Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the 1Q '19 Caleres Earnings Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer session [Operator Instructions].

I'd now turn the call over to Peggy Reilly Tharp. You may begin your conference..

Good afternoon. I'm Peggy Reilly Tharp, Vice President of Investor Relations for Caleres, and I'd like to thank you for joining our first quarter 2019 earnings call and webcast. A press release with detailed financial tables and slides are both available at caleres.com.

Please be aware, today's discussion contains forward-looking statements, which are subject to a number of risks and uncertainties. Actual results may differ materially due to various risk factors, including but not limited to, factors disclosed in the company's Form 10-K and other filings with the U.S. Securities and Exchange Commission.

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

Joining the call today are Diane Sullivan, CEO, President and Chairman; and Ken Hannah, Chief Financial Officer. And I'd now like to turn the call to Diane Sullivan..

Thanks Peggy and good afternoon. And thanks for joining our first quarter call and for your continued support of Caleres. As we're fairly deep into the earnings cycle, I know a lot of what we're going to discuss today will sound familiar to investors in the footwear and retail spaces. So let's get right to the point.

As you read in our release, while we still expect to see year-over-year gains in 2019, we are realistic about the impact of slow start to spring had on our business and our ability to regain those lost sales.

As a result, rather than maintaining the midpoint of our adjusted EPS guidance at a 13% growth rate, we are prudently bringing the midpoint for earnings growth down to 9%. We believe this new rate more accurately reflects industry challenges to-date and the gradual improvement we expect to see over the balance of the year.

Now with that in mind, I'd like to start with the metric no other footwear company can match. Once again in the first quarter, our brand portfolio owned six of the top 25 women's footwear brands and grew sales ahead of market rate while gaining share. In total, brand portfolio sales were up more than 20% in the first quarter.

And that includes both the addition of Vionic and Blowfish sales and the planned reduction in Allen Edmonds sales. Over the past several years, we have made strategic investments in a number of areas and these have enabled us to continue to adapt and grow our brand portfolio.

Specifically, as you know, we have invested in product development and design in order to give our retail partners and our consumers' fresh relevant styles. We further invested in our speed program to ensure we can get those styles in-stores and on-feet faster, and we also diversified our global sourcing operations.

And finally, we continue to respond to changes in consumer shopping patterns by putting investments in our overall digital and fulfillment solutions.

Together, these investments form the foundation of our brand portfolio and are integral parts of the strategy that we've been developing over the last several years to make sure we diversify and to drive the sales and earning power of this half of our business. In the first quarter, we were able to leverage these strategic investments to drive sales.

And not only did we benefit this quarter, we expect to do so going forward. First and foremost would be our 2018 investments in Vionic and Blowfish, which contributed to sales, gross profit, operating earnings in the first quarter. We're very pleased with both of these additions to our brand portfolio.

And our retail partners are also thrilled that we've added these brands to our lineup. Next, our investments in our industry leading sourcing capabilities enabled us to maximize our speed-to-market program as we continued to adapt to changing consumer and retail dynamics.

For the first quarter, replenishment orders showed considerable growth, enabling our partners to keep fresh, relevant products on their floors.

Thanks to the investments we've made in the new distribution and fulfillment center for brand portfolio, we helped create value for ourselves and our partners by enabling expanded digital commerce opportunities. As a result, total e-commerce related sales were up high-teens and represented approximately 30% of brand portfolio sales.

Dropship sales, which go directly to our retail partners and consumers, accounted for a quarter of our e-commerce sales, up more than 40% year-over-year. So all-in-all, a good quarter and continued progress for the brand portfolio. Now, let's turn to Famous Footwear, where clearly our performance was frankly not what we wanted it to be.

February comp sales were down high single digits, but improvement came with better weather in March. April comp sales were up mid single digits and the month was also a record April for athletic sales. Unfortunately, it was difficult to offset the February decline.

And we ended the first quarter with comp sales down 1% and total sales down 3.1% as we operated 28 fewer doors. There were several macro trends that impacted the retail space in quarter, specifically February and the slow start to spring delayed and in some cases, eliminated sales and in turn drove increased promotions across the industry.

As a result, we were more promotional at Famous Footwear during the quarter in response to the unseasonable weather and increased peer activity. In addition, as we said on our last call in order to drive freshness in our product assortment for back to school, we started this year really working to reduce inventory.

And all this though this negatively impacted gross margin in the quarter, we felt it was essential to follow through on our decision to eliminate certain products from our assortment and to reduce overall inventory. As a reminder, we expect to continue to actively reduce inventory into the second quarter.

Finally, we still had excess levels of certain underperforming styles from our lead vendor partner. However, we expect significant improvement to become apparent in the second half. We're not there yet, but we're moving in the right direction and we are seeing improvement and good strength in the new product.

In the first quarter, we also invested in our rewards program and officially launched Famously YOU Rewards. A refresh of this program needed to be done and it's essential in our go forward plans. We are on track with our expectations and are already receiving a good response.

We expect to see continued and significant improvement during back-to-school and rolling into the second half of the year. In total, we added 1.1 million new rewards members in the first quarter, reactivated nearly 700,000 existing rewards members and drove positive improvement in our retention rate.

Reward sales were up approximately 1% in the quarter with April up 10%. Sales to rewards members represented approximately 80% of all first quarter sales. But before I turn things over to Ken, I'd like to reiterate something I said on our fourth quarter call.

Our vision to become a powerful portfolio of footwear brands and the strategic underpinnings of what makes us Caleres remain relevant and unchanged. Our direction is sound and we are picking up both our pace and our focus in 2019.

And as a reminder, for our brand portfolio; we will extend our winning results by intensifying our consumer focus; continue to drive our investment in our digital capabilities; being out first when it comes to product design, development and relevance; and most importantly, by continuing to drive share gains for our top women's brands.

At Famous Footwear, we will elevate our product assortments by strengthening our relationships with all of our vendor partners. We are also deepening our relationship with our consumer through our new rewards program. And we are investing in digital and consumer marketing to drive growth.

And with that, I'd like to turn the call over to Ken for a Financial Review..

Thank you, Diane, and good afternoon, everyone. For the first quarter, we reported earnings per share of $0.22.

Our adjusted earnings per share was in line with expectations at $0.36 per share, excluding $0.11 of Vionic transaction related expense and inventory adjustment amortization, and $0.03 of brand portfolio expense related to the exit of the Carlos Footwear brand.

Consolidated sales for the quarter of $677.8 million were up 7.2% over the prior year, including the addition of Vionic and Blowfish sales and the planned reduction in Allen Edmonds sales. Our brand portfolio total sales were up 20.3% year-over-year. At Famous Footwear, same store sales were down 1% as Diane already discussed.

Our total sales at Famous Footwear were $352.2 million, down 3.1% as we operated 28 fewer doors versus the prior year, and ended the first quarter with 985 total doors after opening four and closing 11 in the quarter.

As a reminder, last month we announced the change to our segment presentation and provided re-cast results for 2017 and 2018 on a quarterly and annual basis. Beginning this quarter, we are eliminating brand portfolio sales to Famous Footwear in our other segment. We made this change to reflect the growth in brand portfolio given the 2018 acquisitions.

Let's turn to consolidated gross profit and margin. For the first quarter, consolidated gross profit of $279.8 million was up 1.8%. And our reported gross margin came in at 41.3%.

Adjusted to exclude the $7.2 million related to Vionic inventory adjustment amortization and for the markdown expense related to the Carlos brand exit, consolidated gross profit was $287 million and up 4.4% year-over-year.

Our adjusted gross margin of 42.3% was approximately 115 basis points, reflecting continued growth in both e-commerce and in the overall brand portfolio and increased promotional activity at Famous Footwear.

Our brand portfolio reported gross margin was 37.2% in the first quarter and adjusted gross margin was 39.3%, up approximately 90 basis points over the prior year. This increase was due to the addition of Vionic and Blowfish, and also reflects an increase in e-commerce related sales and a decrease in sales to the mass channel.

For Famous Footwear, first quarter gross margin of 43.4% was down approximately 210 basis points year-over-year. As I Diane discussed earlier, the team aggressively cleared inventory and back to school, and we expect to see similar pressure from this effort in the second quarter.

Additionally, e-commerce continued to grow as a percent of our overall Famous Footwear sales. Our consolidated SG&A expense for the first quarter was up 4.8%, including the addition of Vionic and Blowfish. Our SG&A represented 38.7% of sales, a reduction of more than 90 basis points despite the addition of two new brands.

For the brand portfolio, SG&A represented 33% of sales, down more than 50 basis points versus the prior year. And the Famous Footwear SG&A was down $1.5 million, a 1% reduction in expense and included the incremental investment we made in our new rewards program.

Depreciation and amortization for the first quarter of $16.4 million was up 11% versus the prior year, primarily due to the additional trademark amortization related to our Vionic acquisition. Our first quarter operating earnings were $16.9 million or 2.5% of sales with adjusted operating earnings of $24.9 million, representing 3.7% of sales.

For brand portfolio, first quarter reported operating earnings of $12.9 million were up 11.2%. Adjusted operating earnings of $20.7 million were more than 50%, including the addition of our acquisitions. Adjusted operating margin of 6.1% was up more than 140 basis points versus the first quarter a year ago.

At Famous Footwear, first quarter operating earnings of $10.8 million represented 3.1% of sales and was down year-over-year, reflecting the team's conscious decisions to clear through certain products and reduce overall inventory levels at Famous Footwear.

Our net interest expense for the first quarter of $7.3 million was up $3.7 million as we used our revolving credit facility to finance the October 2018 acquisition of Vionic. Our first quarter tax rate was 25.2% on a GAAP basis and 25.4% on an adjusted basis.

Our capital expenditures were $21.4 million for the first quarter and up approximately $12 million year-over-year, reflecting our continued investment in the automation of our new brand portfolio distribution center.

Turning to our balance sheet where we ended the quarter with $35.8 million of cash and equivalents, and outstanding borrowings under our revolving credit facility with $318 million at quarter end, down from $335 million at year-end, but up on a year-over-year basis due to the 2018 acquisition of Vionic.

Our consolidated inventory position at the end of the first quarter was $648.1 million. For our brand portfolio, we saw an increase in inventory, primarily related to the Vionic and Blowfish acquisitions. At Famous Footwear, we ended the quarter with inventory down approximately 2% year-over-year as previously mentioned.

Our first quarter operating cash flow was $49.9 million. Famous Footwear continued to be a solid and consistent contributor to our operating cash flow and once again, deliver growth in the quarter.

Wrapping up our review our first quarter performance, our trailing 12 months adjusted return on invested capital at 20.2% was up approximately 350 basis points over the same period last year. And finally, I'd like to review our guidance.

As Diane already discussed, we now expect the midpoint of our earnings per share guidance range to reflect year-over-year growth of 9%. This new rate reflects the slower than expected improvements at Famous Footwear in the first quarter, both due to unseasonable weather and as we actively cleared through inventory in advance of back-to-school.

While we expect to see improvements in the back half of the year, we believe the second quarter will remain challenging for Famous Footwear as we continue to reduce inventory levels.

And additionally, while we are confident in our brand portfolio and its ability to offset weakness at Famous Footwear, we believe is best to remain prudent as we monitor activity across the industry and at our retail partners.

And before we begin Q&A, I would like to turn the call over to Diane to provide a brief update on the footwork tariff situation..

Thanks, Ken. And as you all know, additional tariffs of up to 25% were proposed and made for footwear produced in China. As a reminder, we have been actively diversifying production away from China over the last five years, and now source approximately 60% of our products from there.

And our powerful sourcing base gives us a competitive advantage in the footwear space.

While nothing is final yet and we are certainly hopeful for a positive resolution, we are actively working through contingency plans, which includes, potentially shifting additional production out of China, working with our factory partners to reduce costs and exploring price increases.

While we are treating this issue with the same sense of urgency we're applying across our entire business, we are taking nothing for granted. And with that, I'd like to turn the call over to the operator for Q&A..

[Operator Instructions] Your first question comes from Rick Patel from Needham and Company..

Thank you. Good afternoon, everyone. I'm hoping you can give us some more context on why you're being more conservative with second quarter guidance.

Perhaps, is there any way to provide context on comps during the month of May that might be difficult to overcome? And also in terms of the inventory actions that you're taking, it sounds like it's a function of the marketplace being more promotional and some sluggish product, but I'm hoping you can provide insight on which of those factors might be the bigger pressure point right now?.

Rick, I'll give you a few numbers and then Diane can share some of the specifics. But I think as we were working through the period, I think, we had said on our last call that we expected Famous Footwear margins to end up around flat this year. And as you noticed, we were down a little over 200 basis points at Famous Footwear in the first quarter.

We had taken about half of that into consideration. The other half, the incremental 100 basis points, was a result of really just the back half of April really drop and back off, and some of the clearance activity that we had done to move through the product that we needed to move through to make sure we were clean going into back-to-school.

And so we're expecting that margin basis point decline to continue into Q2 and we would expect it to be down roughly 100 basis points. So improving but still down year-over-year in the second quarter..

So Rick, maybe just a little more color. We did add a few unplanned promotions during the quarter in order to continue to drive the inventory down. We also are really looking at speeding up the lifecycle of some of the product categories that and particularly in the non-athletic side of the equation.

And then the glide path really out for our key vendor partner was a little bit longer. So that was a little bit of a newer news post our first quarter, or late last year, end of the last year call that we had..

And can you also touch on the outlook for the back half.

What is it about the assortment or the strategy that you have in place that gives you confidence? And what’s the sustainability of that from 3Q to 4Q?.

We feel very good about the third and fourth quarter. And there's a couple of reasons why we have the degree of confidence that we do. First of all, a lot of the new products that are coming in and replacing some of the non-performing categories are working exactly as we had hoped.

The investments that we've made in those appear to be the right correlation of what we're going to need to show improvement as we move into third and fourth quarter.

That's both on the athletic side and our key vendor partners there, as well as on the non-athletic side with a lot of new iconic brands that we're bringing in and actually getting allocated more inventory in order to support those brands going into the third quarter.

And then, of course, we made a bet on launching this rewards program in the first quarter, not exactly the easiest time to do it. But we wanted to get ahead of our back-to-school time period in third quarter. So as we go into the third quarter and back-to-school that program is going to be up and running and performing well.

And probably the last thing is we feel very confident about the marketing plans that we have. There's a few new shifts in terms of what we're going to be doing in a positive way. And the good news is we've tested some of those things, and we like what we see..

Your next question comes from Laura Champine from Loop Capital..

Thanks for taking my question. Could we get a little more color on what's going on with the comp and the brand portfolio? I know it's a small part of sales through your own stores and brand portfolio. But just to see such strong growth for the segment as a whole, but not so much on the comp. If you can bridge the gap for us that would be helpful..

I think a lot of a lot of that is really -- we're seeing a lot of our growth in the brand portfolio with our replenishment programs, and then a lot of our drop ship. And so our e-commerce related sales there continue to be 30%. So that's a big piece of what's driving the growth there.

The initial orders, the traditional way that we would take an order and ship through continues to be a smaller and smaller piece of that brand portfolio. So, when you flip that over on the retail side and you go to comp, you caught -- a big piece of it is Allen Edmonds, which we had planned down.

So when we look at our comps in total, you've got Sam Edelman in there, his online business continues to be strong and then the same thing on Naturalizer. So a lot of that's really driven by our planned reduction at Allen Edmonds..

Laura, I'd add one other thing to what Ken already said. And that really -- it does come back to the e-commerce growth. All of the dot com business is across whether we own them, whether they're pure plays or they're portion of many of our department store partners.

All of those businesses are really strong and the investments that we've made in our capabilities the last two years have really allowed us to take advantage of the opportunity that that's there now with the consumer and the way they're shopping. So a lot of our growth came from there..

Your next question comes from Laurent Vasilescu from Macquarie..

This is Wilson on behalf of Laurent. I wanted to start on Nike. I think for Nike in your FY 17 10-K was 25% of sales and then in the latest 10-K was 22%. So it implies a mid-teens decline.

Any sense as to what we should expect out of Nike for this year?.

We are expecting Nike to be up. And I think that's really the dynamic that that we're seeing here through the first half, and then the confidence that we have going into back-to-school. The new product as it is showing up, we're actually seeing some nice gains.

And it's really the clearing out of the older product that’s putting the pressure on the first half of the year. But we are expecting Nike in total to net to a positive. I don’t know Diane if you'd like to add anything to that..

I think you said it well..

And then for on Vionic.

How did Vionic performed in the quarter and any thoughts on growth for this year?.

Vionic performed well. They were certainly a contributor as we had mentioned in sales, in margin and in operating earnings. We did have almost an incremental $4 million of interest expense just as we're paying down the line.

And then remember they have little over $3 million of amortization of their intangibles and so with all of that, they were slightly accretive in the quarter..

And then on Allen Edmonds, any update on Allen Edmonds, any visibility into the repositioning of the brand in terms of both the top and bottom line?.

We actually, as you know, made some tough decisions and bold move at the end of last year in order to reposition Allen Edmonds. So we think we reduced our top line to about 15%, and so far so good. We're tracking nicely against our targets there. We took out some of the excess promotions we run, two of the major ones anyways.

That seems to be going well. So, so far so good, three or four months into the year, we feel much better about the direction of that business..

And one quick last question. At the EPS level, your guide down at $0.10.

Just want to make sure that that's fully driven by Famous?.

Yes, I think the direct production is driven by Famous. I think we’re very cautious about what's happening on the wholesale side of the business just with some of the recent announcements, and some of the issues that some of our key partners are having beyond footwear.

And so, we tried to be prudent and not bet on a lot of upside from that in the second half. I mean, we still are up 9% at the midpoint..

Your next question comes from Steve Marotta from CL King and Associates..

Diane, you mentioned Allen Edmonds, to put a finer point on it, would you say that was within your plan within the first quarter given the changes are going on [indiscernible]? And there were no additional incremental promotions in the first quarter that were not planned at the beginning of the….

No, none. Fewer days on sales, still not enough but we're working our way down. So that's still the intention..

And then can you talk about there was a distribution center inefficiencies late last year, if I remember correctly.

Can you give a little update where you are there? And are you in line and do you expect further optimization as the year progresses?.

We fully transitioned in our new distribution center. The team there has done a great job in terms of just building confidence with our teams internally. The growth that we talked about with our e-commerce related sales was all really fueled by the capabilities that we invested in there.

And just remind everyone the automation, really the benefits of that come in the back half of the year. We did the cut over on CAL 2. And so, we're in the process of fine tuning that automation, and then the CAL 1 automaton happens over the course of the next 30 days.

So with that, you'll start to see the productivity as we start to take some of the manual labor out in the back half of the year. So we've got about a million and a half square foot of capacity. And that incremental space was required as we went through automated those facilities, but the teams done a great job and they're on track.

And we've got some pretty nice improvements in the back half of the year..

And last question, just a little bit of housekeeping. You added 1.1 million rewards in the first quarter. Can you talk about what you entered the quarter with, and what the net number was coming out of the quarter? In other words, including -- we can do that offline, it's not that important. Thank you all. Thank you very much..

Your next question comes from Chris Svezia from Wedbush..

So I guess my first question is, what is the comp that you're expecting, I guess for the second quarter? You're expecting to see similar to the first quarter for Famous. You're expecting to see flat.

Just any color about what you anticipate the comp projections or trajectory if you move forward here?.

I would say second quarter we're expecting flat to up - load low and then consecutive improvements throughout the rest of the year..

And the inventory piece that you're talking about.

Have do you, I guess, characterize enough of the potential rest around inventory in order to move it based on the location of Famous Footwear margins being down 100 basis points? Are you basically looking down and saying this is more of a worst case scenario, or is this the midpoint scenario that you're thinking about?.

I think we've gone in and really looked at this every single which way that we could, Chris. And making sure that we left the team enough room to be able to do what we needed to do to start back-to-school in the position that we wanted to begin back-to-school in.

I think we were realistic with what we thought about what the impact of margin was going to be..

And then just, Ken, for you from an earnings perspective, help us out a little bit.

You're anticipating more Q2 being a flat earning situation, or down low-single-digits year-over-year? Or just characterize how we should be thinking about the earnings for the second quarter?.

I mean, I think what we've tried to say is, we expect improvement throughout the quarters. And so, we were down and we guided down in Q1. And I think we're flat to down in Q2 and then it flips over in Q3 to be up low, high-single-digits. And then Q4, I just remind everyone is when we had the dilution from the acquisition last year.

So that 2.21 on a recorded basis, there was $0.10 of dilution that came through in the October, November and December time period last year..

And just from last two months here. One, what was the organic growth rate for branded portfolio ex the acquisitions? And on the loyalty program, I guess I would have thought it would have gone maybe a little bit more to drive the comp in the business in the quarter.

Just what was successful, what wasn't? And why do you anticipate back-to-school for it to really be a much longer drive to the business?.

Well, if you think about it was a soft launch in mid-February, Chris. So that's when we kicked off the rewards. And as you saw, it grew and I think I mentioned in April, we added, but in April we were up. Reward sales are up about 1% in the quarter, in April, we were up 10%. So, it's starting to build.

It just doesn't kick off and hit the ground running, it takes a while. And so we have continued to see that ramp from the first quarter now into May. And everything that we've been looking at is meeting the expectations that we had about how that auto ramp back-to-school.

So there's nothing right now that would give us any pause to say that things are going to be different than what we anticipated. And then Ken on the….

Yes, I think on the -- so we had no luxury of taking the Allen Edmonds sales down in the first quarter, because we did have the two acquisitions. So when you pull out the benefit of the two acquisitions, the Allen Edmonds business, the sales were down as planned..

And they were down low single?.

No, we planned on down around 50 and it's where it came in..

No, I'm talking in aggregate. It's okay. I'll find out. I'll catch up later with you guys. Thank you very much, all the best. Appreciate it..

[Operator Instructions] The next question comes from Sam Poser from Susquehanna Financial..

I have a few follow-ups and some follow-ups to Chris. I guess the question is ex the two brands out, Vionic and Blowfish.

What was the increase of the brand portfolio sales or decrease for that matter?.

Well, excluding the two acquisitions, it was down..

Low singles, high singles, bigger than the….

Yes, low single….

How often in the past have loyalty customers shop at Famous? And how often do you expect them to now shop with the new programs?.

They typically shop three times a year, typically. And with the new programs, the anticipation is that it's actually about with a reactivation of some of the folks that are not currently in the program, as well as keeping the ones that are in so we don't have the same attrition rate.

So all-in, we'd normally have been in, I don't know, 75% to 78% range of people that shopped and rewards in the first quarter already 80%. We'll have to see how it unfolds. But a big piece of this is about the reactivation and the continue with communication and engagement with consumers as opposed to too much of the one and done thing.

So the churn we're trying to really eliminate..

And April, how much of April do you attribute to the shift of Easter?.

No, not much, again rewards are in the open….

No, in the comp. I mean, you had the late tax refunds.

And how much do you attribute to late tax refunds hurting February?.

Not too much really. I mean, there were other factors that hurt February and hurt the quarter, but really the tax refund, it was really hard to correlate any of that with our business..

I have two other questions.

Number one, what percent of Famous Footwear's inventory is sourced from China?.

I'll have to get back to you. But if you think about the mix of Famous athletic versus non-athletic, I would guess it's probably outside of China, probably somewhere in the 35% to 45%. But I'd have to check on that number..

And then it's great that you changed the reporting structure, because it gave us more visibility into the sales.

But why did you? I mean, what made you think that adjustment to the reporting structure?.

Well, I mean the fact of the matter is we've got businesses that are selling into Famous. And we wanted to just eliminate those sales and the consolidation like we always do, but do it through our other segment, so that you could see the real growth of the brand portfolio. So it's consistent with the way everybody else does it.

And at the year with all of the accounting, it was pretty messy and so we -- effective with 2019, we put out a recast of '17 and '18. So you can see what those years would have looked like if instead of the sales and margin being eliminated in the brand portfolio segment they were eliminated in other.

So when you look at our acquisitions, those businesses were selling into Famous and are going to continue to do so. And so it just seemed like the right time to clean that up..

And is there anything else in those other businesses other than sales of the….

No, 100% of the elimination in the sales and margin is tied to those inter-company sales..

Your next question comes from Chris Svezia from Wedbush..

I'm going to ask Sam’s question in a little differently. I guess, when you step back and look at the company, the valuation of where it is and where it has been.

Can you maybe just walk through what's the value of keeping Famous and branded portfolio together? And just walk us through any thought process, consideration of maybe enhancing by splitting the two apart if that's ever been a more focused consideration, or maybe walkthrough why still keep these companies together?.

So, if we want to get into a strategy conversation. I mean, look at the end of the day, we believe that the brand portfolio, the growth, the improvements in earning, all of that is part of the strategy that we have put together a while back.

And look the strength of the cash flow at Famous Footwear gives us the ability to continue to grow that brand portfolio. And so I think at the end of the day, when you look at where the stock is currently trading, I mean, you can question why anyone is even in this business right now.

And so, I don't think we want to go into details around splitting the company up on this call..

Chris, I'm just going to add to that that we feel very confident about the direction that we've laid out for the last two years. This one quarter and the issues that we had at Famous Footwear is not indicative of what we believe the opportunity for the entire portfolio of this company.

And in fact, if you take a look at the continued improvement on the brand portfolio side, I think we’ve had been executing with excellence against that. So it really is, not happy with our performance at Famous, believe that that’s going to turn around in the back half of the year.

And there is a lot of good reasons why to keep the integration of all of the brands that we have, including Famous as part of this network, because it all really does work together in terms of its ability to generate cash and to allow us to really invest in other business.

That question seems to come up periodically, not usually when we've had a great quarter though..

And that was our last question. At this time, I will now turn the call back over to Diane for closing comments..

Thanks, Michael. I appreciate it. Thanks for everybody for joining us. I look forward to seeing you and over the next couple of days, and sharing more about how we see the future. So thanks again for your support. Talk to you soon..

This concludes today's conference call. You may now disconnect..