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Brown Shoe (NYSE:BWS)

Q3 2013 Earnings Call

November 26, 2013 9:00 am ET


Peggy Reilly Tharp - Vice President of Investor Relations

Diane M. Sullivan - Chief Executive Officer, President, Director and Member of Executive Committee

Russell C. Hammer - Chief Financial Officer and Senior Vice President

Richard M. Ausick - Division President of Retail


Steven Louis Marotta - CL King & Associates, Inc., Research Division

Jill R. Caruthers - Johnson Rice & Company, L.L.C., Research Division

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division


Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter earnings call. [Operator Instructions]

Thank you, and Ms. Reilly Tharp, you may begin your conference.

Peggy Reilly Tharp

Thanks, Jennifer. Good morning, and thank you for participating in the Brown Shoe Company Third Quarter 2013 Earnings Call, which is being made available to the public via webcast. I'm Peggy Reilly Tharp, Vice President of Investor Relations for Brown Shoe Company.

Earlier today, we distributed a press release with detailed financial tables, which is available on our website at In addition, slides are available on our website for you to reference during today's call. Please be aware that today's discussion contain forward-looking statements, which are subject to a number of risks and uncertainties. Actual results may differ materially due to various risk factors, including, but not limited to, the factors disclosed in the company's Form 10-K and other filings with the U.S. Securities and Exchange Commission.

Please refer to today's press release and our SEC filings for more information on risk factors and other factors that could impact forward-looking statements. Copies of these reports are available online. The company undertakes no obligation to update any information discussed in this call at any time.

Joining us on the call today are Diane Sullivan, President and Chief Executive Officer; Russ Hammer, Chief Financial Officer; and Rick Ausick, President of Famous Footwear. Today, we'll begin with the strategy review from Diane, followed by a financial summary from Russ, before turning the call back over for Q&A.

And, I would now like to turn the call over to Diane Sullivan.

Diane M. Sullivan

Hello, and thanks very much for joining us this morning as we report another good quarter of Brown Shoe Company results. Third quarter consolidated sales of $702.8 million were up 1% over last year, and that excludes sales from discontinued brands. Earnings per share of $0.63 were up 12.5%, while gross margin of 39.6% declined 50 basis points. Operating margin of 6.4% was up 50 basis points and, as you know, we've been working hard to advance our corporate operating margin to reach our long-term goal of 8%. While this was a really terrific quarter, there is still room to grow this metric.

We've been able to make some outstanding progress against our financial targets in the past 18 months. Our strategy is working and for the third quarter of this year, we have already delivered $0.27 more in earnings versus the first 9 months of 2012.

Let's get into the detail starting with Famous Footwear, where we saw continued growth in same-store sales, up 4.9% for the quarter and this strength was across all geographies, climate zones and genders. We delivered record quarterly sales at Famous Footwear of $439.6 million, while operating margin of 8.4% was up 30 basis points.

During the quarter, Famous Footwear capped off a great back-to-school season with 5.6% same-store sales growth. I know we gave you a pretty good update, I think, on our back-to-school strategy and execution during our second quarter call, but I'd like to just stress that our success is due to the work we've done over the last 18 months and we're continuing to build on that foundation.

We accelerated our store portfolio review and are now in a much better position in terms of store profitability and revenue per square foot. We also invested in our assortment efforts. We're focused on a smaller number of key styles but providing greater depth with those products. And finally, we've developed a relevant and compelling approach to marketing that has really resonated with the consumer, and the results have followed.

Now despite our success during back-to-school, like many of our peers, we did experience weak traffic patterns during the quarter and, actually, kind of throughout the year. However, our conversion rate has remained strong in the third quarter, up 5.3%, while pairs per transaction and AURs were also positive for the quarter. In terms of product categories and styles, we continue to see good success with canvas, which was up 25%, including boat shoes. Lightweight running is still also tracking very well and accounts for nearly 2/3 of all running shoe sales.

And when back-to-school was in full swing during the quarter, we saw strong growth in sport slides, up 32%, and continued strength in sandals, up 16%, as warmer weather remained with us during the third quarter.

Not surprisingly, this growth appeared to have come at the expense of the boot category, which was up only 2%. Although we only have a few weeks of the fourth quarter behind us, boot sales have been somewhat sluggish in November. But we feel confident that we have the right product in-store for when the consumer is ready to buy.

At, sales were up 6% in the quarter, and Russ is going to talk in a little more detail about our online and our omni-channel results.

Now, let's turn to our Wholesale Operations for a minute, where sales of $205.3 million were up 4.5%, excluding sales from discontinued brands. As we've moved into the fall season, we've seen high-shaft boots, shooties and booties doing well for all of our brands. We're seeing a lot of buckle and strap details, jewels on suede, distressed leathers, which are somewhat new for a lot of consumers this season.

Healthy Living wholesale sales were down 5.6% in the third quarter, excluding sales from discontinued brands. But as we talked about last quarter, approximately $7 million of Healthy Living sales, primarily Naturalizer, shifted into the second quarter from the third quarter this year. So if you look at the Healthy Living portfolio on a year-to-date basis, sales are up 1.2% over 2012, in line with our expectations and we expect to be running somewhere around up 2% by year end.

At Naturalizer, our largest wholesale brand, all-in sales were down 6.1% in the quarter. However, most telling is that retail sell-throughs are up year-over-year on lower inventory. And we've also seen significant improvements in the non-store channel with retailers like Zappos, Amazon and HSN, driven primarily by boots. And at Naturalizer retail same-store sales were up nearly 1% with a slower September turning into a strong October, and that has continued into November.

At Dr. Scholl's, good growth at the mid-tier was offset by lower sales at the mass channel, and of course, as we've shifted the balance of this brand to a more profitable customer mix, we've seen a related improvement in gross margin.

LifeStride continued to deliver sales success across-the-board and the brand also grew third-party e-commerce sales by 40% in the quarter. And for Rykä, although sales were down year-over-year, they're in line with our expectations.

At our Contemporary Fashion brand, wholesale sales of $98.4 million were up 19.3% in the quarter, excluding sales from discontinued brands. The improvement we've seen with this platform is due to better product performance from our key brands and we should see a continuation of these trends into the fourth quarter.

Sam Edelman continues to be red-hot, up mid-single -- excuse me, up mid-double digits in the third quarter. Early in the fourth quarter, we launched our Sam Edelman e-commerce site to rave reviews as consumers are thrilled to be finally able to buy Sam shoes directly from the source. While it's clearly very early, the site is currently performing well. And we're also pleased with the performance we're seeing with our licensed partners. Although very early and a small part of our business, it's an important part of the future expansion plan for this brand and for our Wholesale Operation.

Franco Sarto had mid-double-digit sales in the quarter as well, up 37% with flats, casual, booties and riding boots doing well. At Carlos, boots also performed well, however, sales were down year-over-year, but up versus expectations. And for Fergie casual boots and dress sandals performed well, but weakness at the mid-tier weighed down sales for the quarter.

As Via Spiga sales are gradually improving, as we've been talking about the last couple of quarters, and we expect this brand's performance to begin to level out in the fourth quarter. So far this season, wedges, boots and booties, pointed toe pumps and flats are doing well. And we brought in a new designer for the brand, Paul Andrew. And Paul has been singled out by many top-tier retailers for the debut of his own label this past spring. He is actually going to receive the Launch of the Year honors at Footwear News achievement awards this December, and he will also be able to see his first collection for Via Spiga in December at FFANY as well.

Finally, our newest brand, Vince, continues to see good consumer interest with key sellers in all categories, sneakers, flats, heels and booties. So while Vince is still a small part of our Contemporary Fashion portfolio, it's growing. And by 2014, we will have doubled our number of doors, and for sure, we know this brand is really in demand by consumers as we could see last Friday when they did their IPO.

This was a good quarter for all of our businesses, and we continued on the path we set out at the beginning of the year. So to reflect the better clarity we have following the biggest quarter of the year for us, we're raising our adjusted EPS guidance range to $1.36 to $1.40.

You know, when we reported our second quarter earnings, we received a fair amount of grief for our realistic view of the back half. While I'm pleased we were able to modestly outperform almost all of our analyst expectations this quarter, I believe we maintained the appropriate amount of realism in terms of our guidance, based on the macro environment. And I will tell you that we're employing that same realism as we look towards the fourth quarter and beyond.

As our wholesale peers and our retail partners have reported their third quarters, you heard a lot of concerns swirling around out there in terms of the promotional environment, consumer sentiment, et cetera, et cetera, et cetera, over a lot of things we don't have control over. So we're going to continue to operate as we have all year and we're going to be focused on executing the things that we have control over and try to appropriately plan for the external factors that are beyond that scope.

So with that, I'd now like to turn the call over to Russ, who's going to review our financials in a little more detail around our guidance.

Russell C. Hammer

Thank you, Diane, and thank you, everyone, for join us on both the call and the webcast. We certainly appreciate it. Although Diane briefly reviewed our consolidated sales, I'd like to add a little more color.

For the third quarter, we reported net sales of $702.8 million versus $696 million in the prior year. And both amounts excluded sales from discontinued operations. As a reminder, discontinued operations include the Avia, Nevados, Vera Wang and Aigner brands.

For the third quarter, there were minimal sales from the other brands of businesses we have exited, which include our FX LaSalle and Brown Shoe Closet stores and also our children's and women's specialty wholesale brands.

We reported net earnings of $27.3 million in the third quarter or $0.63 per diluted share, up 12.4%, compared to $24.3 million in the prior year or $0.56 per diluted share. Third quarter 2012 included portfolio realignment costs of $2.6 million on a pre-tax basis.

I'd now like to turn to our individual businesses, beginning with the Famous Footwear, which is part of our targeted family platform. As Diane discussed, we reported good third quarter results with same-store sales up 4.9%. On a trailing 12-month basis, our revenue per square foot is solidly over $205 and approaching $210. We remain on track to close or relocate approximately 60 stores, and we expect to open 51 in total this year.

In the third quarter, we closed or relocated 22 stores and opened 11.

Turning to our Wholesale Operations, sales of the $205.3 million were up 4.5%, excluding sales from discontinued brands. Contemporary Fashion third quarter wholesale sales of $98.4 million, excluding sales from discontinued brands, were up 19.3%.

As Diane mentioned, our Healthy Living wholesale sales of $106.6 million were down 5.6% in the third quarter, excluding sales from discontinued brands, but up 1.2% for the first 9 months of the year.

Wholesale sales via our external e-commerce partners were up 25%, while our site was up 6%. In total, our owned e-commerce businesses accounted for slightly less than 5% of our third quarter sales. As we mentioned last quarter, we are seeing more consumers more rapidly merging their in-store and online shopping into a true omni-channel experience, browsing on their computer, tablet or mobile device and then heading into the store only when they're ready to buy.

For truly integrated retailers like Famous Footwear, this is good news, as we provide consumers with both fully functional brick-and-mortar stores and a robust online and mobile experience.

Now, let's turn to a review of our financial metrics. Overall gross margin for continuing operations was 39.6% in the third quarter, which was down approximately 50 basis points. The majority of this weakness was primarily related to Rykä as the team has begun working to transform this promising brand.

On a year-to-date basis, gross margin for our continuing operations is up 50 basis points. And as you read in our earnings release, we expect this metric to be up slightly for the full year. SG&A spend of $233.5 million was down 1.1% in the quarter, and at 33.2% of revenue, it was down approximately 70 basis points year-over-year.

Inventory at quarter end was $544.6 million, up from $512.2 million in 2012. At Famous Footwear, total inventory was up 4.8%, while Wholesale inventory was up 8.5%, driven by our higher growth brands.

Net interest expense of $5.1 million was down 3.8% in the quarter due to reduction in overall debt. Our consolidated tax rate was 31.6% for the quarter, and cash and cash equivalents were $42.4 million, up 3.7%.

We ended the quarter with 0 borrowings against our revolving credit agreement. While this is a great achievement, clearly we'll be using our revolver as we take on inventory for spring. Still, there's no denying the progress we've made in our debt reduction efforts.

Year-to-date depreciation and amortization were $41.1 million for the quarter, while capital expenditures were $41.6 million. Our debt-to-capital ratio improved to 30.6% from 41.7% in the third quarter of 2012.

Before we begin, Q&A, I'd like to review our fiscal 2013 guidance. As Diane mentioned, we are updating our guidance to reflect our performance year-to-date, and we now expect consolidated net sales of $2.53 billion to $2.54 billion; same-store sales at Famous Footwear up low-single digits; net sales at Wholesale Operations up mid-single digits for continuing operations; gross profit margin up approximately 10 basis points for continuing operations; SG&A of $910 million to $915 million will be flat to down slightly as a percent of sales; and net interest expense of $21 million to $22 million; an effective tax rate on adjusted basis of 31% to 32%; depreciation and amortization of $54 million to $56 million; and capital expenditures of $54 million to $56 million; GAAP earnings per diluted share for 2013 are expected to be between $0.82 and $0.86, and this includes $31 million of nonrecurring cost; and adjusted earnings per diluted share of $1.36 to $1.40.

Finally, we expect we could see some wholesale sales shift from the fourth quarter of 2013 into the first quarter of 2014, as retailers navigate their fiscal year end spring product arrivals and an earlier Chinese New Year.

And with that, operator, we'd be happy to answer all questions.

Question-and-Answer Session


[Operator Instructions] And our first question comes from the line of Scott Krasik with BB&T Capital Markets.

Unknown Analyst

This is actually Kelly [ph] for Scott. First, I just want to talk about now that you're, obviously, seeing a lot of strength in athletic and casual this year. As you look to next year, can you just talk about how you're planning to lap these tough comparisons in athletic and casual?

Diane M. Sullivan

Sure. I think we'll ask Rick to answer that one.

Richard M. Ausick

Look, I will tell you, we've just come through our back-to-school pre-lines with all of our major athletic guys and in process of finalizing all that. Frankly, on the athletic side, we see no reason why there isn't still room for growth. We think the product still looks great, innovations and newness, color all the things that we think customers are looking for, so we have no problem with that. On the canvas side, even though it's been a great growth for us, we still have room to expand that assortment into more stores and into more styles, so we think there's still opportunity in that as well. So, even with the growth we've had, we see no reason why we can't have continued growth in those 2 categories for 2014.

Unknown Analyst

Okay. Now just shifting over to the Wholesale. Your -- the gross margins were down in the quarter. I just -- can you kind of just talk a little bit more about the outlook there and dig a little deeper, because it's kind of difficult for us to get a grasp on where these are going, considering you've kind of lapped the SAP issues and your higher-margin businesses are growing at a faster pace?

Diane M. Sullivan

Yes. Maybe I'll make a couple of comments and then Russ can sort of fill in. To give you a perspective around the total portfolio, and not just a quarter, Kelly [ph], I'm going to talk a little bit about the sort of year-to-date performance and kind of what we expect by the end of the year, because I think it helps sort of clean it all up. Sam, Franco, Vince and LifeStride, those 4 brands are really ahead of our expectations and in some cases very much ahead of our expectations. Naturalizer, Dr. Scholl's, Rykä and Carlos are really kind of trending with what we thought and up 1% or 2% to LY is what we kind of think the year is going to look like -- and Via Spiga and Fergie are the ones that are somewhat [indiscernible] so we're going to expect to see margins up, all in, at the end of the year. Russ?

Russell C. Hammer

Right. And I'll just add, primarily, as I mentioned earlier, Rykä was the primary reason why the margin were down in the quarter. And that's what the teams are working on the portfolio and making the adjustments with the new portfolio that will be coming out. So we have some hits in the quarter due to Rykä. But on a year-to-date basis, all of our margins are up in all of our brands across our segments. So we see an increase, reflecting the continued improvement in all of our margins. So we see our strategy's definitely working.

Unknown Analyst

And just lastly, could you just elaborate on your plans for Vince given the recent IPO or their -- stepped up their expectations for store growth?

Diane M. Sullivan

Yes. It's, actually, incredibly exciting. We loved the brand before we learned of the IPO. We think it just resonates with the consumer really well. As I've said, we're really looking at doubling our door count. It really feels that there's this white space in this market for this luxury kind of casual look. So we've really got some terrific iconic shoes already out there that we think we're going to be able to continue to build on. And then beyond that, who knows what will happen. But right now, it looks very positive.


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

Steven Louis Marotta - CL King & Associates, Inc., Research Division

The 5% comp in the third quarter was tremendous, congrats on that. Can you talk a little about quarter-to-date, have you seen the sort of the balance accelerate into November? I know it's also a difficult comparison, given Thanksgiving but any sort of commentary there will be helpful?

Richard M. Ausick

It's a difficult comparison based on Thanksgiving. I think, Steve, we've got, probably, another week or 10 days before we kind of annualize at least. And we were up against Cyber Monday yesterday, we were up against Thanksgiving last week in the calendar. So until we get through next week, it's really hard to look at that. We're trending close to our plan. So we figure if we planned it correctly, we should come out of this okay. But again, there's a lot of business to be done between tomorrow and next Tuesday. So we probably want to hold on talking more about that.

Steven Louis Marotta - CL King & Associates, Inc., Research Division

Also, can you comment a little bit on potential comp drivers for next year, either specific product categories, specific marketing programs, larger emphasis on customer service and conversions. Can you just talk about what you believe will be the primary drivers of comp next year?

Richard M. Ausick

Yes. We still -- again, and everybody keeps saying when is the running business is going stop? And I don't know because it keeps getting better. So I think, we still have a great opportunity there. I mean, one of the things that people, I think, might have missed, Steve, is the #1 running shoe in all of athletic selling in third quarter was a shoe we carried. That's the first time that's ever happened. the men's flex, Nike Flex was the #1 running shoe in the third quarter. That -- when that happens, that just gives us the opportunity to participate harder for the customer that's looking for that product. So as that happens and they continue to bring us innovation and new styling there, we don't see that business actually slowing down much. On the other side of that, we're going to try a little summer -- a little spring boot business and see if there's some business there on the casual side because we think the customer, at least at back-to-school is really receptive to those styles. Now we're just going to lighter colorations and see if there some opportunity with that. And then the Canvas business, the other thing that was pretty surprising, I guess, but that pleasant surprise is we have a huge Converse business and when we -- we've impacted our Vans business big time for back-to-school. Converse had an increase and we've had a huge increase in Vans. So those 2 brands seems to be living -- coexisting very nicely together in our stores. And we still have opportunity on both of them to grow them into first half and into back-to-school. So those are probably the biggest things.

Diane M. Sullivan

And even on that, Steve, I would even add to what Rick said. It's -- he is doing -- he and the team are doing an incredible job even on building against the lot of the fundamental shifts that he has made in terms of the portfolio change, the marketing shifts and all of that. So you add that, the upside that he continues to see in the merchandising side, built on that foundational shift that we've made and the structure of Famous Footwear, as well.

Richard M. Ausick

That too.

Russell C. Hammer

With a [indiscernible] stores in the quarter.

Steven Louis Marotta - CL King & Associates, Inc., Research Division

Great. And actually -- and I was just going to ask about store opening opportunities next year, and now that you've ramped from a productivity standpoint on a per-door basis, can you talk about opportunities to either fill in markets and what the potential [indiscernible] growth?

Richard M. Ausick

We've -- I think our plan for next year is to have about 15 to 20 net store gains. So 45 store openings, 15 to 20 store closings, something on that range. 20 to 25 stores closed. Somewhere in that range, so about 15 to 20 net new stores next year is what our plan is. But we're looking at it, we're doing some work around what that opportunity might be and if there's ways to accelerate. But that's what we're looking at right now.


Your next question comes from the line of Jill Nelson with Johnson Rice.

Jill R. Caruthers - Johnson Rice & Company, L.L.C., Research Division

You touched a bit about it on the Wholesale and some questions on whether you get some orders shifted from fourth quarter to first quarter. It seems as though -- are you including some of that potential shift into your guidance and is there any way you can quantify what you have in your outlook?

Russell C. Hammer

So, in our outlook, I think given the environment out there, we're cautiously optimistic. So implied in that guidance would be a little bit of that.

Jill R. Caruthers - Johnson Rice & Company, L.L.C., Research Division

Okay. And then if you could talk about the boot category. It seems as though you talked a bit more like a softer trends at Famous Footwear, but then when you talked about kind of the Wholesale brands, it seems as though you had some stronger boot trends. Could you talk about maybe that divergence or variance between the 2?

Diane M. Sullivan

Yes. I guess, I would say, Jill, at Famous, certainly at back-to-school started off with a real big bang. The team there did a great job of really assorting shooties and boots. Lace-up boots during that back-to-school season had a significant presence there and it did extremely well. Obviously, as the weather has stayed relatively warm and there's a lot of other alternatives for the consumer to buy, it's softened a little bit. But again as I've said, I think we're up 2% in total on boots and we expect to be in a great position going forward. On our Wholesale side, a much higher percentage of our business there is in the boot category and the consumer really is shifting, sort of blending, I guess, boots and casual and how she's wearing that into a much broader category. So we had a little more opportunity on the Wholesale side to grow that business. And I think one of the big surprises or bigger surprises has been the tall shaft boots, the riding boots. I think, everyone thought that, that was not going to be as strong a category as it has been. And it really -- it's been a sellout. I can tell you in Naturalizer boots, we're already sold out on, and virtually any other riding boots in any of our brands are virtually gone at this point in time. I don't know if that helps.

Jill R. Caruthers - Johnson Rice & Company, L.L.C., Research Division

Okay. Yes, it does. And, just last question is on the Naturalizer brand. I know that you're looking at quarterly revenue performance, it's a bit skewed given the calendar shift. It seems as though last quarter that, that brand started to see a recovery from some challenging trends last year, if you strip out the whole calendaring shift, are you still confident that, that brand is kind of on a rebound?

Diane M. Sullivan

Yes. Absolutely, I am. It was kind of lumpy, for sure, between second and third quarter just the way it all played out. But I'm very confident in terms of the performance of that brand, and I would expect it to continue to show improvement fourth quarter and then into next year. No issues on that.


And your next question comes from the line of Chris Svezia with Susquehanna Financial.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Just when you think about wholesale, how are your partners at this point thinking about kind of the back half fourth quarter, are they being, just given the promotional cadence, as if business is usual? Have they -- are they managing their inventory a little bit better, so there's less markdown support potential. I'm just curious if there's anything different you're seeing optically this go around versus other periods at all?

Diane M. Sullivan

Not yet. I mean, I think our expectation for sure is that it's going to be more promotional, that there is going to be more couponing and discounts, and you name it. How much of it is hard to say yet. But in terms of order flow and that kind of thing, Chris, not a significant shift at all.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. All right. And then as you -- anything you can add about how they're thinking about spring, if you take out Chinese New Year, things shifting a little bit, any other color how they're thinking about spring orders at this point in time?

Diane M. Sullivan

It's a little early for me to comment too much about that, but again, I think everybody's sort of kind of waiting to see how this holiday season does. But, in general, I can't. There's nothing that was in -- that would be in the cards, I guess, I'd say that has us concerned about spring. And they make their kind of their final determination about receipts and all of that, really, after the holidays, about things that they might want to tweak or shift or change. So, but right now, I'd say I'm not really concerned.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. That's good to hear. Mix in Wholesale. I'm just curious, as you start to think about the Contemporary Fashion continuing to grow at strong rates, just say, I mean, what really slows Sam Edelman? If Via Spiga starts to turn around? And then you think about the Lifestyle business, I'm just curious, how do we think about the margin profile of Wholesale suddenly, does it really -- do both continue to show improvement because you're most focused on the sell-through piece or does it potentially accelerate just because suddenly your higher-margin businesses continue to grow and surprise and grow at a faster rate? I'm just curious how we think about that.

Diane M. Sullivan

Yes. That's -- it's a great question. And, yes, we do expect margin expansion on both our Healthy Living and our Contemporary Fashion business and we have not changed at all that target that we have out there for an 8% operating margin for the company, all in. So while -- yes, while Contemporary Fashion is growing their topline at a faster rate than the other segments, we still have a lot of work to do in terms of ensuring that the margins and operating margins continue to perform well and the same with the Healthy Living side, too. So I would -- the way I guess, I'd say is more topline growth in Contemporary Fashion with comparable improvements in operating margin and slower topline growth on the Healthy Living side with slightly slower growth in operating margins.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. All right, I got it. And then just on Famous, real quick. Any -- you mentioned athletic, you mentioned running, you mentioned canvas, any thoughts about what's brought out the boat shoe business, how well that's done for you guys? Just any thoughts as you think about that for next year. Does that continue to be a driver for you guys?

Richard M. Ausick

I mean, our business is still continuing to be really strong, Chris. I think we're watching it. I mean the industry keeps talking about how it's softened in some categories or in some channels distribution. We're expanding some store counts in a few places. So right now, we still think it's a positive opportunity. But we'll watch it and we won't get too far ahead of it, but we still think there's still opportunity to grow that business next year.


[Operator Instructions] And we have no further questions at this time. And I'd like to turn the call back over to Diane Sullivan.

Diane M. Sullivan

Thanks very much. I appreciate everybody joining us this morning, and we wish everyone a happy Thanksgiving to them and their family. See you soon. Take care.


Thank you. This does conclude today's conference call. You may now disconnect.

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