Peggy Riley Tharp - VP of IR Diane Sullivan - President and CEO Russ Hammer - SVP and CFO Rick Ausick - President of Famous Footwear.

Jeff Stein - Northcoast Research Steve Marotta - C.L. King Associates Chris Svezia - Susquehanna Financial Danielle McCoy - Wunderlich Securities Jill Nelson - Johnson Rice Jay Sole - Morgan Stanley Ben Shamsian - Sterne Agee.

Good morning, my name is Jennifer and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2014 Earnings Conference Call. [Operator Instructions] Thank you. And Ms. Peggy Riley Tharp, you may begin your conference..

Thank you. Good morning and thank you for participating in the Brown Shoe Company third quarter 2014 earnings call, which is being made available to the public via webcast. I’m Peggy Riley 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 on this call at any time.

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

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

Thanks so much Peggy, good morning everyone and thanks for joining us just two days before Thanksgiving and let me take this moment to wish you and your families and friends a really wonderful holiday.

But before we get too far ahead of ourselves, for turkey and stuffing, let's take a look at our third quarter performance as we posted earnings per share of $0.75 up 19% over last year. I am very pleased with our result especially considering what a mix quarter we had in terms of weather, traffic patterns and consumer sentiment.

Even with these industry-wide trends contributing to increased uncertainty in marked down activity, we maintained our planned commercial cadence.

And it's also really rewarding to see the work that we've done over the last few years, help us to deliver another outstanding quarter with solid contributions for both wholesale and retail as we continue to gain traction on both sides of our business The real estate work we completed in Famous Footwear and the elimination of underperforming brands at wholesale have enabled us to better navigate tuff environment and deliver shareholder value each quarter.

Despite some softness at retail during the quarter, we delivered $729 million of sales up 3.8%. Famous Footwear and Wholesale contributed to the quarter, which also provided gross margin expansion of approximately 30 basis points.

Let's take a look at Famous Footwear where same-store sales were down 0.2% for the quarter, but up 1.6% for back-to-school. These results demonstrates a nice two-year trend up 4.7% for the third quarter and up 7.2% for back-to-school. While August and September of this year were positive, the mild October was really difficult to overcome.

We've seen much fairer shopping patterns as the weather has turned and our November month to date same-store sales are up mid single digits. In terms of product, our focus on big ideas continue to pay off as our investment in Canvas drove 25% growth in this area.

Overall, athletic was up low single digits on a same store basis and we saw significant increase in athletics lifestyle product as consumers continue to shift away from more technical athletic footwear. We also saw good performance in Sandals up 6.2% in total, with woman’s up just over 10%.

Boots were also up 2.5% in the quarter, despite the mild start to fall and this includes Shearling products, which did very well and was up over 20%. Consumers not surprisingly continue to join our rewards program and use our mobile app during back-to-school. We had over one million downloads since our app was launched in September of 2013.

We added a million new members to our awards program during the quarter as part of our back-to-school effort. Now we have close to 10 million rewards members. We all know that these multi-channel consumers like these award members continue to be more valuable as the average annual shop is over 60% higher than consumers who shop using a single channel.

So although we only have a few weeks to the fourth quarter behind us, it looks like we'll be able to end 2014 on a positive note, barring a repeat of last year's weather.

As you would likely recall, Famous Footwear same-store sales were down 1.8% in the fourth quarter of last year, as we locked nearly 4% of our store selling days due to weather related closures.

While we certainly don’t know what to expect of weather this winter, we do expect to take the same approach to the promotional holiday environment and despite what other retailers are doing, we plan to maintain our promotional cadence as we did last year.

We do not intend to sacrifice margin for sales and we expect to deliver a strong, overall 2014 at Famous Footwear. But before we wrap up the year, let's take a look at our third quarter results in our wholesale operations.

Sales of $242.6 million were up 18.2% with eight of our 10 wholesale brands delivering solid growth ranging from high single digit to mid double digit for Naturalizer, Sam, Franco, Biff and Via Spiga all grew 20% or more, while Dr. Scholl's, LifeStride, and Carlos all grew at high single to low double-digit rates.

I am really pleased with these results as well, especially after hearing so much about the impact of weather, caution at retail and lack of trends. We succeeded in the quarter, because each of these brands did try to embrace their unique consumer and capitalize on the relevant trends in the markets to drive their sales.

For sure as we all know, booties did well across the Board, but each brand also saw success with products that were really targeted towards their customer base. Naturalizer, for example, reinvented its top-selling riding boot from last year and some wear in wholesale again this year.

This brand also saw good strength in classic dress silhouettes, especially at mid Tier and eCommerce. For all-in Naturalizer sales were up 3% as we operated 10 fewer retail stores year-over-year.

Franco Sarto was true to their career focused consumer and as a result casual flats, like menswear styles and oxfords and some lace-up booties did really well. And Via Spiga hit booties from every direction and nailed this look from everything from upfront open toed style to biker booties to short causal and ankle booties.

And Sam's core products continued to shine as consumers remained really interested in these iconic item. During the quarter, we opened Sam’s second store in Beverly Hills and we also saw his apparel line ramp up at retail where it's really striking a chord with his target customer.

We expect the apparel door count to be up over 50% in the first quarter of next year as we enter the spring selling season with a pretty good momentum given that it's our first season out there of the parallel line.

And then finally the rapid expansion of the Vince brand continued in the third quarter with causal flats and snickers in addition to other styles really hitting the mark. For spring we'll Vince footwear an additional 120 doors as the reach of this impactful brands really continues to spread in the marketplace.

So in total for the quarter, wholesale operating margin improved to 11.5%, a 330 basis improvement. It's really been an exciting 2014 so far at wholesale, but we are realistic about the promotional mindset in the marketplace. The cold weather we've seen over past few weeks has definitely aided boot sale.

But there is no doubt that has the potential to be a very promotional holiday season. So our team will continue to carefully manage their performance in the fourth quarter. With that, I’d now like to turn the call over to Russ and he is going to give you a review of our financials and details around our guidance for the year. .

Thanks Diane. And thanks, everyone for joining us on both the call and the webcast. We certainly appreciate it. Although Diane briefly reviewed our results, I’d like to add a little more color. For the third quarter, we reported net sales of $729.3 million up 3.8% versus $702.8 million in 2013.

Third quarter net earnings of $33.1 million or $0.75 per share were up 21.2% over the $27.3 million or $0.63 we reported last year. At Famous Footwear, we improved our trailing 12-month revenue per square foot to $213, as we closed or relocated six stores in the quarter and opened 12.

We’re operating seven fewer stores versus this time last year, and we still expect to open approximately 50 stores in 2014 and close roughly 60. Let’s turn to a review of our financial metrics now. Overall, gross margin in the third quarter was 39.9%, which was up 30 basis points year-over-year.

SG&A as a share of revenue was 32.6%, which improved by 60 basis points year-over-year as we continue to leverage our expense base and see the benefit of our cost management actions. Inventory at quarter-end was $567.8 million up 4.3% over the last year’s third quarter.

Famous Footwear inventory was down 1.2% and we also saw a year-over-year improvement in our aged inventory position. We expect inventory levels at Famous Footwear to continue to decrease through the fourth quarter and enter 2015 with fresh inventory. At wholesale, inventory was up 31% at quarter end driven by our key growth trends.

Our corporate tax rate was 30.9% for the quarter. Net interest expense was $5.1 million down slightly in the quarter. Cash and equivalents for the quarter were $39.1 million and our improved operating earnings are building back cash powering the $65 million acquisitions of Franco Sarto back in February.

We ended the quarter with $40 million of borrowings against our revolving credit agreement, due to increased working capital needs. We also improved our debt-to-capital ratio to 28.3% from 30.6% last year. Before we begin Q&A, I would like to review our fiscal 2014 guidance.

To account for a better than anticipated third at wholesale, we’re raising our annual EPS guidance range to $1.65 to $1.69.

As a result, we now expect consolidated net sales of $2.58 billion to $2.59 billion, same store sales at Famous Footwear up low single-digits, specialty retail sales down high single-digits due to store closures and reflecting performance to date, net sales at wholesale operations up mid-to-high single-digits and gross margin up approximately 10 basis points.

SG&A of $920 million to $925 million with continued leverage, net interest expense of $20 million and $21 million and effective tax rate of 30% to 32% and depreciation and amortization of $51 million to $53 million with CapEx expenditures of $56 million to $59 million. And with that operator, we would be happy now to answer all questions..

[Operator Instructions] And our first question comes from the line of Scott Krasik with Buckingham..

Hey this is Kelly for Scott. Congrats on a great quarter guys..

Thanks Kelly.

How are you?.

Thanks great. So just wanted to dig in a little bit more into the wholesale business, as your margins were off this quarter up 330 bips, as you seek in temporary rents just growing as a larger piece of the total, could you just talk about kind of the outlook for the margins in that business going forward? Then, I just have a follow-up with that one..

We expect to show continued improvement really on our wholesale margins going forward I would say, the next two to three quarters for sure.

As we -- Kelly, as you know, we've been working hard over the last couple of years to really kind of recapture some of the margin rate that we had lost over the last number of years, so I would say you should expect to see a continued tick-up in the margin rates certainly over the next couple of quarters..

Okay. And then, just on the same lines, just given where the inventory, the wholesale shook out at the end of the quarter, up 31%, could you kind of dig into that a little bit more? And perhaps, if there's any kind of near-term pressure in that business, given where you guided wholesale and where inventory has been..

Yeah. That -- in general I would tell you, Kelly that we're in great shape as it relates to inventory. The growth in inventory and wholesales is all tied into the real growth drivers of -- for the wholesale brand.

So, for example, Vince is a big piece of this, the Sam Edelman inventory is also a very large piece of it along with really bits and pieces from each one of our other brands. But the big driver is really Vince and Sam..

Okay. All right. And then just shifting gears, just over to Famous, given there are -- you're coming off several years of pretty strong strength in terms of the casual brands that you carry.

And just looking at the next year, could you maybe talk about the drivers of that business going forward into next year? I know you don't give any exclusive guidance but kind of -- just talk higher level about that..

Yeah, Kelly, it's Rick. We would consider -- we believe that the whole canvas thing is continuing at least for the first half of the year. We've planned that up relatively aggressively. So we see that continuing to drive additional business. I think on the casual side, I think we're being very selective on women's non-athletic.

When we talk about casual shoes, what we invest in. There is life in some of those products, but the assortment just has to be narrow for us to make sure we're buying the right items. That business is still probably waiting to find a trend, if you will, and something that we can offer the customer that would be different than to what's in her closet.

Other than that on the casual side I don't know how else to answer the question..

I think I'm sorry. I was talking about Famous in general, just in terms of athletic, but we can take the rest offline..

Okay..

Thank you, guys..

Thanks..

Thanks Kelly..

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

Okay. Nice quarter guys. A question, first of all, for Rick. I'm wondering if you believe your inventories are properly aligned to take advantage of the strong selling trends in the categories that you're betting on in fourth quarter..

Yeah, I do. We think our good inventory is allocated again, there's different components to that business. We think we're really allocated it well for the things that are trending right now. And we continue to see that happen on a daily basis.

The canvas business, the story of iconic canvas business is a little more bulletproof on weather than people think. If we really sell those shoes pretty much every day just relative to volumes and levels of that. But we've seen continued growth in those businesses even as the weather was colder in the last two weeks.

But those businesses still held up very nicely. So the categories we believe strongly are producing very nicely right now. So we'd expect fourth quarter to turn out to be very good for us as well in those businesses..

Great. And a question for Diane. If you're kind of guiding to mid to high-single-digit in wholesale, but if you -- it would seem to me that kind of implies low-single-digit top line growth in the fourth quarter.

So I'm wondering, are you just being conservative, or is there something we should be considering when looking at fourth quarter wholesale growth..

No, I think you're exactly right. We're really forecasting somewhere in the mid to high-single-digit growth. I think we're trying to be as cautious as we possibly can with the promotional environment that's out there.

And if you think about the growth that we've had this year, we were up close to 6% in the first quarter, up, close to 8% in the second, up 18% in third. And so, I think in the fourth quarter, I think it's prudent to be planning kind of where we're at because that's a pretty good pace.

And it does swing a little bit, as you can see, quarter-to-quarter too..

Sure, sure. And just final one for Russ. Russ, it looks like you're going to be maybe within 50 basis points of 10% EBIT margin for the year in wholesale. And I know that that's kind of been your target.

So I'm wondering is it too early to think about resetting the target and is 10% the ceiling or could we go higher?.

Well, I think as we talked about at the Investor Day we certainly expect to go higher over time and that's definitely what we're planning. And as you've pointed out, Jeff, we do see the possibility to get there this year, and get very close to it. So we're cautiously optimistic as we go into fourth quarter as Diane said, on our wholesale business.

I think we just had a great quarter here in the third quarter and we continue to see the power and the profitability of our wholesale portfolio growing, which we've been pointing out now for the fourth quarter in a row. So we're very bullish on it..

Perfect. And Diane, did you make any comments on the Vince men's line? If I missed it, I'm sorry, but I didn't hear any comments..

Jeff, I didn't, and it's been -- it's small, so I want to say that which is why I haven't mentioned yet. Its first season, it's just starting to pick up some momentum. Fantastic sell out of all the styles, people are very excited.

Store growth first spring all positive, but again, it's relatively small yet to really have a material impact on our overall results..

Got it. Thank you very much..

Thanks Jeff..

And our next question comes from the line of Steve Marotta with C.L. King Associates..

Good morning, everybody.

Russ, can you comment on the gross margin drivers at Famous during the third quarter?.

Sure. Most of the drivers are canvas business and our booty business both helped tremendously.

Rick, any other add to that?.

Yeah. A lot of it was mix of some slightly higher margin products versus some margin product. There's some products that have lower margin, cleaner inventories, so we had less clearance that was going out of the door at low margins. Those were probably the two biggest drivers seen..

Great. Thank you. Diane, you mentioned that promotions during the fourth quarter are going to be held and checked very similar to last year.

Are there any deltas around Black Friday, or can you talk a little bit directionally about that holiday, what you're expecting for the weekend?.

Yeah. I would say, again that -- I'd really repeat what I said that we're not planning a significant change around the amount of discounting or the cadence than what we're doing.

I know we have special thing planned around our mobile apps that is a little bit different than what we did last year, but other than that Steve, we really think we're just going to continue to drive it the way we did last fourth quarter. We think we're in great position.

The merchandise is to what Rick was saying earlier, we get the right inventory against the right goods that we're selling. So we don't really think we need to take that posture at this time..

Terrific.

Russ, one last question, regarding the tax rate in the fourth quarter, is the implied rate in the mid to upper-teens?.

No.

For the fourth quarter?.

Correct..

No, the -- if you take the annual guidance we gave you in the year-to-date you come back into the fourth quarter..

Okay. Thank you..

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

Good morning, everyone. Nice job on the quarter..

Chris thanks..

Hi. So, I'm just curious. Just so I understand this, the wholesale sort of backdrop here. It looks like you sold in extremely well. You're probably not anticipating big reorders for the fourth quarter, potentially as being promotional so you're being somewhat conservative there.

But help me walk through on the inventory side, up 31%, does that just imply as you think about spring, some of these brands like Sam, Vince, etcetera, that the visibility there is pretty strong and that's part of why that inventory is up?.

Yeah, yeah. That's almost -- there's really a good portion of it, Chris, is against both of those two businesses. And then the other thing with the port issues on the West Coast, we also sort of extended our ordering in all that about seven days, so that maybe a little bit of contributing to that too.

But overall, it's really the demand for the current business trends..

Okay.

Any -- I know it's early, but any thoughts, visibilities you start to think about spring in terms of how retailers are thinking about orders placing, open to buy just any early thought process in terms of how they're thinking about?.

No, I wouldn't say I have anything unusual to really report. I would say, right now, that most retailers are really focused on the fourth quarter that there's you go a couple of days, and business is really terrific and you go another couple of days and it's down, it’s a little bit hard to read.

So I think everybody is really trying to make sure that we stay focused on delivering the most profitable fourth quarter that everybody can. And then, kind of, as we do that turn the attention to next spring..

Okay. Fair enough. Just on same as from a margin perspective, I think last fourth quarter EBIT margins were down to nearly 80 basis points or something like that. If you keep the same sort of promotional cadence, the inventories were down, you get back some of those selling days that hopefully weather cooperates a little bit here.

Is it fair to say you recoup what you had lost, is that sort of the thought process how we think about that? Because I assume most of the EBIT margin pressure is related to -- on the negative comp..

Basically the EBIT loss is due to lack of sales, I mean on top line. But that was probably -- a lot of that was driven by the weather, Chris.

So yeah, I would think we would have gained much of that whether we gain 100% or not I don't -- I'd have to go, look, pull the book out and do all the math, but that would be the idea we believe that the fourth quarter again with modest weather or whether there'd be more typical or less damaging to traffic in stores we would think we'd be able to recoup most of that..

Okay. And on the athletic trend, maybe there's definitely a push towards more fashion and casualization on athletic versus I guess technical to a degree.

How does that play into your thoughts and thinking about the business which gets you ahead into spring? How you think about the running business versus casual, lifestyle, canvas, etcetera, just thoughts around that..

Yeah. Our plan would be to have our running business to be relatively flat. That would be our hope so if we can maintain that business.

We think there's some new things coming in the pipeline that we're delivering probably over the next 30 or 45 days and early into first quarter that we think again will hopefully energize the business a little bit, but we're not expecting it to run 15%, 20% like it did for two or three years in a row. So we're trying to maintain that business.

Our investment has been into more lifestyle driven businesses, driven in primarily canvas where the customer seems to be not able to get enough, so our assortments are broadening; our depth is getting more powerful on size and things like that. And they continue to buy at a very, very fast rate.

So again, that's how we planned the early part of first quarter. We're still working on back-to-school. So we've seen the shoes, we're just now going through final assortment plans for that. So I really can't talk much about the second quarter in to back-to-school.

But we saw plenty of product we think will drive our second and third quarter business as well. So we feel pretty good about that business. We think there is a shift up. It is something different than we've seen before..

Okay. Fair enough. All right. That's all I've got. All the best to you, guys. Thank you..

Thank you..

Thanks Chris..

Your next question is from the line of Danielle McCoy with Wunderlich Securities..

Congrats on a great quarter..

Thanks Danielle.

How are you?.

Good, good. Hanging in there, getting ready for Thanksgiving.

So just quickly wanted to ask about Sam Edelman, if you can go a little bit further into the performance of the Soho and Beverly Hills stores, any planned store openings? And if you could talk a little bit about the rollout into Macy's, the number of doors they ran and if they are all table doors..

Yeah. Couple of things. First of all, Soho and Beverly Hills, again performance there is terrific. We're beating our plans at beating pro forma. At Beverly Hills and even with the -- interesting in that it's really the first time we've had a broader apparel assortment in there.

We're learning a lot about how the consumer is responding to some mix and how we really need to balance that going forward. So, so far, so good. We are -- got a number of stores in the pipeline for next year.

It looks like we'll be adding anywhere between five to eight in the next 12 to 15 months or so and being very thoughtful about making sure that they're in locations that we feel terrific about, we need to not just hurry up and open stores, but we want to make sure that there's stores that we feel terrific about.

As an example, we'll be done at the World Trade Center. That's going to be opening up next year. We think that's going to be a fantastic location, very high profile. So, overall, I think we're taking -- making nice progress with Sam as it relates to both the store piece of it and the expansion.

It's new licensing categories because we can't believe that it's going to help in productivity, and so, stores as we continue to go forward. And then, there was another part of the question I think you asked me, I'm sorry.

Did I miss it or did I answer it all, Danielle?.

Just in terms of the expansion into Macy's, the number of doors and for table?.

Yeah, yeah. I think we're in probably a little over -- somewhere between 40 and 50 doors at Macy's and it's really their best doors. I think we're – Sam's is always assessing how many doors are the right doors. So they are fundamentally shop in shop. So we'll see so far so good..

Great.

And then just switching gear as the same as footwear, could you just touch base on the Canadian business?.

Of course, we've just opened our fifth and sixth stores this past month in Montreal. And we are very pleased with how they've opened so far. The six stores are doing well. Obviously, probably a variety -- variants of performance versus our plan, but we've opened some very strong stores.

We have one more signed lease that we'll open outside of Toronto in March I believe. That will give us our seven stores. And that's kind of what we've committed -- that's what we've committed to at this point, Danielle. We're looking at additional real estate deciding how far we could take it. But the early results have been very promising.

We're happy with that business so far..

All right. Great.

And then lastly, just touching on the tax rate again, how should we book the tax rate for next year?.

In the low 30s in that 32% range is going to be about the range to use for next year..

All right. Great. Thanks guys and happy Thanksgiving..

Same to you, Danielle..

You too, Danielle..

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

Good morning..

Good morning..

Good morning. If you could talk about the Naturalizer brand, just dig a bit deeper on the wholesale side as well as kind of your specialty retail on the smaller part it did have take….

Yeah, sure. No problem, happy to. Naturalizer in total is, as we mentioned, all our sales were up 3%. We have -- we're really struggled a bit at retail this quarter, no doubt about it, not unlike a lot of people did in the women's dress kind of casual categories.

But it was interesting when we did have the traffic, conversion rates were up and pairs per transactions were up, but still overall a disappointing quarter for us for the retail side of it. But on the wholesale side a very strong quarter overall. We were up into the high-single, low-double-digits on the Naturalizer and wholesale side.

They seem to hit the mark in terms of booties and some shorter boots silhouettes, their classic dress styles were doing pretty well. And the inventory for them is pretty -- is also very good, it's clean and it's really down year-over-year. So overall, a little bit of a mix bag in total goods. Retail not so much, wholesale very good.

And our international business as well, was up significantly. So all in, continuing to make progress, Jill, the way we need to. Little guys do a little bit more though on that specialty retail side, which we're working on and more to come in the next couple of quarters on that..

Okay, okay. And then just digging a bit deeper on -- deeper on the same footwear side with the boots, you've talked about good performance third quarter despite no real cool weather. And if you could talk about maybe if that category was the main help with the rebound in November..

Yeah, Jill, a couple of things are riding boot, tall shaft boot business, however people describe it, but basically the casual tall shaft boot business has been pretty consistent. I know there's different versions of that commentary in the marketplace, ours has been pretty good. And so, those boots continue to perform for us.

The booty business just like everybody else's where we have it. We didn't buy it tremendously in-depth or broad, but what we had is selling very well. So that's been a key factor. And for us our shearling business has been a pleasant surprise. We had a strong early part back-to-school with shearling, which was a little bit of a surprise for us.

And then, it obviously continue to be very strong as the weather got cooler around the country, so looking for that to be pretty significant increase. The only place where we probably had some, what I would say, less demand than we had hoped for within more junior-driven lace-up boots.

That seems that the category has leveled off a little bit more than we had anticipated. We don't have -- we're not concerned about our inventory levels, but it's just we are getting some lesser sell-through than we've seen historically over the last couple of years on that category..

Okay. And then just last one Famous Footwear, sales per square foot has continued to increase consistently.

Could you talk maybe how your new stores are performing on that number and also some maybe relocations as well?.

They're doing better. I think we pulled a number, but it want to say it's probably in the 225 range or something like that on our new store basis.

So we began, as part of our plan going forward, its more in-depth review of real estate using some new technologies we have at our disposal to make sure we continue find opportunities that will get us to higher productivity in our stores than we've been on this merger four or five years now.

And I think as that real estate comes online, we continue to find it does prove that.

So we would think we can continue to find places that will perform at higher levels than our current sales per square foot; and therefore, over time, would drive that offer, to not only we have an organic growth, but also our new store growth should help us drive to better sales per square foot..

All right. Thank you so much..

Thanks Jill..

And your next question from the line of Jay Sole with Morgan Stanley..

Good morning..

Good morning..

Diane, I just want to follow-up on the comment you made on Naturalizer. You mentioned international was strong.

Can you maybe talk about that in a little bit more detail? And for the wholesale business in total, I'm not sure if you've mentioned it before, but with international is strong contributor to the wholesale growth in the quarter?.

No, it was a good contributor overall to the Naturalizer brand, it's a fairly sizable piece. Probably in total, it runs maybe about 10% to 15% growing of the total size of the business that was up very strongly in this quarter. We continue to open up stores around the world. We have close to 200 that are opened now with the number of distributors.

So again, in total for the total wholesale business, Jay, it's not a huge piece of it, but it's growing and important piece for Naturalizer, and it certainly will be for Sam Edelman too as we continue to work on that over the next couple of years. And then our wholesale business, again, here domestically was super strong.

And a little bit new to the story, we really had a couple of tough years with Naturalizer a number of years ago when we implemented some systems changes. They were heard particularly hard. So we are in the process and have been for the last 24 months, really rebounding and getting ourselves back to where we really needed to be with Naturalizer.

So it's a combination of relevant -- the relevance again where we've been good and getting better performance overall in wholesale and growing international base and the specialty retail business that we are going to need to make sure start to pop a little bit better as we go forward in the next year or so..

Got it. And then if I can just ask you one more thing on M&A. Have you seen -- have you been involved looking your stuff, how would you feel the environment is right now for opportunities to make some clearing, I feel..

Well, we are -- get called all the time about opportunities in the marketplace. And I've said on an ongoing basis that if there's a great consumer demand brand out there then we're certainly going to take a look at it.

Because we -- given our performance over the last couple of years and our aspirations that where we're shifting, as we're taking this company there to add another demand brand, the portfolio would be a terrific plan. So it's always comes back, Jay, so it's right time, right place, right valuation and all that. But for sure, yes, we're always looking..

Great. Thanks Diane and good quarter, and have a great Thanksgiving. And good luck to all of you..

Wish you the best..

And our final question comes from the line of Sam Poser with Sterne Agee..

Hi. It's Ben Shamsian for Sam.

How are you?.

Good.

How are you, Ben?.

Good, good. Couple of questions on Famous.

Your kids' business there; how was that trending for the quarter?.

For the third quarter?.

Correct..

The third quarter?.

Yes, yes..

You're making me look, because I can't remember actually. Down to low-single-digits was basically again, driven pretty much by the athletic piece of it being softer than we had anticipated..

Got it. Okay. And then, so I'm looking at canvas up 25%, athletic still positive, although not as much as we anticipated, sandals up 6%.

I mean, so what was the -- I mean what led to the flattish comp? I mean what did do comp negative or what was really disappointing?.

I think I commented earlier, I think our running business didn't perform to the level we expected, so that would -- that's our biggest category, so that would be number one. The other thing is on the women's non-athletic side, the dress and casual footwear business is difficult.

And we basically planned those businesses to be difficult so our inventories were in line, but we're obviously off the -- the top line is off as well. So that would be the three places where we probably underperformed in total versus last year for sure..

Got it. Okay.

And then traffic, what was the traffic for the stores?.

Down mid-single-digits. And it's kind of in line. I think there's actually an article in the Wall Street Journal today talking about that, that number seems to be in general what the world is seeing in their store traffic..

Got it. Okay.

And in terms of store growth for next year, real estate and all that, how can we think about it? Have you seen -- is the focus more on relocations, or can we see some opening -- new store opening up?.

I think our plans right now are 55 openings and about 50 closings. We're not -- it's not overweighed to relocations versus new stores. It's pretty much in the ballpark. I think it typically runs about 20% or so of our openings, our relocations something along those lines.

I don't think we're planning it to be more aggressive than that, but that all comes down to the real estate itself. Sometimes we have opportunities to get to a better spot or a better location in the center and we'll take it, but right now we don't anticipate forcing them..

Got it. Okay. Thank you so much..

Thanks Ben..

And there are no further questions in queue at this time. And I would like to turn the conference back over to Diane..

Thanks everybody for joining us and have a very happy Thanksgiving..

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