Caleres' (CAL) CEO Diane Sullivan on Q3 2016 Results - Earnings Call Transcript

| About: Caleres, Inc. (CAL)

Caleres, Inc. (NYSE:CAL)

Q3 2016 Earnings Conference Call

November 22, 2016 4:45 PM ET

Executives

Peggy Reilly Tharp - VP, IR

Diane Sullivan - Chairman, President & CEO

Ken Hannah - SVP & CFO

Rick Ausick - President, Famous Footwear

Analysts

Jay Sole - Morgan Stanley

Scott Krasik - Buckingham Research

Jeff Stein - Northcoast Research

Laurent Vasilescu - Macquarie

Steve Marotta - CL King & Associates

Operator

Good afternoon. My name is Jennifer and I will be your conference operator today. At this time, I would like to welcome everyone to Caleres’s Third Quarter 2016 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

Thank you. And I would now like to turn the conference over to Peggy Reilly Tharp. Ma’am, you may begin.

Peggy Reilly Tharp

Thank you. Good afternoon. I’m Peggy Reilly Tharp, Vice President of Investor Relations for Caleres, and I'd like to thank you for joining our third quarter 2016 earnings call webcast. A press release with detailed financial tables and slides are both available at caleres.com.

Please be aware today’s discussion contains 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 which could impact forward-looking statements. Copies of these reports are available online. The Company undertakes no obligation to update any information discussed on the call at any time.

Joining us on the call today are Diane Sullivan, CEO, President and Chairman, Ken Hannah, Chief Financial Officer and Rick Ausick, President of Famous Footwear.

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

Diane Sullivan

Thanks, Peggy, and good afternoon, everyone and thanks very much for joining us for a review of our third quarter. Our EPS of $0.81 exceeded street expectations and despite a mixed consumer environment, we delivered growth in sales, margins, earnings and cash from operations.

Gross margin was up 53 basis points in the quarter, driven by both Contemporary Fashion and Healthy Living. For SG&A we maintained our spend in the third quarter, continued our operational investments in future growth and drove operating margin improvement up 41 basis points.

Once again in the third quarter, our portfolio strategy delivered shareholder value and we continued to drive consistent profitable and sustainable growth. Our portfolio strategy is more than just Famous Footwear versus our Brand Portfolio, or Healthy Living versus Contemporary Fashion. It’s really about how we use the lens of consumer trends as we approach our entire business, by segment, by channel, by brand and by our partner. For our Brand Portfolio that means that no one of our brands is more than 30% of our sales, no single channel is more than 20% of our business, and no individual retailer is more than 15% of sales.

For Famous Footwear, we use the portfolio approach to respond to consumer trends and demands and this is reflected in how we edit and present our assortment of brands and how we manage our real estate portfolio.

This approach enables us to remain agile and ensures the experience is the same no matter how our consumers choose to shop as they use our national retail footprint, our redesigned mobile site, and Famous.com interchangeably.

Now at Famous Footwear, consumers shopped across all of our direct-to-consumer options during the back-to-school season and drove same-store sales up 2.7%. While the last two weeks of July and the first two weeks of August got off to a slow start, we saw a much stronger September with same-store sales up mid-single-digits.

For October, comp sales were down low-single-digits, as record-breaking warm weather spread across the country, which undeniably delayed Boot and Bootie sales. Because of this type of variability in the market, we continued to look at sales on a seasonal basis. As short-term measurements have become less relevant, but what I can say is that Famous Footwear’s top styles and top vendors continued to perform very well with lifestyle athletic and sport-influenced products maintaining its strong consumer appeal.

Similarly, Famous, not only maintained its broad consumer appeal, but expanded on it as rewards consumers comprised 76% of sales in the third quarter, up nearly 100 basis points year-over-year. As we had in the past, we focused on our rewards consumers this back-to-school season. However this year, we expanded our efforts to include our targeted high value customers.

Let me give you a little bit more color on this. Our existing stores with a higher penetration of high value consumers outperformed our other doors during both the back-to-school season and in the third quarter on both a comp sales and a traffic basis. While it’s still early in the execution of this strategy, we have already begun to open new stores where this consumer lives and shops.

For 2016 and beyond, we will continue to integrate our high value consumer strategy and our digital efforts into our appropriately sized stores and we will expand our efforts to include new experiences both in-store and online to drive cohesive messaging.

A good example of this during our back-to-school season with our online NIKE hub where the teams built a bigger story around one of our largest brands and highlight its four key styles. This online experience included video to bring to life the special features of these styles which we also featured prominently in-store. Visitors to our online NIKE shop drove a higher conversion rate and a significant increase in revenue per visitor.

The online shop also drove visitors to other pages at Famous.com and created – and increased the time that our consumers spent online. E-commerce sales were up more than 180 basis points in the third quarter and included our successful ship-from-store program, which was expanded to approximately 900 doors last October.

So consumers keep coming back to Famous Footwear because we offer trend-right and relevant products from trusted brands and we are confident in our ability to execute against our strategy. The same can be said for our Brand Portfolio where our retail partners and our consumers continue to respond to fresh new and innovative products.

So let’s turn to our Brand Portfolio where both businesses reported outstanding improvement in gross margin driving overall Brand Portfolio gross margin to 37.5%, up more than 300 basis points despite a 3% decline in sales.

Across the portfolio, we delivered in-demand products resulting in higher sell-through rates at retail and healthier margins. Operating margins increased for Brand Portfolio and at 11.5% of sales it was also up more than 300 basis points even as we continued to invest in product design and development and new brands.

Of particular note, is that the Brand Portfolio operating margin continued to trend up and was at its highest rate in five years. For our Healthy Living brands, third quarter sales of $134.1 million were down 10.4% reflecting previously discussed declines at Naturalizer and Dr. Scholl's.

However, there was good news in the quarter as well. Dr. Scholl's sales were up approximately 3% excluding the planned reduction in the mass channel, sport-influenced styles were up for Healthy Living and all Healthy Living brands reported improvement in growth and operating margin including Naturalizer.

The brand teams have worked hard to drive significant margin improvements by targeting more profitable businesses, exiting underperforming products and categories and managing inventory. For the quarter, Healthy Living inventory declined by low double-digits year-over-year.

Now shifting to Contemporary Fashion where its third quarter sales of $130.4 million was up 6.2% with good growth from key brands such as Sam Edelman and Vince. Consumers continued to respond to newness from these brands and others in our Contemporary Fashion portfolio. Our exciting designs and fresh products have helped drive better sell-through rates and favorable stock-to-sales ratios.

So even though retailers continue to tighten inventory, reducing their shoe orders and chase product and season, we continued to adapt and deliver a successful third quarter. Our success today to both Brand Portfolio and Famous Footwear is doing great part to solid execution against our strategy.

I am very happy with the decisions and the investments we have made as well as the work we’ve completed as it has allowed us to remain very agile and as a result, we’ve been able to read and react to the atypical seasonal shopping patterns that we see today. We are able to more rapidly respond to consumers’ desire for newness and we’ve reduced inventory and delivered good performance in a really ever-changing environment.

So we’ll continue to make solid decisions going forward as we execute against our strategy to deliver consistent, profitable and sustainable growth for our shareholders.

So with that, I’ll turn things over to Ken to give you more of a financial review.

Ken Hannah

Thank you, Diane, and good afternoon everyone. Today, we reported a strong third quarter in which we delivered growth in sales, margin, earnings and cash. Our net sales of $732.2 million were up 0.5% versus the third quarter a year ago. Famous Footwear delivered a solid back-to-school with same-store sales up 2.7% for the season and 2.1% for the quarter.

On a two year trend, same-store sales for back-to-school were up 5.7%, while the quarter was up 6.5%. Contemporary Fashion also contributed to the overall sales growth for the quarter with sales improving 6.2% year-over-year.

Consolidated gross margin for the third quarter was $293.8 million or 40.1% of sales, up 53 basis points year-over-year, and driven by both Famous Footwear and Brand Portfolio. As Diane mentioned, Brand Portfolio delivered solid gross margin improvement as we continued to benefit from the exit of lower margin products, improved product mix, inventory management and better sell-through rates at retail.

Famous Footwear, while a contributor to the overall margin improvement was impacted by both higher shipping cost as we continued to grow online sales and slower Bootie and Boot sales when compared to this period last year. We essentially maintained SG&A spend in the third quarter at 32.5% of revenue or $238.3 million and as we have all year we continue to invest for long-term growth. We are currently operating seven more doors at Famous Footwear versus last year and this includes three new high volume destination doors for the Famous business. We also opened seven new Sam Edelman retail stores in fiscal 2016.

Depreciation and amortization were $13.9 million for the third quarter, up 8.6% over last year due to our new retail doors and our continued investment in our consumer fulfillment initiative. The modernization and expansion of our Lebanon distribution center is on schedule to ramp up in December and will provide us the flexibility to adapt and meet our consumers’ ever-changing needs.

As a result of this work, we will soon be able to get new products directly into our consumer hands faster than ever before. Our net interest expense for the third quarter was $3.1 million. This was down from $3.9 million in 2015, excluding $2 million of debt extinguishment expenses related to the refinancing of our senior notes last year.

For the third quarter, our corporate tax rate was 33.6%. This was up significantly over last year’s rate of 26.7%, which included a discrete tax benefit of approximately $0.03 per share related to the use of tax carry-forwards.

Net earnings in the third quarter for this year were $34.7 million or $0.81 per share and included investments in the business discussed earlier and the opening of additional retail doors. For the third quarter of 2015, earnings per share were $0.78 on a GAAP basis including the debt extinguishment expense and $0.80 per share on an adjusted basis.

Capital expenditures of $17.5 million for the third quarter and $48.7 million for the first nine months of 2016 reflect the investments in the consumer fulfillment initiatives and the new retail doors.

Now turning to our strong balance sheet. We ended the quarter with cash and equivalents of $173.4 million, up $87.1 million year-over-year and had no borrowings against our revolving credit facility. As always, our priorities for cash center around delivering value to our shareholders. We are focused on investing in organic growth and continue to be interested in opportunistic acquisitions.

We plan to continue to our longstanding dividend and to repurchase shares to offset dilution associated with our stock compensation programs. Our consolidated inventory position at the end of the third quarter was $524.8 million, down 3.6% year-over-year. And as it has been all year, Brand Portfolio inventory was down as we continue to manage inventory and improve our in-season replenishment capabilities.

At Famous Footwear, we ended the quarter with overall inventory down 0.4% per store on a dollar basis with the mix of inventory down for Fashion Footwear and up for lifestyle athletic and sport-influenced products.

Before we begin Q&A, I’d like to reiterate our fiscal 2016 guidance, which calls for consolidated net sales of $2.57 billion to $2.6 billion with Famous Footwear same-store sales flat to up low-single-digits and Brand Portfolio sales flat to down low-single-digits.

We continue to expect gross margin to be up 25 to 35 basis points while we expect SG&A as a percentage of revenue to be down 5 to 15 basis points. Our effective tax rate will be between 30% and 32% and our earnings per diluted share will be between $2 and $2.10.

And with that I’d like to turn the call back over to the operator for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Jay Sole with Morgan Stanley.

Jay Sole

Great, thank you. So, Ken, I just want to start off with the gross margin, because, year-to-date so far gross margin of about 65 basis points, you are still guiding to the gross margin being about 25 to 35 for the year, and that implies a little bit of slowdown in gross margin improvement for the fourth quarter, just wondering what the drivers are there? Kind of, what explains, kind of implied guidance for 4Q gross margin?

Ken Hannah

The big piece is just, we want to make sure we maintain as much flexibility as we can in the fourth quarter. I mean, clearly, I think, we’ve been trending at a rate higher than that and so long as we don’t see the quarter get highly promotional, we would expect that we could extend that leverage. But I think for the most part, we are wanting to make sure that early here in the quarter, we leave as much flexibility as we can.

Jay Sole

Okay, great, and then, maybe just to dig into the gross margin in the wholesale business for this quarter, you called out some of the drivers, talking about better products and maybe more responsiveness, can you just quantify which ones have been the biggest factors that have driven that really strong improvement in the wholesale business in terms of gross margin?

Ken Hannah

Yes, I mean, it’s been across the board. We’ve been focused on making sure that for managing our inventory and as a result, we’ve been able to continue to see nice initial margin improvement. I think as we’ve seen lower initial orders that’s resulted in a reduction in markdowns and discounts and allowances. So, I think, as we look throughout the entire season, the profitability of our business continues to improve. So, I mean, we are seeing those improvements across a number of categories.

Diane Sullivan

Jay, it’s really not one thing, it’s really all of the pieces that Ken talked about in combination, which is the best piece of it all. You never wanted to be any one thing and I think that’s what we are very encouraged by.

Ken Hannah

And it was across, I mean, really across the entire portfolio, we saw improvements in gross margin and operating margin and I think we made some tough decisions earlier in the year around exiting some categories and products and so, we are getting the benefit of that and that was pretty painful earlier in the year when we were happened to report overall revenues that were down, but I think as you can see, that’s resulting in a much more profitable business for us going forward.

Jay Sole

Got it. Understood. And then, just on SG&A, because this year SG&A, dollar growth is pretty flat, very strong SG&A control which has been a hallmark for quite a few years now. But looking ahead into 2017, do you see the inflationary pressures, whether it’s rising minimum wages or anything of that nature that could cause that SG&A growth rate to increase as we head into next year?

Ken Hannah

No, I mean, we are not in a position today to give guidance for 2017, but I think on a more general term, we spend a lot of time talking about how do we maintain those expenses and I think as you impact the top-line growth, obviously, the more the easier it is to leverage those expenses and when that growth slows down, then we traditionally have had to monitor and really modulate our investments in the business and I think that’s one of the consistencies this year as we said from the very beginning. We were going to invest in some new brands. We were going to invest in the team and product development and we’ve continued to do that and we’ve had to find offsets in other places of the business to do that.

Jay Sole

Right, and then, maybe last one for me, Diane and Ken mentioned some of the new businesses, can you just talk about DVF and George Brown and some of the new things that you’ve done this year and if you are pleased with the progress you’ve made in those areas?

Diane Sullivan

Yes, I’d say, we are, it’s particularly DVF is off to a good start. The sell-through rates on that classification and category of business have actually been one of the surprises I would say of this fall season I think, you’ve probably heard that it’s not just the sport and athletic today, but we are starting to see early signs that the sort of non-seasonal categories of those footwear business is starting to open up a little more, that we are seeing more in the dress and casual side and we think that’s going to bode well for not only our entire company, but that will help DVF quite a bit. And our George Brown, it’s very early, but not a whole lot of doors yet, but so far so good in terms of the read on the kind of products that the consumers going to want from us in the future.

Jay Sole

Okay, great. Thank you so much.

Operator

Your next question comes from the line of Scott Krasik with Buckingham Research.

Scott Krasik

Yes, hey everyone. Congrats on a good quarter.

Diane Sullivan

Thanks, Scott.

Ken Hannah

Thanks, Scott.

Scott Krasik

I jumped in a little bit late. So I didn’t necessarily catch it. Did you say what the monthly progression of comps for Famous Footwear were?

Diane Sullivan

No. We basically said that August started off slow and finished in the high twos, September was in the mid-single-digit range up and then October slowed down a little bit in low-single-digits.

Scott Krasik

So, no – so positive all three months though?

Diane Sullivan

Oh, yes.

Scott Krasik

Okay.

Diane Sullivan

Yes, positive all three months 2.1% back-to-school to 2.7%, 2.6%.

Scott Krasik

Okay. So, as we think about next year, I am not talking about guidance, but, it seems like the consumers are shopping more during peak periods and you can really capture that and back-to-school especially, but, is there anything that you can do to try and drive traffic to the stores at a greater rate if that phenomenon continues or maybe accelerates?

Diane Sullivan

Well, I think we are focused on making sure we are used to engaging consumers lots of different ways, Scott, and we really look at trying to drive traffic not just to stores, but really again across all of the different ways that the customer shops. So, we are looking at – the mobile actually is the fastest growing way that she is shopping, I know that you know, and you hear that from everybody and you can see the traffic rates there are just growing exponentially.

The desktop and tablets, we’re focused on how manage that as well, that’s been a little less robust in the last couple of months as we’ve seen the growth in the mobile growing much more. And then, the store piece of it continues within our peak times of the year to be to really come back and to do quite a good job. But again we don’t focus necessarily specifically by channel. We are really trying to drive interest and engagements and purchasing really across all of those different channels that way that she shops. So not any one place.

Scott Krasik

Okay, thanks. And then, Ken, you alluded to, you want to keep your optionality on the gross margins, but historically, you really haven’t played in that as same as, I think the sell-in just based on what your reporting hasn’t been over the top. So I don’t think that retail inventory is that high. So, how would you sort of frame the likelihood of needing to be more promotional?

Ken Hannah

Well, I think I would frame it by just the unseasonably warm weather, obviously, we are selling more sandals today than we are boots and booties and I think just with what we’ve seen in the slight change in weather patterns in the last week, that’s had a big impact on that business. And so, I think, we want to make sure Rick has as much flexibility as he needs to navigate the fourth quarter. We are not anticipating that there is going to have to be anything done from a response standpoint, but we certainly didn’t want to close our options.

Scott Krasik

Okay. And then just, you said, Sam was up, is that up ex the new store growth? Are you growing in all stacks though as well?

Ken Hannah

Yes.

Scott Krasik

Okay. And then, is there anything that you’ve learned from the stores could improve wholesale or gives you confidence to open more stores, just sort of update that?

Ken Hannah

Well, I think that probably, it might be the reverse, actually a little bit. I think we want to make sure that we have even more product differentiation in the stores that there is actually we need a stronger breadth of assortment and more – even more freshness and even more newness there. So I would say, sort of the pace of how we flow goods is something that we are going to have to pay attention to there. So I would say, that there is almost a reverse there. We learned a little bit about how to, really how to drive the retail side of it better.

Scott Krasik

Great. Okay, thanks, good luck.

Ken Hannah

Thanks.

Operator

Your next question comes from the line of Jeff Stein with Northcoast Research.

Jeff Stein

Good afternoon everyone.

Ken Hannah

Hi, Jeff.

Jeff Stein

At the low end, you are looking for about a 23% improvement in earnings per share in the fourth quarter and obviously that would represent the highest increase of any quarter this year. So, where do you see it coming from, Ken and how would you kind of size up the risks, the upside, downside, where do you see the biggest risks in the quarter?

Ken Hannah

I think if you look at the business in the third quarter, the operating earnings contribution was a little more 50-50 across the business. And so, I think, traditionally, that’s been much more heavily weighted towards the Famous contribution and with the 11 plus percent operating margin at the branded business, it’s contributing a larger percentage of the overall earnings and that continues into the fourth quarter.

We don’t anticipate any real – any shifts really in the Famous business in trend or anything year-over-year. I think the biggest change is, we are getting more contribution from the branded portfolio and then we are also – we are seeing little bit of improvement in the corporate other segment just as we continue to manage our overall expenses.

Jeff Stein

Got it, got it. And, when I look at the SG&A of each of your segments, it was kind of interesting, for the Brand Portfolio, your dollars in SG&A were actually down over 5% and when you combine that obviously with the 300 plus basis point improvement in gross margin, that certainly gives you a lot of leverage particularly if you could start getting the top-line growing against.

So, I’ve got two questions here, one, what’s contributing to the drop in SG&A? And number two, when do – when would you guesstimate we’ll start to see positive revenue growth in the Brand Portfolio?

Ken Hannah

Yes, so I think, a big piece of that is Contemporary Fashion up 6.2% in the quarter and I know that, Jay has done a great job of really going through and evaluating all of the brands in the portfolio and making sure that he is reallocating resources appropriately. So, we are seeing the improvement there at the expense level. I think from an overall contribution on the top-line, I mean, we do believe that you’ll see that turn in the fourth quarter and the sales for the Brand Portfolio segment will be up.

Jeff Stein

Excellent, okay, so in other words, if you don’t anniversary the – kind of the changing mix at Dr. Scholl’s in terms of the channel?

Diane Sullivan

Yes, in the fourth quarter we have just for sure and if not, then we have other off predators for how we offset that going into next year and I wanted to mention one other thing around the Brand Portfolio is, well, in terms of our full year expectations that we really expect that every brand is going to show operating margin improvement by the end of this year, which really demonstrates significant amount of discipline and terrific execution in this last year which is the – it’s one thing when a couple of them do and it’s another thing when you really have everybody in the portfolio ending up contributing in that way.

Jeff Stein

Very good. And final question, gross margin drop at Famous Footwear, I presume that has everything to do with the product mix shift, in other words, slowdown in boots and booties during October and was there anything else that may have contributed?

Rick Ausick

Yes, Jeff, it’s Rick. Yes, that’s the contributor as well as the additional freight expense on our dot com shipping.

Jeff Stein

Got it. Okay, thank you very much. Great quarter.

Diane Sullivan

Thank you.

Rick Ausick

Thanks.

Operator

Your next question comes from Laurent Vasilescu with Macquarie,

Laurent Vasilescu

Thank you very much for taking my question and congrats on the strong quarter. I was curious to know, I think in the prepared remarks, you talked a little bit about Nike in a positive. I am curious to know athletic did this quarter at least a little more?

Ken Hannah

Yes, athletic in total was up mid-single-digits.

Laurent Vasilescu

Okay. And then within that, canvas, is there any commentary on that?

Ken Hannah

Well, I guess, canvas business, it was probably a little bit more diversified by brand. Some brands did very well, some brands had a little bit of a struggle. We’d like to look at it now as more lifestyle-driven. So, whether we have – whether it’s shoes in actual canvas shoe or not it’s secondary to the fact how the customer is wearing it and using the product. But the lifestyle business, as we look at it today was up in the high teens.

Laurent Vasilescu

Okay. That’s great. And then without getting into specifics on numbers for next year, how are you guys thinking about the athletic category for next spring?

Ken Hannah

We don’t see it as trends slowing. I think we are looking at making sure we have breadth of products, making sure that we have the assortment in the brand that the consumer is looking for in a more meaningful way. So it’s going to continue through first and second quarter and we are anticipating even through back-to-school.

Laurent Vasilescu

Okay. And then, with the weather turning, getting a little bit colder, it gets colder a bit, how is November stacking up so far?

Diane Sullivan

Well, the weather has just turned in, and as Rick just said, the athletic really not falling down, it obviously has gotten better.

Laurent Vasilescu

Okay. And then, on the SG&A for the fourth quarter, are there any one-time items that we should think about from last year, have you think about the SG&A dollars for this year for fourth quarter?

Ken Hannah

No, not really.

Laurent Vasilescu

Okay. And then the tax rate, I guess, we get to 25, I guess, fair estimate?

Ken Hannah

Yes, I mean, the tax rate, last year we had a number of discrete items that allowed us to utilize some of our tax carrying forwards, don’t really have those this year and with the higher mix of our business coming through our US subsidiaries, that rates been at the high end of that 30% to 32% range.

Laurent Vasilescu

Okay. Thank you very much and best of luck.

Diane Sullivan

Thanks, Laurent.

Operator

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

Steve Marotta

Good evening everybody. Diane, I have a couple of questions.

Diane Sullivan

Sure.

Steve Marotta

If you could endeavor to disassemble weather-related acceleration through the month, was there any change in pace of sales after the election?

Diane Sullivan

No, not significantly, no. Definitely not, I would say. We didn’t see any material change with the election.

Steve Marotta

As you look into next year and without giving specific guidance on 2017 of course, are there – can you comment on the open to buy dollars that are available for the branded portfolio within the wholesale channel? And are there any shifts to that that are currently going on that you would view either positively or negatively?

Diane Sullivan

I wouldn’t say that there is anything that I could give you specifically other than to tell you there will be the continuation of people wanting to place fewer initial orders and chase goods and keep inventories tight and lean.

And that for sure is what we are seeing and I think, again demonstrating our – not only the third quarter performance, but what we also expect in fourth quarter, our teams have really done an outstanding job of managing inventory and chasing the great new items that they’ve been testing and able to get reorders and replenishment and improve their drop ship capabilities. So, what we are not getting on initials, up front, we are really figuring out how to continue to chase the opportunity and chase the consumer demand.

Steve Marotta

And that will help of course, when the DC goes live in December?

Diane Sullivan

Sure, yes.

Steve Marotta

Great. Rick, I have one question for you. There was a comparable within the industry that recently commented that acceleration of denim is helping out in other categories besides athletic. Are you seeing anything like that, it seems and actually Diane, if you want to chime in on the branded portfolio as well, if you are seeing anything like that in any of the styles that you are selling in either of the divisions?

Diane Sullivan

I mean, I think, directly say right, it’s really for Famous and for the Brand Portfolio that that continues to be a trend in athletic and sport-inspired products. We don’t see that really flowing down at all, But what we do see is, maybe a little bit of a shift from seasonal to more seasonless kind of products and little more on the casual and a little bit more on the dress side.

So, we think that there is – we think that’s actually a good trend, because it really allows the consumer to really diversify her were drawing a little bit and we are going to be less reliant on boots and booties and potentially sandals. So there as we see more closed shoes and opens that closed shoes selling as well. So there is a couple of nice new trends that we think we can take advantage of.

Steve Marotta

That’s great. Thank you so much.

Diane Sullivan

Okay, thanks, Steve.

Operator

And we have no other questions in queue at this time. And I would like to turn the call back over to our presenters.

Diane Sullivan

Thank you very much for joining us this afternoon and we wish everybody a happy and healthy Thanksgiving. Take care.

Operator

Thank you for your participation. This does conclude today's conference call and you may now disconnect.

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