Operator: Good morning ladies and gentlemen. My name is Monfranz and I'll be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Following the speakers' remarks, there will be a question-and-answer session.
I would now like to turn this call over to your host Ms. Peggy Reilly Tharp, Vice President of Investor Relations. Ms. Peggy, the floors is yours.
Peggy Reilly Tharp - IR: Thank you. Good morning and thank you for participating in the Brown Shoe Company's fourth quarter 2012 earnings call, which is being made available to the public via webcast. I am 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 brownshoe.com. In addition, slides are available on our website for you to reference during today’s call.
Please be aware that 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 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 will begin with a strategy review from Diane, followed by a financial summary from Russ before turning the call back over for Q&A.
I would now like to turn the call over to Diane.
Diane M. Sullivan - President and CEO: Thanks Peggy and good morning everyone. 2012 has come to a close and I'm very happy to report full year sales of $2.598 billion, an improvement of 0.6% versus sales of $2.583 billion in 2011. Excluding sales in both years for brands exited as part of our portfolio realignment effort consolidated sales were up 2.6% in 2012. We also delivered on our earnings promise each quarter of this year culminating in 2012 adjusted earnings per share of $1.13. This was up more than 60% as we followed through and delivered on our strategic initiative. Today we are a slightly smaller but leaner and more profitable Company with adjusted operating earnings up 45% over 2011. Throughout the year we worked hard to execute on our portfolio re-alignment efforts at the infrastructure, retail and brand levels. We reduced our total SG&A by more than $18 million in 2012 while simultaneously investing in key Wholesale brands and our Famous Footwear stores. Importantly we did all of this while strengthening our balance sheet by reducing our short term borrowings by nearly 50% to $105 million. All in very solid results.
Let's take a deeper look into 2012 results starting with Famous Footwear which remains at the leading edge of our strategic efforts to build brand differentiation and brand equity. At Famous Footwear, we had a record year in terms of sales crossing the $1.5 billion mark and also achieved gross profit of $666.1 million and record operating earnings of $94.1 million. In addition, we reported record fourth quarter sales at Famous with same store sales up 4.4% on a 52 week basis. For 2013 we plan to continue to focus on three key areas for productivity growth at Famous; real estate, inventory optimization and omnichannel engagement. Our strong real estate strategy will continue to optimize selling square footage as we did in '12 when we achieved an overall improvement in revenue per square foot of 7%. We are just shy of $200.
We also worked to enhance our visual story-telling in 2013, by continuing to upgrade signage and install victory fixtures across our store footprint. As many of you know, in 2013, we're improving our inventory optimization by installing a new allocation tool. This change will result in smarter replenishment and improved service levels as we'll be adding a key analytical component to our existing process. This will enable us to more intelligently allocate inventory by item, size, width, and store and to maximize Famous Footwear margins.
We'll also continue to integrate both real estate and inventory components into our omni channel engagement as we work to continuously upgrade the consumer experience, while improving speed of delivery and driving cost efficiencies. I have said it as many have many times before that the consumer in the way they shop is changing in order to succeed in the future everyone is going to need to be ready and willing to change and to rapidly try new ways to reach our consumer.
We believe our omni channel efforts are already paying off, with famous.com up 22% in 2012. We logged more than 60 million visits at famous.com during the last year with the quarter of those via mobile. In total, mobile revenue grew by more than 190% in 2012 and we'll be maximizing this channel in 2013 by debuting a rewards app and revamping our mobile optimized sites. So, we had just an outstanding year at Famous Footwear and there is more on tap for 2013.
Now, let's turn to our 2012 Wholesale Operations where sales were up 1.6% including exited brands and earnings were flat. In Healthy Living, we saw continued sales strengths at LifeStride up 9.2% and Ryka up 10.6%. At Dr. Scholl's, we overachieved in terms of operating earnings of more than 200%. While we saw sales increases at mid-tier online and in catalogs for Scholl, overall 2012 sales was down slightly as we continue to successfully ship its brand away from our reliance on the math channel. In total, Healthy Living sales declined 3.5% in 2012 as we saw some mix results across the platform. One of our challenges for '12 was Naturalizer were all-in sales were down 2.7% as a difficult 2011 extended into '12 for this brand. We continue to aggressively work to improve all aspects of Naturalizer in 2012 and the start to spring '13 we're seeing a consistent and gradual improvement in our overall sell through percentages, resulting in an average gain of 1% to 1.5% on new spring product assortments versus last year.
Our new fall 2013 Naturalizer collection was well received by retailers at all of our recent shows, so while there is still work to be done we are seeing signs of strength. Sales to Naturalizer e-commerce and independent retail partners were up 41% and 3% respectively. We expect continued growth in these channels for 2013 as our variety of size and list makes it natural for consumers searching online for the perfect fit.
In Contemporary Fashion, full year sales were up 11% with Franco Sarto reporting a strong year, up 19.6% as it delivered against all metrics. Sales at Fergie were also very strong, up 54.8% and we expect to see continued good growth for both of our celebrity brands just as we had since they've moved into the Contemporary Fashion portfolio. For our newest brands Vince, we remain in investment mode with our fall 2012 soft launch behind us and spring '13 currently selling very well. We see good potential for this brand which is part of really one of the leading Contemporary women's and men's lifestyle collections.
Finally turning to our Sam Edelman brand which was named footwear's newest Brand of the Year and I don't think I need to tell anyone why. Sam has remained red-hot in 2012 with sales up 16.8% and he continued to deliver results thanks to his great understanding of his consumer and what's important to her in terms of fashion. As I am sure some of you may have noticed Sam recently announced that Kate Upton will be serving up the space of the Sam Edelman brand this year. Everyone is excited to have Kate join the brand. We also opened our flagship Sam Edelman store in SoHo in late October 2012 and we are quickly ramping up to our sales target and this is a store for – we never actually even had a grand opening thanks to Hurricane Sandy. This May we are looking forward to launching Sam & Libby as Sam continues to fire on all cylinders into 2013. There is a lot going on at Sam.
At Wholesale in general we ended the year with a much cleaner inventory position down 21.6%. We are also in a significantly better place in terms of processes and systems with greater visibility into inventory and inventory management. We continued to focus on leveraging costs in Wholesale and across the Company in 2012 and you should expect to see continued gradual improvement in this area in 2013.
Now specifically at Wholesale we are putting all of the non-business-related moving parts behind us as we focus on a few very important items in 2013. Over the past several years, our Wholesale teams have had to weather a lot of distraction, restructuring efforts and systems implementations just to name a few. So, in 2013, we are going to be focused on the areas that are going to drive improvement, managing inventory, growing margins and frankly just developing outstanding product that's on time and on quality. In short selling shoes and connecting with consumer.
So before I turn the call over to Russ, I just want to say that I'm proud of what our entire team has accomplished over the past year and I'm also extremely appreciative of our shareholder support as we worked each quarter to deliver on expectations. I remain confident that we are on the correct strategic path and without question, we will continue to provide details of our strategies and plans as we develop them and update you as we execute against them.
Now, with that Russ, I think I'm going to turn the call over to you.
Russ Hammer - SVP and CFO: Thanks, Diane. Thanks everyone for joining us on the call and webcast this morning. We certainly appreciate it. Although Diane briefly reviewed our consolidated sales, I'd like to add a little more color. For the fourth quarter, we reported net sales of $640.2 million versus $628.9 million in the prior year. As a reminder, 2012 included a 53rd week, which increased our net sales by approximately $21 million and had an immaterial impact on earnings.
Results from both the fourth quarter of 2012 and 2011 included sales of $2.8 million and $16.5 million respectively from brands and businesses we have exited. If we exclude these sales from both periods, net sales for ongoing businesses were up 4.8%. For the fourth quarter, we reported GAAP net earnings of $4 million or $0.09 per diluted share versus a loss of $8.2 million in the prior year or $0.21 per share.
Fourth quarter 2012 results included portfolio realignment costs of $2.9 million, while the fourth quarter of 2011 included portfolio realignment integration related costs of $18.5 million. On an adjusted basis, net earnings in the fourth quarter improved 43% to $5.9 million or $0.14 per diluted share, compared to earnings of $4.1 million or $0.10 per diluted share in the fourth quarter of 2011.
For the full year net sales were $2.598 billion versus $2.583 billion in 2011. Excluding sales from exited businesses of $42.5 million and $92.5 million respectively resulted in sales improvement of 2.6% for 2012. GAAP net earnings for the full year were $27.5 million or $0.64 per diluted share versus $24.6 million or $0.56 in 2011.
On an adjusted basis, excluding all portfolio realignment, organization change and integration related costs in both years, net earnings for 2012 were $48.6 million or $1.13 per share, up 60.4% when compared to 2011 earnings of $30.3 million or $0.70 per share.
I'd now like to turn to our individual businesses beginning with Famous Footwear which is part of our targeted family platform. As Diane discussed we reported record-setting fourth-quarter sales, with same-store sales of 4.4% on a 52-week basis. We also saw our conversion rate improve by 3.4%, while footwear AURs were up 2.1% in the quarter. These results were with 34 fewer stores year-over-year. In the fourth quarter we closed or relocated 18 stores and opened 12.
For the full year, we closed or relocated 89 stores and opened 55 stores, right on the plan we had shared with you earlier. During the quarter, all of our financial footwear regions saw reasonably significant sales increases as we improved our margin rate.
Boots continued to do well in the quarter with women's boots up more than 15% and with boot sales continuing to improve as the weather turned to winter here across the country in February of 2013. Our total inventory is as current as ever in recent memory and on a per store basis inventories were up at quarter end as we took early receipt of key selling product in January. Conversely, we saw traffic counts weaken as we moved into February which was more challenging than the fourth quarter. Like our peers, we continue to monitor consumer activity in the wake of tax rate changes as we settle into the sequester.
Turning to our Wholesale operations for our Contemporary Fashion portfolio, fourth quarter sales were up slightly with especially good sales growth from our Sam Edelman and Franco Sarto brands up 13.8% and 37.2%, respectively. For our Healthy Living brands, Wholesale sales were up 1.8% in the fourth quarter. LifeStride sales were up more than 9% with strength in riding and wide calf boots as well as a resurgence in dress pumps. Ryka sales were also up more than 25% in the fourth quarter.
However, the strength at Ryka was not enough to offset continued weakness at Avia which fell short of plan. Dr. Scholl's Shoes sales for the fourth quarter were up more than 5% as new styles continued to drive interest in the brand. All three of these growth brands LifeStride, Ryka and Dr. Scholl's maintains at mid-tier channels in the quarter. All-in Naturalizer sales were down slightly in the fourth quarter while Naturalizer same-store sales were down 6.6% on a 52 week basis. During the quarter Naturalizer sales to wholesale e-commerce partners grew 12%.
For Brown Shoe Company overall, online sales remain the driver of both Wholesale and Retail in the fourth quarter. For the full year, Wholesale sales via our external e-commerce partners were up 35% while our famous.com site was up 22%. All told, our owned e-commerce sites accounted for more than 5% of total sales for the full year.
Now, let's turn to a review of our financial metrics. Overall, gross margin in the fourth quarter was 39.3%, which was up approximately 140 basis points. SG&A as a share of our revenue was 37.3%, up approximately 70 basis points year-over-year due to the addition of the 53rd week in 2012.
For the full year, gross margin was 38.9%, up 30 basis points over 2011. SG&A as a share of revenue was 35.4%, down 90 basis points year-over-year. Net interest expense of $5.9 million was up 0.4% in the quarter. For the full year, net interest was $23.1 million, down 13% as we continue to reduce our borrowings. Our corporate tax rate was (13.7%) for the quarter and 29.4% for the full year.
Operating cash flow at the end of 2012 came in at $197.9 million, up $149.9 million versus a year ago. Cash and cash equivalents were $68.2 million. Cash used for financing activities was higher by $118.7 million primarily due to repayments, net of borrowings under our revolving credit agreement for both 2012 and 2011.
Inventory at year end was $533.3 million, down 5.1% when compared to $561.8 million in 2011. At Famous Footwear, total inventory was up 2.3%. At Wholesale, inventory was down 21.6% due to strong inventory management and exited brands. Thanks to a continued focus on this area of our business, we are operating from a much cleaner inventory position versus a year ago and are in a much better place in terms of process and system when it comes to buying and managing our inventories.
Our aggressive balance sheet management has resulted in significant improvement in our borrowing position versus 2011. We ended the quarter with $105 million of borrowings under our revolving credit agreement, a reduction of $96 million from the end of last year. At year-end our revolving credit agreement had approximately $380 million of additional availability.
Depreciation and amortization was $54.8 million for the year, while capital expenditures were $63.7 million. Our debt-to-capital ratio declined to 41.6% from 49.1% in 2011. Our working capital as a percent of sales was 11.7% versus 11.2% in the prior year. I'm proud to report yesterday we reported our 361st consecutive quarterly dividend payable April 1 to shareholders of record as of March 25.
Before we begin Q&A, I'd like to review our fiscal 2013 guidance. We reported an outstanding 2012, but it would be easy to get carried away with the enthusiasm. We feel compelled to maintain our realistic stance towards future results, especially since we're seeing many of the same issues our footwear peers and other retailers have been calling out. So in terms of guidance, we expect adjusted earnings per diluted share of $1.18 to $1.25, consolidated net sales of $2.555 billion to $2.580 billion, same-store sales at Famous Footwear up low single digits, net sales at Wholesale Operations down low to mid-single digits, reflecting the exited brands, gross profit margin up 10 basis points to 40 basis points, SG&A of $900 million to $910 million.
Minimal expected non-recurring costs of $1 million to $2 million, which reflect to the 2012 portfolio realignment efforts that shifted into 2013, resulting in GAAP earnings per diluted share guidance of $1.16 to $1.23, and net interest expense of $21 million to $23 million. We expect an effective tax rate of between 33% and 35% and depreciation and amortization of $54 million to $56 million and capital expenditures of $50 million to $55 million.
All-in-all we are making conservative assumptions on the top line for 2013 and targeting margin growth while expenses as tight as possible to provide us with maximum flexibility.
With that operator, we would now be happy to answer all questions.
Operator: Steve Marotta, CL King & Associates.
Steven Marotta - CL King & Associates: Just to talk a little about first quarter, you mentioned it started a little late. Can you tell us where you are now? Also how your assumption has changed for the balance of the year? Does the consumer need to just stabilize? Is there acceleration that's assumed? Can you talk a little bit about the assumptions from quarter-to-date to the balance of the year standpoint?
Russ Hammer - SVP and CFO: So Steve I think as we look at the quarter we are seeing as we mentioned on the call the same consumers softness whether it's from the consumers from the tax hit that they're saying or other financial impacts or the extremely cold weather that's been sweeping across the country, we have seen that the slower first quarter. We do expect our back-to-school season in the third quarter to still be one of our strongest and we do see some shift into the second quarter from third quarter on the back-to-school season as well that will occur this year.
Diane M. Sullivan - President and CEO: Just a little bit more on that, we are actually seeing so far in the first quarter really lower traffic counts in general and across certainly Famous Footwear and as we talked to other retailers similar challenges. But at Famous, we are seeing higher conversion rates, with the consumers that are coming in. When we take a look at our warmer markets, those warmer markets look very good. So, it really is the colder ones that are the ones that aren't performing as well. So, a lot of moving parts also in the first quarter here with earlier Easter, all the stuff with (program) taxes issues and I hate to say but a little bit of weather stuff that's creating a little more confusion in terms of how we view the cadence of our business right now.
Steven Marotta - CL King & Associates: Has March been a little bit better than February?
Richard M. Ausick - Division President, Retail: Well, not really. I mean we're actually this week last year for instance Chicago was 45 degrees warmer than it was yesterday in Chicago, so, no.
Steven Marotta - CL King & Associates: Also can you talk a little bit about your marketing spend in total for 2012 versus 2011, your expectations for 2013 and is there any significant cadence differential in '13 versus '12?
Richard M. Ausick - Division President, Retail: I think we were actually pretty close to the percentage rate '12 to '11, if my memory serves me correct and as far as '13, there will be some adjustments and shifts depending on timing for third quarter, second quarter when calendar falls a little differently that might adjust some things, but our expected spend will be very similar as a percentage of sales as we were in '12.
Russ Hammer - SVP and CFO: I think the focus as we had shared with you guys earlier between our Victory Campaign, the rebranding of our stores, the rewards customer base, the mobile focuses is continuing, that's not changing.
Operator: Jeff Stein, Northcoast Research.
Jeffrey Stein - Northcoast Research: Couple of questions here. First of all, on the Wholesale side, I'm trying to understand the various moving parts in terms of where you see things going. I guess if I back out the sales of exited brands, which was about $42.5 million and if you assume that you're expecting down low to mid-single digit that would suggest that in the aggregate on a like-for-like basis, you're probably looking for somewhere between 1% and 2% increase, if my math is correct. So, I'm wondering, with Sam & Libby being kind of a new brand that you're rolling out to target with -- I think if I recall you were working on refresh of the Avia brand, kind of wondering what's going on with that? With Sam Edelman continuing to do well and I guess the Contemporary Fashion brands seemingly continuing to do well, I guess something seems to be planned down for the New Year, and I'm trying to understand what that is.
Diane M. Sullivan - President and CEO: Your calculation on all the numbers is absolutely correct. If you think about it this way, there is two challenging pieces as we mentioned, the first one is Naturalizer and the second one is Avia those are the two businesses that we need to get corrected in 2013 and feel that on Naturalizer we're headed in the right direction as I said, and spring so far looks good. Avia, we have to see how it plays out over the spring season and 2012. And then the rest of our brands like you highlighted, Sam Edelman or Franco Sarto or LifeStride or Dr. Scholl's are all performing well. So it really is a question of those two businesses that we need to accelerate the momentum on them. I will just add we are again taking a very conservative top line assumption, being more aggressive on our margin expansion, conservative on expenses across the Company to drive really the quality of earnings up.
Jeffrey Stein - Northcoast Research: I guess for Rick. The comp store inventory at Famous Footwear at fiscal year-end, Russ I know you mentioned it was up, but can you talk to up how much? Then I have got a question on store growth at Famous Footwear, net additions, openings and closings.
Richard M. Ausick - Division President, Retail: Yes. The comp store at the end of February was up about 5.5% Jeff. You got to remember we also had an extra week in there. So it's actually as if we delivered the first week of February last year in January. So you have to back that in a little bit. But that's what the number was at the end of February – end of January.
Jeffrey Stein - Northcoast Research: Store growth?
Richard M. Ausick - Division President, Retail: Store growth for 2013?
Jeffrey Stein - Northcoast Research: Yes.
Richard M. Ausick - Division President, Retail: I think we are planning to open about 55 stores and I think we are looking to close around 60. So it probably would be a net minus five or flat, somewhere in that range.
Jeffrey Stein - Northcoast Research: You guys set out a plan at your Analysts Meeting last spring when you were looking at kind of 2012 to 2014 the ability through store openings and closings to see about a $20 million pretax improving with that real estate strategy. Can you share with us how much of that $20 million improvement you realized in 2012 and how much you would expect to realize in 2013?
Russ Hammer - SVP and CFO: Yeah. I think when you look at the three year projection that we showed then and then the fact that Famous has reported record sales and profit this year. We are ahead of plan at the end of 2012 on that $20 million. So, we were able to accelerate some of our openings and closings and stayed on that plan, but the results actually came in a little better. Our sales per square foot came in little better than what we thought on the stores that we are opening. So, it's improving. So, I would say that we will stay on that plan for the three years. Rick, any other comments on that?
Richard M. Ausick - Division President, Retail: No.
Jeffrey Stein - Northcoast Research: Russ, what I'm trying to get at there is, in terms of modeling I'm trying to understand the increment. In other words, what is the path to get to $20 million? How much of the $20 million did you realized last year? How much in '13 and how much in '14?
Russ Hammer - SVP and CFO: I think maybe the way to think about it is that $20 million is more backend loaded because that's when you have more stores opened for full years that are contributing at the higher rate. So, I would more back-end load that as your model from '12, '13, and '14.
Richard M. Ausick - Division President, Retail: Probably got further down the road in '12 than we expected. So, as we look that it is probably not quite as backend loaded as we had to be accelerated some of that in '12, but to Russ' point more of that will show up in '14, '12, -- '14 because of all the stores being fully operational and having -- getting towards close to maturity levels.
Operator: Jill Caruthers, Johnson Rice.
Jill Caruthers - Johnson Rice & Company: Question on 2013 gross margin expansion guidance, a little lighter than I was expecting and just could you talk about your plans there and it seems greater benefit as your Wholesale portfolio was restructured into kind of some higher margin brands and you're growing up against somewhat of easy comparisons given the system issues you dealt with.
Russ Hammer - SVP and CFO: I think when you when you look at the margin mix, it's kind of impacted by the sales growth. When you look at our businesses, we're growing our famous business at market growth rates and our Wholesale business on the Healthy Living side is also growing at about market rates. So those are both growing at approximately 3% type rate next year, but our Contemporary Fashion is growing faster and that's where the margin improvement and Diane talked about the challenges that we had in the couple of brands have more of an impact. So we see that improving more in the back half of the year, Diane talked about Naturalizer and we see that improving more in the back half of '13 versus the front half.
Diane M. Sullivan - President and CEO: I think in the fourth quarter too Russ on Wholesale in total we were up on our margins 70 basis points or 80 basis points I think it was.
Russ Hammer - SVP and CFO: Q4 right?
Diane M. Sullivan - President and CEO: So we are really driving hard in '13 to continue to improve the margin rate in Wholesale.
Jill Caruthers - Johnson Rice & Company: Then the inventory allocation system you're talking about upgrading that same. I guess the timing of that, is there already any risk to implementation? Then when do you expect to see some benefits materialize?
Richard M. Ausick - Division President, Retail: At this point in time Jill we don't see any risk yet. We're basically through the science of it. We're actually I believe start going into parallel mode testing next month, so in about three weeks. Our attention would be to have some categories, maybe not the entire store on the program in June or July. At this point we don't see any issue with that implementation and we have put additional sales in our plan into back half of the year to mitigate the cost of the – to capitalize the cost of the expense on the system. So we have factored and the numbers were according to our full year reserves, the number in there is part of that sales plan that would be generated by the implementation of the system. We don’t see anything to-date that will tell us that's not going to happen.
Operator: Chris Svezia, Susquehanna Financial.
Christopher Svezia - Susquehanna Financial Group: So I am just curious, when you talk about the trends that you are seeing currently in the business, can you just maybe answer the question, are you from a same store sales perspective given what's happening on traffic is a conversion enough speaking off of your positive comp in terms of what you are seeing in the first quarter or no?
Richard M. Ausick - Division President, Retail: Well right now, its no. We expect it will get warmer someday. So if that ever optimistic view, we would still expect our first quarter to be flat or up a little bit or down a little bit with right around flat for argument's sake, which is a little less than we had hoped. But again the beauty of the kind of product that we are talking about Chris as you know, we have a long life to sell the shoes. Right this isn't November 15th in boots and its still 70 degrees outside. So we have more opportunity, we think, to sell things in the second quarter than we would have than we normally would. Frankly if you go back over the last few years this has kind of happened over time where we have had warmer early spring February and Marchs. As retailers we all get aggressive about that, we keep pushing more and more product into February and March that we will see and then we have a period of time like this where it's not conducive and all of a sudden it goes back to normal, because we used to sell more of our shoes in the second quarter over sandals and open footwear than we sold in first quarter in historic times. But it has shifted because of the way that the customer was buying and they want their needs. So it feels like a little more like that, again we…
Diane M. Sullivan - President and CEO: Looking and looking at warm markets.
Richard M. Ausick - Division President, Retail: Yeah. We've done a whole thing about basically even though Seattle is not a warm market. If you look at the Seattle weather pattern over the last few weeks, it's been very much normal or a little warmer than normal. Our business in Seattle is up double digits. So, it tells me that again the economic issues and the gas prices and the taxes and all that stuff I believe is relatively equal in every part of the country and that's the only thing we can see as a difference between all those places is the weather and urgency for customers to change our wardrobe or want to buy different products. So, again that gives us the confidence that we'll get it or how it comes maybe a little different than we thought, but we are taking -- we are spending our time and energy making sure that our inventories are right, so things that aren't selling well now, we're doing some adjustments, but there are things that are selling really well. We are buying more of them too. So, it's a little bit of all that.
Russ Hammer - SVP and CFO: I think Chris as we mentioned earlier, we also took early receipt of key spring product in January. So, we are well positioned when that weather does change.
Christopher Svezia - Susquehanna Financial Group: Rick how you're thinking about from an athletic perspective, your running assortment looks really good and continues to get upgraded, what are you doing in I guess in basketball if anything, what you're going in skate? Outside of the athletic, what are you doing in the boat shoe business?
Richard M. Ausick - Division President, Retail: You hit on it. Our running business is still very healthy and it's obviously our biggest categories. It has been our biggest categories for several years and is bigger than it was two years ago. I think we've had a 25% to 30% compounded growth in running in the last several years, so grown it well. Basketball, Chris, the full conversation about that trend, the reality is we've never really participated on the basketball trend because we never have the access to the product that customer really wants for basketball, not only today, but in the last 25 years we haven't had it. So, it really is not part of what our -- we worry about or think about too much. We have products and our basketball business is okay, but it's relatively small category, so it really won't make that bigger difference in our mix. You've talked about skate -- I would refer to it as alternative athletic or alternative sport if you want and canvas-based shoes. Our Chuck Taylor business is excellent. Some of our other canvas product business is excellent. Those are huge businesses for us. Those are in a way our bigger businesses for us than basketball. So again, we have basketball shoes, we service that customer the best we can with what we think we can have assortment wise. But our focus is on making sure running assortment looks good and we will get increases in running this year. I don't believe it will be 25% or 30% it will be probably mid-to-upper single-digits, but that's on a much bigger base, and then we have alternative business, which is really driven a lot now by our canvas piece of that business. So, I think those are the things that are driving our business right now in addition to when we get to warm weather, sandals, et cetera.
Russ Hammer - SVP and CFO: Maybe just to add to Rick's point there. Fourth quarter running was up almost 7%.
Christopher Svezia - Susquehanna Financial Group: Rick on the boat shoe business, just how you're thinking about that for spring?
Richard M. Ausick - Division President, Retail: The boat shoe business is actually is -- we thought that we might see because we had basically doubled that business last year. We thought it might be a little, come back a little bit. We actually saw much better selling to that product in January and early February than we expected. We've come back and try to acquire more goods. It hasn't slowed down from our year ago business right now. We've changed it a little bit. There is more canvas based boat shoes in there, and I think that's part of why we're seeing it on the men's side particularly. On women's, I think we're offering a little broader assortment of Fashion product, so prints whether they'd be animal or sequence or glitter kind of product and customers seem to be responding to that. So I think that business still looks like it has plenty of legs through back-to-school for sure.
Christopher Svezia - Susquehanna Financial Group: Then just on the Wholesale business, I guess the $845 million that you did in Wholesale that includes brands that you have exited or it takes a hit because of brands that you exited, correct?
Russ Hammer - SVP and CFO: Correct. So we had approximately $38 million of exited brands in that $845 million.
Christopher Svezia - Susquehanna Financial Group: So then when I – going back to a prior question, when you think about declines of low to mid-single digits, I mean, there is some exited brand impact in that but it's very, very small, I would assume relative to 2012 in terms of the actual impact, correct?
Russ Hammer - SVP and CFO: Well actually if you look at '12 over '11, just to give you context on that. In 2011 exited brands represented about $96 million and 2012 is like I said about $38 million.
Christopher Svezia - Susquehanna Financial Group: What would it be in – I mean, what's your estimate – what impact if you just strip out – what's your organic growth rate in Wholesale go forward with brands for 2012?
Russ Hammer - SVP and CFO: So I think one of the earlier questions mentioned that, it's a couple of percent.
Diane M. Sullivan - President and CEO: Yes, low single digits.
Christopher Svezia - Susquehanna Financial Group: Low single digit growth?
Diane M. Sullivan - President and CEO: Yes.
Christopher Svezia - Susquehanna Financial Group: When you think about margins in this brand, I mean I guess Famous Footwear the opportunity to expand margin is comp and productivity but at Wholesale that's really the big opportunity. I mean is it pretty broad based across all the platforms? Is one stronger than the other? Do you look at the Sam Edelman business and say, hey, as we continue to expand and grow therefore the margin profile there reflects investment? Maybe just parcel out where specifically is that opportunity of spend margin, because at the end of the day at 4% EBIT margin ballpark for Wholesale, not as great as some of those big opportunities. So I am just more specifically want to understand where that opportunity is?
Richard M. Ausick - Division President, Retail: Sure. So when you look at the businesses and a lot of moving parts, two very different businesses within our continuing brands in Wholesale. The Healthy Living side as Diane mentioned earlier, our Naturalizer was down is recovering. We do expect that to continue to recover. So, we will see improvement there and in the Avia brand that is down. Those did impact our margin and we are improving. We are seeing nice margin growth in the Sam Edelman brand, our Fergie, Franco and Avia as Diane mentioned are all doing well. So, lot of moving pieces there, but our intention is to continue to improve our margins in Contemporary and in Healthy Living in 2013 and you'll see more of that impact in the back half of the year.
Operator: Sam Poser, Sterne Agee.
Sam Poser - Sterne Agee: This is more technical regarding the first the effect how that on a comp basis, how that 53rd week behaves and number two, how the shift of the week's affect the sales relative to the comps by quarter. So, in other words of the value of week ending February 9th that you are starting a week later, so your comp will be on a week-over-week basis, but your fiscal is still your fiscal number. So, what that's kind of variance is by quarter because you should have a big variance in Q2 and Q3 given that you gain a weaker back-to-school in Q2 and then lose it in the third quarter?
Richard M. Ausick - Division President, Retail: We think it will take all day to answer that question, Sam.
Sam Poser - Sterne Agee: Well, I mean it's important because if you're going to model this, what's going to end up happening is, is that people who've put in three comp for second quarter and understate the revenue because you're losing a small week at the beginning of May and taken up a big week going into back to school. So, there is a percentage, which is there regardless of what the comp is on the variance.
Richard M. Ausick - Division President, Retail: Yes, there is. Again, I think you're right. There is one that we have I think it's a week of back-to-school was into July. Obviously, it gets replaced by, whatever it replaces a smaller week, but I think our number is probably in the neighborhood of $7 million to $8 million worth of sales would be my guess Sam on that because I'm looking explicitly at it, because again, in our head it's about the customer, right, when they're shopping. So, we just worry about making sure we have the product and plan our business around that because they don't anything about our calendar.
Sam Poser - Sterne Agee: I'm not saying that one I'm just saying this for the sake of modeling.
Richard M. Ausick - Division President, Retail: Got it. But we don't necessarily. We have been optimal on it so much because we just want to make sure we have our flows and our products right.
Sam Poser - Sterne Agee: I understand that, I completely get that. What I'm saying though is that if we model two comp in Q2 for argument sake the relative sales if you didn't open or close on these sales might look like a plus 5% in total revenue for your business, and in Q3 if you model plus 2% it could look negative just because of the gaining in ones of those two weeks.
Richard M. Ausick - Division President, Retail: As we look at the quarter Sam or what the quarter looks like. I'd probably tell you it's maybe a fourth of percent or something like that, 1% or 1.5% or something on that range of difference from what we would have had a year ago.
Sam Poser - Sterne Agee: Then lastly, how much do you think the shift of the tax refunds impacted the business? I would say from the middle of week three probably through whenever. How do you look at that?
Richard M. Ausick - Division President, Retail: We've never felt as much an impact on any of those issues, as some people have. The only thing I have to – can I give or to give you a relative measure against is we had somebody who came out and talked about what their last two weeks of January where, ours where anywhere near as bad as that. So ours were down like mid to upper single-digits that was our loss. So, if that was – if you want to apply that to the impact of tax returns or tax refunds being the problem, it had a much lesser impact on us than them. That's about the only relative way I can look at it.
Sam Poser - Sterne Agee: Why do you think that is?
Richard M. Ausick - Division President, Retail: Well because I think our customers are of a little higher income. I think our customers in the different parts of the country we are much more suburban business than we are an urban business. I those are all parts of it. That seems to be the businesses that live and die with some of that stuff. So Walmart's always talking about those things, Carnival talks about those things, even some of the Sport Specialty guys talk about it because it’s the market. We have never been able to draw huge distinctions rather. We see some – there is no impact, but that is not the kind of impact that you see other places.
Operator: There are no further questions. I would now like to hand the call to Ms. Diane Sullivan.
Diane M. Sullivan - President and CEO: Thank you everybody for joining us for our 2012 year end call and we look forward to seeing you at the end of the first quarter. Take care.
Operator: Ladies and gentlemen with this we conclude today's presentation. We thank you for joining. You may now disconnect.