David Weinberg – Chief Operating Officer

Chris Svezia – Susquehanna Financial Group Scott Krasik – C.L. King & Associates Sam Poser – Sterne Agee & Leach Dave Turner – Avondale Partners

Thank you for standing by. Welcome to the Skechers third quarter 2009 earnings conference call. (Operator Instructions). This conference is being recorded today, Wednesday October 21 of 2009.

Good afternoon and thank you for joining Skechers quarterly financial results conference call. I will now read the Safe Harbor statement. Certain statements contained herein, including without limitation statements addressing the beliefs, plans, objectives, estimates or expectations of the company for future results or events may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements involve known and unknown risks including but not limited to global, national and local economic, business and market conditions in general and specifically as they apply to the retail industry and the company. There can be no assurance that the actual future results performance or achievements expressed or implied by such forward-looking statements will occur. Users of forward-looking statements are encouraged to review the companies fillings with the U.S. Securities and Exchange Commission, including the most recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all other reports filed with the SEC as required by federal securities laws for a description of other significant risk factors that may affect the company's business, results of operation, and financial conditions. With that, Skecher's Chief Operating Officer, David Weinberg will begin with prepared comments.

Thank you for joining us today to review Skecher's third quarter 2009 results. As always, we will open the call to questions following our prepared comments. Third quarter 2009 net sales totaled $405.4 million, a new record, and $1.48 billion for the first nine months. Net earnings for the third quarter were $24.5 million and diluted earnings per share were $0.52. For the nine months ended September 30th, net earnings were $26.8 million and diluted earnings per share were $0.57. As discussed in our first and second quarter conference calls, we anticipated that the weak retail environment would negatively impact our domestic and international business in the first half of the year, while the second half of the year would be profitable. This has been the case as the third quarter saw a return to profitability and growth in several of our business channels. The strong profitability in the quarter and our much improved gross margin of 45.3%, with the result of less closeouts and more in line in demand inventory. During the first half of the year and into the third quarter, we carefully managed our inventory which was reduced by $69.4 million from year-end. And our SG&A expenses, which increased by $4.3 million from the prior year which includes 29 more retail stores, operated in the third quarter of 2009 versus 2008, and significant additional expenses related to our new operations in Chile, as well as our growing business's in Brazil, China and Hong Kong. Based on our record sales and key performance indicators, which include a healthy backlog, positive retail comps, and strong sell-throughs, we believe we are on track for positive results for Q4 and 2010. Our domestic wholesale business declined 10% in the third quarter and 16% for the nine months. The decline in sales was in part due to the weak retail environment, the closing of several fashion brands and the decrease of availability of off-price merchandise. The reaction by consumers and accounts to o r Skechers fall product has been extremely positive. While our third quarter sales are not as high as last year, we had more in line full price product and increase in average price per pair from the third quarter 2008,and less closeouts which resulted in much improved profitability and positively impacted margins. The growth came across key men's, women's, and kid's lines which we believe is the result of continued positive reaction to our core styles and new lines supported by concentrating marketing efforts, strong execution, and attractive and affordable product. In the third quarter our marketing included High School Musical star Vanessa Hudgens in a TV campaign for Red by Marc Ecko, and our own animated characters who appear regularly in commercials airing on children's television networks such as Nickelodeon, Cartoon Network, and The Disney Channel. Additional print and TV campaigns supported our Skechers and fashion brands. We believe our domestic sales will improve in the fourth quarter, though we expect the continued soft retail environment will remain a factor. We are confident that we will continue to be one of the key footwear vendors to majority of our accounts, and our product continues to be in demand and sought after by consumers who look to us for style and value. Our international wholesale business improved by 7% for the third quarter from the prior year, and was down 3% for the first nine months. The improvement in the quarter is significant in comparison to the first and second quarters, which were flat and down 20% respectively. As in the United States, many international markets are also facing difficult economic conditions. This has impacted our sales in select regions around the world, but we believe that our brand is in a great position in terms of shelf space, reputation and awareness as we continue to increase our presence around the globe. Key retailers and consumers are looking to Skechers as a key footwear resource. In the third quarter, our subsidiary and joint venture sales improved by 18.5%. This was due to growth in most of our subsidiaries including two of our largest, the transition of Chile from a distributor to a subsidiary and the growth of our joint venture operations in China and Hong Kong, and the addition of Singapore as joint venture. Our two newest subsidiaries are in South America, Brazil and Chile. We believe that Brazil, which is now entering its third year of operations, will become one of our largest subsidiaries. And Chile, with 10 retail stores, a solid account base and approximately 800,000 pairs shipped as a distributor in 2008, is a meaningful addition to our international business. Our international subsidiaries utilize the proven marketing campaigns we have created, often modifying them with certain key styles particularly suited and popular in their markets. Additionally they will translate our commercials, and often print ads, into multiple languages including Spanish for Latin America and Spain, French for Canada and France, Portuguese for Portugal and Brazil, German, Italian, and Dutch to support their sales efforts. Unique marketing with local celebrities is utilized in China, Hong Kong and other Asian countries where we have established joint ventures. The marketing images reflect our brand identity while also embracing the culture in these regions. We believe our growing markets and presence in Asia will positively impact our international business within the next two years. Several of our international distributors achieve growth in the third quarter, but the transition of Chile from a distributor to a subsidiary and declining economies in several countries, in particular in Eastern Europe, negatively impacted our international distributor business, which was down in total by 16% for the quarter and 18% for the first nine months. We are excited about our new international distribution agreement in Mexico and India, both of which were announced recently. In Mexico, Skechers is already known to consumers due to both proximity and a previous distribution agreement. In India, the second most populous country in the world, our focus on style and quality at the right price will be key to building a successful business. We believe we have the opportunity to build both strong wholesale and retail businesses in these two important countries, and think they will contribute to our international growth and positively impact our business within the next three to five years. Many of our key distribution partners continue to open Skechers retail stores in regions where they sell our footwear. At quarter end there were 102 distributor-owned or licensed Skechers retail stores across South America, South Africa, the Middle East, Eastern Europe, Scandinavia, Asia and Australia. Nine new distributor stores open in the third quarter, one each in Australia, Colombia and the Philippines, and six in South Korea and eight closed. Similar to our company-owned stores, these distributor stores serve as marketing tools building brand recognition, as well as offering local consumers a complete picture of the Skechers brand. The majority of our distributors use the marketing campaigns we create in-house to support our brands in their regions, while a select few create ads that reflect the local flavor. Currently Japan, South Africa and the Republic of Korea are using the power of local celebrities. Skechers is available in more than 100 countries and territories around the world including the top five most populated countries. With the relatively recent launches in China, India and Brazil, and continued growth in many key countries, we believe our international business now at approximately 25% of our total, will become a significantly larger percentage in the near future. We currently believe our subsidiaries, which have an improved backlog, will continue to grow into next year. While we have seen improvements in some of our distributor countries, most of Eastern Europe continues to have challenges due to the economic issues in the regions. Several countries in other regions are facing similar challenges including one of our key distributors. We believe on balance, our international business will be relatively flat or slightly positive for the fourth quarter as compared to Q4 of 2008. Over the long term we see many opportunities to further grow our Skechers and fashion lines around the world, and will continue to focus on improving our existing business and building the brand in promising new areas. Our combined domestic and international retail sales were up 20% for the third quarter with a positive retail comp of 7% in total same store sales. For the nine months our total retail sales were up nearly 8%. A quarter end we had 244 company-owned Skechers retail stores. In the third quarter we opened five retail stores including an outlet and a concept store in Canada and two concept stores and an outlet in the United States. We have another six stores planned for the remainder of the year, including prime locations in London's Covent Garden and downtown Santiago, Chile and have plans to open in additional 20 to 25 Skechers retail stores in 2010. Planned stores include Eastern Town Center in Columbus, Ohio and locations in Portugal, England and Canada. Turning to our third quarter 2009 numbers in detail, as I mentioned earlier, third quarters sales were a record $405.4 million compared to $403.2 million in the third quarter of 2008. The increased third quarter revenues were driven by growth within our international business and double digit improvement in our retail channel, as well as strong growth in our online business. Third quarter gross profit was $183.7 million or 45.3% of sales compared to last year's gross profit of $171.5 million or 42.5% of sales. The 280 point basis point increase in gross margin percentage was primarily due to the improved quality of our inventory, which resulted in reduced closeouts and strong product sell-throughs during the quarter. We expect our margins to return our historical range of 42% o 43% in the near future which is line with our business model. Third quarter selling expenses as a percentage of sales were virtually flat at 10.2%. The slight increase in the dollar amount of selling expenses for the quarter was mainly a result of slightly higher marketing expenses largely offset by lower trade show expenses. General and administrative expenses were $110.5 million or 27.3% of sales compared to $106.5 million or 26.4% of sales for the third quarter last year. The increase in G&A expense was due to a combination of slightly higher expenses in wages, distribution and rent, partially offset by reductions in temporary help and travel expenses. Total operating expenses for the third quarter were $151.7 million or 37.4% of sales compared to $147.4 million or 36.6% of sales in the third quarter of 2008. Considering the addition of 29 retail stores and several new international initiatives such as Chile, Brazil, Hong Kong and China, we feel that we have done a solid job managing our costs while positioning the company well for the future. During the third quarter of 2009 we returned to profitability and saw income from operations growth to $32.4 million, an increase of over 31% from a year ago. Net income for the third quarter was $24.5 million compared to $28.3 million last year. Net earnings per diluted share in the third quarter of 2009 was $0.52 on approximately 47.1 million average shares outstanding, compared to net earnings per diluted share of $0.60 on approximately 46.8 million average shares outstanding during the third quarter of 2008. Income tax expense was $10.2 million during the third quarter of 2009, as compared to a tax benefit of $3.6 million during the same period last year due to an advanced pricing agreement reached with the Internal Revenue Service. Net sales for the nine-month period ended September 30, 2009 were $1.48 billion compared with $1.143 billion in the prior year period. Gross margin was $431.8 million compared to $500.9 million. Operating expenses decreased to $401.9 million compared with $409.6 million last year. Selling expenses decreased to $97.6 million from $105 million. General and administrative expenses were flat at approximately $304 million from last year. Net income for the nine months was $26.8 million compared to $75.8 million last year. Diluted earnings per share were $0.57 on approximately 46.6 million average shares outstanding compared to diluted earnings per share of $1.62 on approximately 46.8 million shares last year. Our balance sheet continues to be very strong. At quarter end we had approximately $276 million in cash and short-term investments were $5.86 per share which should provide us with sufficient capital for our initiatives and to fund our future growth. Trade accounts receivable at quarter end were $205 million and our DSOs at the end of September 2009 were 50 days, versus 46 days at September 30, 2008. Total inventory at September 30, 2009 was $191.8 million, representing a significant decrease of $69.4 million from December 31, 2008 and a decrease of $58.3 million from the same period last year. The decrease in quarterly inventory includes an addition of $7.2 million in inventory for our new subsidiaries and joint ventures Brazil, Chile, China and Hong Kong. We believe our inventory is now clean and well-positioned for both the remainder of the year and into 2010. Working capital increased to $529.8 million versus $413.8 million at year-end. Long-term debt was $15.8 million. Shareholder's equity increased to $716.7 million versus $671.9 at December 31, 2008. Book value, or shareholder's equity per share, stood at approximately $15.20 as of quarter-end. Capital expenditures for the third quarter were approximately $4.3 million, which primarily consisted of five new store openings and several store remodels and $1.4 million for warehouse equipment for our new distribution center. Excluding the distribution center, which we now expect to be a 2010 event, we believe our total capital expenditures for the remainder of 2009 to be between $5 million and $7 million. In summary, in the first half of the year, our focus was on managing our balance sheet, inventory and expenses while maintaining our strong position in the domestic and international footwear markets with the goal of returning to profitability in the second half of the year. We have achieved this goal and are performing extremely well. The combination of our focused approach to our global footwear business, including the development of new international distribution agreements in India and Mexico, new product initiatives, strong execution, additional distribution channels and more Skechers retail stores, have allowed us to grow sales and increase profitability. Our third quarter sales reached a new record high, driven by sales growth in the high single digits in our international business and double-digit improvements in our retail channel, along with improvements in our domestic business. Our gross and operating margins also improved meaningfully in the third quarter due to our ability to manage our expenses and inventory. Furthermore, we have improved our cash and short-term investments to $276 million and introduced successful new products for men, women and children backed by effective marketing. We believe the combination of our ample liquidity, clean inventory and fresh product in the market position us well and will allow us to capitalize on new growth opportunities as they arise. While the global economy continues to show signs of weakness, we believe our business is on track and continuing to strengthen, based on our record third quarter sales. The combination of the many positive indicators we are seeing, including healthy domestic and international backlog, positive retail comps and strong sell-throughs, gives us confidence that we are well-positioned for continued profitable growth. And now, I'd like to turn the call over to the operator to begin the question and answer portion of the conference call.

Thank you, sir. We will now begin the question and answer session. (Operator Instructions) One moment please for our first question. Our first question comes from the line of Chris Svezia – Susquehanna International Group. Chris Svezia – Susquehanna Financial Group: Good afternoon, David. Congratulations. A handful of questions, I guess. First, can you maybe just quantify on the backlogs, maybe just walk through domestically and internationally, put some perspective around the increases if you could?

They both remain low double digit increases over this time last year. Chris Svezia – Susquehanna Financial Group: And then on the international piece, if you strip out – what impact does currency have on that?

It has a slight currency. It's actually, if you look at it, the euro is fairly consistent to last year. We have a little bit of loss in the pound, which is obviously a big country for us. But on par, the existing country, the euro, the Swiss franc and the Canadian dollar are not significantly different than last year, even though fluctuations. So there's not – in backlog, anyway, not significant change because of currency. Chris Svezia – Susquehanna Financial Group: And then one thing you didn't really mention here is Shape-ups, and I'm just curious if you can maybe talk about incremental benefit to the third quarter, your thoughts as you look further out, store growth, things in that nature, just put some perspective around what it is, what it means, what you guys are doing, etc.?

Well, I don't know that in and of itself it means anything more significant than what it is as part of the overall. We've been doing very, very well, and obviously its impact on the third quarter is not significantly higher. We're actually down 10% in domestic sales, and that would be the biggest piece since that's where it was launched. So it's a piece of what we do. We now have a number of products that are checking very well. It's just like I said, it's just an increased part. It had a good beginning, but it's just the beginning and no one knows what it'll bring. But we have other products in our kids', men's, women's that are doing very, very well that are a bigger piece of the backlog and continue to improve over last year. Chris Svezia – Susquehanna Financial Group: Can you just – I mean – can you just, I mean in the past you talked about that you guys are doing a [Manila] test, and obviously retail is talking them pretty highly of it. Can you just maybe talk about where you are in that test phase, maybe the number of doors to some degree that you're in, what it looks like? Is this more of a spring business, or is it really going to potentially build for holiday, any perspective around that?

I really can't tell yet. I mean it's getting some reception and obviously Q4 is the next iteration of the test. Q1 in and of itself was only basically first deliveries to retail. So it's just too early for us to tell what it really means. We know most of the product we're delivering now is pretty hot, that's a part of it. So I don't know that it's a good time to pull it out or segregate it. It's a piece. It's starting very well. It's like we said in the past, we're very good at taste change and merchandising tastes change. So there could be something new coming at the end of this year that we'll jump on as well. Right now, it's a good beginning, and it's only a very small piece of what we've done for Q3. Chris Svezia – Susquehanna Financial Group: Do you have that internationally? Is it for all Shape-ups?

It's even further behind internationally. It's only getting first introductions now. Chris Svezia – Susquehanna Financial Group: And when you guys talk about domestic to improve the wholesale piece as you go into the fourth quarter, is that – does that mean you can potentially actually be positive in the fourth quarter on the wholesale side?

Oh, I would anticipate that. Last year's fourth quarter doesn't have a tough number to beat given the environment of a year ago. I mean if I had to put it in perspective, last year's fourth – third quarter was our best top line quarter ever and this one is better. That third quarter last year started to slow down, obviously, in September and moved into the fourth quarter. This year, we accelerated through September and would expect acceleration into the fourth quarter. So it'll be very different than last year, and we certainly are anticipating domestic wholesale to show an improvement from last year. Chris Svezia – Susquehanna Financial Group: And last question I have is just on the gross margin. You're very strong here in the third quarter, and the inventory's in real good shape going into the third quarter. I mean when you sit back and you think about 42%, 43%, I know the fourth quarter is typically a lower gross margin quarter. Is that just applying to that quarter, or as we think further out to spring where you usually generate higher gross margins, it could be certainly better than that? I'm just kind of curious of your perspective.

I think we will not be able to – the reason for the higher margin I think is significantly about some of the new products we're offering and the fact that there was no closeout. So our margins are higher because we didn't have closeout. If you were really to take an apples-to-apples comparison, I think our volume would have been equivalent in fourth quarter on a domestic wholesale basis, just given the amount of closeouts we did last year as opposed to this year. So the question is when do we get back to a normal cycle? I don't believe we'll catch all the inventory in the fourth quarter, so I think there is – while I'm maybe not in the 45-plus range or 46 because Q4, like you said, is smaller, there is some possibility to be slightly higher from historical perspectives. But as we get into Q1, where we are building inventories, and certainly it's a back-to-school next year we plan on being closer to our 42% to 43% historical.

Your next question is from the line of Scott Krasik – C.L. King & Associates. Scott Krasik – C.L. King & Associates: Thank you. David, have your retail comps accelerated since the third quarter?

You mean on a percentage basis? Scott Krasik – C.L. King & Associates: Yes.

Yes, of course. I mean last year's October is when things really started to happen. So I think you would anticipate the first couple weeks of October have been up, higher than they were for Q3. Scott Krasik – C.L. King & Associates: So double digit comps is a reasonable assumption?

Certainly. Scott Krasik – C.L. King & Associates: And can you sort of quantify what the ASP increase or what the difference is there, because that's clearly where Shape-ups is having a big impact?

Well, it can't have that big an impact since volume was down, but I understand the perspective. Basically, I think with the lack of closeout business our ASPs were up somewhere in the dollar range on domestic wholesale. Scott Krasik – C.L. King & Associates: That's pretty significant. And you're in retail stores even more than that?

Well, because it's wholesale, it's probably not as significant. It's up, I'm not sure, maybe a dollar, a dollar and change as well. Scott Krasik – C.L. King & Associates: The G&A I think was a little higher than we were expecting. In this environment where people are cutting to the bone, you guys seemed to have put up a record G&A quarter. Any thoughts, or directionally is that going to be coming down? Next year I know you're opening stores, so maybe it won't.

Yes, well that depends on the growth. I think if you look at it closely the only real differential this year was the non-U.S. and even now the old subsidiary. This is our first full quarter of Chile in season as the subsidiary, and they only really ship extensively and have big overhead buildups in Q1 and Q4 so far. So we're looking to flatten that out or certainly move that out. But if you think about the distribution cost of consolidating a distribution center and shipping 50% of your volume, in one quarter you pick up a significant amount in Q1, Q3 actually, from Chile. We've had increases in China, in Hong Kong, and increases in Brazil because of the volume there. So there's more points of sale. So I think on a domestic basis, our G&A has certainly been in line and kept down. I think that's true as far as Europe is concerned as well. Going forward, I think it depends on our growth and the growth of our subsidiaries. We're not planning any significant increases other than what's necessary to increase the volume as we go forward. So depending on how the subsidiaries do and how much volume increases we have domestically and in Europe, we'll certainly – and how many stores we intend to open and could get to – will be the telling tale for what G&A does in the near term. Scott Krasik – C.L. King & Associates: But you are talking about 25 stores next year – 20 to 25 stores?

Yes, that's what we're talking about, and if we can find them, given what the rental environment is and how hot the brand is and our returns at retail, we would do more if we could find good locations at reasonable rent. Scott Krasik – C.L. King & Associates: Just lastly on the technical on the tax rate, you guys I guess were doing some stuff with your transfer pricing I think? Internationally, you've got the tax rate down with the sort of forward thought on the tax rate for next year?

Well, the forwards, so and we're still looking at it, and I don't want to flip that far in advance – we're still looking at 30% for the year and around 30% for the fourth quarter. The main dynamic in the taxes is how much money is earned domestically and how much is earned overseas. The last year we've been earning more money overseas, so it's growing quicker overseas, and it did have a positive impact on the tax rate. I think it's fair to say, coming into Q1 we will have significant increases in our domestic business as well. So the rate of acceleration and profitability between domestic and international will be the telling tale. So I think it's fair to say use your own models, and if you accelerate domestic business significantly high, you may take their tax rate up a few percent. And if you think international's growing faster because of what we're starting, you can take it down a few percent. Scott Krasik – C.L. King & Associates: Oh just last, I mean you mentioned your backlogs are up low double digits. At this point, going into 2009, you're obviously – really start to feel the pain. So I mean is it you know where you'd like it to be? Do you expect to sort fill a lot of that [once] orders, and –

Well, I think you have to think about it as a two-fold thing. Obviously, the backlog as it existed in September 30 of 2008 turned out to be not quite as solid as it normally is for us or what we anticipate today. Because of the cancellations and the changes and the moving out of orders, we didn't get as big a bang for our buck. So I think it's fair to say that our backlog is stronger per dollar, if such an awareness is accurate, and it continues to grow through – in October. So I think it accelerates from here, so being up low double digits, having it solid and starting to accelerate through October as we go into spring is a very good place for us to be.

Your next question is from the line of Sam Poser – Sterne Agee & Leach. Sam Poser – Sterne Agee & Leach: I just wanted to follow-up on the just clarification on the gross margin for Q4 and the components of SG&A one more time. I'm sorry – just to clarify what you're thinking as relative to Q3.

Well, I think Q3 was very good as far as gross margins are concerned. We anticipate having very positive impact, certainly from last year on gross margin. And I think given the shape of our inventories that we currently see at retail we have some upside from our normal Q3, Q4 deterioration in gross margin. As far as G&A is concerned I think the same metrics hold. There should be relatively stable till last year. We have to pick up the stores and some of our international but I don't see any major shifts as far as G&A are concerned. Sam Poser – Sterne Agee & Leach: And then as we look into next year that's really just for the growth along the sides of the growth of the store base and anniversarying the subsidiary changeovers and what not?

I think that's true but I think what you'll also find is that as volume picks up we obviously have in real dollar terms, not necessarily percentage, obviously, overhead that has to do with increased volumes as we pick up the pace. Sam Poser – Sterne Agee & Leach: Growth

The question is how big that volumes going to be and how efficiently we handle it. Right now I don't see any major changes in our core infrastructure but we don't have a final number of our plan of what we think – especially as you get the back to school next year of what growth can be. Sam Poser – Sterne Agee & Leach: And in Q4 you said international wholesale you expect to be flattish up a little. Is that right?

International in its entirety. When you take what we think is going to be – well first of all, it's never a big quarter for international anyhow. So it only moves the needle so much but what we anticipate now is that the subsidiaries will be up and the distributors will be down, not different than we've seen through this year for a net relatively flat, slight positive for a Q4. Sam Poser – Sterne Agee & Leach: And where is the total international for Q3?

It was up high single digits. Sam Poser – Sterne Agee & Leach: Total international was up high single digits so we would expect that to be relatively –

Relatively flat now in Q4 on certainly a more smaller base since it's not a bigger piece of their business year. Sam Poser – Sterne Agee & Leach: I mean, and when you look ahead to 2010 do you foresee – are you planning to double digits or are you planning – where are you thinking about 2010 right now as far as increase?

Of international? Sam Poser – Sterne Agee & Leach: Well, just in total.

I don't know. I don't think we're ready to make that assessment yet. Sam Poser – Sterne Agee & Leach: And you guys have done a very good job of controlling, again controlling all of the expenses of – and you've been doing a lot of marketing against the Shape-ups relative to the size of that business. I mean we see it on sides of busses, on television and so on and so forth.

I'm sure you see much Twinkle Toes on there, too. We're not a one dimensional; I think you're just into it. Sam Poser – Sterne Agee & Leach: We see lots of Twinkle Toes also, but I mean this is the first time in a long time that you've been in a position where you basically are short product of some of the best sellers. I mean you've really chasing some of these things down that we've heard from the retailers. Are you planning, I mean, when do you catch up? When do you think you are going to catch up there?

I don't know. It depends how much they want, how big it is. It never takes us that long. You know our infrastructure is pretty solid. I don't know that there's going to be shortages in the marketplace for a significant period of time. But it's, like I said, it's too early to tell.

(Operator Instructions). Your next question is from the line of David Turner – Avondale Partners. David Turner – Avondale Partners: I was curious about a couple of things. I guess gross margin related, was there any meaningful change in at once business given that your inventories were so lean coming into the quarter or was it enough of a spike in that business to impact gross margin trends? And given that you're lean for Q3 do you think that will have a impact for Q4 as well?

I think in both cases the answer, like we said in our prepared comments, the fact that we had significantly less closeout inventory available and certainly didn't ship it have positive impact on gross margins. And like I said I think it does have a possibility of increasing gross margins from the normal, obviously decreasing Q4 '09, given that we're still very clean in inventory and there is still high demand for our product. David Turner – Avondale Partners: I got you. And then secondly on the international business, I don't know if you can or maybe you can just like ballpark the change in door count. I think you said international was up high singles overall. Is there any way to measure doors working versus selling to existing accounts? I guess, so how do you get to that high single digit? I'm trying to figure out how much share you're taking, I guess, is ultimately what I'm trying to get to.

Well, I don't that I can give you all that. Part of the increase, obviously, is Chile, which was one customer to begin with. It's now a whole country that's a subsidiary, and obviously, Brazil and China are growing because they're brand new. But it's fair to say that our backlogs in Western Europe and Canada are up as well, are up significantly and we anticipate growth. I think the biggest – I think that the combination of door count and taking shelf space within, of course, we are growing there. We're not as established as we were in the United States, and I think that's fair to say that where we are directly, subsidiaries and joint ventures, we expect to continue growth both door count and shelf space. And we have a couple of areas in the world where there are distributors where the economy is tough, but I think it's starting to show signs of improvement. And we could show improvement there for 2010 as well. David Turner – Avondale Partners: All right, and then I guess, just for housekeeping. I think you had mentioned initially, early in your prepared comments, you were talking about domestic wholesale being down, and think you said [inaudible] and I couldn't figure out if there was some brands that were closed and I couldn't figure out if you were talking about internally within Skechers or retail accounts that you ship to?

No, internally within Skechers. David Turner – Avondale Partners: All right, so then the question becomes how much of that 23% decrease in inventory did that, not having those brands on the books, how much did that account for?

The smallest piece, those are small. David Turner – Avondale Partners: I got you.

Small pieces to begin with. David Turner – Avondale Partners: Yes, but were they, I guess just to continue that, did they use a lot of resources from a marketing perspective, and so that would be alleviated in Q4, or even into 2010?

Oh, well, I don't think anybody would think we had problems reallocating the marketing resources wherever they are to what exists, so I don't know you'll see a decrease in there. Obviously, everything has resources, but we're picking it up with growth in Skechers brand, so those will catch on, and we think will certainly make up the difference. But there's certainly is the transition out and they do take a small amount of resources and they had some inventory and some volume, probably more closeout volume, at the end of the year, and the beginning of this year than real volume and real stress on the infrastructure. It's just a part of the cleanup process. David Turner – Avondale Partners: Yes, and I knew that before. Two more, you had mentioned the [D.C.] is now a 2010 event, I guess, just for housekeeping, is there a better mid, late, early 2010 and it seems a little later than what was initially proposed. Is there something structurally going on or just timing is off, askew, whatever you want to call it?

Well, we had various issues and now the economics have certainly changed, so we're revisiting the economics. And so, obviously, we won't have a final date until the first shovel goes in the ground, but we are anticipating no earlier than the last quarter of 2010 and possibly even the first quarter of 2011 before it's really up and running, so. David Turner – Avondale Partners: All right, and then lastly, given the growth in your retail business and the domestic wholesale business still kind of, I mean obviously, the environment's lagging. Do you feel like there's any tradeoff? Is your company-owned retail stores possibly taking share away from the domestic wholesale business?

Well, it probably was a little true in Q3, but we don't anticipate anything happening from Q4 and forward. Our wholesale businesses will be picking up the slack, and like I said, we anticipated growing certainly in Q4 and into the first half next year. David Turner – Avondale Partners: Yes, hearing nothing but good things from the closeout, so good luck this holiday, and thanks.

Your next question comes from Scott Krasik – C.L. King & Associates. Scott Krasik – C.L. King & Associates: Thanks, David, there's usually a seasonal decline and some selling expenses Q3 into Q4, but you're obviously making a big push for holiday. Should we expect that seasonal decline again or?

Yes, absolutely. I mean, you might see though some growth in real dollar terms from last year, small, like you've seen the year as we've gone forward, but certainly we're not going to push it to the Q3 levels, not even close. Scott Krasik – C.L. King & Associates: And do you envision, I mean it's obviously early, but you know, selling and marketing, are trade show costs going to continue to come down? Will they be offset by selling expense and marketing expenses? Maybe talk about just directionally what's going to move that next year also?

Well, we haven't obviously finalized next year, and Q1 is not our biggest advertising time anyhow, so we're still working on that. I think it's fair to say that I'm not sure how much we can decrease the trade show expense. We're constantly looking at it, but I wouldn't anticipate back increases back into it next year certainly. And marketing will depend on what we anticipate our volume is going to be. As we sit with our backlogs to the end of October and into the holiday selling season and we see, we anticipate Q1, Q2 and some of the back to the school, we'll be working on our marketing budget, so obviously they're related to each other and it's too early to come up with a number. Scott Krasik – C.L. King & Associates: And then on the backlog, any major differences between women's, kids' and men's? Is it positive –

You mean from historical levels? Scott Krasik – C.L. King & Associates: No, I mean is your men's backlog positive now, or is it still negative?

Men's backlog is getting certainly much better than it was the beginning part of the year and it's moving into the positive. Obviously, women's is our strongest. It has been. It will be. Men's has been the most difficult this year. Kids' has held up the best, so there wasn't a big deterioration of backlog, therefore growth is different, but we still remain the biggest piece women and then men's and kids. Women's and kids' certainly holding up better than men's for the time being. Scott Krasik – C.L. King & Associates: And then any change? You still expect to spend $30 or so million on the distribution center in CapEx next year, $35 million?

Well, to the end of next year, yes, the end of next year or in '11.

Your next question is a follow-up question from Chris Svezia – Susquehanna Financial Group. Chris Svezia – Susquehanna Financial Group: David, just on your retail store piece, I was just wondering if you could maybe talk about what's going on in terms of maybe renegotiating some leases, co-tenancy violations, if any, and just kind of terms of when you talk about 20, 25 stores are the potential for rents going to be down here every year? Just maybe talk a little bit about that because you guys were growing sort into the height of the real estate groups. I'm just kind of curious about what you're seeing out there and maybe what you're doing on your existing real estate portfolio.

I don't think we're different than anybody else; however, when you have longer term leases and most of our stores were opened in the last few years it's very difficult to renegotiate. Where it's possible for us to renegotiate we certainly are. And looking for new space, we're obviously looking to see what empty space is around and what retails are – I think we can do better deals, although I wouldn't swear to that, as we go look for it. That's what we're looking for in today's environment. So I don't know that you'll move the needle significantly on rents. New rents should be, on a relative basis, better than old, but I think 20 stores won't move the average rent significantly, although we are working on it. Chris Svezia – Susquehanna Financial Group: And the last question I have is just when you look at retail stores, when you're talking about acceleration in comp, to what degree within your company stores, concept stores, outlets, what's driving it? It is pretty evenly split, or just maybe some color between the two, concepts and warehouses?

Well, which ones are growing the fastest, you mean? Chris Svezia – Susquehanna Financial Group: Right.

Well, the concept stores obviously come back the quickest. They were the first to turn positive because they have all our new product and go through there, followed by outlets and lastly by box stores because they have the most difficult economic and are in the most difficult areas for where the economy is hurting nowadays. So I think that's pretty much as you would imagine, concepts first, then outlets and then the box stores.

Thank you, and ladies and gentlemen, that is all the time we have for questions today.

Thank you again for joining us today on the call. We would like to note that today's call may have contained forward-looking statements. As a result of various risk factors, actual results could differ materially from those projected in such statements. These risk factors are detailed in Skechers' filing with the SEC. Again, thank you, and have a great day.