Inter Parfums, Inc. (IPAR) Q2 2013 Earnings Call Transcript

Russell Greenberg - Chief Financial Officer, Chief Accounting Officer, Executive Vice President and Director Jean Madar - Co-Founder, Chairman, Chief Executive Officer, Chief Executive Officer of Inter Parfums, Inc. and Director General of Inter Parfums S A

Joseph Altobello - Oppenheimer & Co. Inc., Research Division Linda Bolton-Weiser - B. Riley Caris, Research Division Wendy Nicholson - Citigroup Inc, Research Division Neely J.N. Tamminga - Piper Jaffray Companies, Research Division David E. Cohen - Midwood Capital Management, LLC

Greetings, and welcome to the Inter Parfums 2013 Second Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Russell Greenberg, Executive Vice President and CFO. Thank you, Mr. Greenberg, you may begin.

Thank you, operator. Good morning, and welcome to our 2013 second quarter conference call. Following the financial review, I will turn the call over to Jean Madar, our Chairman and CEO, for a business overview, and then we will move on to your questions. Before proceeding further, I want to remind listeners that this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. These factors include but are not limited to the risks and uncertainties discussed under the headings Forward-looking Statements and Risk Factors in our annual report on Form 10-K and the reports we file from time to time with the Securities and Exchange Commission. We do not intend to and undertake no duty to update the information discussed. In addition, Regulation G codification for the use of non-GAAP financial measures, provides the conditions for the use of non-GAAP financial information in public disclosures. We believe that the presentation of the non-GAAP financial information included in this presentation is important supplemental measures of operating performance to investors. The information required to be disclosed for the presentation of non-GAAP financial measures is disclosed in our annual report on Form 10-K, which has been filed with the Securities and Exchange Commission. This information is available on our website at www.interparfumsinc.com. Once again, when we refer to our European-based operations, we are primarily talking about sales of Prestige Fragrances conducted through our 73% owned French subsidiary, Inter Parfums SA. When we discuss our United States operations, we are primarily referring to sales of Prestige and specialty retail products, as well as travel amenities, all conducted through our wholly owned domestic subsidiaries. Moving onto our second quarter results. As we reported yesterday, net sales decreased 19.3% to $117.5 million compared to $145.6 million. At comparable foreign currency exchange rates, net sales declined 20.6%. However, net sales excluding Burberry product sales increased 17% to $96.8 million from $82.7 million. Excluding Burberry product sales, European-based operations generated net sales of $72 million, an increase of 15% compared to $62.8 million in last year's second quarter. Sales by U.S.-based operations were $24.8 million, up 24.4% from $20 million. Gross margin was 54.1% compared to 60.8%. SG&A expense as a percentage of net sales was 47.4%, compared to 52.1% in 2012. Operating margin was 6.7% of net sales compared to 8.7%, and net income attributable to Inter Parfums, Inc. was $3.8 million compared to $6 million. Basic and diluted earnings per share was $0.12 compared to $0.20. We have amply covered second quarter sales drivers in our press release, so I will now focus on the dynamics impacting our profitability during the period. Gross margin was 54%, down from 61% in the second quarter of 2012, primarily due to the sales of the remaining Burberry inventory at lower than our typical gross margins. These sales also included the sale of certain inventories to Burberry, which was sold at our cost. SG&A expenses, both in dollars and as a percentage of sales, were also down substantially due to the winding down of our relationship with Burberry. The reduction was most noticeable in promotion and advertising expenses, which were $22.4 million or 19% of net sales in the second quarter of 2013. That's down from $30.4 million or 21% of net sales in the prior-year period. Royalty expense also declined significantly to $6.8 million or 5.8% of net sales. And that's down from $12.4 million or 8.5% of net sales in the prior-year period. Looking at some notable below-the-line items, there was a $2.1 million favorable swing in other income, reflecting a gain on foreign currency versus a loss in last year's second quarter. Additionally, interest income was up significantly, reflecting our substantial cash and short-term investment balance. Also of note, our effective income tax rate in the current second quarter was 50% as compared to 35% for the corresponding period of the prior year. In 2013, we incurred a new tax recently levied by the French government, which is equal to 3% on any dividend paid by a French company to its shareholders. Turning to our cash flow and balance sheet. During the second quarter, as expected, we paid in excess of $70 million in taxes on the $198.8 million gain we recognized in December 2012 for the termination of our license with Burberry. As a result, our second quarter operating cash flow was a use of just over $20 million. Even with this cash usage, our balance sheet remains extremely strong, with $400 million in working capital, including approximately $262 million in cash, cash equivalents and short-term investments, and no long-term debt as of the end of the second quarter. With respect to our 2013 outlook, when we reported second quarter sales 2 weeks ago, we raised our guidance to approximately $525 million in net sales and $1.14 per diluted share in net income attributable to Inter Parfums. This implies breakeven earnings for the second half of the year. As we reported, we are planning significant investment in support of our core brands in the back half of 2013 as part of our multiyear strategy for growing sales and profits. Jean, please continue.

Thank you, Russ, and good morning, everyone. Thank you for your participation on today's conference call. We view the second quarter as a starting point of the next phase of our company's evolution. And from the 2 announcements we have made since June 30, which are the new brands added to our portfolio, we are wasting no time in executing our growth strategy. I'll talk about these 2 new brands, Shanghai Tang and Agent Provocateur, along with new product launches planned for the second half and for next year. So 2013 is shaping up to be a good year for new launches. Thus far, our European-based operations including Flash by Jimmy Choo, Lanvin Me by Lanvin, Rêve by Van Cleef & Arpels and just this month, end June, the signature scent for our dance-inspired Repetto brand. Also, we will still launch Place Vendôme, our first new women's fragrance for Boucheron. For our U.S. operations, earlier this year, we've launched new products under Gap, Banana Republic and bebe brands. Our first new fragrance for the Anna Sui brand, La Vie de Bohème, is rolling out as we speak in the third quarter. We also have, bebe Nouveau, a new fragrance launching soon. And sales of Alfred Dunhill legacy fragrance will be included for all of the second half of 2013. Moving onto the new initiatives. In recent weeks, we have added 2 important names to our brand portfolio, Shanghai Tang and Agent Provocateur. Shanghai Tang is a leading Chinese luxury brand. Shanghai Tang champions the richness and beauty of the Chinese culture with contemporary lifestyle offer of apparel and accessories for men, women, and children, as well as own collections. Shanghai Tang is a truly unique brand with exceptional potential to become a global beauty brand in the luxury segment, and we're committed to making this a highly successful venture. China, as you know, is a strategic priority for Inter Parfums, and we have therefore established a new subsidiary in Hong Kong, called Inter Parfums USA Hong Kong Limited, to manage the global operation of the Shanghai Tang brand operations. So regarding the other brand, Agent Provocateur. Agent Provocateur is based in the U.K. and best known for its very upscale, edgy and quite provocative lingerie. Currently, its products, which extend to swimwear, bridal, bedding and accessories, are sold globally in 80 stores in 26 countries, including its own boutique, shop-in-shops, within the finest department store and specialty retailers. For the flavor of the brand and qualities which you do not know, I suggest you visit the Agent Provocateur website where a picture is worth a thousand words. Initially, we're taking over distribution of certain lines within these new brands as well as reinventing the Agent Provocateur signature brand. We're planning to launch entirely new scents for both Agent Provocateur and Shanghai Tang in 2014. Before closing, I would like to mention some of our 2014 plans. The following year is by no means complete, but next year, we'll launch our first fragrance line for Shanghai Tang, Agent Provocateur, Alfred Dunhill, Balmain and Karl Lagerfeld. We also have new fragrances underway for the Montblanc and S.T. Dupont brands. Perhaps in the next quarterly call, we will be able to shed more on our other U.S.-based brands. While we are not speeding nor acting recklessly, we are clearly searching for new opportunities. While we are on the lookout for other suitable brands and acquisition, we are very selective and turned down many brands that do not meet our criteria. With our strong financial position, reputation in the industry and history of success as our foundation, we are increasingly enthusiastic and confident about our company's future prospects for growing and increasing shareholder value. That ends my prepared remarks. And operator, you can open the floor for questions.

[Operator Instructions] Our first question comes from Joe Altobello with Oppenheimer. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: I guess first question for Russ. If you back out the Burberry sales in the quarter, what was gross margin, up or down?

Our gross margin was actually up a little bit. It was very favorable in this quarter, probably closer to the 62%, 63%, maybe even slightly higher than that. Sales, as we mentioned, included the sales of Burberry, overall of around $20 million. But in addition to that, there were sales of approximately $8 million direct to Burberry, which was sold at cost. So overall, the gross margins were very favorable, mainly because of product mix. As we move towards later in the year, as we do a little bit more of promotional type of selling, I would expect gross margins to contract a little bit when you compare year-on-year. But for this particular quarter, gross margins are very favorable. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Okay, so there is $20 million of low-margin sales and an additional $8 million of essentially no-margin sales?

No, included in the $20 million, that $8 million I mentioned that was sold directly to Burberry at cost. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Got it. Okay. And then secondly, in terms of the spending in the back half of the year, obviously, you guys have been very clear about this. I'm just curious how we should look at that spend. I mean is this catch-up investment or essentially, you guys got a windfall from Burberry and want to invest it? And then maybe secondly, on top of that, how should we think about advertising spending next year on the base business?

That's a good question. As we -- and Jean, you could chime in if you want -- but for 2013, we have a significant number of new product launches and a lot of the advertising spend is always done in that fourth quarter. And in many countries our shipments to our customers, really -- and a new launch of pipeline shipments can happen anywhere during the year -- but we typically have a relatively stronger third quarter in sales, all right? Whereas in the fourth quarter is really where the spending can become a very significant percentage of overall sales because sales are typically lower in that fourth quarter. Getting to the second part of your question, overall, for this quarter we came at around 19%. We, of course, were very low at the end of the first quarter. Somewhere right around that 20%, 21% is probably the right number at this point in time. But in a year like this when you have as many new product launches as we do, almost for every single one of our major lines, that number could even be a little bit higher. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Got it. Okay. Just one last one, the new tax rate we should be using going forward?

This is interesting because, typically, our French subsidiary will only pay dividends once a year, all right? So we don't anticipate paying any additional dividends this year for our French subsidiary. And therefore, the tax rate will revert to a normal tax rate in future quarters in 2013, all right? It really -- the only way to model this is we typically do pay our dividend once a year, it happens usually at [Audio Gap] so that'd help you for modeling a little bit next year.

Our next question comes from Linda Bolton-Weiser with B. Riley. Linda Bolton-Weiser - B. Riley Caris, Research Division: So I guess this is the first quarter that we can kind of gauge your, kind of fixed overhead cost structure, and what it might be going forward. So if you exclude the advertising and the royalties from SG&A, I guess it looks like about $26 million, $27 million in the quarter of selling, general and administrative. So is that kind of a decent number to use going forward? I think it would increase though a little bit because some was variable in the second half, but is that a good number that we'll be thinking of as a run rate?

It's -- that's a very difficult question to answer because there is a significant amount of variable expenses that go along with sales. Even included in that $27 million are servicing fees, which are variable, logistical expenses, warehousing expenses, that are also variable. So that's a very difficult question to answer, and I'm not even sure if the company's even prepared to answer that. Linda Bolton-Weiser - B. Riley Caris, Research Division: Okay. And then, I think in your 10-Q you mentioned something about in the SG&A there is some sort of, I forgot what it was, service or distribution or something that was significantly reduced year-over-year because of Burberry not being in the business. So is that -- can you explain what that is? And then would the magnitude be similar in the next few quarters or would the year-over-year decline in that be even bigger? Or is this a representative quarter for that?

I believe it's pretty much a representative quarter. This kind of even sheds a little light on your prior question. Servicing fees are fees we pay to our distribution partners in certain locations, such as here in the United States, where we have an agreement with Clarins and we share sales force with Clarins. Because this is a variable expense as a percentage of sales and because of the decline in sales as a result of the termination of the Burberry license, it makes sense that this number went down. As a percentage of sales, this number really did not fluctuate significantly because it is a variable expense. Linda Bolton-Weiser - B. Riley Caris, Research Division: Okay. And then in terms of your cash balance, which remains large, do you -- are you having any additional thoughts about whether you want to just kind of hang on to that and keep your powder dry in terms of acquisition opportunities, or what are your most updated thoughts on that?

Jean, I'm sure you want to take that?

Yes. We have to -- I answered this question a couple of weeks ago. Right now, initially, we are looking at growing our business. So for now, we would like to keep this large amount of money. And I would say towards the end of the year, I will look at where we are and I will look at where we are at the end of the year and see if we stay with just a lot of cash or not. But right now, as you can see, we have signed some new licenses. These new licenses do not need cash. We didn't pay for it. But we could be looking also at other businesses, and we are looking at other businesses where we will have to spend a fairly significant amount of money. So roughly, I think between all our options, we're good for now. Linda Bolton-Weiser - B. Riley Caris, Research Division: Okay. And then as we look forward to the new launches in 2014, can you give us -- I guess we're looking at Karl Lagerfeld and the Shanghai Tang and then the Agent Provocateur. Do you think those will be first half launches or second half launches in 2014?

Karl Lagerfeld will be in the first half, Agent and Shanghai Tang will be second half. We'll have also in the second half, we'll have the new Dunhill fragrance. It will be our first Dunhill fragrance made by [indiscernible]. So next year also will be a busy year and it will be a full year without Burberry, and I think that is one of the reasons why we want to really push our sales in the third and fourth quarter and spend a little bit more on these than that we'd have spend normally. Again, we're a little bit ahead this year. We have raised our guidance, I don't know, 2 times, Russ, 3 times, already?

Yes, at least, 3 times.

So we think it's a good time to do this kind of expense because these brands need to -- we're going to count on these brands to be the engine for future growth for 2014 and 2015.

Our next question comes from Wendy Nicholson of Citigroup. Wendy Nicholson - Citigroup Inc, Research Division: I'm really just struggling with the modeling a little bit. And if I take you at your word that the third and the fourth quarter are really going to be breakeven, I have to assume that given the timing of some of the launches, the heavy spending will probably continue into the first quarter. So is that a fair assumption that the first quarter could actually have pretty significantly depressed earnings even if I look at it apples-to-apples, taking out Burberry from this year's first quarter. So the long story made short, in 2014, do you think earnings will be above $1.14 that you're pegging for this year or below?

Well, we haven't issued guidance for 2014 yet. The only thing that we have indicated in a post-Burberry environment is that we expect to be able to at least reach the 10% margins in a post-Burberry year. We're not prepared yet to issue guidance on 2014. We will do so. Normally, we introduce guidance in, I think, it's the 3rd week of November. We'll probably do that a little bit earlier this year to help the analysts a little bit in their modeling capabilities. But to go back to your first question, the -- as I mentioned earlier, the heavy advertising spend is usually in the fourth quarter. First quarter is not a huge quarter for ad spending. So I don't think you're going to see the kind of contraction in earnings that we're kind of anticipating in the back half of 2013 to continue. But also keep in mind, first quarter of 2013 was an exceptional quarter because of the transition agreement that we had with Burberry. It included a significant amount of sales for Burberry with relatively little to no advertising requirement because we would really just accommodate Burberry for that 3-month period. So clearly, unequivocally, I can say that earnings in the first quarter of 2014 will be down significantly, but not because of extra spending in 2014 but more because of the very difficult comparison you have with the fact that the Burberry business continued in that first quarter of 2013.

We made [indiscernible].

Three in the first quarter alone.

That's the total. Wendy Nicholson - Citigroup Inc, Research Division: And then -- and what did you say, as we think again about 2014, the full year tax rate? I know there's variability quarter-to-quarter, but the full year tax rate you think will be somewhere, 35% to 40%, something in that range?

We typically are around 35% to 36%. It may go up maybe a percent, maybe 1%, because of this tax on the dividends. And again, I mean if in fact we decide in 2014 to do some sort of a special dividend, that would be a 1-shot charge. But if you're modeling, if you stick within that 35%, 36%, maybe give a little bit of a bump up in the second quarter, as I mentioned, because that's when our Paris operations usually declare on an annual basis.

When will we begin the first indication of 2014, you said?

2014, normally, it's usually in November, but I think that we're looking to do something maybe even by the end of September or early October.

Our next question comes from Neely Tamminga with Piper Jaffray. Neely J.N. Tamminga - Piper Jaffray Companies, Research Division: Russ, could you help us conceptualize a little bit on the gross margin side? Unless I missed those, you said it will be down slightly here in the back half. Is down slightly a 100 basis-ish points to you, or can you give us a little sense of that, and if there's any vagaries between the Q3 and the Q4 on a year-on-year basis? And then also, if you could just speak broadly to how we should be thinking about inventory trends in a post-Burberry world, where will it start to normalize in terms of the rate of growth in inventories, that would be helpful, too.

I'm going to try. There's only a limited amount I'm really allowed to say here. Our inventory or gross margin fluctuations are typically a result of the different product mix. As we move into the latter half of the year, especially in the third and fourth quarter, your margins are a little bit lower because of promotional sales. We're talking here maybe 100 basis points, maybe 200 basis points. Burberry had typically given us a little bit of a boost because it was a very high margin product. So overall, we're kind of looking somewhere around 100 to 200 basis points in gross margin. The inventories themselves right now, as you can see, inventories have certainly been declining because at this point in time, at the end of June, we have no Burberry inventory in-house. Our reserves that were set up in anticipation of what was going to be given to Burberry for free were destroyed. Those had been fully utilized as disclosed in our quarterly report. So we're really starting off with a clean slate. Now, as we move forward, historically, Inter Parfums has always increased or decreased its inventories based upon new product and the new product launch schedules. I think we're going to be consistent with what we have always done in the past. And so with new product launch, we're going to be a little bit more liberal. We have the cash to spend. We would rather be able to push product out and sell the product than run short. So overall, I think you're going to probably see a consistent days inventory outstanding. Receivables outstanding have always been relatively consistent, running at around 90 days and close to about 180 for the inventory. I think you're going to see some more consistency based upon historic trends. Neely J.N. Tamminga - Piper Jaffray Companies, Research Division: That's helpful, Russ. And just one final question. I'm pretty sure I know the answer to this, but considering some of the other headlines out there today, could you just remind us what your exposure is to the mass channel? Maybe the biggies like Walmart, specifically?

Our product mostly in the mass channel is low-end products. It's dollar store-type products, $0.99 store type of distribution. Our sales still runs somewhere right around approximately $20 million a year. It's been fairly consistent. It could be -- in some years, it's up 10%, some years it's down 10%. We don't really see any significant exposure there. Jean, correct me if you think -- if you any to say on that.

No, I agree.

[Operator Instructions] Our next question comes from David Cohen of Midwood Capital. David E. Cohen - Midwood Capital Management, LLC: Question about advertising promo and also about sales composition. So just to clarify, of the total sales, there were $20.7 million of revenue for Burberry product, at 0 advertising promo behind it. Is that correct?

That's correct. David E. Cohen - Midwood Capital Management, LLC: So I think your total advertising promo is 19% of total sales. But if you back out those Burberry sales, that number goes to 23%. I'm wondering if 23% is the more operable number for the next couple of quarters in terms of the level of advertising and promo.

I think it's -- that number is probably reasonable as we move into the third quarter, and I think it's going to be even higher when we move into the fourth. David E. Cohen - Midwood Capital Management, LLC: Okay. And then in terms of -- so for total revenue for the first half, I had about $130 million for Burberry, leaving non-Burberry at just about $201 million. Is that -- am I accurate in that arithmetic?

Off the top of my head, close. Those numbers have been disclosed so... David E. Cohen - Midwood Capital Management, LLC: Right, but given your guidance, you actually have of all the non-Burberry brands, the second half being less than the first half and the growth rate being less in the second half than the first half, is that...

If my numbers are correct, it was somewhere right around $400 million for non-Burberry sales for the full year. David E. Cohen - Midwood Capital Management, LLC: Yes. I come out with $200 -- $395 million given your back half is backing into it now, $194 million.

As I said, somewhere around $400 million, okay. David E. Cohen - Midwood Capital Management, LLC: And that's the growth rate of first half versus second half, it's actually lower in the second half. So I'm wondering what's driving that, given the launches you have.

Because most of the significant launches for the year occurred already earlier in the year. The Jimmy Choo, Montblanc and Lanvin, which are the 3 biggest brands within our portfolio, have all launched their new products in 2013 within the first 2 quarters.

Yes, in the third and fourth quarter, of course, we'll have -- we'll continue the rollout of Jimmy Choo and Lanvin, we'll have Repetto. And we'll have also the business coming from the new launch of Anna Sui and are starting next month. So we have decided not to change the guidance because... David E. Cohen - Midwood Capital Management, LLC: Right. Is it fair to -- can one characterize that as, okay, with those launches, you'll have a significant amount of sell-in, and then you may not have the visibility yet on what the sell-through and the replenishment is. Is that a fair characterization?

Yes, that is a fair characterization.

Yes, and again, we have given a new guidance, what, a couple of weeks ago? So we are not going to change it all the time. We have to, when we see fit at the end of the third quarter, we do another update. When we talk about or say about 2014, let's take an update on the beginning of October. If we see a reason to change our guidance, we'll do it. But... David E. Cohen - Midwood Capital Management, LLC: Yes, I'm not asking you to change -- I'm not asking you for any new guidance...

Yes, you're correct, David. There is a significant amount of sell in, all right, when you first open up and you do have a new launch. And then you have your continuing sales as things move on. Fourth quarter is typically a low period because many of the retailers do not want to take additional product during the holiday season. So unless they're out of stock, we have to be a little bit conservative with respect to the numbers we are putting out as guidance. There is a possibility that we may be able to beat it. If everything sells through, the retailers want to reorder and get additional product into their stores, well then, as Jean said, we'll have to increase the number, all right? But as of right now, based upon the visibility that we have, we're comfortable with the guidance that we've issued.

Our next question comes from Linda Bolton-Weiser with the B. Riley. Linda Bolton-Weiser - B. Riley Caris, Research Division: Just a follow-up on -- Elizabeth Arden today, in their comments, had expressed -- they said the U.K. was very weak and granted they're not just fragrance, they have a cosmetic business as well. But can you just, for the record, kind of just tell us what you're seeing specifically in the U.K.? I know that's an important market for you. And is it kind of business as usual, or do you see it slowing, or can you give us some color there?

U.K. is a very important market for us even without Burberry, because we have in our portfolio a lot of British brands and we are even adding one, Agent Provocateur. So our sales in U.K. for Jimmy Choo continue to perform very well, and also for Paul Smith which is the main market for -- U.K. is the main market for Paul Smith. So we do not have -- we have not seen for our brands any issues in the second quarter, or even in the month of July in U.K. We'll expect also, when we come up with the new fragrance for Agent Provocateur, we expect U.K. to be the #1 market for this brand. So U.K. is definitely an important market for Inter Parfums.

Our next question comes from Neely Tamminga with Piper Jaffray. Neely J.N. Tamminga - Piper Jaffray Companies, Research Division: Great. I just want to get back and ask a fairly big picture question for Jean. If you will share with us your perspective on these 2 licenses that you just acquired, Agent Provocateur as well as Shanghai Tang, and then maybe also the upcoming Karl Lagerfeld and just the Anna Sui brand as well, how would you size up the longer-term potential of these 4 brands relative to your existing mega brands of Lanvin, Jimmy Choo and Montblanc? Do you think that they could be comparable in terms of size or is there something about these brands that limit their distribution ultimately? Could you share with us?

I can try. I can try. I think you're right to put as a point of comparison the Lanvin and Jimmy Choo. We think that Anna Sui has definitely the potential to become a $50 million brand. Today, I would say we are around in the 30s, and we have still a lot of room to grow. When we talk about the new brands, the winning brands, I think that Karl Lagerfeld, we've shown the product to the retailers and they're really excited and they are committed to give us a great amount of space. So I think that Karl has the potential to be in the top 3 brands, top 2 brands of the company. And Shanghai Tang was a strategic decision. We're very happy to sign with them, and by the way, it's our fourth license with the Richemont Group. We have already Montblanc, Van Cleef, Dunhill, and now, Shanghai Tang. So we have a close relationship as the licensee with the Richemont Group. And Shanghai Tang is basically a very brand -- a very luxury brand for China. We wanted to have China as part of the important market. We have invested in this country for more than 30 years. We have very important sales, we had retailers, and even in all the other brands that we have, Anna Sui or Lanvin, are in the top 10 fragrances sold in China. So we think that with Shanghai Tang, we have a very, very interesting proposition for our Chinese customers. The product, for the first time, will be made in China. And that's why we are building a [indiscernible] in Hong Kong and in mainland China. And we will be in department stores in China, we'll be selling in the Shanghai Tang stores. I think that Shanghai Tang has the potential to be, locally, not worldwide but locally, a very important brand. Last one is Agent Provocateur. Agent Provocateur had a fragrance before, and we decided to get it over from the former British licensee. This brand has a lot of personality, but basically more on the niche side. But as you know, when we signed Jimmy Choo, it was also a niche brand and is now becoming the second largest brand in the company. So we are -- the portfolio is very balanced with global and regional brands. So -- and then we continue to grow the portfolio in that direction. Does this I answer your question? Neely J.N. Tamminga - Piper Jaffray Companies, Research Division: Yes, that's wonderful.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Mr. Greenberg for closing comments.

Thank you, operator. And thank you, all, for participating on this conference call, whether you're live on the call or listening via our webcast. As always, if anyone does have additional questions, I always try to make myself available by phone. That concludes this call, and thank you for joining us, and have a great day.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you, all, for your participation.