Allison C. Malkin - Senior Managing Director Kosta N. Kartsotis - Chairman and Chief Executive Officer Dennis R. Secor - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Omar Saad - ISI Group Inc., Research Division Neely J.N. Tamminga - Piper Jaffray Companies, Research Division Scott D. Krasik - BB&T Capital Markets, Research Division Matthew McClintock - Barclays Capital, Research Division Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division Oliver Chen - Citigroup Inc, Research Division John D. Kernan - Cowen and Company, LLC, Research Division Barbara Wyckoff - CLSA Limited, Research Division Randal J. Konik - Jefferies LLC, Research Division Rick B. Patel - Stephens Inc., Research Division David Wu - Telsey Advisory Group LLC Lizabeth Dunn - Macquarie Research

Ladies and gentlemen, thank you for standing by. Welcome to the Fossil Group Second Quarter Fiscal 2013 Earnings Conference Call. [Operator Instructions] I would like to remind you that this conference is being recorded today, Tuesday, August 6, 2013. And I would now like to turn the conference over to Allison Malkin of ICR. Please go ahead. Allison C. Malkin: Thank you. Good morning, everyone. Before we begin, you should be aware that during this conference call, certain discussions will contain forward-looking information. Actual results could differ materially from those that will be projected during these discussions. Fossil Group's policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statement is readily available in our Form 10-K and 10-Q reports filed with the SEC. In addition, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. If any non-GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure and reconciliation of this non-GAAP financial measure to GAAP will be provided as supplemental financial information through this release located in the Earnings Release section under the Investor Relations heading on Fossil Group's website. Please note that you may listen to a live webcast or replay of this call by visiting www.fossilgroup.com and then clicking on Investors and then on Investor Relations and select Webcasts. Now, I would like to turn the call over to the company's Chairman and CEO, Kosta Kartsotis. Kosta N. Kartsotis: Thank you, Allison, and good morning, everyone. Joining us today is Dennis Secor, our Chief Financial Officer. Jennifer Pritchard is traveling in Europe today and will not be on the call. We finished the first half of the year with a very strong performance, maintaining our positive momentum from the first quarter. During the quarter, we made excellent progress across all of our businesses as we grew both our FOSSIL and SKAGEN brands and delivered a double-digit increase in our multi-brand watch portfolio. We continue to expand our global footprint, driving growth across all 3 of our geographies with strong double-digit increases in both Europe and Asia. In all, we exceeded our top line expectations, delivering an 11% revenue increase. On top of that, we executed well, managed our resources tightly and made excellent progress against many strategic initiatives that contributed to a substantial profitability improvement and drove a 25% increase in earnings per share to $1.15, also well ahead of our expectations. Our consistent growth continues to demonstrate the power of our business model, the strength of our innovation and our team's solid execution. The combination of great brands and our increasingly significant global infrastructure positions us to maximize our potential as we drive our core growth objectives. In the quarter, the FOSSIL brand posted strong growth across all regions. The brand was up solidly led by a 14% increase in watches. Jewelry was also up double digits in all geographies due to our new global assortment and easier comparison from last year. Our leathers business was down for the quarter, mostly due to handbags. We believe that the fall assortments that are being delivered to the stores now will reverse this trend. Our direct business grew in the quarter as a result of store expansion in all 3 regions. Our overall comps were essentially flat, with handbag clearance negatively affecting our outlook performance, especially in the U.S. We feel this trend will reverse for fall as we are delivering made-for-outlet handbags and other leather goods to the stores right now. We had an excellent comp performance in Europe where we delivered strong comps in almost every market, and Asia continues strong comp increases as well. This quarter, SKAGEN celebrated its 1 year anniversary as part of the Fossil Group with a strong mid-teens increase. SKAGEN is benefiting from its integration into our global network with stronger overall sales and margins. Our initial efforts had been focused on Europe where we realized a double-digit increase for the quarter, largely due to door expansion and the beginning of an encouraging jewelry launch. Our entire company is focused on supporting this brand with expanded leadership, early product extensions into leathers and a new store design scheduled to be launched in November in London. SKAGEN's rich Danish heritage and unique market position make it the perfect addition to our business model. We are excited about the potential we see for SKAGEN and its opportunity to develop into an accessories-based lifestyle brand. We continued our strong performance in our watch portfolio as we posted a 50% overall quarterly sales increase with solid gains from both long-standing and newer brands. Our strategies here are really paying off. We're leveraging our great design innovation and our global distribution platform to gain market share. Our strong brands and relationships give us a tremendous opportunity to gain additional space and bring newer brands and products to market. This year, we introduced Karl Lagerfeld watches and we are preparing for the Armani Swiss launch next spring. And we're gearing up to launch Tory Burch watches ahead of holiday 2014. We feel we're in a position for long-term sustainable growth as we continue to place additional brands in a growing number of doors around the world. A great number of these additional doors were in Asia where we are making great progress. Asia led our international growth with constant dollar sales increase of 18%. And China is at the core of our Asia strategy and has performed very well, growing by well over 50% for the first half of this year. We continue to build direct distribution in China focused on Tier 1 cities and are increasingly joining with distribution partners in Tier 2 and Tier 3 cities. We're convinced that the emerging Chinese middle class and their love of watches, jewelry and lifestyle brands can mean enormous opportunities for us in the long term. Our business in Europe continues to show great signs of progress. In addition to the strong retail comps mentioned earlier, our wholesale business was also very strong. This was led by watches and jewelry and included outstanding performances in the U.K. and Germany, as well as in newer markets like Eastern Europe and the Middle East. In the Americas, we performed well with increases across the U.S., Canada and Latin America. We are far along in the integration of our Latin American operations and we're on schedule as we build out our team and our business in that very important region. Lastly, we're making terrific strides in driving efficiencies and improving our execution. Our strong inventory management contributed to our gross margin expansion. We're continuing to simplify processes and speed information and product flows across our company. We're implementing new systems to improve visibility and support realtime data-driven decision-making. And we're investing to enhance our consumer insights and improve our ability to efficiently communicate directly with consumers. Our goal in all these important projects is to build a world-class entity of excellence, focused on long-term sustainable growth that delivers great returns for our shareholders. With the talented team and so many strategic advantages, we remain confident in both our near and long-term prospects. And now I'll turn the call over to Dennis for more color on the quarter. Dennis R. Secor: Thanks, Kosta, and good morning. Second quarter net earnings increased 18% to $68 million, and diluted earnings per share increased 25% from $0.92 to $1.15, which includes a $0.06 per share unfavorable foreign currency impact. This quarter's EPS includes about an $0.08 benefit as we shifted certain marketing and systems expenditures into the third quarter. Second quarter net sales grew 11% to $706 million, as we posted sales increases across all of our segments. Our growth continues to be very balanced with all 3 geographic regions contributing to our growth. Our global sales growth was driven by a 15% increase in our global watch portfolio, with solid increases from many brands, including double-digit gains from FOSSIL, SKAGEN and our licensed portfolio. The recent retail success of FOSSIL jewelry extended into our wholesale channels with increased sell-ins that helped drive a 25% increase in overall jewelry sales. Offsetting these gains was our leathers business, which did not meet our expectations with a 5% overall quarterly decline, coupled with the impact of last year's strategic decision to exit the footwear and optical frames businesses. In North American wholesale, sales increased 4% to $261 million. These results were negatively impacted by this year's earlier Easter, which we estimated shifted $15 million of sales from Q2 into Q1. For the first half of this year, North America wholesale sales have increased nearly 9%. We drove sales increases across the U.S., Canada and Latin America, led by solid increases in jewelry and watches while leathers and eyewear declined. In European wholesale, sales increased 16% to $171 million, which includes $1 million of favorable currency benefits. Watches drove this growth as we delivered double-digit gains among our licensed portfolio, as well as in both FOSSIL and SKAGEN. Jewelry sales also grew in the double digits with the strong sell in the FOSSIL jewelry, coupled with the launch of SKAGEN jewelry. Shipments of leathers declined in the quarter, particularly women's bags, and sales of eyewear were down as well. Sales grew in most of our major European markets with particularly strong performances in the U.K., Germany, Eastern Europe and the Middle East. Shipments in France declined and Italy was flat as conditions in these markets continue to be challenging. The consolidation of our Spanish joint venture, which began a quarter ago, also contributed to this quarter's revenue growth. Sales from our Asia wholesale operations increased 14% to $96 million, which includes a $3 million unfavorable currency translation impact. The growth was driven by strong watch performance with increases in nearly every significant brand. In constant dollars, our business grew in virtually all of our markets and was particularly strong in China, Japan and India. Our growth in China was led by significant concession door expansion, along with strong concession costs. Korea improved to post modest sales growth, driven by an improved traffic and a modest comp improvement despite continued challenging economic conditions and consumer sentiment. Sales in Japan were affected during the quarter by a significant currency decline versus the prior year. During the quarter, we added a net 13 concessions and ended the quarter with 294. In our direct to consumer business, second quarter sales increased by 16% to $179 million. Our direct sales growth was driven by real estate expansion as comps were flat. Our customers have continued to respond very favorably to our FOSSIL global jewelry assortments, delivering positive jewelry comps in our full price stores in all regions. Watch sales continue to be strong in our FOSSIL, SKAGEN and multi-brand stores. Leather, particularly women's handbags, continue to be our most challenging category and particularly impacted the performance of our outlet stores. Overall, global comps were flat for the quarter driven by this year's earlier Easter and the impact of clearing handbag, particularly in America where second quarter comps declined. On a year-to-date basis, our global comps are up about 2%. We continue to be very encouraged with productivity gains in our European stores where virtually all countries delivered positive comps in the second quarter. Comps in our Asian stores also increased in the quarter. We ended the quarter with 493 company-owned stores and remain on track to open a net 70 to 75 new stores this year with the majority focused internationally and in outlet. Gross profit increased 15% to $409 million in the second quarter, outpacing sales growth with gross margins expanding 190 basis points to 57.9%. Our margins benefited from our improved liquidation strategy as we better balance sales through off-price partners and our outlets. On top of that, we're benefiting from overall cleaner inventories and from efficiencies we gained by operating with fewer SKUs. Product mix help drive margin expansion, given the strength of high-margin categories like watches and jewelry. A higher mix of retail, along with the impact of our acquisitions, also contributed to the margin expansion. Partially offsetting these factors were the impact of a higher mix of sales to distributors and a modest currency headwind. Operating expenses increased 13% to $302 million, and our expense rate increased by 60 basis points to 42.8% in comparison to last year. The $34 million increase was driven by new store and concession expansion, increased marketing initiatives, investments to support our swift production capabilities along with other global initiatives and the impact of acquisition. The second quarter's operating expenses were lower than initially expected as we shifted some projects, display rollout and marketing activities until later in the year. Operating income increased 21% to $107 million, including a $3 million negative foreign currency translation impact. Operating margin increased 130 basis points to 15.1%. We posted a net other expense of $3 million compared to no net other income or expense a year ago. This quarter's amount primarily resulted from net losses from foreign currency contracts and account balances. Our effective income tax rate was 32.5% compared to 31.4% in the prior year quarter. We have increased our full year tax rate estimate to about 31.5%, given a slightly less favorable mix of earnings among tax jurisdictions. Now turning to our cash flows and balance sheet. Operating cash flows decreased $28 million or 28% to $73 million for the second quarter. This was driven by higher earnings that were more than offset by working capital changes. We ended the quarter with $313 million in cash and equivalents compared to $139 million at the end of the prior year quarter. During the quarter, we entered into a $1 billion 5-year credit agreement that includes a $250 million term loan and a $750 million revolving credit facility. With this new facility, we were able to take advantage of today's attractive rate environment. We believe that the combination of this facility and our strong operating cash flows can provide us with ample liquidity to fuel our growth, fund our share repurchases and other cash needs, leaving dry powder for other strategic opportunity. We ended the quarter with $341 million of debt compared to $113 million a year ago. During the second quarter, we invested $169 million to repurchase approximately 1.7 million shares of our common stock at an average price of about $101 per share. We ended the second quarter with $843 million remaining on our share repurchase authorization. We continued to manage inventories well as inventories increased 11% to $582 million. Our inventory growth was driven by new store growth, investments in components to preserve production flow and our acquisition. We believe our inventories are clean and we are well positioned to support our business in the second half. Accounts receivable increased by 14% to $258 million at the end of the current quarter, and wholesale DSO increased very slightly. During the second quarter, we invested $23 million in capital expenditures and depreciation and amortization expense totaled $18 million. Moving now to our outlook. We've been very pleased so far with our sales performance for the first half of this year with sales that exceeded our expectations. Our Watch business have been trending very well across many brands and customer reaction to our jewelry line continues to be very encouraging. We are planning to flow more made for products to our outlet stores and are optimistic about our new handbag collections where very early reads have been positive. We continue to be pleased with the performance in Europe where trends have been strong both in retail and among our wholesale accounts. Overall, we feel we have multiple initiatives in place to drive our top line performance for the balance of the year. We now expect full year revenues to increase between 11% and 12% compared to last year. For the third quarter, we expect revenues to increase between 12.5% and 13.5%. This takes into account last year's relatively weak euro. The Japanese yen is substantially weaker now compared to a year ago. Gross margins were strong in the second quarter as we benefited from many efficiency initiatives and cleaner inventories despite currency headwinds. We expect to continue to generate strong gross margins for the balance of this year and expect to see gross margin expansion for both the full year and for the third quarter. We continue to plan operating expenses to be up this year as we make infrastructure investments, build out our direct channels, enhance our marketing and customer engagement efforts in key growth markets and build out our team. The third quarter will be particularly impacted given marketing and advertising initiatives in the run-up to the holiday season, along with the shifting of expenses from this year's second quarter. For both the full year and the third quarter, we are planning with a higher overall expense rate compared to a year ago. Overall, we are planning that third quarter operating margin will be in the range between 15% and 15.5%, and we are expecting third quarter earnings per share in the range between $1.30 and $1.37. For the full year, we're now expecting operating margin in the range between 16.75% and 17.25%. And we are increasing our full year earnings per share guidance to a range between $6.15 and $6.35. Our guidance assumes that foreign currencies remain roughly at prevailing rates, which should result in relatively neutral mark-to-market activity for the second half. We are assuming net interest expense for the back half of the year, given the impact of our new debt facility. Our guidance also includes the impact of a higher effective income tax rate compared to our prior expectation. Lastly, we are now planning capital expenditures between $110 million and $120 million for the year and expect depreciation and amortization between $70 million and $75 million. So now I'll turn the call back over to the operator for your questions.

[Operator Instructions] Your first question today will come from the line of Omar Saad of the ISI Group. Omar Saad - ISI Group Inc., Research Division: Kosta, I was hoping you could talk a little bit about the U.S. wholesale channel. I know you have a lot of things globally going on that are really good. I know there is some shift, timing shift here in the quarter. But just looking out a little bit longer, how do we think about -- or how are you guys thinking about that kind of traditional watch channel, the department store channel in the U.S., how do you continue to grow there? You're so dominant in that channel already, and especially as you layer in new brands like Tory Burch and Karl Lagerfeld, any insight there would be helpful. Kosta N. Kartsotis: In the U.S. for the quarter, we -- our sales were weaker mostly because we moved some deliveries from the prior quarter, I think you remember that. But if you look at Americas in total, so Canada, U.S. and Latin America, we still have huge opportunity. We've seen significant growth in both Canada and Latin America, and we think that's ongoing. In the United States specifically, business continues to be very strong in the stores that we sell to. They're giving it more space. We feel like we can gain -- continue to gain market share and we got Tory Burch coming next year so the category looks strong, our opportunity looks strong, we continue to gain market share. So overall in the Americas, we think we're going to continue to grow. Omar Saad - ISI Group Inc., Research Division: Is the new Herald Square Macy's kind of footprint for the whole watch department, is that something that we can look to as perhaps, say, an indicator of where the channel could go over time? Kosta N. Kartsotis: Well, I think it's showing what you can do with an incredible customer experience and point-of-sale. I mean, it's obviously a beautiful brand-enhancing facility there. And we've done this in a number of other locations specifically with new Kors watch and jewelry where we got great results building shop-in-shops and other stores around the United States and around the world also. So part of our big emphasis not just in the U.S. but globally is to build more enhanced presentations, more shop-in-shops, and that's, we think, a long-term opportunity. We've built our business largely through doing that especially in Europe over the last 10 years and we think it's an ongoing, continuing opportunity to build more larger shop-in-shop enhanced opportunities throughout the world.

Your next question will come from the line of Neely Tamminga of Piper Jaffray. Neely J.N. Tamminga - Piper Jaffray Companies, Research Division: Just wondering if you could help us conceptualize just a little bit of your opportunity. Obviously, liquidation, I think, improvement has been a big contributor to your gross margin. Just wondering kind of how that opportunity still sizes up for Q3 and Q4? And then also, how much a made for handbag strategy for outlet could really help improve your gross margins? Just trying to understand how Q3 might size up relative to the numbers you just put up in Q2. Dennis R. Secor: Yes. I mean, we are expecting that the strong performance that we saw in the margin should continue for the balance of this year. Liquidations were a particularly strong driver in the second quarter. We sold less at liquidation than a year ago. And the outlook are also contributing to that. But the good thing about the margin expansion, it comes from a variety of different sources. We're benefiting from segment mix with a lot -- Asia growing and the retail business growing. The product mix is working well for us with strong performances in both watches and jewelry. The acquisitions are impacting the margins as well. So there's a strong balance of initiatives and drivers that we think will continue to help support that -- those gross margins for the rest of the year with improvement in -- for the balance of the year, rather. Neely J.N. Tamminga - Piper Jaffray Companies, Research Division: That's really helpful. And I just have one follow-up question. Dennis, I think you indicated, I don't know if it's a quarter-to-date trends or year-to-date trends, were tracking up 2% in terms of comp. But if you could clarify that and maybe possibly give us some insights into some of the traffic volatility that we're [indiscernible] you guys are experiencing similar trends quarter-to-date. Dennis R. Secor: You sort of broke up there at the end, but the first part, the 2% is the year-to-date comp in the retail stores with Easter shifting a lot of sales from the second into the first quarter. We wanted to give some perspective about how the overall comps have performed for the full year. So that's what that 2% driver was. If you look at it, what we're seeing in our comps is really the biggest driver is the impact of clearing bags. We still have last season's bags that didn't -- were not successful at -- in full price and they have impacted our outlet business. And outlets were -- was where we really underperformed, didn't meet our expectations for the quarter.

Your next question will come from the line of Scott Krasik with BB&T Capital Markets. Scott D. Krasik - BB&T Capital Markets, Research Division: On Europe, really strong results. We'd actually heard that you might actually be pulling out of some doors in wholesale to sort of clean up that channel, get better visibility. Is that in fact the case, and what's the right growth rate? Which are the brands that are growing in Europe? How do you view that channel going forward? Kosta N. Kartsotis: Well, we have an ongoing procedure globally really to close the smaller doors. Some of those are not very grand and handsome, and they typically don't sell very much product anyway, and really enhance and build shop-in-shops in the larger doors. So that whole procedure is ongoing and continues to be a big volume driver for us. That's partly why the growth in Europe, I think, is strong, is that, that whole procedure of closing smaller doors that don't give much volume and getting more space in larger doors especially shop-in-shops has really helped us grow the business there and gain more share, et cetera. So it's a very positive result and we're doing that throughout the world. Dennis R. Secor: The other thing I would add is that the growth that we've seen in Europe has been very balanced in a lot of different ways across a number of U.S. brands. A number of our brands were strong performers in the quarter. Both watches and jewelry were up and we're getting good growth across a number of different markets. So we're getting a strong diversity of growth coming out of Europe in a variety of different ways. Scott D. Krasik - BB&T Capital Markets, Research Division: That's great. And just to follow-up, a jewelry question. Jewelry sounds like it's moving in the right direction. You didn't talk a lot about Kors jewelry. Can you frame sort of how big or relatively how big that is in your jewelry business and how big you think it could become? Kosta N. Kartsotis: Well, Kors jewelry actually continues to be very strong. I think we're into, what, 1.5 years now and it's still showing strong growth and we're seeing it grow very strongly in Europe as well, so we are very pleased with that. And it looks to be like it's going to be a continuingly growing business and it has, we think, a pretty large opportunity.

Your next question will come from the line of Matt McClintock of Barclays. Matthew McClintock - Barclays Capital, Research Division: Kosta, I know it was small, but I was wondering if you could just help us understand what lessons you've learned from adding a couple of watch SKUs to your semiannual sale? Was that helpful to traffic? And then further, the second question, the second part is I know you successfully raised prices over the last few years. And I was wondering if you could comment on the current relationship of pricing and volume to your business? And how should we think about that as you continue to focus on enhancing the customer experience and continue to add innovative products like Karl Lagerfeld and Tory Burch in the future? Kosta N. Kartsotis: Good question. Our sale in our stores, we had not done watches before. We put a small number of watches in there really just to try to understand what response the customer would give and how -- what kind of result we got. And it actually, I think, was very good in engaging more customers. One of our objectives is to get a more emotionally loyal customer and give them a perk every once in a while with some sale. And I think it had the benefit of doing that. We didn't have actually in the stores, totally more clearance than we did last year, just was more watches and maybe less handbags. So all in all, doing this twice a year and really engaging the customers, getting them more engaged in the brand, we think, is a good thing. We also saw that especially both online and in our stores that when we do that, customers come in and typically buy a regular price as well, so we think it's beneficial. On the pricing issue, over the last couple of years, we talked about this before, is that we wanted to be more democratic in almost every category of business we're in. So we, over the last 6 months to 9 months, have made an effort to put some democratic pricing in almost every category of business we have globally just to engage more customers and have the opportunity to have them trade up and be engaged in the brands and on those products. And I think overall, that's been very beneficial. We've been able to reduce our SKU counts, so I think we're still very tight on that but just have a few styles in each category that are more opening price. And especially in some markets. I think in Europe, that's been more important than it has been in Asia obviously, but I think on balance, I think, we have reached a pretty good protocol where we can go to market, adapt ourselves to different markets, engage customers at different price points and move them up through the different brands. So I think we're in pretty good shape.

Your next question will come from the line of Lorraine Hutchinson of Bank of America. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: I just wanted to follow-up on the earlier jewelry question. It seems like the category as a whole is exceeding expectations. So I was hoping you could walk us through what's next in terms of distribution and brands for that category? Kosta N. Kartsotis: Well, we've mentioned we had a strong increase in FOSSIL jewelry. Part of that was just from the difficulties we had last year, so it was up against an easier comparison. So us changing into that global assortment has put us in a position where we're starting to grow pretty strongly. And we think the FOSSIL jewelry business will continue to grow, gain penetration, et cetera. Kors has been very, very strong and we think it will continue to be. We're building watch and jewelry shop-in-shops, not just in the United States but around the world that we think will communicate this brand and category pretty strongly. It has a very large potential, we think. We do have a situation where we launched SKAGEN jewelry, especially in Europe in the first quarter, we're seeing very strong results and we think SKAGEN could be the next big jewelry grower for us, so we're putting a lot of resources behind that, and that's part of our overall branding effort for SKAGEN. So those are the 3 key jewelry brands that we plan on expanding across the world and we do have a few other brands such as DIESEL and DKNY that are smaller. Also Emporio Armani is actually been doing very well. We think it got a larger opportunity in Asia. But the 3 big ones we're focused on are FOSSIL, SKAGEN and Kors.

Your next question will come from the line of Oliver Chen of Citigroup. Oliver Chen - Citigroup Inc, Research Division: Through the back half of the year, in 3Q, 4Q, how should we think about expectations in relation to the comp store sales trends? Do you expect handbags to still weigh on that comp? Or should we think about a potential acceleration? Also, given the context of the marketplace, the environment, which has been relatively promotional in the mall, should we look for other specials in your stores that are planned coming into the fall? And I just have a quick follow-up on China. Kosta N. Kartsotis: On our comp trends, what's affected us, as we mentioned, was a couple of things, our outlet stores it's the handbags. And we have 2 things going on. We're clearing last year's fall goods. We're competing in an outlet center against stores that are all made for, for example, spring merchandise at very low prices. So that affected our comps. In addition to that, our regular priced leather goods business has been relatively soft and we think that deliveries coming in now are going to be stronger. In fact, we're seeing some better sell-through results just from the last couple of weeks or so. So the combination of those 2 things, I think, is going to put us in a situation where we'll have improving comps in our stores globally. So we're not putting some big numbers out there and we're not having some big expectations but what it looks like to us is those are going to improve. The brand continues to be very strong and we think we're in a good position. In terms of promotional activity, we really don't plan on putting anything in our stores or websites on sale other than the twice a year that we've been doing the last couple of seasons. We are looking for opportunities to engage customers through customer list CRM, some consumer insight, et cetera, we could be doing some extra benefits to key customers, et cetera. But our store or web promotional business, we're not planning on expanding that. Dennis R. Secor: If you look at the trends so far for the first part of the year and you adjust for some of the anomalies like the extra quarter of SKAGEN and the Easter timing, we're trending in that 12% kind of range, which is our view for the rest of the year. So we're expecting trends roughly to continue. I mean, keep in mind that we don't have tremendous visibility into the fourth quarter and it remains to be seen what the environment looks like, but we're expecting trends roughly to continue. We're up against the easiest comparison in the third quarter and among the hardest in the fourth. Oliver Chen - Citigroup Inc, Research Division: And, Kosta, regarding China, just touching upon that, how has distribution growth been relative to your own expectations? I know there's a great market opportunity but it's equally challenging as you try to ramp up and speed up your distribution potential there? Kosta N. Kartsotis: Well, as we said, we'd like to be able to grow our distribution faster, it's just complicated and very fragmented. And I think our team is doing a great job. I was actually there about a month ago, and went to some Tier 2 cities as well just to see it firsthand. And they -- the team is doing a great job. It's just complicated, fragmented and there's a lot of relationship-building that has to be done. That's why we think we can accelerate the process by using some partners, which we have been successful with so far. And we think there's more of that to come. But it's hard to predict exactly when this is going to hit the tipping point but we think it is, and so far, all the signals look good. We just got to keep doing the blocking and tackling and get the distribution done.

Your next question will come from the line of John Kernan of Cowen. John D. Kernan - Cowen and Company, LLC, Research Division: I think Michael Kors said that about 90% of watches right now are women's and about -- the industry's around 50-50 in terms of men and women. There's an enormous opportunity to build out men's for Michael Kors. I know they're opening a lot more stores, they're devoting an entire floor in a new solo-flagship to men's. What do you think the opportunity for Kors watches is for you guys over the next couple of years in the men's side business? Kosta N. Kartsotis: We definitely agree. We're putting some initiatives in place to really facilitate our expansion in men's. And we think it has a pretty significant opportunity. As you know, they're making some overall efforts to expand their men's business, men's presence. And as a follow-on, we expect to do that with watches. And it could have a very large potential, especially in Europe where men's watches are very, very powerful especially on a more aspirational, lifestyle brand efforts. So we agree, we think there's a big opportunity. But overall in the Kors business, it's not just men's but women's also, as we penetrate more parts of the world, has a very large long-term opportunity. John D. Kernan - Cowen and Company, LLC, Research Division: Great. Another question, I guess, for Dennis would be your cash balance is up significantly year-over-year due to some of the debt you've taken out and certainly your credit facility has a lot of dry powder. Are you potentially looking at another acquisition similar to SKAGEN last year? Do you think it's appropriate to add another global lifestyle brand to your portfolio? Dennis R. Secor: I would characterize us as opportunistic when it comes to acquisitions. We have -- we acquired SKAGEN a year ago and a couple of smaller businesses along the way, but it's not a specific part of our growth plan but if the right opportunity came along, then we would certainly be open to that. John D. Kernan - Cowen and Company, LLC, Research Division: And then one more follow-up, I guess, would be the revenue acceleration in Asia and Europe was impressive. Was there any -- in Asia, was there any particular region or brand that drove that revenue acceleration? Dennis R. Secor: No. China continues to be a big driver for us. And that, as Kosta mentioned in his prepared remarks, so far we're up over 50%. We grew, if you factor out currencies which obviously impact us, we grew in all of our geographies there, virtually all of our brands were up. So it was, again, a very balanced performance. Japan, that business grew strong double digits in constant dollars and concession comps were strong. Retail there was a bit softer. Korea, the overall business grew. The concessions weren't as strong, but the comps in the concessions were positive, which was an improvement over the previous quarter. So again, we saw some improving trends and we saw a nicely distributed and diversified performance.

Your next question will come from the line of Barbara Wyckoff of CLSA. Barbara Wyckoff - CLSA Limited, Research Division: I have a couple of questions. First of all, hello, everybody, great quarter. Second, what criteria are you looking at when you choose to open a freestanding store versus a concession? And really I'm thinking about Asia. And I'll give you all the questions and then you can go back. The 294 concessions in the second quarter, could you break out how many were multi versus mono brand? Talk about the performance in the flagship in Shanghai and the enhanced positioning, and multi-brand store plus there's also a store Sanlitun. And then talk about distributors, where you're using them, how many are there? And they're taking deliveries of goods wholesale, I guess, and then putting out the -- making the relationships, or how is that working? And then just lastly, given the interest in the Swiss-made watches, is there an opportunity for ZODIAC down the road? And then how are the Swiss, Burberry and FOSSIL products doing? Kosta N. Kartsotis: Okay. We'll take a stab at this, you might have to help us with more information here. On the opening of stores, our own stores versus concessions in Asia, what we're doing basically is -- our opportunity first and foremost is concessions, to build a broad-based network of concessions throughout Asia and to facilitate brand building in more high profile locations with our own stores. So for example, as you mentioned, we opened -- we have 3 stores now in Shanghai, I think, another 1 shortly to come. The whole idea is to have those in high-traffic locations to communicate the brand and then have concessions surrounding it, it's more like an ecosystem. Similar to that, it's the same thing in watch in Asia. We will have a broad-based concessions strategy in the region and then also have a very select number of locations for high-traffic where we want to communicate the overall idea, lifestyle branded fashion watches through our Watch Station concept. We -- the other question you asked is what portion of our concessions in Asia are multi-brand versus mono-brand. The large majority is multi-brand. So we have a relatively small number of FOSSIL concessions but we're expanding those and we have actually a new store design that we're working on, that has a new model also for concessions that we'll be putting in Asia over the next 6 to 12 months. We also will be adding some SKAGEN concessions in the region in the next 6 to 12 months as well. You also asked about our Swiss opportunity. We have been, as you know, investing in our capabilities in both not just assembly but also on design and innovation and our ability to make movements ourselves. So we are actually, and have been for some time now, making our own automatic movements. We're selling those to some other third party Swiss manufacturers. It's a very good experience for us. We're getting great results, and we're expanding that operation. The whole idea is to produce movements that we can grow on our own through putting Swiss-made products into Asia. As you know, we have the FOSSIL brand now. We're adding Emporio Armani next year. We already make Burberry, which is Swiss-made and, of course, ZODIAC. And we're planning on expanding into additional brands over the next couple of years and mostly for Asia to penetrate the market there. And we think it's a very large whitespace opportunity for us long term and we're interested in moving forward with that. Any other point I missed, Barbara? Barbara Wyckoff - CLSA Limited, Research Division: I think you got them -- oh, Sanlitun. Kosta N. Kartsotis: Sanlitun, that's our store in Beijing. So Dennis [ph], do you have any comments on Sanlitun?

We can get back to her. Dennis R. Secor: Yes, we'll come back with something there. We don't necessarily have that right to hand here.

Your next question will come from the line of Randy Konik of Jefferies. Randal J. Konik - Jefferies LLC, Research Division: Question, Kosta. Can you just talk to, in general, how you're feeling about Europe? Does it feel like we have reached an inflection point there? Obviously, you talked good things about U.K. and Germany. Do you feel like we are close on getting better in France and Italy? Second question, I guess, would be you talked about strong sell-in on the jewelry side. What is the early sell-through looking like right now? And then from a penetration perspective, how big do you think jewelry could be versus watches in the assortment on a reasonable timeframe, maybe a couple years out? And I guess lastly, this one will be for Dennis. You did give us the operating margin guidance for 2013 annual where it assumes at the high-end we're about kind of flattish, let's say, flattish margins with 2012. But if we look out a little bit further, if Europe is indeed going to get better, jewelry becomes a bigger part of the mix and Asia starts to get leverage on some expenses here, is it -- is 2014 a potentially inflection point kind of accelerating margin kind of year? Am I thinking wrong in that kind of -- in that regard? Kosta N. Kartsotis: Okay. On your question on Europe, as you saw from our announcement this morning, we're benefiting from SKAGEN doing very well in the market. And as we mentioned, we've added SKAGEN jewelry to the market, which is going to be a big player there also. And just in general, the European market is, we think, a big long-term opportunity for us as we continue to penetrate the different regions with more brands. And also, we have a structural opportunity with FOSSIL. A large part of our FOSSIL business in Europe is in Germany. So the idea is to build out awareness and stores, et cetera, in the rest of Europe. To get the FOSSIL brand in the rest of Europe to the same level in Germany would be a very large opportunity long term. So our best markets have been U.K., Germany and France over the last year or so and we're -- we've had, in the southern part of Europe, more difficult time but we think long term, there's opportunities there. So we continue to be opportunistic and look for places to grow and we think there's a very strong brand-building and business opportunity in Europe. As far as jewelry, when we're talking about sales in jewelry and how well it's doing, we're really not just talking about sell-in, we are talking about sell-through, which is the way we operate the company. We typically do not really pay as much attention in what we sell in or sell out, and that's part of our whole protocol, but jewelry is doing very well, and FOSSIL jewelry is doing well at retail, selling through. Of course, a lot of this we see in our own stores. As to the opportunity for jewelry, we've always said that we look at jewelry as kind of an add-on to our global watch portfolio. It's almost -- it's a very similar category, it's almost like watches that don't tick and it has the impact of leveraging our entire global infrastructure. Sales reps, for example, that carry Emporio Armani watches probably also carry Emporio Armani jewelry, and it gives us the benefit of having a potential larger business. Jewelry also is something like 7x the size of the watch business globally, and there's been reports and analysis done recently that shows that although the jewelry business is not very much globally branded, it increasingly is becoming so, and we think especially in Asia, that plays very strongly for us. So we're interested in doing it and expanding it, leveraging on our resources, and it will become, we think, a very large business over time because it fits into our general business model, leverages our infrastructure and has a similar profitability inventory characteristics as watches does. Dennis R. Secor: And just talking about the margin structure, I mean, obviously, a lot of the factors that you talked about would naturally, as they improve, they would naturally be margin-enhancing over time. We've got -- the way we look at ourselves longer term, is we -- our goal is to be a double-digit top line grower and over time, leveraging our existing portfolio, leveraging our infrastructure, driving initiatives in our operations to ultimately grow the bottom line faster, expand operating margins over time. So we certainly view ourselves as having opportunities to expand in the future. How it plays out in 2014, we haven't yet finished our plans for 2014, so it would be premature for me to speculate on this call about what 2014 specifically will look like. We still have some investing to do. We're not done building Asia. We still have a lot of systems initiatives that we're driving here to help really establish a global platform that can really drive growth and profitability expansion over time. So we got -- let us finish that exercise before and we'll share that at the appropriate time of how it might look for 2014. But certainly, longer term, we view ourselves as a double-digit top line grower and a margin-expansion company. Randal J. Konik - Jefferies LLC, Research Division: May I just ask a follow-up? Dennis R. Secor: Sure. Randal J. Konik - Jefferies LLC, Research Division: So I guess just on the Asian growth expense, I guess the market has been trying to figure out when do we get leverage on that kind of investment. So is that something that we can think about looking forward to in 2014? Just it's been something that's kind of been thought about in the marketplace for a very long time since it started. So what should we be thinking about in terms of when that levers, et cetera? Kosta N. Kartsotis: Well, the opportunity for us in Asia, as you know, is very, very significant. And this is a project we're trying to take on, in a very balanced way. We do not want to under-invest there and miss a big opportunity. So the visibility we have of exactly when this is going to all hit the tipping point and start leveraging is really difficult to say except that we know it's coming and we're investing as prudently and in a balanced way as we can trying to get there. We just do not have an exact date of when that time period is going to occur.

Your next question will come from the line of Rick Patel of Stephens. Rick B. Patel - Stephens Inc., Research Division: Can you touch upon the performance in Korea? A little bit better in the second quarter after a soft start to the year. Just wondering if you did anything different in that market or if it's just general volatility there? And as a follow-up, can you update us on the sales mix in Asia? I'm curious if it's dominated still by Japan, Korea and Australia or if China has ramped up to be a significant portion of that segment? Dennis R. Secor: Yes, just starting with Korea, again, we were pleased with the performance. It's still -- the conditions there still continue to be challenging. The economy is not robust and consumer sentiment still seems to be soft. But certainly, in our business, we were improved with what we saw moving from the first quarter into the second. The business did grow. We were able to accelerate our retail sales performance and delivered stronger positive comps. Traffic improved in the second quarter compared to where we had been in the first. I think I mentioned earlier that concessions were not as strong as the retail environment but we were able to improve on the trends from last quarter and delivered positive comps in the concessions. So still not the most robust of markets but we were pleased with the trend. In terms of the large markets, I think you hit the big ones, Japan, Australia, Korea, those are the biggest markets. China has not yet reached that same level but it certainly continues to grow. Rick B. Patel - Stephens Inc., Research Division: And can you also give us an update on Lagerfeld, just perhaps give us a read on how that's performing versus your expectations. And can you help us think about the opportunity there now that it's been in the marketplace for a little while? Perhaps if the greater opportunity is through new doors or if you expect to increase productivity? Kosta N. Kartsotis: Karl is doing very well, meeting our expectations. As you know, we typically start-up these brands really small and do not expand them quickly until they're kind of ready for prime time. And I would say, Karl, in a balanced approach across all the distribution, is really not ready to push it. But having said that, I mean, it's in a similar situation in terms of size and number of doors as most of our brands have been, that we've started over the last several years. It's basically too early to tell how big it's going to be. Rick B. Patel - Stephens Inc., Research Division: I know it's early but do you expect to take a similar approach with Tory Burch next year? Kosta N. Kartsotis: Yes. We're working on the distribution strategy now. It's going to be a similar approach. We're going to launch it in a very select kind of special number of doors and in addition to their own stores. And it will be a very, very much so of a global launch and a very unique number of special doors around the world.

Your next question will come from the line of David Wu of Telsey Advisory Group. David Wu - Telsey Advisory Group LLC: In terms of sell-through trends, if you could talk about whether or not you did see improvement in the sell-through rates for watches in the second quarter just across your wholesale doors in U.S., Europe, and in Asia and just how inventory levels are tracking? Kosta N. Kartsotis: I would say our sell-through rates are consistent with, not just last quarter, but over the last couple of years or so. We monitor that very closely, and the inventories that are in the stores right now look like they're at the right level and sell-through rates are good and we're just moving forward. David Wu - Telsey Advisory Group LLC: Excellent. And, Kosta, you mentioned being obviously more democratic with some of the price points. And I was wondering if you could talk about watch sales by price point, if you're seeing any changes at all there with consumer spending patterns? Kosta N. Kartsotis: We have seen, in some markets, like I mentioned in Europe, for example, we may have seen a larger response to some of the opening prices than we have in Asia, for example. But on balance, it hasn't really affected our averaging in retail. We're, I think, engaging some customers at the lower end and moving some of those customers up in the chain. And it's been a relatively small number of units we're selling there, but we think the impact is good because it engages more customers in our brands. David Wu - Telsey Advisory Group LLC: Excellent. And then just any updates on new sort of emerging watch trends that you're seeing and what styles consumers are really gravitating towards? Kosta N. Kartsotis: Well, there continues to be a huge amount of interest in watches and there's a lot of innovation, mix materials, new movement ideas, limited editions. I mean, you see it in the press a lot, the discussion and the discourse about watches is ongoing and we think it helps us raise the awareness of the category in general. And our role is to be disruptive and put innovation and great brands with buzz in the marketplace and create interest in business where there wasn't any before. I think we're in a pretty good situation, the response in the marketplace is good and we think it's ongoing.

Your next question will come from the line of Liz Dunn of Macquarie. Lizabeth Dunn - Macquarie Research: Just a few follow-ups. I guess, first, can you tell us what your men's versus women's ratio is in your business for watches? Kosta N. Kartsotis: Well, it's -- we don't have exact numbers because, as you know, women are very much so buying men's watches. So if we were to guess, we would probably say, it's something like 65% of our business is women's, 60% to 65%, depending on the brand. Of course, the other 35%, half of that is bought by women also. But having said that, if you look at categories, compared to apparel and other accessory categories, watches is a category that men are more interested in than others just because it's a gadget and it's an accessory that they can wear. So we think especially in Asia where the men's consumer is much more prevalent, that there's larger opportunity there for us in men's. And we do think that, as you've seen a lot in the press and other information, even in the United States, men are shopping more, they're more interested in fashion. And we think that we do have opportunities in men's as well. As we mentioned, the Kors one is a big opportunity and of course FOSSIL is very strongly unisex. So there is an opportunity, I think, both in Asia and around the world to gain more in men's. Lizabeth Dunn - Macquarie Research: Okay. And then my other follow-up question is relative to your North American comp, could you quantify how much it was down? And is it -- do I understand it correctly that watches comped positively in North America? Dennis R. Secor: We didn't specifically quantify the specific regional performance but, yes, it was down. That was also impacted in a couple of big ways. One, the bags that are impacting our outlet business, as well as Easter. The Easter shift obviously impacted the quarterly comp in North America as well.

And, ladies and gentlemen, this does conclude the question-and-answer session for today. And I will now turn the conference back to Dennis Secor. Please go ahead. Dennis R. Secor: Thank you, and thank you very much for joining us and for your interest in the Fossil Group. We're looking forward to speaking with you again when we hold our next quarterly call on the 5th of November. Just please take note that we plan to change the timing of that call and hold it after the market closes. So thank you very much, and we'll talk to you soon.

And thank you. Ladies and gentlemen, this does conclude the conference call for today. Again, we thank you for your participation and you may now disconnect your lines.