Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Collective Brands' Fourth Quarter 2010 and Year-End Earnings Call. At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded.
I would now like to turn the conference over to our host, Mr. James Grant. Please go ahead.
James Grant - Director, IR: Good afternoon, and welcome to Collective Brands' conference call for the financial results on the fourth quarter and full year of fiscal 2010. I am James Grant, Director of Investor Relations.
Our call today will begin with Doug Treff, Executive VP and Chief Administrative Officer; followed by Matt Rubel, Chairman, CEO and President. Also with us today for the Q&A portion of our call is Chief Financial Officer, Doug Boessen.
After we complete our prepared remarks, Matt, Doug, and Doug will take your questions. Today's remarks will contain non-GAAP financial measures. Management believes that these non-GAAP measures will help you to better understand underlying performance trends in our business. For a reconciliation of these measures to their nearest GAAP measure, please see our financial press release and visit our website at collectivebrands.com, and click on the Investor Relations and Presentations & Webcasts links.
Also our remarks today contain forward-looking statements, which are not historical facts and are subject to a number of risks and uncertainties. Actual results may differ materially. Please refer to today's financial press release and our SEC filings for more information on risk factors and other factors that could impact forward-looking statements.
Now I would like to turn the call over to Doug Treff.
Douglas J. Treff - EVP and CAO: Thank you, James, and good afternoon, everyone. Collective Brands delivered improved fourth quarter results with a $10 million loss or $0.16 a share versus an $11 million loss in the fourth quarter of 2009 or $0.17 a share. This improvement was due to net and comparable store sales increases, leveraging SG&A, and lower interest expense due to debt reduction. For the year, net earnings and EPS were up over 36% on a 2% sales increase illustrating the leverage and effectiveness of our business model.
I'll now take you through the key drivers of our fourth quarter and year-end financial results for 2010 in more detail. Let's begin with fourth quarter sales. Net sales for Collective Brands increased 4% and comparable store sales increased 0.4%. The sales increases were due primarily to strong global sales in PLG Wholesale and Payless International.
Fourth quarter PLG Wholesale sales increased 20% led by gains in Sperry Top-Sider, Saucony, and International. The growth was driven by several related factors including increases in doors or points of distribution, particularly in premium channels, new innovative products, and connecting more deeply with our targeted consumer segments.
Payless International sales increased 6.5% driven by comparable store sales increases in Latin America and Canada, new stores in Columbia, and the favorable impact of exchange rates. PLG Retail net and comp sales increased driven by successful execution of strategic improvements around merchandising and marketing, programs such Slingshot, Glitzy Pets, and Star Wars were successful supported by distinct marketing messages to moms and kids in appropriate channels.
Payless Domestic sales declined 0.4%. We recorded higher sales in many key categories such as boots, fitness, flats, moccasins, and accessories. This drove higher average selling prices, units per transaction, and customer conversion. However, the favorable results were offset by lower customer traffic which led to lower sales particularly in children's and dress footwear.
Gross margin; our fourth quarter gross margin rate decreased 110 basis points, this was driven primarily by three factors. First, in the fourth quarter of 2010, we had a more normalized level of markdowns compared to an unusually low level of markdowns in the fourth quarter last year given our low inventory levels at that time. Second, cost on light product increased in the mid single-digit percentage range. Third, due to the rapid growth of our wholesale business, we had a greater mix of wholesale sales, which have lower gross margin rates than retail.
Our fourth quarter SG&A improved 70 basis points. This favorable leverage was due principally to 4% sales growth and expense management in our retail businesses. Payless Domestic managed lower expenses on nearly flat sales, while PLG Retail kept expenses flat and generated a sales gain.
Moving on to net interest; fourth quarter interest expense declined by over $3 million, due to having reduced our total in 2010 by $185 million. Our effective income tax rate for 2010 excluding discrete events was 18%. We had nearly $2 million of favorable discrete events related to the resolution of outstanding tax reserves in the fourth quarter and nearly $8 million for the full year.
Before moving to the balance sheet and statement of cash flows, I'd like to share a few income statement metrics for the full year of 2010. Collective Brands had strong growth and profitability this year. Our sales increased 2%, which led to an operating profit increase of 20% and an operating margin increase of 80 basis points. Adjusted EBITDA increased 9% to $325 million and net earnings increased 36% as we directed some of the cash flows to paying down debt thereby reducing interest expense.
Within the Performance + Lifestyle Group, we achieved record sales and operating profits. PLGs 2010 sales were $856 million, up 17% to last year and operating profit was $59 million more than double last year’s. Collective Brands' results were also driven by Payless International, which recorded a 9% sales gain in 2010 and expanded operating margins by 400 basis points. Over 60% of the Company’s profits in 2010 came from our fastest growing and highest margin operations in PLG Wholesale and Payless International.
Now into the cash flow statement and balance sheet, capital expenditures were $98 million, up $14 million from last year. The incremental spending was driven primarily by Payless store accessory fixtures and Collective Brands information technology projects, an example of which is markdown optimization. We again had very strong free cash flow. For the year, it totaled $174 million. The 2010 free cash flow was aided by a $65 million increase in changes to accounts payable from payment term changes that are one time in nature. The 2010 results were lower than 2009 due to particularly favorable changes to the inventory last year in 2009.
At year-end 2010, our inventory increased to $532 million as a result of three primary factors. First, more units; we increased units at Payless to replenish them to a more normal year-end level and added inventory to support the launch of beauty in 1,500 stores. Inventory units grew at PLG along with sales to support its strong growth.
Second, product mix; the Payless inventory reflects a higher price product mix driven by boots and fitness, as well as a higher mix of inventory for our expressive consumers. The PLG inventory reflects a higher price product mix driven by the faster growth in Saucony and Sperry compared to Stride Rite and Keds.
Finally, higher product costs due to industry-wide inflationary pressures. Inventory at the end of 2010 was well positioned for spring 2011 with relatively low levels of aged inventory.
We strengthened our capital structure as we paid back $185 million or 22% of our long-term debt in 2010. We used our cash flows to lower debt and the related interest expense contributing to higher net earnings. Net debt declined to $340 million or one times EBITDA. In the fourth quarter, we made an early repayment of $41 million of term-loan debt and repurchased 1 million shares of our stock on the open market for $20 million.
For the year, we reduced our outstanding shares by over 4% as we repurchased $60 million of stock. Regarding Collective Brand's financials going forward, reiterating the outlook we provided in October, our long-term goal over the next three to five years is to grow our earnings per share approximately 12% to 16%. This will be driven by 3% to 5% net sales growth and 9% to 12% operating profit growth. During 2011, we expect a more significant profit growth to come in the second and third quarters.
For the full year 2011, the effective tax rate is anticipated to be $21 million excluding discrete events and capital expenditures are expected to total about $110 million, and our retail store count is expected to decrease by approximately 15 stores as closings in Payless Domestic more than offset new store openings in Payless International and Sperry Top-Sider. Based on our backlog for first quarter delivery which was 49%, we anticipate wholesale sales in the first quarter to increase in the high-teens percentage.
Now I'll turn the call over to Matt.
Matthew E. Rubel - Chairman of the Board, CEO and President: Thanks Doug. In the fourth quarter, Collective Brands delivered a positive comparable store sales gain and accelerated its rate of net sales growth. These metrics validated two fundamental aspects of our strategy. First, that increased focus on expressive consumers at Payless will drive improvement in that business. Second, in our wholesale business continual flow of customer-focused innovations sold through the appropriate channels will drive sales of all of our iconic brands. Also in the fourth quarter, we invested heavily in PLG and Payless International with sponsorships and new market store openings which lay the groundwork for continual growth in 2011 and beyond.
For the full year 2010, Doug discussed our financial accomplishment, I'd like review some of the key wins from a strategic point of view as these lay the groundwork for the future performance as well. Starting with Payless, we've rolled out beauty accessories fixture categories and fixtures into 1,500 stores, which are off to a good start. Franchising ended 2010 with 62 stores in seven countries, up from 9 stores in three countries the prior year. Franchise performance has consistently exceeded our plans and is not included in the store count that Doug gives you. We launched a new in-store customer service model which increased customer satisfaction scores by four percentage points and validating our new model. We've seen that transaction size, likelihood of return, and advocacy are highly correlated with execution of our customer service model.
At the Performance + Lifestyle Group, Sperry continues to expand into a full nautical lifestyle brand, with women’s relative share now greater than men’s. We have also opened up our first seven Sperry retail stores and are exceeding our pro forma sales plans.
Saucony led the industry’s new minimalism trend with its Kinvara line. In addition to its commercial success which far exceeded our plans, Kinvara was named the Running Network's Best Shoe in Performance Category, one of several awards won by Saucony models.
Keds executed a successful brand turnaround. Sales and earnings increased. We elevated the brand's distribution. Captured new accounts and doors, and added exciting collaboration. We had successful initiatives with pinnacle retailers such as Bloomingdales and Neiman Marcus during the year.
Stride Rite delivered its positive comp store sales growth in the second half of the year as we appealed to moms through technical, functional, and emotional benefit, and appealed to kid's through fun and exciting product concepts. We improved retail store metrics, increased the relevance of our marketing, and launched successful merchandise program at both retail and wholesale.
As for Collective Brands overall, we further integrated and strengthened our operating units. We greatly improved our ecommerce platforms, finishing the rollout of our new platforms to Keds and Stride Rite, and developing mobile commerce for Payless. All of our business units had substantial gains and sales in ecommerce for the year.
We opened a new European distribution center and showroom to better meet the growing wholesale needs in that region. We integrated or deployed new information systems, tools such as new markdown optimization system, which is optimizing gross margin dollars throughout the lifecycle of products at Payless, and we continued our commitment to continuous improvement and efficient operations including reducing occupancy costs across all of our store portfolio.
Having summarized the year, now let's go through our operating segments, main drivers and accomplishments in the fourth quarter in Payless Domestic. We succeed at reengaging our customers by democratizing fun-fashion possibilities. We reenergized our focus on expressive consumers, providing them trend-right products through compelling stories. We had broad based successes in boots in the fourth quarter as customers responded very favorably to our trend-right style and greater depth and breadth of assortment.
In particular, cozy and weather boots were strong. Our transitional styles including bootines and shooties resonated well with customers, as sales of Children's boots increased as well. We also had strong quarterly results in other significant women's categories. Flats increased again in basic product, as well as more expressive styles at better and best price points. Mocs also drove women's footwear, particularly in branded and expressive styles. Branded footwear was 61% of our mix, up two percentage points from last year, driven primarily by increases in Champion and Dexter athletics.
Moving to Dexter; athletics had mixed results overall with our strongest results in fitness. We have though built our house of brands in athletics out now adding Above the Rim and Spot Bilt to our existing Champion and Airwalk brands. Our brands on the go forward will offer consumers trend-right innovative products in running, basketball, and fitness. We're launching ActiveLite, our Champion branded entry, into the minimalist running category for both men and women.
Our new brands Above the Rim and Spot Bilt will help drive results amongst male customers in the categories of basketball and cross training respectively. Early results are good. As planned, we increased the proportion of footwear sourced through agents to 38% from 25% through a significant increase year-over-year. We anticipate the proportion of agent procured footwear to stabilize at about this level in the future.
We utilized agents for additional product trend insights, while continuing to leverage the supply chain capabilities we've built internally. Once again, accessories delivered strong quarterly sales growth the increases were broad based with higher sales in most women's categories as well as children's. For the year, accessories were nearly $0.25 billion business and have emerged as 10% of Payless global sales. We believe there continues to be great opportunity in accessories. Later this year, we will launch new beauty products and brands targeting the junior customer, the consumer segment that has a very high affinity for Payless and relatively high discretionary spending power.
In summary, during the fourth quarter, we offered our expressive consumer more of what she relies on Payless for. We were more on trend and we drove sales with elevated branded product. We delivered another sequential improvement in comparable store sale and improvements in conversion, units per transaction, and average unit retails.
At Collective Licensing during the fourth quarter, we executed five new license agreements globally on our Airwalk, Above the Rim, and Vision Street Wear brands for a variety of product categories. For the year, CLI revenue was up driven primarily by our new brand Clinch Gear in Mixed Martial Arts and Above the Rim in the basketball.
Moving onto Payless International operating segment, we had a solid sales performance in most regions. In Canada, sales increased largely due to the performance of boots we brought into several Canada specific style to close gaps in our portfolio and we offered greater breadths and depths for adults and children. In addition, we held highly successful Boxing Day promotion and utilized our customer relationship management database very effectively.
In Latin America, our consumers continue to embrace our trend right fashioned aspirational brands and the value we offer. We increased inventories to meet consumer demand. Gains were broad-based though most pronounced in women’s dress footwear and in children’s footwear. During the fourth quarter, we opened our first store in Jamaica. Today we have four stores and this market is off to not a great start, a spectacular start. We expect to have 10 stores in Jamaica by the end of fiscal 2011.
Also internationally we ended the fourth quarter with 62 Payless franchise stores in seven countries which are collectively operating above plan. During the quarter, we established a franchise presence in Peru as well. Since the fiscal year end we opened our first store in Turkey and later this month we’ll open in Israel and next month we’ll open in Indonesia. By year end 2011, we intend to double the store count to a total of at least 130 Payless stores in a dozen countries including Morocco, Mexico and others.
Now onto the PLG Wholesale segment, we had another strong quarter of sales in PLG Wholesale with growth of 20%. Profit was flat due primarily to higher product costs and the timing of investments to enable future growth which is expected to produce leverage in 2011. Some examples include athlete signings, key hires related to sales and marketing, internationally and domestically and enhancing the rest of our European infrastructure.
Sperry Top-Sider which embodies our passion for the good life, in on and around the sea, their sales increased significantly across all genders, all target consumer segments in every way. While I meant business grew substantially, our women's business has grown even more, now representing just over half our sales. In addition, younger consumers and the premium channels in which they shopped helped drive results. Sperry also experienced significant growth online, internationally and in its retail store channel.
Looking forward, innovation will remain a key in driving Sperry results in 2011 and much of our increase in inventory is focused in this brand as it's growing. We're seeing favorable response in the new category of SON-R performance water shoes for boating and in fall we'll launch a line of dress and dress-casual shoes with our anti-shock and vibration technology in those shoes that will be launched at Nordstrom.
At Saucony we run. Saucony had another great quarter of sales driven by innovative performance products and great styling. Minimalism drove results and we're building a complete product platform around this category to continue driving results in 2011, Kinvara continuous to be the successful centerpiece of that platform today. We're also selling the Mirage, a shoe with more structure, but still lightweight.
The Mirage won Running Network's Best Shoe in the performance category in its Spring 2011 review. Ramming out the minimalism platform, we will soon be selling the Hattori, a 4.5 ounce shoe for more of a barefoot feel. Our efforts to capture more of the sprinting market are also gaining traction. Our Spike business for the spring season is growing fast. The apparel business continues to accelerate led by ViZiPRO, our high visibility running collection, which we expanded to multiple colors. Apparel was also driven by the award winning Epic Jacket and our innovative AMP PRO Recovery wear. Saucony had significant quarterly sales growth internationally led by Europe and through its ecommerce channel.
Keds represent timeless American style and the art of what is possible for the millennial consumer. While up for the year Keds sales declined slightly in Q4 as we switched around a certainly product mix during that time period. Keds had a strong Q4 international sale, and continued to build new business accounts across channels globally with accelerated growth in top tier accounts.
Our team has a variety of initiatives lined up for 2011 to continue to drive our positive momentum that we have in Keds. We are launching an exciting full integrated online and offline marketing campaign dubbed 'How do you do?' We engage the millennial generation, our target market, and inspire them to do what they do and incorporate Keds into their lifestyle. Also for 2011, we have a more complete and compelling fall and holiday product line, which will more fully established Keds as a year-round brand.
Finally, we just announced a licensing arrangement with Lee & Fung to develop a line of Keds' men's and women's casual apparels targeted initially to boutique and better department stores launching in spring 2012.
Stride Rite enriching the journey of childhood one step at a time had higher fourth quarter sales driven by its retail businesses. For both wholesale and retail, the Slingshot, Glitzy Pets, and Star Wars by Stride Rite merchandising programs continue to do well along with our adult brands and kid's sizes led by Sperry.
We are continuing to innovate with new programs and alliances such as our recent deals with MARVEL and Sesame Street. We are making strong consumer connections with moms and our three step progressive fit program has been well received at retailers and with consumers. The use of CRM and more relevant marketing and proper messaging across multiple channels has boosted our attitude and usage scores quite nicely. At retail, we're reconnecting with customers through lower opening price points to get trial from first time moms and our new service model and all our children specialty stores is driving conversion.
At wholesale, we are getting into more doors, as well as driving door productivity and diversifying our account base and improving our story telling. During Q4, we opened up our first Stride Rite stores in Asia with Li & Fung as a partner and are seeing good success there. They opened one in Hong Kong, one in Singapore, and two in Malaysia. Combined with those stores opened earlier in 2010 by our franchisee in the Philippines, Stride Rite now has eight stores under the franchise business model.
Now a few words on global sourcing; this impacts each of our four operating segments in cost of sales. Collective Brands footwear products on a like product year-over-year basis were up mid single-digit in the fourth quarter. This excludes the significant impact in changes of merchandise mix to higher cost products. The Payless mix was weighted more in favor of fitness in boots, and the PLG mix was weighted more in favor of Sperry Top-Sider and Saucony, which are more expensive than Stride Rite and Keds. The change on like product was due to cost increases from Asia related to materials, labor, and freight. Company specific initiatives related to materials costing greater reliance on factories outside China in more cost effective locations within China helped partially to mitigate the cost increases.
In the first quarter of 2011, we expect Life product cost to increase in the mid to high single-digit range. By second quarter 2011 this rate could increase to high single-digit percentage rate versus the prior year.
In closing, our fourth quarter results showed that our diversified portfolio asset and strong balance sheet enabled us to deliver sales and earnings. We have a portfolio of leading high growth premium brand at PLG which continue to innovate with outstanding product focused against the right consumers and the right channels. We have a rapidly expanding and profitable global footprint.
Our Payless Domestic business continues to generate strong cash flows and we built a leveragable business model and cost structure which we believe supports long-terms earnings growth and guidance.
Before taking questions, I want to thank our nearly 30,000 associates worldwide for an excellent year. They've shown a passion for serving our customers and a commitment to our corporate and individual brand strategies.
That concludes our prepared remarks and we'll now take questions.
Operator: (Casey Flavin, Hedgeye Risk Management).
Casey Flavin - Hedgeye Risk Management: Good thanks. You guys ended up closing several stores in the fourth quarter relative to what you're expecting at the end of Q3. Can you just highlight what changed, or what might have changed during the quarter as well as how you think or how you're thinking about your store closures over the course of this year and what do you think - ?
Matthew E. Rubel - Chairman of the Board, CEO and President: I'll go through that, but no more than planned actually. There may be some timing things but actually nothing extraordinarily different than our plan over the last 12 months.
Douglas J. Treff - EVP and CAO: Actually, Casey, I'll add a little more flavor to that as well. We go back and we talk with landlords. In some stores, we may think we may be able to get rent reductions to be able to keep those stores open but if it doesn't meet the expectations that we have in order to make that cash flow on return on capital make sense then we will close the store and so there are some issues at year end and there are also some stores that are involved in negotiation at year end that can make a change, but it's nothing material, no material difference.
Casey Flavin - Hedgeye Risk Management: Then throughout the store level, it sounded like your metrics were largely positive. So it seems like traffic was inherently the issue. Can you just touch on, if you can by month what you guys saw in terms of traffic trends and since the end of that quarter, what you guys are seeing?
Matthew E. Rubel - Chairman of the Board, CEO and President: Well, it was, I would say it was about as choppy a quarter and again, we try not to get it month-by-month but it was about as choppy a quarter as I remember seeing. I will kind of say that if it hadn't been those last three weeks, where the world frozen snowed, we would actually positive comp because the last three weeks were really challenging but a bit – generally speaking, we still have a consumer segment that is challenged that we deal with at Payless Domestic. I think part of our hypothesis though was proven out that even though that part is challenged and unemployment remains high in that sector that if we focused brand right, fashion right, trend-right stories against the expressive consumer, in fact we can move forward, and that’s why you saw the sequential improvement.
Casey Flavin - Hedgeye Risk Management: Then lastly guys, could you just give us some thoughts as far as how you're thinking about profitability in the PLG segment over the next sort of 12 to 24 months, do you expect to start leveraging the store base and some of the investments you’ve made there or should we expect further investment spending to keep margins in sort of at a similar level to what we’ve seen?
Matthew E. Rubel - Chairman of the Board, CEO and President: I think, what Doug tried to give you was a little bit of that Q2-Q3, is where we will start to see the leverage. Some of the investments are still kind of coming in place here along with some of the cost increases into Q1. So you really will start to see it leverage more later in the year, but it’s pretty well mapped out and so we think we have pretty good handle on it. But it’s sequentially going to happen more not really in Q1, but more Q2 and Q3.
Operator: Dorothy Lakner, Caris & Co.
Dorothy Lakner - Caris & Co.: Just wondering if you could in talking about PLG, and the sales and profit performance in the quarter, profit was flat and I think you said partly due to investments, partly due to product costs, I wondered if you could sort of share what part, what percent, or what portion is the product cost and what percent is the investment, because obviously the investments pay off at some point, and then if you could sort of hazard some thoughts about product cost, where you see that going in the second half of the year? Then lastly, you seemed to be making some improvements in the Stride Rite retail business, and just wondering if you could share some of the metrics directionally with us?
Matthew E. Rubel - Chairman of the Board, CEO and President: I will give a little color and then I will let Doug give you some numbers around kind of the how it breaks out. I mean, the color is that while there is product cost increases in PLG here in the first half, not until second half or late in Q2 will our wholesale prices somewhat more effectively align with the increases that we are seeing in our cost prices. So, we purposely held that. So, some of that is kind of a Q1, Q2, kind of move through, but then as you move into Q2, you will start to see that mitigate somewhat, and then we’ve made huge investment in putting a whole team in place in Europe. We've built out a whole women’s team in Sperry. We have added in a whole sports marketing group, and all the sports marketing in Saucony. We've put a lot of emphasis on how we are going to build out some of the new things that are going on in the Stride Rite kid's group, and we had a very bare and minimal team in the Keds last year and starting to add the positions that the business is warranting, so that it can grow to the next level. So each one is fairly well mapped out and so as we work through these cost increases and then translate them back to the wholesale price, those will start to pay off in Q2 and Q3. Then on the Stride Rite retail side, net-net everything is looking really positive. Our wholesale business, we are seeing sell-throughs and we're seeing future order book goods. We've got great stuff going on there, not just in Stride Rite kids, but Saucony is really doing some amazing stuff and as we've brought product out there that's more aligned with some of the innovation in the parent business, that's great, as well as making sure that we have OPP, and we've gotten some great slots from some key retailers for back-to-school, already nailed and in a good way. So overall, it's been our most challenging division over the three years that we've owned the Company, but I think the team is really starting to get all of its stuff right. Our attitude and usage scores with the brand are up significantly. So what mom is saying about us out there is tremendous, and transactions are up, conversion is up, and here actually, we're starting to see traffic move in that direction as well. So all things here pointing to positive, we do have the challenge and more so though in kids on the cost side than even on the adult brand, because how much of that can translate through to a wholesale price increase is more mitigated here. So we're more – while we're seeing all the positive stuff. I also want to caution that we can't take our prices up too much here because premium kid's is still premium kids. So we've got to go into…
Dorothy Lakner - Caris & Co.: You just pulled back as well on the pricing there to…
Matthew E. Rubel - Chairman of the Board, CEO and President: Yes, to get into it and it's working. So we've got to really be thoughtful about that, and there may be some, I will call them bumps along the way that there will maybe some moves towards getting that to align on an even basis quarter-by-quarter. Hopefully, that's helpful. Doug can fill you in on the two specifics.
Douglas J. Treff - EVP and CAO: Dorothy, Matt covered it real well. I would just add that in terms of the average product cost, the PLG brands experienced slightly higher product cost increases than the total Company did and so that affected the margins, but wanted to know that there are some degradation in the gross margin but also to reiterate what Matt said related to the investments that we are making, some of this result is attributable to the talent that we've added to the business to marketing in how we're positioning the Company, things that will benefit the future.
Matthew E. Rubel - Chairman of the Board, CEO and President: If you watch the end of our Track & Field Championship this past weekend, you would see there were two Saucony athletes finishing with gold and one with silver, getting a lot of TV time with the wonderful Saucony logo on there, more than showing that we are made great equipments that’s making world-class athletes finish in the top. So, pretty exciting stuff.
Operator: Paul Swinand, Morningstar Incorporated.
Paul Swinand - Morningstar Incorporated: First question would be on the inventory. How do you think about inventory turns long-term? Do you have a goal or something you could share with us and do you see that eventually improving or is it this the normal inventory run rate?
Matthew E. Rubel - Chairman of the Board, CEO and President: Let me give a headline and I think Doug can again get into some specifics. Last year was a very strange year, as it relates to growth trends and supply and change in factories. So, we had a lot of chasing of product during the year and in chasing that product I mean break it down into Payless is one story and to PLG is another story. About 62% to 63% of our growth in inventory is in the PLG. So with the vast majority of it in PLG, then on top of that the vast majority of that growth is within (Sperry. In Sperry), we had trouble supplying our hand tone product last year, and getting that really up and ramped to meet demand. We feel as though we have now got the right factory base and like capacity, but we wanted to make sure, we've got in stock on the right key items, so as to not loose spring business. We also are more in women's, so there is more of what I'd call an overhang time period in women's fashion product when at the end of the season, you do have some remnants and how you then liquidate that. That's fully reserved for and in a very, very low and manageable amount based on what women's product is. So we do have metrics. No, I'm not ready to share them with you publically at this point. I think, it's a good goal though to be able to give you more guidance on that. We did turn quite fast last year, perhaps a little too fast because we lost some business, and I think, we have to do it category-by-category. So, by the time we get to next year's investor conference I would hope to be able to be a little clear on that. Also we made a stand at Payless, and the stand that we've made at Payless is that we want to have full assortment. The team there is working on some very specific assortments that will be in place by back-to-school or just after let's say mid to late August in 1,800 doors that really kind of broaden our assortments a little bit and we want to make sure that we've got the units, because as there's a natural growth in overall cost and retail pricing of footwear. We believe that as we are appropriately expressive with good brands and we continue to market ourselves effectively that the marketplace should come to us more naturally, because we'll have prices that are relative to the competition for the type of product we're offering quite good, so we are not taking ourselves down in unit inventory as much as I'm sure many other retailers are. So, we're making a bet on that throughout the year, but we're actually doing it in a very, very thoughtful way by cluster type, by store in a very, very focused manner. In addition, we are into – the fitness product is more expensive, so there is mix up there as well. So, that I think kind of hits the overall summation of it. We are at a low level of age. I wish we're a little bit lower in inventory than we were right now, so I do believe we might be $10 million or $15 million more than I personally like to see, but we are not $50 million more than I'd like to see. That's kind of the way I'd look at it.
Paul Swinand - Morningstar Incorporated: Then along those same lines as you add the beauty and accessories. Is that still additive throughout 2011? Because you'd be lapping some of those additions from 2010, but that should be a net add of inventory, is that correct or not?
Douglas J. Treff - EVP and CAO: You're right. You're right. A portion of the inventory growth at year end in Payless was attributable to the accessories, the beauty that we put on fixtures in the stores, and we anticipate doubling that from the current 1,500 stores to 3,000 stores this year.
Paul Swinand - Morningstar Incorporated: So the increase is about the same in dollars. Is that correct?
Douglas J. Treff - EVP and CAO: Correct.
Paul Swinand - Morningstar Incorporated: Just on the merchandising. I feel like a lot of athletic retailers are saying running is strong. Obviously, Saucony has been strong as well. Do you feel like you're outpacing the industry and is that just due to entering the new categories or is it broader than that?
Douglas J. Treff - EVP and CAO: Yeah. Saucony grew over 30% for the year. That definitely outpaced the industry. It was driven by innovation and by great, great product, and so the Kinvara was a starting point for them and I think they gained a tremendous amount of confidence in what they were doing off of that. The Mirage coming out after that continuing to build with the Hattori. So we're going more at a call built-up, more stability, and then more lightweight closer to barefoot. So I think we've now got, and I think we've also done some price pointing into the zone which is really I think going to give us a broader swath into the marketplace and we are powering up our marketing against this and the sell-throughs are already starting to come. So we feel like there's really only – we feel like we are one of the two people that are in this zone as leaders and we are out to take the new consumer who wants this lightweight running and we're doing it, so not just a running channel like this, but so that the regional sporting goods consumer loves it as well.
Operator: David Mann, Johnson Rice.
David Mann - Johnson Rice: Thank you, good afternoon. In terms of the product cost issues can you just give us a sense on what your early belief is for the second half for cost increases we might see should be similar to second quarter or likely somewhat higher?
Matthew E. Rubel - Chairman of the Board, CEO and President: Slightly higher David. It's fairly dynamic. It's categorically driven as well. So I think one of things we just had a long meeting yesterday at Payless and we're very focused on making sure that we don't walk away from the (express) consumer just because the price went up. So we're going to make sure we have the right product, but at the same time, as it comes to everyday value product, we’re making sure we’ve got the right things there, so we said high single digits for the second quarter. Try not to go too much further out than that. I see it slightly higher than that as you enter third quarter and fourth quarter, but it’s too early to really finalize it, so a lot of what’s going on with oil and with all the other stuff, you know it's like it one day it’s a 110, the next day its 90, so there is a lot of changes as it relates to that where it won’t be lower let's put it that way and I think that it will be slightly higher than the current growth rate.
David Mann - Johnson Rice: The mix shift that you are talking about in your product towards expressive, can you give us a sense on what that ASP impact was in the quarter?
Douglas J. Treff - EVP and CAO: Well, sequentially, I mean I think we had another three or four point increase in kind of our overall trend, so I think the best way to look at that is that’s what it did and I don’t believe we were fully – I don’t think we fully nailed it in Q4. I don’t think our marketing was lined up as effectively as it could have been. It was better. I think our storytelling was better. I think we did have the right boots. So we were better on the key category. We owned more of it. our breadth of assortment was good, and I think like somebody was talking about running earlier on the Saucony side, well, we’ve got that running category covered at Payless already now, and we’re on it as well as there is a reemergence of basketball. We’re on that with Above the Rim. We feel as though when you look at kind of what Neiman Marcus is advertising this month and what you are seeing with others and then you see what Payless is advertising this month, it’s the same stuff. So same trends meaning, so I feel like we are back at it in terms of being on trend and the customers are loving it.
David Mann - Johnson Rice: When you moved more towards agents, I think, you've indicated there might be some higher cost involved there, but maybe not material. Can you just sort of update us?
Matthew E. Rubel - Chairman of the Board, CEO and President: Well, I mean, I think, the margins are kind of showing that all the other tools that we have in place the markdown optimizations, the site assortment metrics, all of those other things are mitigating that, because we are now at a level of where I think on the agent side, LuAnn feels very comfortable that she has got a diverse enough group of people giving her insights into what's happening that she doesn't need to increase any more than that, and in fact it could go down two or three points from there, but we're probably at the far edge of that, and hasn't really had a material impact on the margins that we have shown you.
David Mann - Johnson Rice: Then last question with crude as you're saying going to $100, whatever, potentially higher, have you seen any kind of shock impact on your customer in terms of when you think about what's going on now, or what's gone on in let's say '08 in terms of how they shop, is there some point where it just does shock them and they slow down, and can you talk about where that would be?
Matthew E. Rubel - Chairman of the Board, CEO and President: I don't really know where it's going to be – if it goes to $5, we've definitely got a problem. So, I think, anybody in the mass market, I mean, that just takes money out of their customer's pockets. I think, the whole thing with Payless is positioning it towards being the aspirational brand for the expressive consumers, so that we are not as dependent upon the person who everyday is worrying about that extra $0.10 in gas money, so I think that as we do that more appropriately that becomes less of a factor for Payless today than it was five years ago, David.
Operator: Chris Svezia, Susquehanna Financial Group.
Christopher Svezia - Susquehanna: I guess, the first question I have is just, maybe Doug can you just tell us again what the ASP or footwear and the unit trend line was for footwear year-over-year? In other words, units, was it up or down and/or ASP, was it up or down, I don’t recall what you said if you gave that number?
Douglas J. Treff - EVP and CAO: Footwear average, retail was up for the quarter.
Christopher Svezia - Susquehanna: Unit?
Douglas J. Treff - EVP and CAO: The units, they were down.
Christopher Svezia - Susquehanna: I guess, Matt, a question for you. You have done a nice job transitioning, doing better job in boots that clearly show in the results. As you move into spring, give us any color, any thoughts about how you would think about your spring merchandise, just kind of the trends you may or may not see, and I know, you're not going to (tilt your hat) one way or the other on early market trends, but we are hearing a lot of good things about some styles, wedges, flats, things of that nature in key markets. Any color you can add about that?
Matthew E. Rubel - Chairman of the Board, CEO and President: Yeah, I think, you’ve got it. You’ve got good insight, Chris. I mean I think there is some good wedge business, good platforms are out there, and starting to sell and I just did another product overview on some things that are flowing into Q2 and into early Q3 yesterday, and I think, the team there has really put together some extraordinarily appropriate and exciting product, and I think, our challenge is actually making sure we continue to have good, better, best, well modulated, and so that we don’t walk away from the good category. We keep enough in that, and I think there are some slight tweaks they can do on that. I think our team is flowing the right stuff, and actually I think in a couple of times where we're right at the trend and maybe even a month or two ahead of the trend which I'd rather be than behind it.
Christopher Svezia - Susquehanna: When you guys talk about and I'm talking about product cost per second, so when you talk about mid-to high single on life product for Q1, up high single in Q2, I assume that's for the entire Collective Brand's organization, is that right?
Matthew E. Rubel - Chairman of the Board, CEO and President: Yes, and that's why Chris, I think what Doug was trying to say is you're going to see the kind of - that we give you long-term goal that we have in terms of EPS increase. So, I think it's really more of the Q2, Q3 is when you'll see that growth when we can modulate some of the wholesale pricing to go along with that price increase that's coming through because you just can't do it midstream, you got to wait for the right pricing time period.
Christopher Svezia - Susquehanna: So then, what does that mean because you talked a lot about PLG, what does that mean for Domestic Payless in terms of the opportunity to mitigate some of that cost because I know you have pricing, markdown optimization, favorable occupancy, changes in sourcing, what does that look right? What are the buckets? What are the things can you do offset that pricing increase on a Payless side?
Matthew E. Rubel - Chairman of the Board, CEO and President: Ultimately, we're doing material sourcing directly. We're working with core factories. We this will be approach approximately 25%, outside of China as a company, which is huge because we were 96% in China. So, we're starting to build critical math in Vietnam. We will really have a huge ramp up in Indonesia. We accelerated - we actually had a ramp up plan to double it. We're going eight-fold growth in Indonesia in sourcing this year, because our factory partners are already producing the quality that we want. By the way those two things give us a great advantage to how we are going to bring goods in the countries outside the U.S. because there are a lot of China importation issues into some countries. So, I think we do in Vietnam and do in Indonesia across categories, actually makes it easier for us in countries outside of the U.S. So, I'd say that the other thing is that our sourcing team has really busted their b