Okay. And I guess that would change, I mean if the weather turned against you, obviously that would change that, that picture there, is that fair to say?

Yes. It would certainly be something that the major players would have to consider. Gets back on, just like you said, gets back on Angel's comment whatever their inventory level is.

Okay. And then just lastly, just on the international side, which you haven't really talked too much about. I guess -- what, I guess, are your thoughts, you've seen before, I mean, U.K. was a little bit worse than, I guess, I thought it would've been, but can you talk about some other markets, just visibility there, just kind of your thoughts going forward, any potential churns, anything at all as it pertains to international side of the business.

Yes, I'll give you some color on that, on -- for the fourth quarter, when I talked about some of the European wholesale and distributor business being down some. That's really not a U.K. phenomenon that business has still some challenges, but it's really more of the Netherlands part of the Benelux phenomenon and then and our Japanese wholesale business continues to grow. We're pleased about that, and also in Asia Pacific, we have a new distributor in Korea, good sized footwear market. We're excited about that opportunity and we're excited about other launching other brands into China, then there's Latin America as well. We're going to and won't get into some of our strategic planning relative to Latin America, but essentially. We're not there now. There's an opportunity there as well.

And there's -- we tend to focus on UGG in these conversations on these calls, but the fact is that Sanuk has a significant opportunity with retail particularly around the world. They currently operate over 50 stores, distributor-owned stores in Asia. And they performed quite well. They're not expensive to put up, and excellent margins. So that's an opportunity. The other thing, let me just say this about the U.K. Our business in the U.K. is actually improving, improving significantly from -- certainly from a cleaning up the distribution sort of point of view. We have a lot less promotional activity that's going on there now as a result of the team's effort to clean things up. We look a lot better at retail in terms of spread and assortment of product versus just being very classic-focused as we were in the past years. So that, I think, bodes well. And that business has very certainly stabilized. As Tom said, it's the Benelux and the economic downturn there that has been the issue in Europe.

And we'll go next to Christian Buss with Credit Suisse. Christian Buss - Crédit Suisse AG, Research Division: I was wondering if you could talk a bit about the cadence of SG&A, the declines this quarter and what implied acceleration of SG&A spend in the fourth quarter. Can you walk me through the puts and takes their a little bit?

Yes, in the third quarter, we had a combination of things going on in the third quarter. Some of which, mainly some marketing, close to $4 million shift to the fourth quarter. We had some FX benefit in the fourth quarter in SG&A, the retail expenses came in lower than planned and lower legal expenses than originally planned. And then you move into the fourth quarter, you're going to pick up that marketing expense and open up more retail stores. And I think that the fourth quarter is obviously the biggest SG&A quarter. More marketing, significantly more relative to the prior year in the fourth quarter. So that's... Christian Buss - Crédit Suisse AG, Research Division: Okay. That's helpful. And did you make any shift in you're plannings for discretionary SG&A spending? Have there been any reductions, any headcount reductions, any proactive shifts in the SG&A spend?

We've -- to my earlier points, we have been very cautious there and very prudent there in terms of managing manpower, managing the growth of manpower in the fourth quarter. We've been more cautious on some legal in terms of how we can be even more productive. We're very productive from an anti-counterfeit perspective and finding the bad guys around the world. But we're more and more, evaluating more effective methods to do that. And most of the times, those are more cost-effective methods. So those are some -- just some of the initiatives that we've undertaken to try to control the SG&A.

And we'll go to our next question from Diana Katz from Lazard Capital Markets.

On the price adjustments domestically, can you comment on the decision to limit the adjustments to just 3 styles? There's still quite a few classic boots with higher prices year-over-year, like the Bailey triples still at $230. Why keep the prices on the other styles?

Well, those were the key styles. Those are the more significant styles. We really -- it's a combination of the volume we do in those products and what consumers told us. That's really where the pain points were for consumers. So that's why that decision. We feel that on the -- like for example, the fashion product and the non-classic boots are priced well for the quality that we have in the product. We've seen lots of boots out there in the market at $180 and $200, but frankly, the quality is not what we would feel acceptable. So we're trying to work very hard to offer better quality at the most competitive price we can. And as the next year rolls around with some of the innovations, you're going to see even more of that.

Just on the fashion side, do you feel that you have the right fashion this season, and are you open to considering promoting your fashion products when needed to be more in line with how your competitors are running their businesses?

Well, we feel that we have the right fashion once the product was delivered as I mentioned. There were some late deliveries, and so what people may have seen as our fashion collection early in the season, if they go out and look at the line now, they'll see it's a much more complete assortment, primarily because we had late deliveries from factories. So -- and our performance at retail with those products has improved significantly since the complete line arrived at retail. In terms of how people operate, that's up to the retailer. They'll make decisions about what they do. Our approach is to offer the best quality product we can at a very fair price. We have been constrained again as I said because of sheepskin pricing, and we feel that those constraints are being mitigated through everything we're doing for next year. So you're going to see next year much sharper price points given some of this innovation and more aggressive approach to our assortment and being very precise about the kind of assortments we put together. In other words, we now have had enough experience in the fashion boot market that we have a sense of what is appropriate UGG product, what people want from us and what opportunities there are. And we intend to be very competitive in going out and getting that.

Okay, great. And then, Angel, you mentioned in Europe when discussing the businesses there some issues in the Netherlands, can you elaborate on that?

Yes, that's our Benelux region that we were directing there. That market has been a challenge. They've -- to drill down into the macro issues in Europe, the Netherlands has had many issues there. They've had some leather as well, but that market is characterized by a lot of smaller independents as opposed to major retailers. So as a result of that, they're more sensitive to macroeconomic issues and inventory buildup because of the weather and things like that. So that's been the issue there.

Okay. And just to remind me, is the Benelux larger than the U.K. of a market for you.

No, it's a smaller market.

Smaller market.

Ladies and gentlemen, that does conclude today's question-and-answer session. At this time, I'd like to turn the conference back to our speakers for any additional or closing remarks.

Thank you very much, everyone, for participating on the call. I hope you get the sense that we're certainly not sitting here waiting for the weather to punch us in the face. That's not our approach. We've been proactive at controlling expenses. We've been proactive at innovating new product. We've been proactive at expanding retail opportunities to maximize profitability, and we'll continue to do that. And I think the key word is flexibility, where we've looked at our business and said, "Okay, what are the things that we need to address to continue to be a profitable great opportunity for investors." And that's our long-term objective, and we will continue to perform. Obviously, this is not a quarter in which we're feeling great about everything, but we are feeling great about our strategy, we're feeling great about our brand, and we'll make whatever necessary changes we need to make to assure a profitable future. Thank you, all, very much.

And that does conclude today's conference call. Thank you for your participation.