Wolverine World Wide, Inc. (WWW) Q1 2012 Earnings Report, Transcript and Summary

Good morning, and welcome to Wolverine World Wide's First Quarter 2012 Earnings Conference Call. [Operator Instructions] This call is being recorded at the request of Wolverine World Wide. [Operator Instructions] I would now like to introduce Ms. Christi Cowdin, Director of Investor Relations and Communications for Wolverine World Wide. Ms. Cowdin, you may proceed.

Thank you, Andrew. Good morning, everyone, and welcome to our first quarter 2012 conference call. As always, on the call today are Blake Krueger, our Chairman, CEO and President; and Don Grimes, our Senior Vice President and CFO. Early this morning, we announced our financial results for the first quarter of 2012. If you did not yet receive a copy of the press release, please call Brad Van Houte at (616) 233-0500 to have one sent to you. The release is also available on many news sites or you can view it from our corporate website at www.wolverineworldwide.com. Before I turn the call over to Blake to comment on our results today, I'd like to caution you and remind you that the predictions and projections made in today's conference call regarding Wolverine World Wide and its operations may be considered forward-looking statements by securities laws. As a result, we must caution you that, as with any prediction or projection, there are a number of factors that could cause results to differ materially. These important risk factors are identified in the company's SEC filings and also in our press releases. And with all of that being said, I would now like to turn the call over to Blake.

Thanks, Christi. Good morning to everyone, and thanks for joining us today. Earlier this morning, we reported our financial results for the first quarter, concluding another solid performance for the company despite soft retail conditions in some parts of the world. While we had planned for relatively soft revenue growth in each of the first 2 quarters of the year, revenue performance in the first quarter was slightly below our internal plan and was adversely affected by weak retail conditions in Europe, attributable to the recessionary environment in that region. Q1 revenue was also impacted by the timing of shipments from our lower margin military business. At this point, we do not expect any significant short-term improvement in Europe and have adjusted our full year revenue guidance to reflect the recessionary market conditions in that region. Despite these headwinds, our team was able to deliver good earnings performance in the quarter. Earnings exceeded our internal plan as SG&A discipline and proactive pricing increases helped us maintain a healthy gross margin. An excellent outcome from our global CAT planning strategies led us to raise our earnings guidance for the year today. Globally, fashion and macro lifestyle trends continue to work in our favor. The global consumer is interested in authentic Heritage brands, brands that stand for something and have withstood the test of time. Americana styling and prep also continue to drive consumer demand around the world. The boot trend and the consumer focus on health and wellness also remain strong. As one example, Merrell Barefoot continues to perform very well. Don will provide more details on the financials in a few minutes, as well as our updated full year guidance. We remain very optimistic about the most global consumer markets -- about most of the global consumer markets in which we do business and plan to deliver another record year of sales and earnings. Now I'll spend a few minutes talking about the performance of our brands, starting with the Outdoor Group. The Outdoor Group, which includes Merrell, Chaco and Patagonia Footwear, remained the company's largest revenue and earnings contributor in Q1. While Chaco and Patagonia Footwear turned in solid revenue growth, softness in Europe was the primary reason for the Outdoor Group's flat revenue performance in the quarter. Turning first to Merrell, where the Merrell Barefoot Collection continues to drive performance and open up the new distribution for the brand. Merrell continues to invest heavily to enhance its leadership position in the barefoot category and in Q1, launched a pretty strong marketing campaign focused on female athletes and runners. The minimalist running landscape has become increasingly competitive in the U.S., but our investments in advertising, point-of-purchase programs, social media and education, as well as planned category expansion, have allowed Merrell to maintain and increase its share of the fast-growing barefoot minimalist market. The barefoot minimalist trend continues to gain traction internationally with Merrell positioned to be the clear leader for this category. Outside of barefoot, Merrell continues to grow its market share lead in the core hiking and light hiking category, gaining incremental 150 basis point year-to-date according to NPD. Market data also indicates that Merrell has increased its market share over the last year in the outdoor footwear category, with a significant gain in the important outdoor specialty channel. Merrell also continues to grow in the women's lifestyle and casual product category. The women's land sandals, heel-clog and Lorelei sport casual programs experienced very high sell-through in Q1 and correspondingly high reorder rates. Strategic inventory investments in key files allowed us to fill in replenishment orders during the quarter. Chaco, our pure outdoor adventure brand, turned in strong growth in Q1. The brand's expanded closed toe collection of boots and shoes, and the unseasonably warm early spring in the U.S., led to strong sell-through at Retail and a great start to the sandal season. These initiatives have helped drive a substantial market share gain for Chaco. The launch of the new custom Chaco made in USA program, called MyChacos, also generated substantial consumer interest, as loyal brand friends can now design and create their own Chacos. We remain very bullish about the growth prospects for Chaco. Patagonia Footwear also achieved very good revenue growth during the quarter, led by the success of the multisport and trail running category. We are leveraging the Patagonia brand in partnership with 1% For The Planet to fuel the brand's presence at retail and drive sell-through. Next I'll focus on the Heritage Group, which includes the company's oldest brand Wolverine, our 2 largest licensed footwear businesses, Caterpillar and Harley-Davidson, as well as Bates and HyTest. During the quarter, very good growth in the Wolverine brand was offset by plan declines in Bates and Harley-Davidson Footwear. The Wolverine brand led the way for the Heritage Group in Q1, as the brand maintained its #1 position in the important U.S. work market with strong sell-throughs of the Contour Welt and DuraShocks product offerings. 2012 marks the 20th anniversary of the patented DuraShocks comfort technology, with more than 25 million pairs having been sold around the world during that period. The Wolverine 1000 Mile collection continues to exceed our expectations in the premium priced men's street segment. This collection has been expanded to the women's category with the introduction of the 1000 Mile collection designed by Samantha Pleet. The response to the new made in USA women's offering has been very strong, and the line will be introduced this fall in some of the most influential footwear and fashion independent retailers in the U.S. Turning to CAT. CAT Footwear achieved double-digit gains in the U.S. and international markets in Q1, although these increases were offset by soft retail conditions in Europe and Canada. In the U.S., CAT continues to take market share in both the industrial and lifestyle categories. The lightweight anti-fatigue Flexion product drove a substantial market share gain in the work category et al as reported by SportsOneSource data. Now on the lifestyle side, the women's authentic rugged boot product and the men's Legendary RAW collection drove high double-digit growth in the lifestyle category. The CAT international distributor business generated a strong double-digit increase in the quarter. In part, this increase was the result of our international partners opening up mono-branded CAT retail stores, selling CAT footwear, apparel and accessories. We ended the quarter with 25 CAT lifestyle stores and another 10 planned for the remainder of the year. Next, I'd like to discuss the Lifestyle Group, which includes Hush Puppies, Sebago, SoftStyle and the most youthful consumer brand in our portfolio, Cushe. Overall, group revenue for the quarter declined slightly, primarily due to softness in the Hush Puppy businesses in Europe and Canada. Starting with Sebago. Our premium New England Heritage brand led the way for the Lifestyle Group in Q1, growing revenue at a very strong double-digit pace. New product initiatives and the continuing strong consumer trends for Heritage brands, prep and boat shoes drove increased demand for Sebago in all major markets. In the U.S., expanded assortments at key retailers like Nordstrom's, Macy's and the Walking Company had positioned Sebago for growth, as revenue with these accounts is up triple digits and sell-through remained strong. Also the new TriWater collection, featuring the toughest shoes on the water, has been enthusiastically received by retailers and allowed the brand to gain placement at retailers such as Bass Pro Shops, West Marine and MarineMax. Sebago's collaborations, such as the Artisan and Filson collections, continue to drive growth in the high-end department stores and the most influential boutiques around the world. Sebago posted solid growth in Europe and our new lifestyle store on Regent Street in London reconfirms the brand's premium positioning in that market. Turning to Hush Puppies. Solid performance in the U.S. and international distributor markets was offset by declines in Canada and Europe. The brand continues to gain traction in the U.S. with expanded offerings and excellent sell-throughs in the department store and independent channels. Our extensive international distributor and licensee business remains a key strength for Hush Puppies as the brand ended the quarter with about 570 concept stores and approximately 3,300 shop-in-shops around the world. Finally, Cushe, our action sports inspired brand, delivered another quarter of solid revenue growth with momentum fueled by a particular focus on an expanded women's range and a deeper penetration of core actions sports retailers. The women's business is growing at a faster pace than men's, and continues to capture shelf space at key U.S. department stores and independents. Cushe is also taking shelf space in the sandal category and has a 50-door test for both men's and women's sandals later this summer at a leading U.S. franchise retailer. We remain very bullish on the future growth prospects for Cushe. Next our direct-to-consumer business had a great Q1, as revenue grew at a strong double-digit rate at both our brick and mortar and online stores. Comp store sales increased at a mid-single-digit rate for the quarter. Our e-commerce business also continued to grow at a very strong double-digit pace, driven by targeted investments in mobile commerce, as well as key brand initiatives like Merrell Barefoot and MyChacos. A little more than a year ago, we announced the formation of a new international group within the company. The primary purpose of which was to better align and increase our resources dedicated to accelerating growth in international markets. While our distributor and licensee business was excellent, and frankly remains so, our new international group was tasked with driving the regional strategies and growth for all of our brands in all markets outside of North America, either through our existing distributor and licensee business models or by taking advantage of expanded relationships and new business structures. The international group has also provided a vehicle for us to make significant investments in people and infrastructure to help our brand dominate on a global scale. Today, we announced the formation of a joint venture for our Merrell and CAT Footwear brands in India with the Tata Group, the leading industrial, retail and consumer business group in India. Late last week, we also announced the formation of a joint venture for many of our brands in Colombia with one of our long-time South American partners. Colombia is a country of almost 50 million people that, like many global markets, is experiencing accelerated economic growth. We have also recently executed a distribution agreement with the largest footwear and sportswear marketer and retailer in China, Belle International. This is for the Hush Puppy brand. Belle also currently handles the Merrell and CAT brands in China for us. We're obviously excited to announce these new initiatives, all of which reflect our enhanced business relationship with strategic partners, as well as our strategic focus on driving accelerated growth in key global markets. Despite the macro economic headwinds in Europe and the tepid pace of the recovery in some key markets, we remain focused on expanding our already significant global footprint, maintaining a leading position in product innovation, strengthening our connection with our core consumers and delivering another record year for our shareholders. I'll now turn the call over to Don Grimes, our Senior Vice President and CFO, who will add some additional commentary on our Q1 results and expectations for the full year. Thanks.

Thank you, Blake, and good morning, everyone. This morning, I will review our first quarter financial results in a little more detail, update our full year expectations and provide some color on the second quarter. Earlier today, we reported first quarter revenue of $322.8 million, a decline of 2.4%, compared to first quarter 2011 revenue of $330.9 million. It's worth noting that last year's revenue represented a growth of 16.1% versus the year prior. Foreign exchange negatively impacted revenue by $2.2 million in the quarter. The quarter's results were impacted by challenging trading conditions in a couple of regions, most significantly in Europe, where we do about 20% of our business. In the United States, our largest market, our Wolverine, Caterpillar Footwear, Chaco, Cushe and Sebago brands all posted mid-single-digit to double-digit gains. Additionally, the international distributor businesses for Sebago and Caterpillar Footwear each delivered strong double-digit increases. Most notably during the quarter, our consumer direct business had outstanding results as it delivered nearly 19% revenue growth on a strength of mid-single-digit comp store sales gains, new locations and continued strong double-digit growth from the e-commerce channel. The quarter results were impacted by both the continued macroeconomic concerns in Continental Europe emanating from the sovereign debt crisis and its impact on consumer spending, and more specifically, bankruptcy proceedings for several key footwear retail chains in the United Kingdom, our most significant European market. And in the U.S., we saw retailers take a more cautious stand towards future orders following the fall-winter season that fell short of expectations due to the unseasonably warm weather. On a more positive note, current inventories across our retail channels are lean and our sell-through rates remained strong, results that have had a very positive impact on reorders thus far in Q2. Turning to our international businesses Blake just discussed, we are tremendously excited about the new joint ventures in Colombia and India announced late last week and this morning, respectively. We will now have a more meaningful business interest in Colombia, a country where well over 100 million pairs of shoes are purchased each year and an economy that is growing at an accelerated pace. And India is an incredibly promising market, the world's largest democracy with a fast-growing middle-class that has an appetite for Western brands. These are great examples of the benefits we are reaping from the important work of our International Group as they focus their time, talents and resources on regions that represent significant potential future growth for the company. We look forward to more exciting announcements in the future. Our Outdoor Group, which consists of Merrell, Chaco and Patagonia Footwear, had revenue of $137.1 million in the quarter, almost flat compared to the prior year. Our Merrell brand was impacted in the quarter by the economic challenges in Europe and reduced open-to-buys within certain retail channels. Many of our key retail partners reported that Merrell had continued to outperform its competition on the sales floor and online, an assertion that is supported by the fact that Merrell's at-once or replenishment orders were up over 20% in the first quarter. We view this as a strong sign that the brand is positioned to continue to perform well in challenging trading conditions and also has the innovative, market-right product to accelerate growth when global market conditions improve. Patagonia Footwear and Chaco each grew their revenue in the quarter in the mid to upper single-digit range. The Heritage Group, which consists of our Wolverine, Caterpillar Footwear, Bates, Harley-Davidson and HyTest businesses had revenue of $103 million in the quarter, down just over 7% versus the prior-year. Global growth from Wolverine footwear and apparel and growth from Caterpillar Footwear in the United States and third-party distributor markets were offset by 3 things: expected lower revenue from Harley-Davidson Footwear, reflecting the brand's narrow distribution channel; the timing of orders on Bates military contracts, which are weighted towards the back half of the year; and finally, and not to sound like a broken record, but the difficult economic conditions in Europe. The Lifestyle Group, home to Hush Puppies, Cushe and Sebago, generated revenue of $50.6 million during the quarter, a decline of 2.7%. Hush Puppies revenue remained even with the prior year in the U.S. and third-party licensee markets. However, this is offset by the impact of the bankruptcy proceedings at several key U.K. retail customers and again, the overall economic challenges of Continental Europe. Cushe and Sebago both grew their revenue during the quarter as product initiatives such as Cushe's Surf-Slipper and Sebago's popular product collaboration continued to produce positive results. Wolverine retail delivered a standout performance in Q1 driven as noted by mid-single-digit comp store sales growth and another quarter of strong double-digit growth from our e-commerce business. We ended the quarter with 101 brick and mortar locations and 41 e-commerce websites, and we look forward to continued impressive performance from this group. We still plan to open 12 to 15 new retail stores during all of 2012. Gross margin in the quarter decreased modestly to 41.0%, a decline of 60 basis points versus the prior year. Selling price increases and FX contract gains were more than offset by higher product costs and a negative mix shift, the latter being driven by higher closeout sales and lower contribution to some of our higher gross margin brands. Consistent with our prior expectations, we project favorable gross margin comparisons later in the fiscal year, especially the fourth quarter, driven by a more benign product cost environment, expected positive sales mix and moderately lower LIFO expense. Our operating expenses in the quarter came in meaningfully below plan as we exercise the appropriate discipline around discretionary spending. Total SG&A of $95.2 million was up 7.8% with almost all the increase driven by incremental non-cash pension expense, occupancy and labor cost associated with our new retail stores, higher bad debt expense and some non-recurring employee separation cost, the benefit of which will occur on the remainder of the fiscal year. SG&A was 29.5% of revenue, up 280 basis points versus the prior year, but meaningfully better than our original plan, even though revenue fell a bit short of our expectations. Over the balance of the year, we will continue to support our brands through investments innovation, product design and consumer awareness while maintaining strict financial discipline in all other areas. Fully diluted weighted average shares outstanding in the quarter were 48.2 million, down from the prior year's 49.2 million, reflecting both the approximately 65,000 shares we repurchased in Q1 at an average cost of $37.09 per share and the 1.7 million of shares that we repurchased in the last 3 quarters of fiscal 2011. The company has approximately $86 million remaining under its current share repurchase authorization. Getting to the bottom line, fully diluted earnings for the quarter were $0.64 per share, a decrease of 11.1% versus the prior year, but significantly better than the range of $0.50 to $0.56 communicated in January. The better-than-expected results were driven by a favorable ruling related to the computation of the taxable income of our Asian sourcing operations that resulted in a $5.6 million or $0.12 per share benefit in the first quarter. Although most of the benefits relate to prior years, the favorable ruling will have a positive impact on our go-forward effective tax expense of about $1 million per year. This outstanding news reflects the efforts we've made over the last few years in the international tax planning arena. Our balance sheet remains strong. Inventory at quarter end was up approximately 6%, driven primarily by additional inventory to support new product initiatives, such as Merrell Barefoot, and the impact of product cost increases. We finished the quarter with cash and cash equivalents of approximately $123 million and approximately $70 million drawn on a revolving credit facility. The revolver balance is in support of seasonal working capital requirements as our fiscal first quarter is typically a quarter of negative free cash flow. We also cut our defined benefit pension plans, fully funded from an actuarial perspective. Our strategy for the use of our strong cash flow and ample liquidity remains the same: fuel the organic growth of our existing brand portfolio; fund potential new acquisitions; and return cash to shareholders via regular dividends, and when appropriate, share repurchases. Based upon the first quarter results, our expectations for the remaining 3 quarters of the year, especially the trading conditions in Europe, we are adjusting our outlook for the full year revenue to a range of $1.46 billion to $1.5 billion, representing growth of 3.6% to 6.5% compared to the prior year. This will represent the company's third consecutive year of record revenue. Although our current consolidated backlog is down in the mid single-digit range versus the prior year, it's important to remember that about half of our overall business is in the form of at-once or replenishment orders, and it is our expectation that at-once business will be very strong over the balance of the year. I'll share with you that our Q2 to-date consolidated at-once business across all brands in the portfolio is up almost 20% and was up almost 30% just this last week, supporting our belief that retailers have shifted and will continue to shift a substantial portion of their business to at-once orders and that our brands continue to sell through well at retail. We continue to expect that full year revenue growth will be heavily weighted to the back half of the year, especially the fourth quarter, when the comparisons to a more modest prior year growth rate. Embedded in our revenue outlook are the expectations of a stable U.S. economy, continuing to up trading conditions in Europe and a moderately stronger U.S. dollar over the balance of the year. This is probably the appropriate time in my prepared remarks to let you all know that over the balance of the year, we're going to wean you off of the backlog as the business metric. First, as I just mentioned, about 1/2 of our wholesale business comes in the form of at-once orders, orders that spend very little time in the backlog before being fulfilled. Second, as we evaluated this, we looked at data over the last 16 quarters, comparing the relationship between the beginning of quarter backlog position and the ultimate revenue growth recorded in that quarter, and there's just very little correlation. We see quarters where the backlog was soft and we delivered much stronger revenue performance, and we see quarters where backlog is up strongly, as it was most of last year. And while our revenue growth is outstanding, it's still well below where the backlog would have predicted. Reasons for this include the significant swings in the ordering pattern of retailers between future and at-once orders, large fluctuations in the magnitude of order cancellations from one year to the next, volatility and third-party factory capacities, which leads to customer orders being placed earlier or later due to lead time expectations, and just general changes in retailers' collective psyche, as they continue to push a portion of the inventory carrying burden back to brand owners and wholesalers. We didn't want to completely abandon the discussion of backlog without giving you some time to adjust to our decision, but we will be moving in that direction over the balance of the year and encourage you to rely on our revenue guidance, which takes into account all the factors just noted, and is grounded in detail by brand, by geography and by key account analysis. We are raising our full year estimate for diluted earnings per share to a range of $2.70 to $2.80 per share, representing growth of 8.9% to 12.9% over prior year earnings per share of $2.48. The lift in earnings guidance is attributable to a lower projected tax expense versus the prior guidance of about $0.10 per share, as the $0.12 per share benefit in Q1 is slightly offset by a projected negative mix shift between high tax and lower tax jurisdictions, resulting in a full year effective tax rate of approximately 25%. We still expect modest growth full year gross margin expansion and modest full year operating expense de-leverage, with the latter being driven by an incremental $0.15 per share of non-cash pension expense. We were pretty open in January about our view of Q1, and not surprisingly, we received positive feedback about how helpful the commentary was. Given the continued unusual volatility in our revenue earnings growth this year, we thought we should give you a little more color on how we see this year's second quarter compared to the second quarter of last year when revenue grew more than 20% and adjusted EPS grew more than 23%. We are currently projecting revenue in a range of flat to up low single-digits in the quarter, gross margin flat to slightly down versus the prior year, and slight SG&A de-leverage, driven primarily by the increased pension expense. The full year effective tax rate of approximately 25% just mentioned, reflects the inclusion of the Q1 non-recurring benefit in the full your calculation. Q2's effective tax rate should be approximately 27.5%. As a result, we expect fully diluted earnings per share in the range of $0.40 to $0.45 per share in the quarter. Fiscal 2012 is going to be a year of focus on execution. We'll bring you the company with the lifestyle brands, talents and global consumer following that enables us to outperform in a variety of geographies and retail environments, even when those environments are being challenged by macroeconomic factors. The brands with the best, most innovative products typically win, and we have continued to invest in innovation and remain focused on exceeding the expectations of our global consumers. Thank you for your time this morning. I'll now turn the call back over to Blake for some final comments.

Thanks, Don, and thank you, all, for your time this morning. We'll now turn the call back to the operator so we can take your questions.

[Operator Instructions] The first question comes from Christian Buss of Credit Suisse.

I was wondering if you can provide a little bit of color on the Merrell brand in the United States and what you are seeing there? And what gives you confidence in the continued growth potential in that market?

Well, when you focus -- let's look at Merrell just in the U.S., which is its largest market. I guess, we're focused first of all on sell-through reports from retailers, which remain very strong. And then also, as you know, we pre-line our spring and summer lines to retailers well in advance of introduction. We've received simply excellent feedback. I think the -- like many retailers, I think there's been some challenge on the inventory side coming off of the very warm fall and winter in the outdoor specialty arena. This is probably true for all retailers, but in particular, retailers that carry a lot of hard goods and soft goods, ski jackets, skis, things really focused on a normal winter. I think they came off the fall and winter selling season with a little too much inventory, not necessarily in footwear, and they've been weaning that down through the first quarter. So what we've seen is pretty much what we expected from Merrell in the short term, which is a substantial uptick in at-once orders, a substantial uptick in at-once orders above our company average in Q2. As these people get back into the market, they've pretty much adjusted their inventory levels, and they're now back to buying what's selling.

The next question comes from Jim Duffy of Stifel, Nicolaus.

A handful of questions for you guys. Don, help us to get a handle on the tone of business by different regions. Can you compartmentalize it? How much was the U.S. business up in the first quarter, how much was Europe down, sounds like Canada was down. Is there a way that you can separate the brand commentary into just a more holistic view?

Yes. I mean, stepping back, I mean, Europe and Canada were down and the U.S. was essentially flat, and the other areas had small -- or had growth. And so really the overwhelming factor obviously, in terms of our reported revenues is Europe, Canada and the U.S. And Canada was a bit down due to some kind of retailer difficulties, Pierce [ph] Canada and Forzani, in particular. Europe was down more than that for all the reasons we talked about during the prepared remarks and U.S. was essentially flat.

Okay. And then with respect to the decline in Europe, is there a way to isolate how much of that was related to the U.K. bankruptcy proceedings that you mentioned?

It's difficult to do that. I would say that throughout Europe, the U.K. is one of the most challenged markets right now, although there is certainly a recessionary environment in a lot of the countries in Europe. The one good thing about the U.K. administrative bankruptcy proceedings is the fast process, unlike the United States Chapter 11 or some others. So it's possible for retailers to go in, cut a deal and come out much quicker than the United States. All that -- and that happened in the U.K. That being said though, we had 2 of our very largest customers go into administration, and certainly, had an impact on Q1.

I mean, certainly, as we said I think either in the last call or the call before that, Jim, the U.K. represents about 1/2 of our European business. And with those 2 key retail customers, particularly for Hush Puppies and Merrell, that went through the administration proceedings, certainly caused a dislocation in their ordering pattern that impacted Q1. And in addition to that, the incremental bad debt expense that I referred to in my prepared remarks was about $0.01 a share on the earnings line.

I see. Okay. And then as you mentioned, Don, anniversary-ing the difficult comparisons from 1Q a year ago was challenging, 2Q looks to be an even more difficult comparison. What gives you the confidence that you can hold revenue flat or grow it against that comparison as implied by your guidance?

Primarily, the at-once order trends, they were strong for most brands in the portfolio in Q1. If you adjust our Q1 at-once business for the Harley-Davidson and Bates business, Harley-Davidson because of known factors of narrow distribution channels and Bates for timing shifts of some military contracts, if you adjust that out of our Q1 at-once orders, the at-once orders were up mid single-digits in Q1 and they are up by a multitude of that Q2-to-date, as I mentioned. So a 20% on a quarter-to-date basis and up 30% just last week. So we believe, again to repeat what Blake said in response to Christian's question, I believe that our key brands continue to sell-through well and now that retailer inventory are coming more in balance and we're getting the reorders. The business is coming in the form of at-once orders and not future orders. So obviously the backlog isn't where we would want it to be but we are seeing very positive at-once order trends.

Great. That's encouraging. And then Blake, at the ICR Conference in your presentation, you mentioned a longer-term objective for the business of a double-digit revenue growth. Help us understand how you guys are going to close the gap between the mid single-digits implied by your full year guidance and what you hope to do with the business over the longer term?

Yes. While I think you've seen a couple of announcements just in the last couple of days, Jim, that reflect that. We're going to move down the channel in certain select international markets and geographies, India clearly a big time potential for the company, but also a country like Colombia. But in addition, we are also focused on driving upper single-digits or double-digit organic growth in our existing businesses. Some years, it will be above that, some years it will be a little more challenged. This year, we've frankly got the challenge of Europe's during this down, and I guess, it's not just us in Europe. I think Kellogg announced this morning they took their revenue and earnings guidance down for the entire year, primarily because of Europe. So it's a challenge that everybody is going to be facing in many different product categories.

Jim, I don't want Blake to take the blame for something that I said at ICR, but I think it was in my prepared remarks that I said our longer-term goal was high single-digit revenue growth and earnings growth even stronger than that. But I don't want to everyone to forget the fact that we did grow our revenue at 13% and 12-plus percent in the 2 years prior to this fiscal year. So if there are some challenges this year related to Europe or other things that are kind of beyond our control, I don't want to lose the side of the fact that we did grow our revenue at the double-digit rate in 2010 and '11.

The next question comes from Edward Yruma of KeyBanc Capital Markets.

Can you talk a little bit about the U.S. pricing environment? I know that you've opportunistically taken price to offset some of the cost challenges. In particular, focus maybe on the Barefoot running category, since it's gotten more competitive.

Yes. Just to focus, a little -- first of all, I think we are entering a phase, the second half of this year, that's going to be the most stable pricing environment that we've had in probably 4 years. I'm not saying we're back to the good old days, but at least it's a much more stable environment for the entire industry. And that's reflected in our price increases. As you know, we've been proactively focused on price increases for at least 2.5 years now, taking them on a selective basis, some new introductions. We were probably one of the very few companies last year in the consumer soft goods space that maintained gross margins over 2010. So we have an inherent D&A and discipline in that regard. With respect to Merrell, we still have Merrell Barefoot tiered at the better grade distribution and better price points, but we've also introduced some new product access that is spectacular and that's about $20 less at retail. So you are starting to see some good, better, best pricing across that category, and Merrell is certainly participating in that strategy.

And more specifically across the portfolio, the whole, not just the U.S. comment, but our selling pricing increases this year's Q1 versus last year, benefited gross margin by over 300 basis points. But we had more of a negative impact from product cost increases this year than last year, even though the environment perhaps a little more stable. But last year's Q1 benefited from inventory prebuys that we did towards the end of fiscal 2010 that protected the gross margin or at least dampened the product cost increase impact in Q1 of last year, and it didn't have the same level of inventory prebuys this year. So we still were, I guess, the point to your question, is we're still rather aggressive with our selling price strategy in Q1.

Great. And you guys were able to control SG&A very nice in the quarter. Can you talk about kind of where you pulled back the reins, and kind of how sustainable it is going forward?

I think over balance of the year, we expect it to remain continuing very disciplined. It was almost all areas of discretionary spending were examined closely. We realized, going into the quarter we knew that our revenue was going to be challenging. We said in January, we expect a flat revenue versus the prior year and it's down about 2.4%. So we -- all areas of discretionary spending from purchase services to travel and entertainment, we just looked at better ways to run the business more efficiently. And a guess the SG&A performance in the quarter was even with the, I've referenced the $2.5 million of higher pension expense, the higher retail cost, as well as some employee separation cost, there's a benefit at which we're going to experience over the balance of the year. So we expect to keep a pretty tight hand on our spending over the balance of the year.

Great. And one final question. Was the Bates timing issue related to the quality issue that you had with some of those products last year?

No, it was not. Just the normal volatility that we experience in doing business with the government and their inventory levels.

The next question comes from Oliver Chen of Citi Research.

It's Oliver for Kate McShane. Regarding Europe, and thanks for all the color around that, what about the remaining 50% x U.K. Could you give us some color about what you may be seeing in other Western Europe markets like Germany and Spain?

Yes, I would say Southern Europe has been especially challenged. Maybe not as severe as the U.K. right now, but you take Spain and France and Italy and Portugal, I'm not even going to Greece, have all been impacted to a large extent. Germany, for the moment, is held up a little bit better, but frankly, if you visit those countries and read all the reports, like I read the reports, Europe right now is probably officially in another mild recession, and it's probably going to remain in a mild recession as they put on the spending breaks and they put in some fiscal austerity and at the same time, try to grow their economy, something that's frankly very difficult to do. So it isn't just one country. It isn't just the U.K. It's really spread around Europe. I would say though that Scandinavia has probably held up a little bit better than some other pockets.

What is the reason regarding Germany potentially holding up a little better than Southern Europe and the U.K?

Well, I'm not an expert on the German economic policies, but they've been -- fundamentally the Germans make things that the world wants to buy. Fundamentally, it can be a Mercedes, it can be a BMW, computerized knowing equipment. You name it. Fundamentally, the Germans got ahead of the game, as they do, and they have very, very strong exports. And that's held them up as the drag on the rest of Europe has increased.

Okay. We also asked regarding your Merrell Barefoot product. How would you speak to the nature of your competition? Is it a competition within a roughly comparable price range, or is the competitive landscape potentially less expensive product?

Well, I think it's across the board. As you know, our industry has never been wanting for competitors. We're a very competitive, fragmented industry. It helps to be a first mover. Merrell was one of the very first movers in barefoot. But I think to answer your question, some of it depends on how you define barefoot. So one service defines it as 0 drop from forefoot to heel as barefoot natural running. If you look at a broader category that includes that lightweight running, that category had significant double-digit increases this year. So there's competition from other brands. There's a competition at different price points, and Merrell is participating in that. But more importantly, from day one, Merrell has had a 360-degree program. They've had a special education website. They are viewed by the specialty running community and the outdoor specialty community is being the experts here. They've held health clinics. Their advertising has been focused on not wild claims, but education. And that's made -- help make the Merrell offering authentic and desirable.

And our last question is related to your thoughts on what you're seeing on the M&A market. How do you think valuations are looking? Do you feel like there's a potential pickup in activity in the marketplace at large?

Well, I think the M&A -- first of all, as we've said in the past, Don and I remain focused on acquisitions as a company over the last 15 years. We're very good at bringing new brands, whether the underlying business is good or not so good, into the company, nurturing them, giving them some global spread pretty quickly, and providing some mass. On a macro-environment, we see frankly, the tax uncertainty. What is the long-term capital gains rate going to be after December 31 of this year, is helping to create maybe a little bit more frothy M&A environment. People are just uncertain what's going to happen. Money, at least in the United States, remains relatively cheap by historical standards. So that's probably also weighing in to the minds of some sellers. So I can't say there has been a substantial uptick, but I think the market's been pretty robust. There's a macro trend going around, around the world, not just here in the United States. And that trend is consolidation, consolidation of brands and brand ownerships, but also consolidation of -- at the retail level as well. We think it's going to continue.

The next question comes from Taposh Bari of Jefferies & Company.

So, Don, I wanted to ask you a question. I know the backlog is going to become less meaningful or less disclosures, so while I have you, on the topic, so backlog down mid single-digits, outruns is running out about 20%, so about 50-50 split. If you average those out, you get to about a high single-digit kind of aggregate growth rate. And as I look at your implied revenue guidance for the rest of 2012, it looks like you're modeling roughly a mid single-digit type of revenue growth rate for Q2 through 4Q. So can you help me bridge that gap. I'm assuming that you're either not modeling a 20% perspective at-once trend line or you're giving yourself some cushion on some increased cancellations. If you could just give me some color on that?

There are a lot of factors that go into it. I mean, there is certainly, there are assumptions regarding cancellations or assumptions regarding how the at-once orders -- at-once business will be over the balance of the year. There is also the account that of what we call short future orders, orders that come in that are beyond what we would classify not at-once order, that still gets shipped out in the fiscal year. So I can appreciate the effort of trying to do the math on a quarter-by-quarter basis to kind of bridge, but the backlog that we cited as down mid single-digits, there's a different growth rate year-over-year comparison as you go Q2 versus Q3 versus Q4. So that's all reflected in the revenue guidance that we gave. So I think it holds together fairly well, at least when I've looked at the math and asked the challenging questions that I've asked internally. So we're looking at kind of flat to up low single-digit revenue as in second quarter. Obviously, stronger growth in the second half of the year to get to the full year revenue guidance that we cited.

Okay. So I guess just as a follow-up, are you expecting -- are you kind of expecting this elevated level of at-once business to kind of extend throughout the rest of the year, or are you modeling something more conservatively? And the second part of that question is, do you feel like your guidance adequately selects increased European risks at this point?

To the second question, yes. To the first quarter, I guess it depends on which at-once order trend you're talking about. Adjusted for Harley-Davidson and Bates in Q1, our at-once business is up in the high single-digits. Q2 to-date, for all brands in the portfolio, including Harley and Bates, is up 20% and as I've said in my prepared remarks, the last week they were up 30%. We're not modeling plus 30% or even plus 20% at-once business over the balance of the year, but we are projecting strong year-over-year increases in at-once business in Q3 and Q4.

That's helpful. The other question I had was I guess related to this recomposition of at-once versus prebook. How should we think about, I mean you're inventories are in great shape, so how should we think about -- your view on inventories as, I guess to Blake's point, there's more of an emphasis on the vendors taking on inventory versus the retailers in the past as they get moved to a more at-once dependent model?

Well, this is Blake. I guess, fundamentally, our view hasn't changed. And that view is -- and our philosophy is narrow and deep. So when you have 1/2 of your business, or this year maybe more than 1/2 of your business done at-once, you've got to be narrow and deep in the right stuff. You got to carry a little bit of everything, but you've got to manage your supply chain extremely well, and have on hand the key items that you believe are going to be desired. We had that in Q1. We have that in Q2. It's never perfect, but we've been pretty good at it. And frankly, our philosophy hasn't changed over the last 3 or 4 years on that.

Got it. So I guess the number itself won't go -- I guess the number won't accelerate in terms of inventory growth. I guess the way to think about it is just to recomposition within that existing inventory base, is that correct?

In terms of having what we think is going to be in demand in the at-once orders shift, that's correct. In total, inventories is up 6%. That we have a stronger position in what we think -- where we think the reorders will be coming from.

The next question comes from Mitch Kummetz of Robert Baird.

I think I've got a handful of questions here as well. And let me start by just following up on a couple of Taposh's questions. So again, I can appreciate you guys wanting to disclose less on the backlog, but again while we've got you. Down mid single-digits, can you just maybe talk about the split between Europe and U.S. Is the backlog worse for Europe just given the conditions there, or is it pretty similar between the 2?

No, Europe has been a drag both on sales and on backlog.

Okay. And then, Don, on the at-once, clearly, you've seen an acceleration in that, especially going to -- starting from the fourth quarter of last year. So what exactly is your at-once assumption for Q2? Again, it doesn't sound like it's 20% but it's probably more than mid single too, so...

I don't want to go get that granular. We do typically don't give quarterly guidance at all, but we wanted to be -- give a little helpful commentary given how helpful everyone said Q1 was. And we actually, the tax benefit aside, we actually came in pretty obviously, close to plan on earnings per share. So we wanted to give you guys a Q2 commentary, but trying to dig down into any further details beyond what I've already given, it's probably just not productive. And the more details I give, the more wrong I will eventually be. So that's why I don't want to do that.

Okay, fair enough. That means you're really not going to like this question.

Don't even ask then.

No, I've got to ask it. So for the back half of the year, when I just look at where consensus revenue numbers are for Q3 and 4, I think consensus is like 10% growth in Q3, 13% in Q4. I'm guessing that the way you're thinking about the business, you would expect revenues to be skewed more towards Q4 than Q3, relative to kind of where consensus is right now? Is that fair or...

I mean, the answer to your question is yes. I don't have the consensus numbers for Q4 in front of me, but we certainly are expecting much stronger revenue growth in Q4 because that's the way our business is trending, and also last year's Q4 revenue growth was only in the mid single-digit range, 5-point something percent.

Yes. Okay. That's what I thought. And then 2 quick last items. One, and forgive me if you already said this and I didn't catch it, but what was the impact of the military timing shift on Q1 revenues? Do you have a dollar impact for me?

I'm just trying to take a look here. It's probably not precise, but I would say mid to upper mid millions.

Yes. I'm looking at the brand that we're talking about, it's down in the mid single-digit million range, and most of that will be timing shift on military orders.

So since it's a timing shift, when will you expect to receive that? In Q2 or in the back half or...

That's always the interesting question when dealing with the government.

When we go into a fiscal year planning the Bates business, it's a different animal within the company. We have certain assumptions about contracts that we're going to win that we haven't won yet, and we have certain assumptions about contracts that we've already won, when the draws will take place in those contracts. And so the Bates business tends to be the more volatile because of those 2 factors.

Okay. And then a last question in terms of the FX impact. You called out what it was on the sales, could you say what it was on the earnings? Then quickly, what you think FX impact on your full year sales and earnings outlook is?

Yes, on the full year, I think we said in the first quarter that we expected slight negative FX. I think a negative FX translation, partially offset by FX contract gains. Given our current outlook on FX rates, we expect a very small, like $0.01 net tick up on EPS from FX, with the negative translation more than offset by full year FX contract gains.

[Operator Instructions] The next question comes from Chris Svezia of Susquehanna Financial Group.

Don, just so I'm up on the lingo here for a second, can you remind me what you mean or define by slight and modest? Are you talking slight full year gross margin improvement and modest SG&A de-leverage? Just remind us what that is.

We've had this conversation before, have we not?

Yes, yes. We did have this conversation once before, but I just want make sure I've got this. So...

So for the benefit of the entire listening audience, in the world of Don Grimes, slight is generally in the 10 to 20 basis point range. Modest would be something north of that, in the 20 to 40 basis point range, and moderate is something above that. And then we get into the robust and strong and extraordinary type range so that's -- whenever I use all of that, it's just I'm talking in that ballpark of basis points. And there's overlap, I guess, between those 2, so I give them some wiggle room.

Yes, I know it. It would be nicer for a CFO guy just to put the numbers instead of using all the fancy lingo, but then again... So I'm curious, when you guys talk about more at-once business and the strength you're seeing in Q2, why would you make an assumption that gross margin, given the comparisons year-over-year, would still be flat, maybe down, assuming at-once is modestly higher margin, you have good inventory. Just curious, is it the mix and it's because Europe is weak, or just maybe give a little operation there.

Yes. It fails me, because as a primary driver, you would expect you're right, you would expect in a -- of course Q2 as compared to Q2 last year. So Q2 is more of an at-once quarter in general. But the stronger at-once business, you're right. In a vacuum, that should result in positive gross margin comparisons, but it's some mix issues that are kind of bringing it down to that view that it will be slightly down versus the prior year.

Okay. And then at at-once, are you seeing any differences between U.S. and the rest of the world? Canada, Europe obviously, is there any wild swings, or, you said up 20 to 30, is that in total, globally?

No, Europe I think is been negative even in at-once. Negative Europe is going to be a drag this year also in the at-once arena. Canada, I don't have the numbers right in front of me, but Canada is really a reflection of the consolidated -- huge retail consolidation that has gone on over the last few years up there. And getting that settled out with Mark's Work Wearhouse, Forzani Group, Canadian Tire. Canada has seen a tremendous amount of consolidation at the retail level.

Okay. And then when you guys revised your revenue -- annual revenue outlook, did you take into consideration how you're looking at the back half of this year? Because I think, obviously, making -- I think on the last call you made some assumptions about Q4, the comparisons, and being somewhat optimistic. When you look at your revenue outlook for this year you've taken consideration up to Q1, Q2 but you are also looking at the back half as well and maybe 10% of that enthusiasm based on what you're seeing?

Yes, definitely, in our view, the back half is reflected on our full year revenue guidance, without question.

Okay. All right. And last question, I'll just add real quick. Just on barefoot running, in general, as a category, I think it might be something to be getting concerned about, the competitive dynamics, pricing, what you're seeing globally. I mean, could you just maybe talk about, x barefoot, what you're seeing in the Merrell brand, in the business. And in the past, talked about how that was still growing despite what you're doing in barefoot. Just give us some comfort about what's going on overall the Merrell portfolio outside of this barefoot running?

Yes. Well, clearly there's beginning to become a little bit of a gray area between barefoot, light running and lightweight, in general. And it's spreading across categories. Merrell, of course, as you know, is one of the first brands in with barefoot water product this year, casual product this year, walking product this year. So -- but if we go down to the lowest level, barefoot and natural running, that's a category that's still growing. I know I've read a couple reports where people say maybe that pure subcategory is leveling off, but I think it grew in the first quarter almost 40%, of course Merrell's growth in barefoot was substantially above that percentage. So Merrell is certainly holding its own given the increased competition. But Merrell is doing that with, as always, with great new product and great new product at different price points. The whole athletic lightweight trend, we don't see any let up there. Barefoot is maybe a subcategory at that but we don't see any let up there at all.

The next question comes from Sam Poser of Sterne Agee.

Number 1, when you said that you're going to get a tax benefit here, how should we think about, I'm jumping way ahead, but how should we think about the tax benefit into next year or what the tax rate is? Are we looking at like 27.5%?

I mean, assuming the same mix of business next year as this year, yes. I mean again, I mentioned in my prepared remarks that the ruling, although it benefited 2012 by $5.5 million, it's really going to have kind of $1 million ongoing benefit to our tax expense.

Okay. And then, Blake, how -- with the -- would you -- how much of this accelerated at-once business is the U.S., especially with the Merrell brand? And how much of that do you think is driven just in the last couple of weeks by the Easter shift pulling business up a couple weeks from a year ago? And given that the business portfolio tracked pretty well there, you'll be getting the orders now for that, and is that an effect do you think?

Yes, maybe it's some effect, Sam. But if you look at Merrell -- first of all, it's been most noticeable here in the United States for Merrell. So the Merrell U.S. business has been pretty robust, at-once has been very robust. And a lot of that is reflected in the U.S. Globally, it's probably more business as usual in international distributor markets, with the exception of Europe, as I mentioned. The shift in Easter may have had some impact, but quite honestly, we've seen the at-once business throughout this year steadily growing, being very good. And frankly, we expect it to continue, given the fact that the retailers have had a quarter to adjust their inventory levels, whether it's outerwear or ski products or snowshoes, to get their inventory levels in line, and now they're looking to tail in what's selling. Clearly, across outdoor specialty, specialty running shops and other distribution, Merrell is selling.

And then lastly, because I think almost every other question's been covered. You called out in your prepared remarks that Chaco and Patag in the Outdoor Group, I think between the 2 of you that Chaco and Patagonia business was up double-digits in the quarter, and -- but the total Outdoor Group was flat due to Europe. Can you give us -- because Merrell is the story in that whole group, can we assume that the Merrell business was down in the quarter and up slightly in the U.S. and down more in Europe driven by the U.K.? Am I thinking about that in general?

I mean to say that the outdoor group is flat and Chaco and Patagonia had mid to upper single-digit growth, you could do the math and say therefore Merrell must have been down. And the biggest drag on Merrell's business was Europe.

Was the U.S. Merrell business up?

We're not going to comment on specific geographies beyond saying Europe was the most significant drag on Merrell in the quarter.

But you've commented on specific geographies with other brands today. So...

But that doesn't mean we're going to give you every brand and every geography around the world.

Well, I mean this the biggest one and this is where the growth is. And if business was down there and you're happy about the at-once, there's a lot of things moving around, and shouldn't we get more color on that?

All right, Sam, we'll give you this one. Merrell, Merrell U.S.A. business in the quarter was flat. It was not down.

The next question comes from Diana Katz of Lazard Capital Markets.

I just wondered if you could dive a little bit more into gross margins. Maybe press out some of the buckets in the first quarter in terms of closeout sales impact on gross margins. What happened with these closeouts? Which brands? What was the retail benefit? And then maybe if you could give us some more color on what exactly are the mix issues bringing gross margins down in Q2. Is that Europe versus U.S.?

Sure. In Q1, I think as I mentioned in response to someone else's question it might have been Ed Yruma, that our selling price increases in the quarter, I said over 300 basis points, actually the math works out about 360 basis points of gross margin benefit, which was more than offset by about 400 basis points of higher product costs. We had about 60 basis points of FX benefit on gross margin in the quarter, primarily the FX contract gains that we had previously said we would realize in the first 3 quarters of the fiscal year. I think that works out to about 90 basis points of negative mix. We had higher -- we referenced higher closeout sales in the quarter. Our closeout sales were 50% higher in the quarter, still small numbers. That's 50% higher at a slightly lower gross margin than we had in Q1 of last year. So that was the biggest contributor to the negative mix in the quarter, that was the gross margin drag.

And for 2Q?

In Q2, closeout primarily European closeout, which was a drag on Q2 gross margin.

So that's a mix?

Yes.

And then for the year, the acceleration you're planning, so that's just U.S.-based?

In terms of gross margin?

I'm sorry, on the revenue line?

I'm sorry, revenue.

No, that would be across the board. It's really, for us, it's a bottoms up analysis by brand, by country, by key accounts. So it's a very detailed bottoms up analysis to the extent you can look in the future 8 or 9 months. And it includes our view on distributor and licensee business owned operations.

If you look at our, Diana, at our non-U.S. business, about 1/2 of it is in the EMEA region and 1/2 of it is in the rest of the world. So we certainly are very bullish about the growth for Europe over the balance of the year, but the non-U.S. business, excluding EMEA, we expect nice back half growth as well as nice back half growth from the U.S. and then the recent at-once order trends supports our views on that.

Okay. And what about Canada? How do you view the market in Canada for the rest of the year?

Certainly, more stable than Europe. And delivering some growth for the rest of the year. Much smaller piece of our overall business, of course.

Okay. And then just if you can help us think more big picture internationally with the 2 recent joint ventures. How quickly can these ramp up to meaningfully impact your bottom line? How big of a market can these become?

Well, I think everyone is obviously unique and very different. This year, these 2 joint ventures in '12 will have some very small impact on, a relatively small impact, on our top line. They'll probably frankly be diluted by a couple of pennies a share. Taken together, this will be an investment year, but we have our plans in place. Our plans are reasonable, but probably a little conservative for these 2 ventures, of course. And the potential is certainly bigger than our internal plan. Just if you look at Colombia for example. It's a country where Western global brands have some presence, but still it's country of 50 million people with a lot of money to spend. It's primarily focused on local brands and local retailers. So when you talk about bringing our portfolio wholesale and retail on the ground in Colombia within an established operator, a partner that we've known for 30 years who already has the infrastructure, it's going to be much quicker when potentially than some other markets.

Yes. There's some startup cost in the India venture that we're not really incurring as much in Colombia. Because in Colombia, we're buying some 49% stake in an existing business, and then we're jointly creating a new -- 2 joint ventures in Colombia and 1 in India. So we're more of in an investment phase in India in year 1, but Colombia should be accretive from the get-go.

The next question comes from Jonathan Grassi of Longbow Research.

Just 2 quick questions. I guess first, can you discuss Cushe's presence in the U.S. It sounds like it's a pretty good opportunity, and I believe you guys said you're going to be in about 50 more doors by the year? And how many doors are you in right now? Which doors? And can you just talk about how the sell-through has been relative to expectations?

Yes, Cushe continues to grow frankly, quite nicely. We have it in already about 99 markets around the world. Above 40% of its business is here in the U.S. I don't have the exact number of doors in front of me, but the U.S. distribution, it would go from Nordstrom's high-end specialty independents, The Tannery in Boston. It would extend down to flip flop shops, in Canada, the Forzani Group, REI in the U.K. shoes. In the action sports surf shop arena, Maui Nix, Cocoa Beach, any number of distributions. The Cushe product just remains great, and as you know in our industry, it always starts with product, product, product. And the Cushe product is simply excellent. Cushe's had a substantial interest in -- with retailers in expanding its surf slipper line and also its sandals, but has had some other wins as well. Again, not a huge business compared to our $1.4 billion, $1.5 billion business right now, but a brand that's special and has lots of potential.

Okay. And then just lastly on the Merrell Barefoot. How has the performance of that been in the big-box sporting good channel versus the run specialty channel?

It started off last year a little weak, as you might expect. It's a new concept. Does better in a full-service environment, a sit-and-fit environment. But performance, even in the big-box arena, has picked up steadily as that -- initially that running community and now other consumers start to understand the concept and the product.

Well I guess, it's the incremental strength and demand that we're seeing from the product right now, is that coming from the specialty run channel or is that coming from the big-box channel?

Across the board.

The next question comes from Andrew Burns of D.A. Davidson.

Could you talk about minimalist footwear growth outside of the U.S.? Just talking about development of the market, say in Europe versus U.S., in terms of where we are for consumer adoption, and what you're doing in terms of marketing investments, or what have you to ignite or accelerate consumer interest outside the U.S. in minimalist footwear?

Yes, I would say certain parts of the world, Europe and some other markets are basically where the U.S. was a year ago. This is a trend. This is an idea. This is a book that was published in the U.S. to begin with. And the U.S. is clearly the home for this concept. It's catching on in Europe. The running community certainly, is global, not limited to any particular country. And as you know, with our international network of distributors and licensees, we have the ability to get a unique new incremental concept to the consumers quickly. And so in a lot of these markets, you are going to find Merrell is going to be the clear market leader. The strategy for introduction around the world really hasn't changed. It still that 360-degree approach from a website devoted to barefoot running, to seminars, to helping educate the specialty running shops in these different geographies. So it's a full 360-degree approach.

At this time, we have no further questions. I would now like to turn the call over to Ms. Christi Cowdin. Ms. Cowdin, you may proceed.

Thanks, Andrew. On behalf of Wolverine World Wide, I would like to thank you, all, for joining us today. And as a reminder, our conference call replay is available on our website at www.wolverineworldwide.com, and that replay will be available through July 10, 2012. Thank you, and good day.

Once again, the conference has ended. You may disconnect your line. Thank you.