Angel R. Martinez - Chairman, Chief Executive Officer and President Thomas A. George - Chief Financial Officer and Principal Accounting Officer

Jessica Schoen - Barclays Capital, Research Division Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division Omar Saad - ISI Group Inc., Research Division Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division Howard Tubin - RBC Capital Markets, LLC, Research Division Camilo R. Lyon - Canaccord Genuity, Research Division Scott D. Krasik - BB&T Capital Markets, Research Division Diana Katz - Lazard Capital Markets LLC, Research Division Christian Buss - Crédit Suisse AG, Research Division Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Deckers Outdoor Corporation Second Quarter Fiscal 2012 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded. Before we begin, I would also like to remind everyone of the company's Safe Harbor policy. Please note that certain statements made on this call regarding the company's expectations, beliefs and views about its future financial performance, brand strategies and cost structure are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements relate to the company's anticipated revenues, expenses, earnings, gross margin, capital expenditures, brand strategies and cost structure, as well as the outlook for the company's markets and the demand for its products. The forward-looking statements made on this call are based on currently available information, and because its business is subject to a number of risk and uncertainties, some of which may be beyond its control, actual operating results in the future may differ materially from the future financial performance expected at the current time. Deckers has explained some of these risks and uncertainties in its earnings press release and in its SEC filings, including the Risk Factors section of its Annual Report on Form 10-K, and its other documents filed with the SEC. Listeners are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to publicly release or update the results of any revisions to forward-looking statements. I would now like to turn the conference over to the President, Chief Executive Officer and Chair of the Board of Directors, Angel Martinez. Please go ahead, sir. Angel R. Martinez: Well thanks, operator and welcome to everyone joining us today. With me on the call are Zohar Ziv, Chief Operating Officer; and Tom George, Chief Financial Officer. We're encouraged by the sales trends we experienced in several areas of our business during the quarter. Overall, sales increased 13% over the second quarter last year versus our projection of 8% as our direct-to-consumer channel delivered better-than-expected results. This included a 7% comparable store sales increase on top of a 24% increase a year ago and 40% growth of our eCommerce business. We expect that our direct-to-consumer channel will be a key component of our future success both in terms of growth opportunities and enhancing the valuable connection between our brand and consumers. We took an important step towards strengthening this platform by appointing David Powers as President of Direct to Consumer. He brings a vast amount of global experience to this newly created role, which encompasses both our eCommerce and retail operations. This is critical as we continue to build out our store base, particularly in Asia and further evolve our digital capabilities in the years ahead. Before we get into a deeper operational review, I want to reiterate what was announced in conjunction with today's earnings. After completing our $100 million stock repurchase program during the second quarter, our Board of Directors recently authorized a new $200 million repurchase program. We're very pleased with this decision as we believe that buying back stock at current price levels will provide a significant return on investment. So turning to the brands. The UGG brand's second quarter was filled with many positives. In addition to the direct-to-consumer performance I noted earlier, domestic wholesale sales increased double digits highlighted by strong sell-through of fashion sandals and flip-flops. The spring line had a good season, which we believe bodes well for sell-in of the 2013 line as confidence in our expanding non-boot collections continues to grow with retailers. During the quarter, we shipped initial fall deliveries to several domestic accounts, including Nordstrom, ahead of their anniversary sale. While it is obviously very early, well ahead of our main selling season, we believe that the sell-through data over the past few weeks have been positive. With regard to Nordstrom, the women's fashion styles included in this year's sale are performing well, underscoring our belief that the brand is continuing to expand successfully beyond its traditional roots and is attracting new consumers. Getting back to the direct-to-consumer business, our U.S. stores posted a mid-single digit comp increase as in-season demand for spring and summer styles remained healthy through the end of the quarter. Regarding new stores, we opened our first-ever men's only shop next to our Madison Avenue store in New York City in early June. The early results have exceeded our expectations, which we believe reflects the growing momentum of the men's line coming off a strong year in 2011. We witnessed similarly strong demand for open-toe products on our domestic eCommerce site. The women's Ansley and Luciana did particularly well. The men's slipper casual and sandal categories, along with the women's slipper and fashion sandals all delivered double-digit increases. Our international sales were down in the second quarter as weakness in Europe outweighed the strength in Asia. In Europe, second quarter sales of our UGG brand declined in line with our projections as our largest distributors reduced their fall orders this year due to the inventory overhang created by the combination of a warm winter, worsening economies and deteriorating consumer confidence. Our European wholesale business was down, although I can note that second quarter sell-through in the U.K. was positive across virtually all product classes. We've implemented many organizational and distribution changes over the past 6 months in order to get this business on track. These include price adjustments on key styles to increase accessibility, tighten distribution to better reflect the UGG brand's positioning and increase investments in local marketing and visual merchandising to ensure our product is front and center at point of purchase during key consumer buying periods. After a challenging 12 months for our European retail division, we believe that the situation has stabilized somewhat evidenced by a high single digit same-store sales gain for the second quarter. Expanding our retail footprint in the U.K., as well as France and the Benelux is a key aspect to our strategy to evolve the UGG brand's lifestyle position. During the quarter, and ahead of the Olympics, we opened one store in the U.K. in a terrific location in Piccadilly, in addition to one store in Benelux. We're on schedule to open 4 more stores in the U.K. in the second half of this year, plus 2 stores in France. While the second quarter is always a low-volume quarter for our retail and the majority of our retail sales are concentrated in the fourth quarter, we're encouraged by these results. Lastly, Asia exhibited nice growth. Distributor sales for the UGG brand in Asia increased 70% versus a year ago, and our Japanese business, which is wholesale, retail and eCommerce, collectively was up more than 80% over the second quarter last year, bouncing back nicely from the earthquake impact, driven by a strong double-digit comp increase, additional retail locations and a larger assortment of spring product at key wholesale accounts. As of June 30, we had 12 retail stores in Japan, 3 of which are now in the comp base. As we previously announced, we purchased the remaining minority interest in our China joint venture in April. We are bullish about the UGG brand's opportunities in this incredibly large market and continue to execute a strategy aimed at building a long term, sustainable business in this region. We ended the second quarter with 13 stores in China, up from 5 a year ago. Our recent expansion has been focused on back-filling existing metro areas in order to best leverage our current infrastructure. As a result, our stores in China are some of the most profitable in our international fleet, even with double digit declines in our 3 comp stores from some expected cannibalization. We have learned a good deal this year about the style and fit preferences in the Chinese market, for example, foot shape and heel height has had -- all made adjustments to the assortment for 2013. We're also adding more resources to improve execution and future results, including more real estate support and increased investments in local marketing and advertising. And based on his experience, we believe that Dave Powers will be integral to this part of our business as it evolves and expands over the next several years. Turning to the Teva brand, net sales for the second quarter decreased 15.4% to $34.1 million compared to $40.3 million for the same period last year. The Teva brand's second quarter performance in the U.S. was very similar to the first quarter, strong sell-in and good sell-through driven by demand for our iconic sports sandal line and a growing assortment of light hiking and multisport footwear. However, record domestic wholesale sales and growth in domestic eCommerce sales were offset by a decline in international sales. Europe continues to be challenging. Following last summer's wet leather, which led retailers to order cautiously, we believe that the slowdown of the Eurozone economy this year has tightened consumer spending even further, leading retailers to be similarly cautious. Domestically, despite good spring sell-through and award-winning fall product, reorder expectations in the second half of the year have been reduced as many key customers continue to struggle with carryover inventory of other fall winter brands following the mild weather. With the added economic uncertainty, the trend of conservative purchasing is expected to continue in the near term. However, we continue to be confident that the brand has the authenticity, positioning and product to expand its share of the domestic and European outdoor market, and we expect growth to resume when things stabilize. The Sanuk brand delivered another outstanding performance. Strong sell-in during the first quarter was followed by strong sell-through, leading to a high level of reorders in the second quarter. The Sanuk brand's success continues to be broad based with both open and closed-toe footwear sales up strong double digits. From a channel perspective, the brand remains one of the leaders in independent action sports stores, while continuing to gain traction with more mainstream specialty and department stores, as well as key online retailers. The Sanuk brand's eCommerce business delivered equally impressive results, driven by a great product offering and by the integration of sanuk.com with Deckers' eCommerce platform. With the brand now on the platform, we can begin driving a higher level of consumer engagement and incorporate the Sanuk brand into our overall eCommerce strategy. Overseas, the brand's momentum is building in Asia as distributors continue to roll out Sanuk brand stores. In aggregate, the performance of these stores has been very promising, which we believe illustrates the Sanuk brand's growth prospects in the region, as well as the opportunity to develop company-operated stores in the U.S. and other direct markets. With that, I'll turn the call over to Tom. Thomas A. George: Thanks, Angel. Today's earnings release contains a good amount of detail about our second quarter sales and earnings, including sales by brand, channel and geography. Therefore, I'm not -- I'm going to limit my discussion primarily to gross margins, operating expenses, the balance sheet and guidance. Gross margins for the second quarter was 42.2% compared to 42.7% in the second quarter of last year. The 50 basis point decline is primarily attributable to an increase in product cost, the negative mix impact of a decline in Europe wholesale sales and foreign exchange, partially offset by the contribution of Sanuk brand and increased pricing compared with a year ago. Gross margin for the second quarter of 2012 was 80 basis points below our expectations, primarily due to lower wholesale margins in Europe. Total SG&A expense for the quarter was $102.3 million or 58.6% of net sales compared to $76.7 million or 49.7% of net sales a year ago. SG&A increased primarily due to an additional $14.8 million of operating expenses from owning the Sanuk brand, which includes $7.2 million related to the estimated earn-out liability and the amortization of intangible assets. $8.2 million of the increase in SG&A relates to additional retail expenses, most of which is for the 21 new retail stores that were not opened during the second quarter last year. We're investing in personnel and infrastructure to support a more aggressive store rollout as we plan to build towards a base of approximately 200 stores by the end of 2015. In addition, excluding Sanuk, we had an increase of $3.9 million in marketing, primarily related to the UGG brand's men's and classic campaigns. Operating expenses were below expectations, primarily due to reduced retail, legal and several other general and administrative expenses. The operating loss for the second quarter was $22.7 million compared to $10.8 million last year, primarily the result of the aforementioned increases in expenses. We recorded income tax benefit of $8.4 million in the second quarter compared to $3.2 million in the second quarter last year. Second quarter diluted loss per share was $0.53 comparing to our guidance for a loss of $0.60. The upside was driven by a higher forecasted domestic sales and lower operating expenses, offset by $0.07 of additional expense related to an increase in the estimated earn-out liability of the Sanuk brand due to increased confidence in the long term earnings outlook for the brand. Now turning to the balance sheet. At June 30, 2012, inventory increased 64.8% to $346.3 million from $210 million at June 30, 2011. By brand, compared to June 30, 2011, UGG brand inventory increased $130.1 million to $308.9 million. Teva brand inventory decreased $1.1 million to $21.1 million, and our other brands inventory decreased $2 million to $7 million. Inventories for the Sanuk brand, which was acquired on July 1, 2011, was $9.3 million at June 30, 2012. The $130.1 million increase in UGG inventory was primarily attributable to the growth of fall 2012 inventory, including the growth of our consumer direct division carryover product from the 2011 holiday period, which we plan to utilize to fulfill orders during 2012 and an increase in product cost. I'd like to provide more detail regarding our comfort with the quality of UGG brand inventory. At June 30, 2012, current fall inventory represented approximately 85% of the total UGG brand inventory, and the remaining 15% inventory is spring inventory or inventory currently utilized or available for our retail outlets. Although the absolute increase in fall inventory is approximately $105 million, approximately $80 million of that increase is in classics and slippers for which we have orders, and the remaining $25 million is for fall 2012 delivery for which the majority that we have orders as well. In addition, increased product cost of approximately $40 million and approximately $10 million related to 21 additional retail stores are also driving the increase in fall and spring inventory. We still anticipate percentage year-over-year inventory growth to decline in the back half of the year as we sell the carryover inventory. During the quarter, we repurchased 1.5 million shares of stock for a total of $80 million. As Angel mentioned earlier, we've completed the $100 million stock repurchase program authorized by our Board of Directors this past February, and the board has authorized a new $200 million stock repurchase program to begin in the third quarter 2012. The new authorization will be funded by existing and future cash balances in addition to borrowings from our current credit facility, which we're in the process of expanding. Now moving on to our outlook. Taking into account our better-than-expected second quarter results and the positive impact from share repurchases made during the second quarter, combined with the continued uncertainty in Europe, including a higher dollar versus the European currencies, a higher than previously projected tax rate and increased Sanuk earn-out expenses, we are maintaining our current full year outlook. We still expect 2012 revenues to increase approximately 14% over 2011 levels and diluted earnings per share to decrease between 9% and 10%. Keep in mind, the completed share repurchase does not reduce the total year's share count to the same level as Q3 or Q4 share counts. For the full year, we still expect UGG brand sales to increase by approximately 10%. We now expect Teva brand sales to be flat to slightly down compared to our prior guidance of growth in the low to mid-single-digit range, while Sanuk brand sales are now projected to be approximately $95 million, up from our prior guidance of approximately $90 million. Combined sales of our other brands, which represent only $21 million of forecasted annual sales are still expected to be down approximately 15%. Our forecast is still based on a full year gross margin decline of approximately 250 basis points and SG&A as a percentage of sales of approximately 30%. Based on a higher mix of domestic pretax income, our tax rate is now forecasted to be approximately 32%, up from our previous projection of approximately 31%. Our full year SG&A projection now includes approximately $17 million or $0.30 per diluted share associated with the amortization and accretion expenses related to the Sanuk brand acquisition, up from our previous guidance of $13 million or $0.23 per diluted share. For the year, we still expect capital expenditures to be approximately $80 million, with roughly $30 million allocated to the construction of our new headquarters, $30 million for new store openings, as well as store and showroom remodels, $10 million going to IT and maintenance projects, $4 million to upgrade our retail operating system, and the remaining $6 million for additional corporate infrastructure. For the third quarter of 2012, we expect revenues to increase approximately 1% and diluted earnings per share to decrease approximately 31% from the third quarter 2011 levels. This guidance assumes a gross margin of approximately 43% and SG&A as a percentage of sales of approximately 28%. Included in our SG&A projection is roughly $3.3 million or $0.06 per diluted share in expenses related to amortization and accretion expenses related to the Sanuk brand acquisition. The tax rate for Q3 is estimated to be 31%. For the fourth quarter of 2012, we expect revenues to increase approximately 19% and diluted earnings per share to increase approximately 22% over fourth quarter 2011 levels. This guidance assumes a gross margin of approximately 50%, SG&A as a percentage of sales of approximately 21%. Included in our SG&A projection is roughly $3.3 million or $0.06 per diluted share in expenses related to the amortization and accretion expenses related to the Sanuk brand acquisition. The tax rate for Q4 is estimated to be 32%. I'll now turn the call back over to Angel. Angel R. Martinez: Thanks, Tom. As we prepare for our busiest selling period and look out beyond 2012, we feel good about our prospects and are encouraged by some external trends that could benefit our results going forward. Most importantly, we continue to operate a portfolio of brands each of which we believe has multiple growth opportunities in both the U.S. and international markets. Based on several factors, including spring performance, conversations with key retail partners and market research, we believe the UGG brand has never been stronger. Specifically, recent data tells us that consumer loyalty has increased over the past 2-plus years and as a percentage of people who have purchased UGG brand product are now wearing it more frequently. Similarly, there has been a meaningful step up in intent to purchase during the same period, while the brand recently received high marks for salience versus the competition. Taken all together, this gives us added confidence as we approach the brand's key selling season. We believe that the Sanuk brand hasn't even begun to scratch the surface of its full potential and moves into fall with a lot of momentum and good placement for its first true line of colder weather product. The Teva brand exhibited good domestic sell-through this spring and summer and continues to make solid progress, building share in the broader outdoor category through innovative closed-toe product introductions. Another positive trend is the decline in sheepskin prices. While we have yet to finalize negotiations with our key suppliers for our 2013 raw material needs, it appears prices have continued to come down from the historic highs at which we locked in during the back half of last year. I would remind everyone that we purchase sheepskin from tanneries in China, not directly from farmers in Australia and there are added costs in our price versus what has been reported in recent news articles. Furthermore, the prices for the different grades of sheepskin do not move in direct correlation with one another. The key takeaway is that based on current visibility, we're expecting our price for premium twin-face sheepskin to decline in 2013 versus 2012. That said, we do not anticipate prices to revert to 2011 levels. We'll be able to share more on our cost basis and provide more detailed color on the impact to next year's gross margins on the Q3 call in October. To close, the entire organization is focused on executing strategies that we believe will allow us to carry on our strong track record of profitable growth. Thank you for your continued interest in Deckers Outdoor. Operator, we're ready now to take questions.

[Operator Instructions] We will take our first question from Mr. Bob Drbul with Barclays. Jessica Schoen - Barclays Capital, Research Division: This is Jessica Schoen on for Bob. I was wondering if you could give us a little bit more information on the performance in the international wholesale business, and what was the cause of the difference in what you saw in your direct to consumer in Europe specifically where it seemed to be quite a bit stronger? Thomas A. George: Jessica, this is Tom. On the international wholesale business, we had a -- we mentioned we had a good business in Asia, our Japanese wholesale business there. And on the Europe side, that was -- we saw pressures even on the last call. We talked about the European wholesale business. And those pressures continue in Europe. We're seeing some better signs in the U.K., in the European wholesale business vis-à-vis, let's say, the Benelux in that business. And back on the retail side, we're just really pleased with how we've been able to improve our performance in the U.K. retail stores during the quarter. Jessica Schoen - Barclays Capital, Research Division: Okay, and then on -- as far as the different geographic regions in the U.S., I was wondering if in the less weather-sensitive months of the year, like the quarter you just reported, if there is any kind of difference in the discrepancy between warm and colder regions, their respective performances. Angel R. Martinez: No, not really, I mean, we saw a pretty strong performance across the board on our spring line. Sandals did well as I mentioned earlier. A variety of product that just a few years ago wouldn't have been thought of as UGG product performed quite well, and we saw that in every corner of the country.

And we will take our next question from Mitch Kummetz with Robert Baird. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Let me start on the fourth quarter guidance. I was hoping you could just help us get to the 19% growth that you guys are forecasting. And what I mean by that is, I know you guys are opening a lot of stores. Can you maybe just speak to the comp that you're expecting within your retail business. I mean, talk a little bit about how you expect the wholesale piece to come together relative to your backlog and then talk about kind of your eCommerce expectation as well. Thomas A. George: This is Tom. On the fourth quarter, the retail perspective -- and we are opening a good amount of stores in the fourth quarter, and we're also encouraged by the recent performance and the comp performance. So we are looking for -- really consistent with prior quarters sort of a mid-single-digit comp assumption going into the back -- ended up the year on more of a mid-single-digit comp assumption, I should say. So there's a strong comp assumption in the fourth quarter. The domestic wholesale business between the added men's line, the additional marketing, we've got Sanuk. We expect some good growth in Sanuk in the fourth quarter as well, and our eCommerce business, more international growth, as well as domestic growth. All those factors make us feel comfortable with that fourth quarter sales growth number. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Let me ask the question maybe another way. I know last year in Q4 you had some cancellations. I think there was some closeouts that hurt gross margin. The [indiscernible] business was a bit soft. What are you thinking in terms of those areas this year versus last year. I mean, does the guidance at this point assume fairly dramatic improvement in those areas or is there still room for upside assuming we have more normal weather, and you can get that kind of improvement. Thomas A. George: It's more of a moderate and sort of the average improvement is the way we look at sort of reorder possibilities in the wholesale business and with our inventory levels, we do have the opportunity to chase some more business here in the fourth quarter if there is -- the weather does really react in our favor. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Let me ask one last thing. Your guidance as of the last quarter, I think you were saying by region, you expected international to be up mid-teens, I think maybe U.S. up mid-teens as well. Looks like international's tracking kind of plus, I think I've got it 7% through the first half. I mean, are you changing kind of your outlook for the year in terms of those regions or is it still what it was as of the last call? Thomas A. George: We're looking at on the international side, pretty consistent for the total year on the international side, growth pretty consistent with what we've now incurred for the first half of the year.

We'll now take our next question from Mr. Omar Saad with ISI Group. Omar Saad - ISI Group Inc., Research Division: I wanted to follow up on the guidance, 3Q versus 4Q. But on the gross margin side, it looks like, I think you mentioned 600 bps in 3Q pressure and only 100 in the fourth quarter. Can you tell me what's -- and I think one implies, I don't know, 43% margin versus a 50% margin. Can you help us kind of understand kind of the underlying dynamics there. Is it a mixed shift issue? Is it a channel shift issue? Wholesale versus retail? Or different merchandise products? Or is there some reason that the inflation that you've seen in the sourcing side of it hitting more in the third quarter than in the fourth quarter? Just kind of help us understand the setup on the gross margin differential, it'd be really helpful. Thomas A. George: Omar, this is Tom. Yes, the third quarter doesn't have the same retail store eCommerce contribution that the fourth quarter has. So therefore, it's more vulnerable, so to speak, to the increased sheepskin cost that we've experienced this year. So that's why they're such a drag on the third quarter gross margins. And I think another thing is, we're being more cautious with our international business this year especially Europe from a margin perspective vis-à-vis the prior year. So that's another reason that puts the pressure on the third quarter gross margin versus the fourth quarter. Omar Saad - ISI Group Inc., Research Division: And that's a bigger third quarter business, the international goods wholesale? Thomas A. George: Yes, it's a good sized business in the third quarter. But the biggest driver is -- Omar, just to -- the biggest driver is the fact that there's just not as much retail business in the third quarter versus the fourth quarter. So you really get -- bear a lot of the brunt of that increased sheepskin cost. Omar Saad - ISI Group Inc., Research Division: Got you. Got you. And then Angel, I want to ask you a question about the U.S. business versus the European business or the international business maybe in international in total, given some of the comps -- negative comps on China, yes, I know it's been a drag in the U.K., down 14% or 15% in the quarter. The U.S. business still looking pretty healthy. The comps are good. The wholesale was up. Is there something different in terms of how the brand is being interpreted by consumers or how it's being accepted or the perception or is it that it was more of a distributorship business and you really haven't had a chance to put your brand stamp on it, so there's a disconnect there. But just help us understand what seemed to be pretty 2 different trends, U.S. versus international for the UGG brand. Angel R. Martinez: Well fundamentally, we often forget that the brand has had many years of evolution in the U.S. We've evolved the fashion program here in the U.S. separate and distinct from -- and rounding out our classic business, our core classic business. It has only been a very short period of time, I'd say, 2 years since we really began an aggressive effort to evolve the non-classic product assortment in the U.K. and when you have a distributor-driven model like we had, the distributor is going to focus on the smallest number of SKUs to drive the highest revenue, and so they were primarily a core classic business and really, only until we opened our stores that we start exposing consumers to more of what the UGG brand represents. Also the U.K. comps were up in Q2 by the way, which is important to note. So the fact that the consumer in the U.K. is seeing a more -- a broader assortment of product bodes really well. Slippers are doing well there, and that's something that we've been trying to get established in the U.K. for quite a long time, and it was very difficult to do through a third party. So that's important to understand. There's a difference in the timing and the rollout of non-core classic product, and that's just starting to hit in the last season or 2. And with reference to Asia, again in those markets, since they're -- in China, for example, we've been primarily driven by our retail operation, there's no wholesale business. The consumers have seen a broad assortment from day 1, and that's performing well. In Japan, we had the same issue until we took over, where the distributor was primarily focusing on core classic. And again, in the last 2 seasons, we've been driving diversification of the assortment and the mix in Japan. So the brand in the U.S. has got about a 5 or 6-year head start on the rest of the world and footwear being the type of business it is, it's awfully hard on a wholesale environment to go in with such a broad assortment of product in the first years because retailers do have to have a foundation of sell-through and confidence to continue to expand the product line, and we're earning that every single day as we continue to evolve outside of the U.S. Omar Saad - ISI Group Inc., Research Division: And if I can just ask one more follow up. How do you think about innovation at core UGG product and the silhouette? Do you have any things up your sleeve this fall on holiday and into next year in terms of some innovation around the core product, whether it's different silhouettes that still use the sheepskin. How do you think about that process? Angel R. Martinez: Well, that's a crucial part of any brand's long-term success, and we've been extremely focused on that. You'll begin to see beginning in this holiday period, for example, in limited distribution, but nevertheless very important new products from UGG. More of what we call, really sort of re-evolving the ultra part of our line, which is actually more weather oriented, but I wouldn't say cold-weather product. So that's coming. You're going to see next year, a lot of innovation in our core classic. And we've been listening to what consumers have been saying. We want to have product that's more durable. We want to have product that's even more luxurious. We want to have product that gives better support. We want to have product that grips better, so all of those things are coming as we continue to evolve the classic line. So yes, really important.

And we'll take our next question from Mr. Jim Duffy with Stifel, Nicolaus. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: A couple of questions. One, with respect to the outlook. I'm hoping you can shed some more light on your expectation embedded within the guidance for the U.S. wholesale business, and I'm also wondering if that outlook for the wholesale business contains any planned clearance sales or is the fall '11 clearance effort past you at this point? Thomas A. George: Yes, Jim, this is Tom. We expect some good growth in the U.S. wholesale business, more of that in the fourth quarter versus the third quarter. As part of any footwear brand, there's always an element of closeouts in the mix. The fourth quarter is not really a large closeout quarter. That's more of a first quarter phenomenon. So I hope that answers your question on that. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: Sure. I guess, I'm wondering if you still have fall '11 inventory that you don't view to be in line or have orders for that you're looking to close out in the back half of the year? Thomas A. George: Jim, there's always a certain element of that, but not a significant amount really, because our product, I commented about the classics and then the orders we have on that. Because historically, there's been very minimal amount of closeouts for classics and in the non-classic product, we don't take large bets on that. So there's a minimum amount of that that's left over at any point in time, and that does get closed out. Similar that it did in the first quarter of this year. So your sort of standard operating procedure for a footwear company, minimal amount in the fourth quarter. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: I got you. And then, Angel, some encouraging comments on sell-through being positive in the U.K, based on what you see in the U.K. at this point, do you believe the wholesale business is finding a base in 2012 upon which you can build in '13? Or do you think it could take more time to get the brand positioning where you want it to make forward progress. Angel R. Martinez: Well, we feel we've made excellent progress in terms of the assortment at the wholesale level, diversifying away from the strictly classic orientation. Our retail stores, as I said earlier, are really helping us do that. Now we just really are, as everyone else, dependent on the macroeconomic conditions and really consumer confidence bouncing back in the U.K. perhaps after the Olympics and all of the energy that comes after that, we'll begin to see some of that. But in terms of our line and the assortment and distribution, those things have been cleaned up. I'm feeling pretty good about all that stuff.

Our next question is from Howard Tubin with RBC Capital Markets. Howard Tubin - RBC Capital Markets, LLC, Research Division: Tom, can you give us any more detail on inventory growth? I know you said it's going to moderate as we move throughout the year. Should we think about it up slightly at the end of the year? Or are we still talking about up kind of like maybe 30% or 40%, any more color there? Thomas A. George: Yes, I mean, it won't be up slightly because we're growing our business. On the fourth quarter, we're going to have to make sure we've got the spring inventory in on time to be able to move it -- to have it available for the first quarter. So it won't be slightly. It will be -- it won't obviously won't be up to the same levels as it is -- as it has been. I'd say, it's mostly in the fourth quarter, more of a 30% kind of increase relative to the fourth quarter of last year. Howard Tubin - RBC Capital Markets, LLC, Research Division: Got it. Got it. Great. And then in terms of -- I mean, if it actually snows this winter, how do you feel about your ability to chase into some reorders if they come in? Will you have enough product to fulfill reorders should they materialize this year? Thomas A. George: Yes, we feel good about that. We feel that we have got the right amount of inventory that will chase some -- obviously, to chase some business this year.

Our next question is from Camilo Lyon with Canaccord Genuity. Camilo R. Lyon - Canaccord Genuity, Research Division: Hoping you can shed some light on the third quarter sales guidance and maybe parse out a little bit of what's going on there with domestic wholesale versus international wholesale. What was the source there of the 1% growth. Thomas A. George: On the third quarter, the international business -- Europe, we've talked about all the uncertainties we have been having in Europe, and the pressure that we're seeing there and relative to the prior year, the European business is going to be down, but we feel good where the Asian business is headed. The Asian business is going to be up some and then the domestic business is going to be slightly up as well in the third quarter, and then we've got some more retail stores sort of coming in towards the middle to the late end of the third quarter. Camilo R. Lyon - Canaccord Genuity, Research Division: Great. And just on retail, do you have your new store productivity for the second quarter? Thomas A. George: Yes, we certainly have that. I mean, we don't really get into all the economics of all the individual stores. We've been pleased about the productivity. We commented about the China stores, and albeit they're smaller stores relative to the U.S., the returns on capital there have been very good. You saw the improvement on the comp in the Japanese markets with those comp stores. Those returns have been very good and obviously, the U.S. business, the stores have done very well. Camilo R. Lyon - Canaccord Genuity, Research Division: Okay. So then maybe just to ask another way then, for the Chinese comps, so we're down double digits if I remember correctly, could you just maybe highlight what the first -- 1, 2 or 3 reasons were then that continue to drive that decline in the comp base? Thomas A. George: I think some of the product assortment we commented on the call, we're learning from the Chinese market that we may need to have somewhat of a different product assortment. I think another thing is some cannibalization. As we opened more new stores on a staggered basis as opposed to opening all the stores in one metropolitan market at the same time, you by definition get some cannibalization, especially as you have more learning and as you open each store. So those are some of the reasons why there's -- and I think another thing that we've talked to you about this, we're going to improve the -- and increase the marketing for that market to improve the awareness of the UGG brand and educate the Chinese consumer about what a real UGG is versus some of the down-market competitors and knockoffs there. So those are some of the headwinds we face in China that we're working to improve for the rest of the year. Camilo R. Lyon - Canaccord Genuity, Research Division: Got it. And if I could just squeeze in one last one. Any plans to go outside or to pursue different retail locations in the U.S. versus relative to the urban areas that you've been targeting right now? Angel R. Martinez: No, we really don't plan to extend far beyond our current strategy. Realistically, we think there's probably 50 locations in the U.S. appropriate for an UGG store and really don't see a reason to go beyond that in the long term.

Our next question is from Scott Krasik with BB&T Capital Markets. Scott D. Krasik - BB&T Capital Markets, Research Division: Angel, the issue around pricing I think has concerned investors, and retailers have expressed some issue. Do you feel any more confident or do you have any evidence versus 3 months ago that consumers will accept Classic Talls at $210 or Bailey Buttons at $230, $235. Have you seen any of that up to this point. Angel R. Martinez: It's still too early to comment definitively on that. Obviously, I'm as concerned about the pricing as anyone. I have always felt that this is an accessible brand, and we have to really understand where those thresholds of accessibility are. We really do feel that $200 is a threshold price point. We've tried very, very hard not to go above that and we're working hard to make sure that we come back to that, where sheepskin pricing allows us to do so. One thing to understand though in terms of the total mix, those tall products are not a significant percentage of what we sell. I mean, those are a small percentage of our total mix. The bulk of it is Classic Short in terms of classic assortment, Bailey Button Mini and those kind of products, which use less sheepskin and obviously have lower price points. So I guess to answer your question, on long term, I see us operating within those thresholds that we've established that we know consumers will be wanting to see from the brand in order for the brand to remain as accessible as possible worldwide. Scott D. Krasik - BB&T Capital Markets, Research Division: That's a good answer. And then just a question on China. I mean, there's been some speculation, reports where in that you bungled your store locations and you put the stores in the wrong malls or the wrong parts of the mall. I mean, is it a situation where you need to start over? Do you feel good about the locations you have and as more stores enter the comp base, we'll start to see that turn positive? Angel R. Martinez: I think our locations are the envy of most people in our footwear business in Asia. I don't understand the comment that we bungled the store locations. I think if anything else -- if nothing else, what we have learned is that we may have gone a little bit too far down the luxury part of the mall. So that pulling back just a little bit from that yields much higher traffic and much more revenue opportunity, much more exposure to more consumers. So I'd always rather come from a place where we started out as a little bit too high end and then had to back off just slightly from that in order to reach more people. So the strategy going forward will be exactly that. We'll be diversifying our store mix in secondary cities and in secondary locations within cities to create a mix of what I would call premium high end versus exclusively luxury, and our initial thrust was pretty much luxury. Scott D. Krasik - BB&T Capital Markets, Research Division: And the consumer in China's interested as much on the accessible luxury as luxury in your mix? Angel R. Martinez: Well I think as the consumer evolves in any market, especially a market like China. After a while, they begin to understand that it isn't just about wearing a label, they want true price value for their purchase, and they start to understand, well, why should I pay so much more when I can get a product at a more reasonable price that's just as good. And so that's the sophistication of the consumer. You're starting to see that. Whereas a few years ago, into the last year, you really saw an extreme label consciousness. They had to have the label at all cost. I think you're starting to see a mitigation of that. It's starting to come down to a -- yes, they still want premium labels, but they're also becoming much more savvy consumers, and that's a natural evolution of the consumer.

Our next question is from Diana Katz with Lazard Capital Markets. Diana Katz - Lazard Capital Markets LLC, Research Division: Given the new authorization, what share count should we be modeling for the year? And how should we think about the cash balance and operating cash flow by year end? Thomas A. George: With the new authorization, we really can't comment on what the company's intentions are relative to when they're going to repurchase, and what volumes and obviously at what price. So I can't comment on that. I did comment on the call to be sensitive to the fourth quarter share count versus the third quarter and the fourth quarter because they have more of an impact because of the share repurchase we did complete. On an operating cash flow basis, we feel good where we're at. I commented on the inventory growth. I think we might end the year at close to 30%, roughly growth compared to the prior year. Our receivable balances should be up some, consistent with the growth in our wholesale business. So we should be able to generate good free cash flow, then to have that available for what repurchasing we do and in when and what quarters we do that. I think another point to make is, we have good support from our banking group, and we're looking at expanding our revolving line of credit up to as much as doubling the size of our line of credit to have more flexibility going forward. Diana Katz - Lazard Capital Markets LLC, Research Division: And then for 4Q, can you parse out what percent should that business you already have orders for? Thomas A. George: Yes, I mean, I think the comment that we have for the domestic wholesale business is consistent with prior years. We've got a good amount of that business already. We have orders for that. Keep in mind, the fourth quarter with even more retail stores than a year ago, there's going to be a lot of that once business. Our European business now with the concerns we have and how the macro backdrop there, most of that business now is preordered as well. So hope that answers your question.

Our next question is from Christian Buss with Crédit Suisse. Christian Buss - Crédit Suisse AG, Research Division: I was wondering if you could provide a little bit of color about how you're thinking longer term about the balance between growth with your historical wholesale partners and growth in the direct-to-consumer channel? Angel R. Martinez: Sure. Long term, we are a wholesale-driven enterprise. It's important today to have a complete presentation of the brands to consumers, eCommerce, your own retail stores, wholesale and within wholesale, shop-in-shops. That said, footwear is unique. I mean, footwear is one of those kind of enterprises that it benefits you to be available to consumers with a broad assortment of competition. A consumer comes into a store and generally speaking, if they go to Nordstrom, and they're looking to buy a certain type of product, let's say they want a hiking boot. They want to try on multiple brands of hiking boots. They want to know, which is the best fit for them. Once they have made up their mind about what brand works for them and they love the brand, they then tend to come back to that brand at that brand's own stores and websites, but that initial recruitment of new consumer happens in a wholesale environment. It doesn't really happen in your own stores initially in footwear. So we know that reality, and we intend to be predominantly wholesale in the future in the U.S. In Japan, we'll be the same kind of thing, be it mix. It will be wholesale. In China, it's going to be retail and eCommerce because there is no -- as we've mentioned many times, there's really no wholesale environment. Christian Buss - Crédit Suisse AG, Research Division: And do you have sort of a target mix, wholesale to retail over the long term? Angel R. Martinez: I'd probably say 70-30, would be my guess.

Our next question is from Chris Svezia with Susquehanna Financial Group. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: A couple of questions. I guess first, Angel, you commented, I know it's still kind of early, but just on the Nordstrom anniversary sale, if you have any -- just color in terms of any pointers, things that just stand out a little bit in terms of where maybe consumers are gravitating to, new products, styles, classics, et cetera, anything that just kind of stands out a little bit in terms of what you're seeing would be helpful. Angel R. Martinez: Okay. I'm always hesitant to be real specific because I don't think it's our right to do that. It's Nordstrom's business, and they can comment on that, but I will say a couple of things. First of all, the performance of our non-classic fashion product has been really good, and we're very happy with that. We think that the event this year, especially with the heat that you're seeing around the country, it's a little early to judge the performance for our core classic. It's probably suffered from these 100-degree days that we're seeing around the country, and there's no question about that. So it's early in the season for the core classic, but the bulk of the stuff that you will see in the Nordstrom anniversary event is the fashion and the new products. So it's really not driven -- the mix is a lot more the new stuff than it is core classics. So we're quite happy and quite satisfied with the results so far. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: Okay. That's good to hear. Yes, I mean, when you go into the stores you see people looking in more of the fashion product than classic, and just what we're hearing is, in 100-degree temperatures fur lined boots aren't exactly on people's mind at the moment, but the fashion piece seems definitely of interest. So that's good to hear. And then just lastly, just on the -- I'm curious on the improvement in same-store sales, particularly in the U.K. Do you guys -- I mean, can you just call out anything that you've done differently whether pricing, whether traffic, it might be a little early from the Olympics in that regard, but just call out something that you've done or doing differently, product, et cetera, that's causing a wide differentiation or separation between what's going on in wholesale and what's going in your company retail stores. Thomas A. George: Chris, this is Tom. Some of it is product, the broader product assortment. Some of it is -- we've got a fairly easy comp relative to the prior year, and we've been executing better. We've got some improved management at the U.K. retail operation vis-à-vis a year ago. We've got some more marketing around the stores than we did a year ago. Another year in the market on a direct basis as well with us running the show helps improve and had some positive spill off on our own stores as well. We've talked in the U.K. about sort of rationalizing some of the wholesale distribution that's benefiting some of our own stores as a result of that. So a lot of positive things and initiatives have been helping drive that improved comp. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: Okay. And then just lastly if I can just squeeze one in here. Just on the men's business, any color you can give on the men's business at this point or is it just too early? Angel R. Martinez: Well, again, the sneakers have been doing well, and that's -- we also have some casual shoes that have done quite well in our own stores. It's still a little early because we haven't shipped the bulk of that product for the wholesale environment yet. So it bodes well. We're certainly up in our own stores if that's -- and on our websites. So that's very important.

That does conclude today's question-and-answer session. We'll turn it back over to the speakers for closing remarks. Angel R. Martinez: Well, thank you all for attending the conference. We are looking forward to the rest of the year. Clearly, we have challenges in Europe that we're focused on overcoming with better performance, better execution and a much strengthened management team across the world. So we look forward to the next call in October. Thank you all.

Ladies and gentlemen, that does conclude today's conference. We appreciate your participation.