Paul Marciano - CEO Sandeep Reddy - CFO Michael Relich - COO

Erinn Murphy - Piper Jaffray Janet Kloppenburg - JJK Research Omar Saad - ISI Group Dana Telsey - Telsey Advisory Group David Glick - Buckingham Research John Kernan - Cowen Robert Ohmes - Bank of America Merrill Lynch Jeff Van Sinderen - B. Riley & Co. Dorothy Lakner - Topeka Capital Alex Pham - Mizuho Securities

Good day, everyone, and welcome to the Guess? First Quarter Fiscal Year 2015 Earnings Conference Call. On the call are Paul Marciano, Chief Executive Officer; Michael Relich, Chief Operating Officer; and Sandeep Reddy, Chief Financial Officer. During today's call, the Company will be making forward-looking statements, including comments regarding future plans and financial outlook. The company's actual results may differ materially from current expectations based on risk factors included in the company's quarterly and annual reports filed with the SEC. Now, I would like to turn the call over to Mr. Paul Marciano.

Thank you. Good afternoon and thank you for joining us today. We reported overall first quarter results and posted the loss per share of $0.03, which was better than the high end of our guidance, despite an overall difficult retail environment globally, especially in U.S. and Canada. : While we have a strong footprint in brick and mortar, the strategy going forward is to productively allocate our capital to not renew stores that don't meet our financial requirements and build omni-channel initiatives. We are in a very different environment than we have seen in the past, and we believe our focus would be much more productive. : And finally, planning and allocation; we have system upgrades, allocation enhancements, process improvement and training are positively impacting our ability to [mortgage] (ph) and reallocate products. : Our primary goal has been to improve our performance through products and visual merchandising. In (indiscernible) business we were pleased to see continued strengths in our dress category as well as regaining dominance in our women's (indiscernible) business. Our knit top was strong, but the woven top category was I feel we need some more offering. Our men's business was strong in the first quarter. Men's top as the largest growth category for us and we believe we are uniquely positioning the market to continue to capitalize on these trends going forward. Accessory and footwear continue to be our challenge during the quarter; however, we are reacting quickly to this business for the remainder of the year and have already seen an improvement in trend so far this month, driven by a cleaner, more classic aesthetic as well as investments in power key item with a clear point of view. For the current quarter, we have pivoted our assortment to be dressier and more versatile offering more clothing styles and accessories. Now about e-comm; e-comm has taken center stage with a very strong growth balancing the slower traffic we see in the malls. Our North America e-comm business grew by 49% in the first quarter, picking up from already strong momentum from the first quarter as we continue to see a clear integration of consumer buying behavior across brick and mortar, online and mobile platforms. In Europe, we saw the trend of the first quarter continue in the first quarter, where retail outperform wholesale. Our retail stores in the region carried out the momentum since the last earning call and posted the seven consecutive quarter of positive comp despite a decline in traffic. In Southern Europe, Spain continue to come positive in the quarter, that's in the mid single –digit while, while Italy also comes up in the middle single-digit. On the other hand, wholesale was weaker reflecting a Spring/Summer 2014 booking done in the mid teens. Recently our Russian and Eastern Europe business were affected by the turmoil in the region. So with that, we will continue to manage our business cautiously in these territories with our partners and regional managements. In Asia, growth in our South Korean business offsets the decline in the rest of the region. Korea, which is our largest Asian business, was severely impacted by the tragic ferry accident in (indiscernible) that drove the entire nation into shock. That reversed the momentum we had in the months before. Our China business was soft as we see continued softness in consumer spending, while Hong Kong and Macau stores remain strong and comes up in the high teens. Finally, turning into international expansion, (indiscernible) as a global brand to expand our presence in international territories. We see very good potential to lead our two newest markets, Japan and Brazil as we enter the expansion phase in these two countries. During the quarter we opened our first three retail doors in Japan. And in Brazil we now also operate three stores and are presenting 200 wholesale stores. Finally, we've been in the Middle East now for more than 20 years and after my visit four weeks -- just four weeks ago we decided to accelerate the expansion there. We are planning to open more than 10 new stores. We have our key partners in the region in the next 12 months to reach the hundred stores goal. In conclusion, in the last nine months the product changes and strategic initiative we made are very encouraging, and we believe that this strategy if executed properly for customer need is the absolute right approach. So we are looking forward to back-to-school and holiday season to see the results for that strategy. With that, Sandeep will discuss now the financials. : Our primary goal has been to improve our performance through products and visual merchandising. In (indiscernible) business we were pleased to see continued strengths in our dress category as well as regaining dominance in our women's (indiscernible) business. Our knit top was strong, but the woven top category was I feel we need some more offering. Our men's business was strong in the first quarter. Men's top as the largest growth category for us and we believe we are uniquely positioning the market to continue to capitalize on these trends going forward. Accessory and footwear continue to be our challenge during the quarter; however, we are reacting quickly to this business for the remainder of the year and have already seen an improvement in trend so far this month, driven by a cleaner, more classic aesthetic as well as investments in power key item with a clear point of view. For the current quarter, we have pivoted our assortment to be dressier and more versatile offering more clothing styles and accessories. Now about e-comm; e-comm has taken center stage with a very strong growth balancing the slower traffic we see in the malls. Our North America e-comm business grew by 49% in the first quarter, picking up from already strong momentum from the first quarter as we continue to see a clear integration of consumer buying behavior across brick and mortar, online and mobile platforms. In Europe, we saw the trend of the first quarter continue in the first quarter, where retail outperform wholesale. Our retail stores in the region carried out the momentum since the last earning call and posted the seven consecutive quarter of positive comp despite a decline in traffic. In Southern Europe, Spain continue to come positive in the quarter, that's in the mid single –digit while, while Italy also comes up in the middle single-digit. On the other hand, wholesale was weaker reflecting a Spring/Summer 2014 booking done in the mid teens. Recently our Russian and Eastern Europe business were affected by the turmoil in the region. So with that, we will continue to manage our business cautiously in these territories with our partners and regional managements. In Asia, growth in our South Korean business offsets the decline in the rest of the region. Korea, which is our largest Asian business, was severely impacted by the tragic ferry accident in (indiscernible) that drove the entire nation into shock. That reversed the momentum we had in the months before. Our China business was soft as we see continued softness in consumer spending, while Hong Kong and Macau stores remain strong and comes up in the high teens. Finally, turning into international expansion, (indiscernible) as a global brand to expand our presence in international territories. We see very good potential to lead our two newest markets, Japan and Brazil as we enter the expansion phase in these two countries. During the quarter we opened our first three retail doors in Japan. And in Brazil we now also operate three stores and are presenting 200 wholesale stores. Finally, we've been in the Middle East now for more than 20 years and after my visit four weeks -- just four weeks ago we decided to accelerate the expansion there. We are planning to open more than 10 new stores. We have our key partners in the region in the next 12 months to reach the hundred stores goal. In conclusion, in the last nine months the product changes and strategic initiative we made are very encouraging, and we believe that this strategy if executed properly for customer need is the absolute right approach. So we are looking forward to back-to-school and holiday season to see the results for that strategy. With that, Sandeep will discuss now the financials.

Thank you, Paul, and good afternoon. During this conference call, all our comments for the first quarter are on an adjusted basis, which excludes the impact of certain restructuring charges in the prior year's first quarter. You can find more details of the prior year charges and a full GAAP reconciliation to these and other non-GAAP measures in today's earnings release. Moving on to the results, net loss for the first quarter was $2 million, and diluted loss per share was $0.03 compared to $0.14 adjusted diluted earnings per share in last year's first quarter. First quarter revenues were $523 million, 5% lower than the prior year and down 6% in constant currency. Total company gross profit for the first quarter was below our expectations at $176 million, down 11%, and gross margin declined 230 basis points to 33.7% due to the de-leveraged impact of lower European wholesale shipments, negative comparable store sales on occupancy and more markdowns in North America retail. SG&A dollars decrease versus the prior year down 3% to $178 million, which was better than our expectations. The reduction of SG&A was driven by lower general and administrative costs, lower selling and merchandising costs in Europe due to decline in wholesale as well as lower advertising and marketing. Operating loss for the first quarter was $2 million, and our operating margin declined 290 basis points to negative 40 basis points. Other net expense was $1 million and mostly consisted of losses on foreign currency contracts, partially offset by un-realized gains from non-operating assets. Our effective first quarter tax rate were 32%, down versus the adjusted tax rate of 33% in the prior year first quarter. Moving to segment performance; in North America Retail, first quarter revenues dropped 4% to $228 million, which includes the unfavorable impact of the weakening Canadian dollar. Negative comps in brick and mortar stores were partially offset by 49% growth in our e-commerce business driven by the continuing success of our omni-channel initiatives. This resulted in a net 4% decline in comp store sales including e-commerce in the U.S. and Canada. Operating loss increased by $4 million to a loss of $8 million, and operating margin declined 190 basis points to negative 3.7%. Compared to last year, gross margins were lower due to more markdowns, a higher occupancy rate as a result of negative comp store sales and the unfavorable impact of a weaker Canadian dollar on product margin. Our SG&A rate improved due to lower store selling expenses, lower general and administrative expenses and lower advertising and marketing spend. In Europe, first quarter revenues were $159 million, a decline of 4% in U.S. dollars and an 8% decrease in local currency. This was driven by a mid-teen decline in wholesale Spring/Summer '14 order book that was partially offset by some store growth as well as the low single-digit positive comps, Paul mentioned earlier. Operating loss increased by 27% or $1 million to a loss of $7 million, and operating margin decreased by 100 basis points to a negative 4.2%, and this was driven by the impact of lower wholesale shipments partially offset by lower selling and merchandising expenses and tighter inventory management. In Asia, revenues in the first quarter declined 1% to $70 million and declined 4% in constant currency. In local currency South Korea grew to top line in the low single-digits driven by retail store expansion. This was more than offset by lower shipments into the wholesale channel in Greater China and Southeast Asia. Operating earnings fell 52% to $3 million and operating margin dropped 500 basis points to 4.8%. The decline in operating margin was primarily driven by inventory liquidation in South Korea. In North America wholesale, first quarter revenues decreased 10% to $39 million mainly driven by lower or priced shipments in the U.S. and Canada. As a result, operating profit decreased by 10% to $8 million and operating margin was flat at 19.7%. Royalties generated from sales by our licensee partners were down 15% at $26 million partially driven by anniversary of some one-time royalty benefits in last year's first quarter and shop performance in the handbag and eye wear categories. Moving on to the balance sheet, accounts receivable was 15% lower at $218 million and overall DSOs were flat compared to last year. Inventories were down 1% versus last year at $353 million. The decline in inventory is driven by reduction in European inventories that is partially offset by a buildup of excess inventory in North America. We ended the quarter with cash and short-term investments of $478 million compared to last year's $313 million. Free cash flow for the quarter was an outflow of $17 million driven by the timing of working capital and lower earnings. Our Board of Directors has approved a quarterly cash dividend of $0.2250 per share on the company's common stock. The dividend will be payable on June 27 2014 to shareholders of record have a closer business on June 11 2014. With that, I'll pass the call over to Mike who will take you through the outlook for the second quarter and the full year.

Thank you, Sandeep, and good afternoon. Overall, our expectation on earnings per share for the year have not changed. We have incorporated the cost savings in the first quarter into our full year assumptions. However, we have also incorporated some markdown pressure in the gross margin assumptions due to lower than expected sell-through in the first quarter. Looking at North America retail so far in the second quarter, comp sales have been down in the low single-digits, we are planning the second quarter assuming that trend will continue. This would translate into a revenue decrease in the low single-digits to flat range. For the full year we continue to expect comp sale to decrease in the low single-digits and for revenues to be down in the low single-digits to up in the low single-digits. In our European retail business so far in the second quarter trends have been softer than the first quarter as the first half of the quarter last year is a tougher compare and some of the holiday weekends this year have shifted later into the quarter. As a result quarter-to-date comp sales in Europe have been down in the low double-digits. For the full year we expect the comps to decline in the mid single-digits. For the year we are planning comp store sales to increase in the low single-digits. In Europe, we recently completed the sales order campaign for our fall/winter season and now have more visibility into expected wholesale trends over the next few months. The fall/winter wholesale orders are down in the low double-digits, the same-store by almost flat to last year. We are not planning for any notable improvement in the back half of the year. Considering these factors as well some later deliveries and the season in wholesale, we expect total Europe second quarter revenues to decline in the mid to high single-digits in local currency. Assuming the Euro remains at prevailing rates this would result in U.S. dollar revenues that decrease in the low single-digits in U.S. dollars. For the full year we are now expecting revenues to decline in the low to mid single-digits in local currency and range from a decline in the low single-digits to an increase in low single-digits in U.S. dollars. In Asia economic conditions continue to be challenging especially in Korea where comps have been softer so far in the second quarter. In the second quarter we expect revenues to decline in the low to high single-digits. For the full year we now expect revenues to be down in the low single-digits to flat range. In our North America wholesale business we expect revenues to decrease in the low double-digits for the second quarter. For the full year we are now planning for revenues to be down in the low single-digits. This revenue guidance includes the impact of our Brazilian operation. In our licensing business we are expecting royalties to decline in the low single-digits in the second quarter and continue to expect a decline in the mid single-digits for the full year. For the second quarter we expect overall gross margins to decline as continued markdown pressure is expected to more than offset the product cost improvements we are seeing on our North America business. For the full year we are now expecting gross margin to be flat to slightly down. With respect to operating expenses we expect the higher SG&A rate for the second quarter driven by the de-leverage impact as expected sales decline as well as higher compensation expenses. For the full year we expect the SG&A rate to increase driven by anticipated investments in marketing in the back half as well as higher compensation expenses. We are planning the full year with a 32% tax rate and our guidance assumes foreign currencies remain roughly at prevailing rates. Considering all these factors for the second quarter of fiscal 2015, we expect consolidated revenues in the range of 650 million and 630 million. We are planning on operating margin between 5.5% and 6.5% or earnings per share in the range of $0.25 per share and $0.30 per share. These expectations will result in full year consolidated revenues between $2.53 billion and $2.57 billion. Operating margin; between 7% and 8% and earnings per share in the range of $1.40 and $1.60 per share. For the full year we plan to continue to manage our CapEx carefully and opportunistically by investing between $75 million and $85 million in capital expenditures net of tenant allowances primarily for remodel in these stores. Finally, as Paul mentioned earlier, I want to reiterate that myself as well as the whole management team remain focused on the three strategic initiatives as addressed in the last call. First, omni-channel, we will be continuing to align the organization behind this key initiative and we will make the necessary investments ensure the growth of this business. Second, supply chain where we already have been able to impact our product costs in only a few months. And finally planning an allocation where our focus is to maximize our use of analytics as well as optimize our internal processes. With that, I conclude the company's remarks and open the call up to your questions. Before doing so, let me remind everyone to please limit themselves to one single part question. If time permits we will allow people to ask the follow-up question. Operator?

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And our first question here comes from Erinn Murphy from Piper Jaffray. Please go ahead, Erinn. Erinn Murphy - Piper Jaffray: I was hoping you could talk more about the accessory trend you saw during the quarter. It sounded like they're still challenging, but you have found a couple of things from a product perspective thus far in the second quarter. I guess, first part of that, could you just help us explain kind of what you see, or what you saw from a handbag watch and footwear perspective both domestically and in Europe during the quarter? And what you have changed going forward?

So, from an accessory trend perspective what we saw in the past quarter was an improving trend downs. And it is still down. We were down in the quarter, but we are seeing continuously improving trends as we moved into the first quarter as well. And then specifically when you talk about from a regional perspective, in North America things have actually improved slightly, but in Europe we still remain challenged on the accessories business. We were down in the first quarter, and we have seen a slightly improving trend, but we are still down.

Yeah, I think to add on to that in watches actually in Q2 we've seen a big reversal in trend in watches that were gotten quite strong in Q2. Handbags, we actually all resorted in $100 plus handbags in North American retail. We actually got in some new shipments and we've seen a reversal of trend in strengthening in the handbag business in North America. Erinn Murphy - Piper Jaffray: So it is still predominately footwear though that is causing the weakness, and then handbags to a lesser extent in Europe? Is that the right way to think about it?

Yes. Erinn Murphy - Piper Jaffray: Okay. And then just Paul for you, from a European perspective, just curious on some your comments on the quarter-to-date trend you're seeing a little bit of a reversal. I realize there is a comparison issue to last year. I guess first what was the comparison you are up against from a comp perspective last year? And then, as we think about the regions in the second quarter, what is really -- is their anything to call out that is really driving that deceleration? Thank you.

Well, which was very encouraging for us has been continuous trend to improve on a comp in our stores across the board. And that, as mentioned during the call the whole channel has been weakened. What we see is traffic with a negative traffic, a positive comp month-after-month especially in Italy and in France. And that shows definitely a confidence coming back on the consumer. What has to do with that, I believe is product assortment very focused on the denim where we have been making big fusion dresses. And this has been reflected very much across the board. So what we are looking at really is back to school and of course holiday to see a much bigger impact in the business. Accessories are same. We believe that we are a little bit overpriced in Europe and we are -- we have addressed that and we are making the different assortment now.

And Erinn, I will just add a little bit on the second quarter trend because you seem to be asking about that as well. What we talked about during the prepared remarks as Mike went through -- can you hear us?

Can you hear us?

Can you hear us? Erinn Murphy - Piper Jaffray: Yes.

Yeah. Okay. So …

Yes, I am sorry. I am just going to continue with the answer. So we've had always in Q2 a very difficult cadence to the quarter because of the timing of the holidays in Europe. Now if you go back to our first quarter earnings release last year and in the transcripts you see that at the time we guided second quarter we were running flat, but we actually guided to be down in the mid single-digits for that quarter and that's where we ended up. And it's the volatility returning at the holiday weekends. This year the situation is reversed. So even though we are down in the low double-digits right now, we expect the traffic to come back in the back half of the quarter and now service to finish up at down in the mid single-digits. Now, you may ask a question, you are up in the first quarter, when you are going to be down in the second quarter what's driving that. What's really good for us from a trend perspective is if we look at our cost the new season product has been performing well all year and we have been seeing this for all full months so far that you have been in the year. What has been a challenge is we are sitting on some markdown inventory for whole seasons that we expect to get through by the end of this quarter. Once we get past that we expect the runway to go back to what we saw in the first quarter and cost to be in the low single-digits increase for the year. And so that's really due to a flavor for what the timing shifts are.

Thank you. Our next question here will come from Janet Kloppenburg from JJK Research. Please go ahead. Janet Kloppenburg - JJK Research: Hi, everybody. I was wondering if you could talk a little bit about the North American business. I think you said comps were positive in April. I am wondering if that was markdown-driven or if you saw some improvement in full priced business? And Paul, I couldn't hear you well, I think you said dresses and knits were doing well. And I wondered how the denim business was? And I think you also said accessories and footwear was getting better. Do you think you can sustain that trend in North America in the first half? Thank you.

Janet, no. During the call I mentioned for accessories that for the Q1 the big challenge has been accessories specifically the footwear. And that was the biggest one, and handbag we see an improvement. Janet Kloppenburg - JJK Research: Okay.

That expense has been really a challenge for us. That -- the comp, you see the trend we have, definitely the apparel have been really trending on the positive that have been kind of offset by the accessory performance. And this is where we adjusted now for especially the back-to-school that the assortments in accessory is much more focused, much more clear for the consumer and really the key item where we went on the big bang of that, but underneath, that you mentioned before, yes. We are being performing well on the knit top that we believe on my view that will then -- we could have done better, not that where you have the wrong size, we didn't have enough. We should not have had more offering. And that was the dresses sold that we are seeing us grow in the next 45 days of woven top would be much more diversified in what we have currently. We went too much from t-shirts and knit tops and not enough and woven. Janet Kloppenburg - JJK Research: On the woven, okay. And Paul, could you comment, I was just wondering if you done any pricing analysis versus some of your competitors? And if you think for instance, in the dress category and perhaps in the handbag and footwear categories whether your prices are as competitive as they need to be?

Well, I think that especially on the handbag we are a little bit on the higher end on the pricing in handbags (indiscernible). When it comes to the dresses we go from the 79 to the 149, so we cover everything and we have a very, very strong business of dresses. Again, if you visit any of our stores in New York or there in Florida, we have maybe the most assorted dresses business or any competition we have right now, because we did the very strong front check on that. When it come to certain technical leads, for example, the light outwear for Q1, we believe also that we needs a little bit there, we could not have more, because we have such a cold, cold Q1. And thus we didn't turn back. We thought that it would be warmer than that, but it didn't, especially after the meeting (indiscernible) I learned a lot of lesson few weeks ago. So that's bad, but I think again the receipt in stores we give you a much better pictures today of where we are and how much more focus and well assorted and merchandised it is today compared to a year ago.

And our next question comes from Omar Saad from ISI Group. Please go ahead. Omar Saad - ISI Group: Thank you. Good afternoon. I wanted to ask about SG&A, marketing, and some of the investment things that you have been talking about. It is -- I have noticed that the SG&A dollars have actually been down for you for the last five consecutive quarters. Last quarter, you have been talking about kind of ramping SG&A up in dollar terms and percentage terms. You were talking about the catalogs. Kind of wanted to get an update around that those activities, where you stand? How you are looking at SG&A philosophically, reinvesting in the brand, in this environment where it is tricky in terms of top line and seeing some pressure? Thanks.

Hi, Omar, this is Sandeep. So Omar, I think when we talked about the SG&A investments for the year, we are really focusing on two major drivers. One was marketing and advertising to drive traffic into our stores and I'll let Paul talk about that a little bit more in a second. And the other was we had some compensation cost that we were annualizing and that was also driving both on dollars and rate up in the full year. The marketing cost were more backend loaded and because we are kind of actually tied into the new product launches that they are setting our within the fall, and that's why you don't see really much of that impact in the first quarter so far. And I think with that I want to say Paul talk a little bit more about the upcoming business.

Yes. Omar, I think that when it comes to marketing even if you have -- even if it looks like less correctly, these does not mean rest for the rest of the year. It was going on that trend. And we have a lot of investment currently and especially what I mentioned before which is in process now which is printed now for back to school, all the medals, all the catalog, all that you can bring, everything will hit the stores and the magazine within four weeks. So you will see a big, big impact in marketing. That does translate to a dramatic event that we need to put the ads and magazine people having to rush to your door, I don't know about that. That's -- the traffic mode is definitely a continuing concern for all the retailers of the trend we have been seeing for the last eight, nine, ten quarters. Also, well, you have improvements on the window of stores that you have seen recently. But more important the big investment we have is on the CRM and on the e-com billing of digital media and what we have here. So I would say that we buy very well and right now the Q1 was not the very, very big spend for me. The Q2 will be more, but really the heavy one we will Q3 and Q4, which is of course not there.

And our next question here comes from Dana Telsey from Telsey Advisory Group. Please go ahead. Dana Telsey - Telsey Advisory Group: Hi, good afternoon, everyone. Can you just talk about the strategy that you have had in adjusting your opening price points, and what the reception has been? And the also, would be marketing investment that you stepped up, where are you in that process? How do you see it -- see that progressing? And what's the impact? And lastly, an update on a online relative to the stores, what you are seeing in product sell-through and category? Thank you.

Okay. Actually one of our strategies from our merchants have been to buy deeper at opening price points and that's been specifically in the element you talked and we have been seeing considerable success there. In terms of marketing Paul had just talked about what we are doing, but one of the things we have is 7.1 million people in our loaded database. And right now we are investing in some technology and predictive analytic, start to segment those customers so we can better target them with the type of information they want, at the frequency they want, at the message they want. And so we think that will help actually drive traffic. And thirdly, online relative to stores, basically online we have a higher penetration of accessories because obviously they are not size dependent etcetera. And so the accessories that you skew higher, but we are actually seeing considerable success in denim online. Dana Telsey - Telsey Advisory Group: Got it. And then if you think of the marketing spend and how that's changing?

Yeah. Dana, I mentioned just that to Omar, I think you will see definitely a ramp up in -- now, which is four weeks from now. All the four campaign coming in magazine, catalog, in the stores (indiscernible) this is happening just as we speak now. Q1 was lower than we expected in back-to-school now and towards holiday.

Thank you. Our next question comes from David Glick from Buckingham Research. Please go ahead. David Glick - Buckingham Research: Thank you. A quick follow-up on Europe, just a few from disclose or will disclose the penetration of your business in that Russia-Ukraine area. And then secondly it sounds you have a lot of exciting product initiatives for fall. I am just wondering on what your approach is from a promotional perspective. When that you should try to balance challenging traffic trends across the mall and in your stores? How you balance for the newness you are going to have in your product with how you approach it from a promotional perspective obviously understanding you need to drive sales.

Hi, David, this is Sandeep. I will just take the question on Europe and Russia specifically. On Russia we don't really talk about the specific number, but what I can tell you is consistent with what most of the competitors are probably seeing as well, we had seen some definite softening in that business. We were growing extremely rapidly in the previous quarters. But during this past quarter we have closed fall/winter '14 sales campaigns. Sales are still growing, but much slower than they were in previous quarter. It doesn't change our long-term perspective on the market and the opportunity there, and we will just have to get through this period before we are moving up.

And about the product that you mentioned before, as you can see right now we are entering again a very strong [Indigo] (ph) denim cycle. And for that I think that we are in a very good position by the time just about we have so much history and archives of what the trends are right now, which include that overall, the jumpsuits, the [high waist] (ph), the Acid Wash, all that was really what made Guess? and started Guess? 30 years ago? All that, you're going to see that in delivery in four weeks from now, and if you also -- what I did not mention just before was what plays a big role more and more in our business in retail for women has been really the fast track -- the speed to market market. Speed to market is a key element for us and has been growing and growing up to almost 28% of all the women's business apparel, which is substantial for us. So we see that's all continuing to have an impact. David Glick - Buckingham Research: Thank you very much.

Thank you.

Our next question comes from John Kernan from Cowen & Company. Please go ahead. John Kernan - Cowen: Hey, guys, good afternoon.

Good afternoon. John Kernan - Cowen: I'm just wondering if we could talk a little bit more about the order books in Europe. I think, Sandeep, I think you sit down low double-digits for the fall, I think you also said same-store order books were about flat. So, at what point do you think we've lacked enough store closures to start seeing some stabilization in wholesale side of the business? And is there a specific category or region that's really driving the declines in order book?

Yeah. So, John, you heard right. I think when we look at the Spring/Summer '14 order book we are down in the low and mid-teens. And we actually were down in the low double-digits for Fall/Winter '14 that we disclosed. And honestly, the entire improvement came from improvement in same store buys, which were roughly flat. And so, obviously the door closure rate has not changed season-on-season. What we do believe is once we start getting into flat to positive territory on same store buys there is an underlying indicator of the health of the business of the wholesale customers. So, hopefully this will actually cause a reduction in rates at which the doors have been closed, but we don't know that yet until we go to the Spring/Summer '15 season. So, our planning assumption right now has no change in the rate of closure from the fall/winter. John Kernan - Cowen: Okay, and then -- right, sorry.

From a regional perspective it's not changed a whole lot from what we saw within Spring/Summer of '14 and Fall/Winter '14.

That's correct.

Thank you. Our next question here comes from Robert Ohmes from Bank of America Merrill Lynch. Please go ahead. Robert Ohmes - Bank of America Merrill Lynch: Thanks for fitting me in. Just two follow-up questions, I think you guys mentioned the off-price shipments being down, if you could remind us why your off-price channel shipments were down? And also, could you give us some color on how your factory stores did during the quarter and how they are doing this quarter to-date? Thanks.

So, basically in our wholesale -- North America wholesale segment if we are to satisfy with the full price sales to our customers like Macy's, our price -- mainly liquidation of excess inventories was down. The good news there is that we really didn't have excess inventory to sell and we saw a slight improvement in gross margins in that segment. In terms of factory, factory store sales -- in February were impacted by weather, March by the shift of Easter, but it was our strongest performing segment in April. The trends, it slowed down a little bit in May, but we are still seeing an improvement of trend over the first part of Q1. Robert Ohmes - Bank of America Merrill Lynch: Got it. Thank you very much.

Thank you. Our next question comes from Jeff Van Sinderen. Please go ahead. Jeff Van Sinderen - B. Riley & Co.: Regarding North American Retail, do you expect more or less -- was there more or less promotional stuff this year in Q1 than last year? And do you plan to more or less promotional in this coming Q2 this year over last year?

Yes. In Q1 we actually were slightly more promotional than we were last year. A lot of this is driven by the weather impacted traffic and we ended up with a little higher inventory position than we expected and that caused -- put some pressure on the margins. Right now, we have a plan to work through that inventory in Q2, so we can start Q3 clean. And so, we expect to actually continue the same trends in the Q2. Jeff Van Sinderen - B. Riley & Co.: Okay. And then regarding inventories for the second half, what is inventory per square foot stand right now for North America Retail? And can you give us any more color on the inventory regarding overhangs, excess and how do you expect to evolve over the coming quarter?

So we are up on a per square basis, 6% in North American Retail. Jeff Van Sinderen - B. Riley & Co.: And in the second half.

In the second half, we have plans to actually go and liquidate this in Q2 and our desire is to start Q3 with basically sales in line with inventory. Jeff Van Sinderen - B. Riley & Co.: Thank you.

(Operator Instructions) And our next question here comes from Dorothy Lakner from Topeka Capital. Please go ahead. Dorothy Lakner - Topeka Capital: Thanks, and good afternoon everyone. I think Paul had mentioned at the beginning that you've made some positive -- or gotten some positive impacts on your efforts in planning and allocation. So I just wondered if you could update us on what's happening now or what we should expect in the back half of the year. And then also I think you talked about product cost and having made some improvement there, I just wondered for the back half of the year how much you've been able to lower those costs? I think it was in North America where you made those efforts. Thanks.

Yeah, so planning and allocation has been a really big initiative for us and we've been actually putting a lot of resources there. So the first thing we've done is we put a demand planning and allocation system in Europe. We implemented that third quarter last year, and that was for retail and wholesale, and I think the strength in the comps that we've seen in Europe are somewhat attributed to basically our ability there to more fine-tune our assortments, to the few geography there with different type of weather, climate, taste, etcetera. Here in the U.S., we just finished rolling out an assortment planning system to all concepts. And that's going to help to do the same to tailor our assortments to store clusters. We've also upgraded our planning and allocation system with the latest technology. We are using analytics for size curves in store clusters, but more important, we put together training program to train our staffs to make sure that they can effectively use this technology. Planning and allocation is the -- that's the heart of any kind of retail company. You got to make sure you put the right stuff in right place at the right time. So we think we were making steps in the right direction. In terms of project cost, we talked last quarter that focusing on North America Retail, don't forget our accessory business, we don't control the supply chain of the licensee product. We're able to reduce the average unit costs between around 200 to 300 basis points. And in the last call we had purchased through fall, but now we have finished our buying through holiday and those trends have continued. So we are really pleased by continuing those efforts in getting the success that we won the other day. Dorothy Lakner - Topeka Capital: Great. Thanks, and good luck.

Thank you.

Thank you. Our next question comes from Alex Pham from Mizuho Securities. Please go ahead. Alex Pham - Mizuho Securities: Hi there, it's Alex on for Betty Chen. I'm wondering if you could just touch on the Asian business by country. I think you guys mentioned that Korea have been impacted by the ferry incident. It seems like margins have been down, I think you mentioned 500 basis points or so, just wondering if you could provide any color there. Thanks.

Yes. So in Korea, actually -- keep in mind that's two thirds of our business and this is a very volatile environment. We actually performed better than we expected in Q1 and comps were down in the low single-digits and we had -- our guidance is assumed to be down low double-digits to mid single-digits. So it performed better than expected, but then in Q2 it's took a reversal. And that ferry incident, that just had a huge impact on demand in Korea. For instance, I was there actually two weeks ago and I was really shocked to see that traffic had declined in restaurants and stores and shopping malls, etcetera. So it's not impacting us, it's impacting the whole country. That's definitely put a drag on margins; plus it's been a promotional environment. In Greater China, so we are going to the other regions, let's say in Greater China we are actually performing slightly below expectations. We had positive comps in low single-digits. We are very strong in Hong Kong and Macau, but our China business is still -- there is still weakness in consumer demand. And our shipments in our franchisee business to our licensee partners in Southeast Asia, they've also been little bit weaker due to slower consumer demand. Alex Pham - Mizuho Securities: Great, thank you.

Thank you.

Thank you. This concludes the question-and-answer session. I would now like to turn the call over to Paul Marciano for closing remarks.

Yes, thank you. Thank you everyone. As I mentioned at the beginning of the call, the change we're making are taking time, but we see now already after nine months, the product change, the strategy change, initiative, the new system, all that is taking place now. The only thing that we cannot control has been really the traffic. The traffic has been, and continue to be in more continuous channel. But on the other hand, we see numbers in e-com who are growing at a very fast pace. That effect offsets the traffic in a mall enough to a degree. So we continue to give all our work and effort to really look at how the business of e-com could be doubling or maybe tripling or it being more than that in the next future. And we will talk to you in the next quarter. Thank you very much.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. And you may now disconnect.