Andrew Greenebaum - IR David Weinberg - COO & CFO

Danielle McCoy – Brean Capital Jeff Van Sinderen - B. Riley Sam Poser - Sterne, Agee Chris Svezia - Susquehanna Financial Group Scott Krasik - Buckingham Corinna Freedman - Wedbush Securities Bill Dezellem - Titan Capital Management

Greetings, and welcome to the SKECHERS USA Incorporated First Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. At this point, I'd like to turn the conference over to SKECHERS. Please go ahead.

Thank you, everyone, for joining us on SKECHERS conference call today. I will now read the Safe Harbor statement. Certain statements contains herein, including without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the company or 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. The users of the forward-looking statements are encouraged to review the company's filings 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 operations and financial conditions. With that, I would like to turn the call over to SKECHERS' Chief Operating Officer and Chief Financial Officer, David Weinberg. David?

Good afternoon. And thank you for joining us today to review SKECHERS' first quarter 2014 financial results. The worldwide demand for SKECHERS footwear exceeded our expectations in the first quarter driving net sales to a new first quarter record of $546.5 million, which was a 21% increase over the same period last year. The sales gain was a result of double-digit increases in our domestic and international wholesale businesses as well as our company-owned retail stores, which included a 5.6% comp store increase. These improvements came in spite of the unusually cold weather experienced by much of the United States throughout the quarter and Easter falling in late April. The key product sales drivers were broad-based and came across our men’s, women’s and kids offering and included both lifestyle and performance products. First quarter sales and financial highlights include a 20.7% increase in our domestic wholesale business with a 14.8% increase in pairs shipped, a 26.3% increase in our international business, a 15.9% increase in our company-owned retail business, which included an additional 46 new stores opened in the last year 10 of which were opened in the first quarter, earnings from operations of $48.2 million or 8.8% net sales, gross margin of 44%, net earnings of $31 million and diluted earnings per share of $0.61, in line inventories, which decreased 12.8% from year end and were up 23% from the year ago, a strong balance sheet with $329.4 million in cash or approximately $6.48 per diluted share. It is important to note that our effective tax rate for the first quarter was 25.7%, which included certain discrete items reported in the period. We are estimating our effective tax rate for 2014 to be between 25% and 28%. With the increased demand for our products from consumers around the world, we believe that strong sales momentum that we are currently experiencing will continue through the second quarter and the full year. Our April incoming order rate and revenues are very strong and our backlogs have accelerated since year end. The reception from our key accounts to our new product offering gives us the confidence and the strength of our business. Now turning to our business in detail. In our domestic wholesale business, sales increased 20.7% or $39.9 million for the quarter with 14.8% increase in pairs shipped and 5.1% increase in average price per pair versus the same period last year. This growth is due to the continued demand for our diverse life style and performance footwear and the multiple successes we are experiencing. Each of our key divisions has produced strong sales drivers and allowed us to extend our offering. Key to this success has been the comfort innovations we have made across all of our brands. By gender we achieved double-digit improvement in our men's and women's business and very high single digit growth in our kids business. The increases came from our men's and women's SKECHERS USA sport and work lines as well as our BOBS from SKECHERS and sport active lines for women. Additionally, our men's and women's SKECHERS go performance and casual lines experience double-digit sales in the quarter. The performance position was fueled by several noteworthy accomplishments in the first quarter. SKECHERS GOrun Ride 3 received the best buy award from Runner's World and the SKECHERS GOrun 3, the best value award from Competitor Magazine, and the SKECHERS performance division with the official apparel and footwear sponsor that used in marathon. And now already in the second quarter the elite runner and Olympian marathoner Meb won the Boston marathon with a new personal best in the soon to be released SKECHERS GOMeb Speed 3 a major accomplishment both for Meb and the brand. Meb continues to be the face of the SKECHERS performance division currently appearing in marketing campaigns on TV, in print and outdoor. To support our many successful lifestyle product categories, we had multiple TV commercials in the first quarter including campaign featuring TV personality Brooke Burke-Charvet, the voice winner Danielle Bradbery and sports icons Joe Montana, Tommy Lasorda and Mark Cuban. These along with our other commercials allowed us to run targeted TV campaign reaching the right demographics at the right spot. In addition, we ran print, digital and outdoor campaign to further drive sales. The continued success of BOBS, our charitable footwear line has resulted in more than 8 million pairs of shoes donated to children in need. We are very pleased with the goals we achieved in our domestic wholesale division especially given the cold winter much of the country experienced and Easter moving to late April. We believe the strong sales are attributable through our innovative product, and we believe the demand will continue through the year based on our incoming orders, accelerating backlog and reports from our wholesale partners. In the first quarter, our total international subsidiary, joint venture and distributor sales increased by 26.3%. As a result of the strength of our diverse product initiatives, our subsidiary and joint venture sales improved by 27.7% and our distributor sales improved by 21.9%. This increase came in spite of the continuation of political and currency issues in Ukraine and parts of South America. We have seen a strong rebound in our business in Europe and believe the demand for our brand is at an all-time high across nearly every region where we directly distribute our product resulting in double-digit growth in all but two of our subsidiary countries. We would also like to note that we expect to complete the upgrade of our European distribution center by the end of 2014 increasing our capabilities and efficiencies in the region. Our Southeast Asia joint ventures continue to perform very well with combined growth of 18.7% for the quarter, which includes more than 50% increase in our China business. We expect our joint venture regions to continue to grow at this type of rate. Our international distributor business performed much stronger than expected especially given the Easter shift and ongoing political and currency issues in a few key markets. The double-digit increase was primarily the result of triple-digit growth in Indonesia, Turkey and Taiwan and double-digit growth in Australia, New Zealand, South Korea, Mexico and the UAE, as well as strong performances from many other regions. We believe that the strategy of opening retail stores serves us both a marketing tool and profitable distribution channel and it's an integral part of building a sustainable business around the globe. At quarter end, there were 497 SKECHERS stores owned and operated by our joint ventures, licensees, and distributors outside the United States. Of these, 327 our distributor owned or licensed SKECHERS retail stores, 140 SKECHERS stores in our joint venture countries in Asia including those run by licensees in the region and an additional 30 company-licensed stores are in Brazil, Canada, France, Ireland, Portugal, and Spain, countries where we directly distribute our products. In the first quarter, 22 stores opened including our first store in Belarus. Additionally, we opened three each in the Philippines and Saudi Arabia, two each in Malaysia, India and Taiwan and one each in Costa Rica, Mexico, South Korea, Indonesia, Russia, Brazil, France, Wales and Croatia. A store in Australia closed in the quarter. Four distributor joint ventures or license SKECHERS stores have opened to-date in April and another 80 to 90 are expected to open during the rest of the year bringing our total to approximately 600 distributor joint venture or license SKECHERS stores by year end. As I mentioned our international product delivery is moving more in step with our domestic delivery creating a more synergistic and cohesive approach to our brand globally. Importantly, this needs the momentum that we are experiencing in the U.S. is also occurring and virtually all of the international markets where our product is available. The double-digit growth in international is a reflection of the strength of our product, marketing and brand. Based on our accelerating backlogs the reaction to our key initiatives and the opening of additional retail stores, we believe that our international business will be of double digits for the second quarter and the year. For the quarter, total sales on our company-owned retail stores increased by 15.9% with domestic sales improving by 10.7% and international sales by 48.8%, which included positive comp store sales of 5.8% domestically and 5.6% worldwide. We are especially pleased with these increases given the timing of Easter as well as the extremely cold weather experienced in the U.S. in the first quarter. At quarter end, we had 399 company owned SKECHERS retail stores around the world. In the first quarter, we opened 10 stores, 9 of which are domestic and one international concept store in Chile. These included new stores in Arizona, California, Florida, Maine, Maryland, Nebraska, New York and Puerto Rico. We closed one domestic concept store in the quarter. We have opened three stores this month; one is in Ohio, New Jersey and Texas. And we are planning to open another 15 to 17 in the second quarter, including one this week in Chilly and an additional 30 stores are planned in second half. Domestic e-commerce sales were flat for the quarter, which we believe in part is due to low inventory key file as a result of stronger than expected sales. Now, turning to our first quarter 2014 numbers in more detail. As I discussed earlier, first quarter sales increased 21% to $546.5 million, compared to $451.6 million in the first quarter of 2013. This marks our highest first quarter sales ever and second largest sales quarter in the company's 22 year history. The increase is due to the strong product successes we are experiencing across our multiple product categories, which have resulted in double-digit increases in our wholesale businesses both domestically and internationally, as well as in our company on retail stores worldwide. First quarter gross profit increased to $240.4 million or 44% of sale, compared to gross profit of $192.7 million or 42.7% of sale in a corresponding prior year period, an improvement of a 130 basis points. The increased profitability and higher gross margin during the quarter was due to the combination of higher sales and strong sell through of our product as well as an increase of 5.1% on an average price per pair. First quarter selling expenses was $36.7 million or 6.7% of sale, compared to $37.7 million or 8.3% of sales on the prior year. The 160 basis point decrease was primarily due to the lower advertising and selling expenses. We made a decision to shift some of our media budget from the first quarter to the second quarter because of Easter falling in late April. For the first quarter, general and administrative expenses were $158.5 million or 29% of sales, compared to $141.5 million or 31.3% of sales in the prior year. This represents a 230 basis point improvement in operating leverage. The dollar increase in G&A was primarily due to a combination of factors, including our increased store count, which resulted in higher salary, rent, employee benefit, as well as increased warehouse and distribution cost related to the higher sales volumes. Of the $17 million increase in G&A, $8.9 million was due to increased expenses related to our international operation and $5.4 million was related to the increased store count. During the first quarter of 2014, earnings from operations were $48.2 million or 8.8% of revenues, compared to $15.3 million or 3.4% of revenues in first quarter of 2013, more than a three-fold increase from the prior year. Net income during the quarter was $31 million, compared to $6.7 million sorry, in the prior year period. Net income per diluted share in the first quarter was $0.61 on approximately 50.8 million average shares outstanding, compared to $0.13 on approximately 50.5 million average shares outstanding in the prior year period. Our effective tax rate for the three-month period ending March 31, 2014 was 25.7%. In the first quarter, we recorded an income tax expense of $11. 4 million, compared to $2.3 million in the prior year period. For the remainder of the year, we estimate the effective tax rate to be in the range of 25% to 28%. And now turning to our balance sheet. At March 31, 2014, we had $329.4 million in cash on approximately $6.48 per diluted share. Trade accounts receivable at quarter end was $312.3 million and our DSO at March 31, 2014 were 45 days versus 50 days at March 31, 2013. Total inventory, including merchandise in transit at March 31, 2014 was $312.2 million, representing a decrease of $46 million or 12.8% from December 31, 2013 and an increase of $58.5 million or 23.1% from March 31, 2013. Long-term debt at March 31, 2014 decreased to $113.4 million, compared to $116.5 million at December 31, 2013. The decrease is primarily due to payments made on our distribution center and distribution center equipment. Shareholders equity at March 31, 2014 was $1 billion versus $979.9 million at December 31, 2013. Book value or shareholders equity per shares stood at approximately $19.93 as of March 31, 2014. Working capital was $743.4 million versus $704.5 million at December 31, 2013. And capital expenditures for the first quarter were approximately $11.4 million, of which $8.4 million related to 10 new domestic store openings and several store remodel and $2 million related to a corporate property purchase. In summary, we are very pleased with our sales growth in the first quarter of 2014, the positive reception to our product globally and the direction of our business. Our record first quarter sales and our second highest annual sales ever is a testament to the strength of and the demand for our brand. We are especially pleased that the 21% first quarter sales growth came despite a severely cold winter in the United States and the shift of Easter to late April. Paramount to the growth in the first quarter was the simultaneous success of multiple key product initiatives around the globe, including our SKECHERS GOwalk, Relaxed Fit, SKECHERS sport and SKECHERS kids footwear. Our subsidiary business is the Americas and in the Europe both achieved combined double-digit increases, and our combined joint venture operations in Asia also increased by double-digit. This mirrors the growth by several of our key international distributors around the world and with the accelerating backlogs leads us to believe that our international sales will continue to grow double-digit in 2014. To further grow our business, we are planning on expanding our company on retail operations with another 50 to 60 stores worldwide. Our international distributors, joint ventures and licensees plan to open another 80 and 90 stores this year bringing our total projected SKECHERS store count at year end 2014 to approximately 1,070. Given our retail growth trajectory, accelerating backlogs and incoming orders for April and at once business which remains at the same level as last year, we believe we are well-positioned to continue to grow in 2014. Further, we remain comfortable with the current consensus estimates for earnings in the second quarter, though there may be some upside in the revenue forecast. Finally, we are excited to share the accomplishments of Olympic medalist and SKECHERS performance division's spokesperson Meb. Just yesterday had won the Boston marathon and achieved a new personal best while competing in SKECHERS Go shoes. Meb's emotional victory also breaks a nearly 30-year shutout of American winners in this event. And now, I would like to turn the call over to the operator to begin the question and answer portion of the conference call.

(Operator Instructions). Thank you. Our first question comes from line of Danielle McCoy with Brean Capital. Please proceed with your question. Danielle McCoy – Brean Capital: Hi, guys. Congrats on an amazing quarter.

Thanks. Felt real good too. Danielle McCoy – Brean Capital: I guess my question really relies around on performance. Can you give a little bit more color on performance entering the opportunity to enter the sporting good channel, how things are going with Dick's? And I have recently seen some sketches SKECHERS in (inaudible) as well, if you could just elaborate on that for us?

Well, we have always had (inaudible), they've been a big supplier and I have always come back to try. Dick's is just at the beginning stage, so we have taken the tact with a performance product to not be an also ran or an also just like the other ones that are running. We are taking it very slow, building it to -- with Meb and some other runners to high performance until there is a high enough demand, they break into the sporting goods channel. And so, right now, we are still at the very early stages, but obviously the possibilities are very, very large. Danielle McCoy – Brean Capital: Right, great. And have you noticed any differences between a full price and outlet channels and maybe just a little bit more color on how the outlet business is doing?

For our own stores in general? Danielle McCoy – Brean Capital: Your own stores or outlets and then I guess any general trends that you have seen difference between full price and outlets?

We haven't seen much difference, the outlets obviously started later; they had easier comps so it is comping up. But their relationship to our full prices hasn't changed dramatically. We seem to be selling very well everywhere we are and that means domestic and international. After Europe has come back very strong and it just continuing to increase month over month. So I think it's the demand for the product. We don't have much dated product in any outlet channels simply because we haven't had much and we have been in great demand, and so for I haven't had a close out, our third party outlet channels don't have significant amount of products and we don't have much old in our own, certainly not multiple seasons worth. So right not everything seems to be working quite well and in tandem. Danielle McCoy – Brean Capital: Great. And then just lastly, can you give us a little bit more color on some of the expenses that you shift into the second quarter and how we should look at that?

For the lack of a better word, we took about $3 million in change from first to second quarter, it was a small piece. We had originally planned that each quarter will be up about $3.5 million in real dollar terms over last year which would obviously give us leverage. So I would plan that in Q2 over last year we probably have $6 million, $7 million increase in media spend so we are committed to around the world. Danielle McCoy – Brean Capital: Okay. Great. Thank you so much. Good luck guys.

Thanks.

Thank you. Our next question comes from the line of Jeff Van Sinderen with B. Riley. Please proceed with your question. Jeff Van Sinderen - B. Riley: Good afternoon. Let me add my congratulations as well. So maybe you can just delve a little bit more into the performance segment; interested to know any color you could give us by gender particularly on the women's side either for GOwalk and some of the other product and you can also touch on any new products that are slated to hit this year where you feel like you have got a pretty good run way?

Well, when you come to see us in June we will show you all the new products that's coming out. We are showing (inaudible) prelines right now, but we have a lot of confidence in a lot of other things that are coming; very difficult to just talk about without showing you what they really are. We actually have a lot of flash points that are working very, very well. As for as the performance, to break down to men's and women's it's certainly large for women's than men's but it's certain getting traction in men's especially from the performance end on the Go and on the Go is certainly much bigger for women, but they are both growing quite nicely and it is somewhat skewed towards women at this stage, but I don't know if that will continue that way. Jeff Van Sinderen - B. Riley: Okay. Do you think that I mean, that the whole women's trend and the whole active thing that's going on how much of that you attribute to with what's going on apparel? And obviously I know you have an apparel business that's I believe Li & Fung. So maybe you could just touch on what you are seeing there as well.

Our apparel business is quite new and I'm not really sure, but we are in accessory, and I think there is a trend towards athletic footwear, so only colorful athletic footwear in the marketplace probably comes from a lot of place is not just active wear, but it is certainly a trend now. And we are selling it through all our price points, but our kids and black and brown business has held us very well and growing slightly as well. So I think it's a good time for us in all directions, but the fact that it is a trend towards athletic footwear is certainly to our benefit right now. Jeff Van Sinderen - B. Riley: Okay. And then if you look at your own retail store business are you seeing it lead by, the comps lead by athletic or and then sort of black and brown as a secondary growth mechanism.

We are seeing it lead by athletic but not necessarily 100% performance. We have some very well selling product and are active and our old sport line both in men's and women's; so it is the athletic look, but it's not only performance. Actually our athletic line moderate price points are growing at the same rate and are still significantly larger than the performance division. So we have a lot of opportunity, because we have a lot of pieces that are working very well for us now. Jeff Van Sinderen - B. Riley: Okay. That's great to hear. And then as far as the booking trend, I'm just wondering if there is anything to call out in domestic versus international if the booking trend also reflects kind of leaning toward faster growth and athletic. Any color that you could give would be helpful.

Yeah, it certainly hasn't changed significantly by product category going to this quarter, but everything is working and we actually had increased shipping. I know that with some questions out there about BOBS and how it holds up. BOBS actually showed increases in the first quarter and we had an increase on our BOBS category in double digits with no declining in gross margin. So we do the comfort factor all of that is really working it's nice, overwhelmingly in any one piece. Jeff Van Sinderen - B. Riley: Okay. Good to hear. Thanks very much and best of luck for the rest of the quarter.

Thank you.

Thank you. Our next question comes from the line of Sam Poser with Sterne, Agee. Please proceed with your question. Sam Poser - Sterne, Agee: Thanks for taking my question. Good afternoon. Couple of things, number one, can you talk about the Go product, GOrun product specifically and how it's differentiated between the US and internationally because I think you had mentioned in the past that is getting sort of the higher end product is getting a better response internationally, are you still seeing that?

I don't if it's better, but it sells well around the world in some distributor countries, not necessarily the video is where they had at a higher price point because of the additional markets they have in the area it shows very well and in some countries they just enjoy the colors and it's not as many runners. But I think we enjoyed GOrun and the whole go platform is building around the world at a pretty good pace. So and here as well as in most places where we are. I thought we said in the prepared comments between Europe and Southeast Asia, and the Middle East its multiple categories and they all seem to be growing in tandem. Sam Poser - Sterne, Agee: Thanks. And then two other things. How do we think about gross margin with big increase, how we think about that for the next quarter and the rest of the year? And you gave specifics on backlog at the end of the fourth quarter up 30%. Can you give us where it stands right now? And you said you saw continued momentum in the order flow through April. So can you give more specific so we can compare it?

Well, we want to be more specific, we probably would have mentioned it, but okay I will give you just my, I forgot the first part of the question, but our backlogs has increased, we are up 30%, we are at least 20% higher than that. So north of 35% as we ended March and our booking rate for April has already exceeded last year, so chances are our backlogs will increase as we end the year unless something dramatic happens in the last week. As far as gross margin, we had gross margin changes, bit the international both the joint ventures and the subsidiaries and the significantly larger piece and they have somewhat higher margin. So I don't expect too much of a change, but I don't think there is significant upside. Too much of a change between Q1 and Q2 I would probably model more in the 40 through 44 range slightly higher than I would normally simply because we seem to be doing that well and historically April is our weakest month in the quarter and we seem to be powering through that. So I don't know that there will be any deterioration this quarter either. Sam Poser - Sterne, Agee: But last year your gross margin was 45.5%, so.

Yeah, I think that's because Easter was in the fourth -- Sam Poser - Sterne, Agee: It was in Q1.

In Q1, I think it's last year I'm not sure why, I think it was predominantly currency in some of the places around world. I think our Southeast Asia which is our highest margin business is probably the biggest growing and Europe which started to come back and there was no closeouts there at all. So I think it was just retail still continued. We had very big comps in retail last April. We were up significantly in the double digits. So it carried through the quarter and I think it was such a bigger percentage. There is no way that retail can grow at a faster pace as compared to the rest of the company just given the constraints of the four walls as the rest of the company. Once domestic wholesale and international starts to grow in the 20% retail will probably become a smaller percentage and, therefore, not regain that push for the overall gross margin.

Thank you. Our next question comes from the line Chris Svezia with Susquehanna Financial Group. Please proceed with your question. Chris Svezia - Susquehanna Financial Group: I'm curios. So DTC any color at all about how April might have trended? I would assume there was a pickup at the weather and the Easter shifting. Maybe add any color about that if that's possible?

You're talking about retail or just -- Chris Svezia - Susquehanna Financial Group: No, no, no, your retail DTC. Your stores.

Our stores are comping very well over the last three weeks and there's a shift out of Easter, but very well into the double digits. We're moving along quite nicely and we're even will make up -- we'll comp positive this week even though we had three-fourths of the stores closed on Easter Sunday, we still think we'll comp up enough to be positive for this week, probably do quite well. So we seem to be comping up, everything seems to be moving along. We're booking well, we're shipping well and our stores are holding up well around the world. Chris Svezia - Susquehanna Financial Group: So when you talk about second quarter and you say there could be some slight upside I guess relative to where people are on in terms of the number, and given the fact that it doesn’t really seem like things have slowed as you come in to the second quarter are we still looking at close to 20% growth or is it more -- I'm just trying to gauge what you mean by upside on that revenue number?

Yeah, I think we're talking somewhere in the close to 20%. I think the numbers on the Street are about 490; we're closer internally for the 20% number probably in the 505, 510 maybe range. The issue is that Q2 is never that big and entirely dependent on movement from between June and July. Now there could be a big movement between June to July or July to June depending on what the overall retail environment is. So there is a lot of flexibility in there. But right now -- and its not that big a retail, I mean, not that big an international quarter, so there is only so much upside you can have around the world, but right now I think we'll be pretty comfortable in that 505, 510 range. Chris Svezia - Susquehanna Financial Group: Okay. And G&A I guess for a lack of better still holds just kind of shy of 160 kind of number, is that how we think about that?

Yeah, I don't -- you'll only get to pickup from new store openings. Depending on how many stores are opened and what we have to run through and the potential growth in some of the joint ventures where we have to build infrastructure as the growth comes. Chris Svezia - Susquehanna Financial Group: I mean how do you interpret that as you think about back to school in any, I know its still little early, but just as you sort of talk to retailers on how they're thinking about that key third quarter, I know a lot of things can move around, but that has the potential to be a pretty big quarter for you guys. So any thoughts about how you think things unfold now and how that backlog will tell us placing for that third quarter?

Yeah, it's going quite well. What we're booking now in April certainly at the rate we're booking its not an at one's feet. It's more back to school. While there is some filling and we do have that one. So right now this accelerated booking seems to be the middle of what we book for back to school. So right now we're way positive about back to school. I consider we're going through prelims now. So we'll get the final story as we go forward, but to book this solidly in a month like April bodes very, very well usually for back to school. Chris Svezia - Susquehanna Financial Group: And internationally, talk about double digit growth do you still talking about this as a above 20% between subsidiaries, JV and distributor for the balance of the year? Is that how we think about that?

We certainly could. We haven't really gone out that far, but certainly for Q2 which is not that a big a quarter I would anticipate to being there with slightly easier comp source in the back half that would hold through Q3 but they book a little later here. So we won't know that until April-May.

Thank you. Our next question comes from the line of Scott Krasik with Buckingham. Scott Krasik - Buckingham: Yeah, hey, Dave.

Hey, Scott, it's hard to hear Buckingham. It doesn’t ring that well but okay. Congratulations by the way. Scott Krasik - Buckingham: Thank you. I'm getting used to it also. But the distributors sales growth this quarter was actually up against a big number last year and then the comparison gets much, much easier. So are we going to see very large numbers out of the distributors in the next three quarters given the easier comps?

We'll probably see higher percentages but they don't make up -- they're probably one-third the size now of what our subsidiary joint venture business is. It can only have so much impact. But yeah, I think it does continue, well maybe not in Q2 so much; it's not that big a quarter all around but certainly in Q3 I'm expecting some big things and I wouldn't shy away from Christopher's question which is 20% but I think anything is possible. We continue to get (inaudible) the way our stores are performing there and the way they are booking, even though it is a small sampling size for April bodes very, very well. We just do not want to get too far ahead of ourselves for back to school. Scott Krasik - Buckingham: Okay. And then, in terms of the comps in your own stores again, April is up double-digits, should have some pent up demand given at the weathers just finally breaking. So any reason why you would not comp up double-digit in the second quarter in your own stores?

I do not think so. I mean we'll have a very good stock for April. May is a very difficult one at retail. You never know if that is more a macro piece and June, so as we get into the holiday period. But I do not anticipate that we will have any issues at retail. And even though the comps get more difficult to compare against, I still think we will be in a high-single-low-digit comp stores. Scott Krasik - Buckingham: Okay. And then -- so I will just go back to the gross margin question that Sam asked. I mean it just seems like a retail -- and lastly, probably a -- be a bigger percentage of mix. Don't you think that the gross margin from last year does not seem like that big of an obstacle?

Well, retail will be a smaller piece of a business. It is already down more than a 100 basis points as a percentage in Q1. Scott Krasik - Buckingham: Right.

We won't have that strong a Q2, was it in April. Domestic wholesale is, we will talk going at a faster phase and that is a much smaller gross margin thing so. Well, I would not take it as the table as it's possible. I would not say it was the most likely scenario, very difficult from that was -- very much to the top end of what is possible for us as far as gross margin is concerned. Scott Krasik - Buckingham: Okay. And then, in terms of the selling, do you still feel comfortable with that $3 million, $3.5 million in a quarter and in the back half of the year for quarter?

Haven't looked that close. It might go higher depending on how much we advertise, we have more category now around the world. I think if there is any upside to that, it will be on international and it will be covered by their growth because they are growing so quickly. We may expand our advertising. So we will defer a little bit to the back half until we get more of our bookings, then I would see what places we need to push a little bit.

Thank you. (Operator Instructions). Our next question comes from line of Corinna Freedman with Wedbush Securities. Please proceed with your question. Corinna Freedman - Wedbush Securities: Hey, David. Congratulations for the great quarter.

Hi. Thank you. Corinna Freedman - Wedbush Securities: Thanks for taking my question. I have a quick question on inventories, they are up 22%. I know you indicated top line could be a little bit better than the double-digit that's in consensus right now. If you could talk -- just speak to the composition of that inventory, how you are planning for that for the back of the year and was that Easter timing shift in (inaudible)?

I think it probably would have to do with Easter timing. We shipped a lot more. As a percentage April will hold up better. And obviously, if we ship in April, the strong shipping that you show for April ends up an inventory in March certainly and certainly and in transit along the way. We have significantly more stores that we need to do. We have Japan is growing, it has more inventory. So we -- and we have average price points that are increasing as we go to the back half of the year. So I would tell you that from a units perspective in our domestic warehouse, which is where the biggest piece is, it is not significantly different than it was last year, it might be down some. So the increase in inventories where it should be, it is around international where they are growing and they needed the inventory and it is later in the year with Easter falling a little later to support our own stores which will have significantly increased unit push through April than they did last year. And it is all very good revenue. We do not have anything in significantly excess that we could tell right this minute.

Thank you. Our next question comes from the line of Bill Dezellem, Titan Capital Management. Please proceed with your question. Bill Dezellem - Titan Capital Management: Thanks. I had two questions. First of all, would you provide us an update on the apparel business?

It is still at the very beginning stages; we are going to roll it out to a few more of our own retail stores. Waiting to see if we hit it right and we get consumer demand. So nothing that would move the needle and nothing that other than way, way at the beginning stages right now. Bill Dezellem - Titan Capital Management: And secondarily, would you please remind me the dynamics that would lead to your gross margin being down in the first quarter relative to the fourth quarter when you have higher revenues in Q1?

It depends where the revenues come from and the product mix. Product in the fourth quarter are usually heavier, more black and brown and have higher margin. It depends on where around the world; we have kids our bigger mix than sport. So on what kind of -- what kind of markdown, what kind of inventory we have to be moving. And so it just seems historically, we take most of our close out and whatever we have, we try to push it full at the end of the year. So this is just differential, it is just had to do with product mix, country mix, currency mix and retail as related the wholesale as they move through the year. Bill Dezellem - Titan Capital Management: And this year in particular, what was the biggest factor that lead to the first quarter margin being down sequentially?

I thought this was pretty good margins, it is up year-over-year. So I think the margins for us were up across every category. It is just like we had a much bigger distributor business which has lower margin. Some European countries, there is some drag down in South America from currency. So it is just a combination, there is no one key spec that you can identify that will be the contributing factor for the shift.

Thank you. Our last question comes from line of Sam Poser with Sterne, Agee. Please proceed with your question. Sam Poser - Sterne, Agee: Just a quick follow-up. Of the inventory, what percent of the inventories in transit right now or at the end of March?

It usually -- this time in year, I think it is -- do not remember off the top of my head. I would think it is about 10%, 15%. If you hold on I would see like a -- it represents like about 20% of the inventory. Sam Poser - Sterne, Agee: Okay.

By dollar.

Thank you. At this time, I would like to turn the conference back over to SKECHERS.

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