Greetings. Welcome to the SKECHERS Third Quarter 2019 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to SKECHERS. You may begin.

Thank you, everyone, for joining us on SKECHERS conference call today. 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 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. Users of 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 all other significant risk factors that may affect the company's business, results of operations and financial conditions. With that, I will like to turn the call over to SKECHERS' Chief Executive Officer, David Weinberg; and Chief Financial Officer, John Vandemore. David?

Good afternoon and thank you for joining us today. The momentum we experienced through the first half of 2019 continued in the third quarter as both our domestic and international businesses flourished, resulting in a new quarterly sales record of $1.35 billion. This was an increase of $177.6 million or 15.1% over last year. On a constant currency basis, the increase was $202.5 million or 17.2%. Our international business continued to drive growth, with an increase of 21.9%, representing a record 58.8% of our sales in the quarter. Our domestic business also added to our strong growth, including a 5% increase in our domestic wholesale business. We believe that international will continue to power our growth especially as we move into leading positions in many markets, open more retail stores and further expand our international footprint. In the quarter, we grew in all regions, achieving the strongest increases in Germany, the United Kingdom and Spain, India, the UAE and Turkey as well as China, Russia and Japan. SKECHERS' direct-to-consumer business continues to grow, acting as a showcase where consumers can experience our brand and shop our complete product collection. At quarter end, we had 3,307 SKECHERS stores around the world, including 779 company-owned stores. Our direct-to-consumer business continue to achieve strong sales growth, with quarterly increases of 13.3%, which included 7.7% comparable store sales worldwide. We believe our global success is the result of our innovative, relevant and comfortable products, supported by our 360-degree marketing efforts that create awareness and generate demand. Additionally, our best product offering from award-winning running, golf and walk footwear, to occupational work boots and slip-resistant shoes has filed with relaxed, wide and arch fit for men and women has allowed us to develop a diverse distribution strategy and gain sales pace as well as enter new doors, such as Golf specialty and leading fashion and independent sneaker retailers. Additional product highlights in the quarter included the release of SKECHERS' premium heritage collection in the United States and Europe, the continuation of our collaboration, like Asia's popular Line French property and limited-edition footwear partnerships with several premium retailers, including Atmos in Japan and Opening Ceremony in the United States. Our on-trend styles appeared on numerous fashion week runways in the quarter, from New York to London and Milan, with global trend sites height bay and height covering sketches product launches and influencers and key opinion leaders appearing in social media posts in nearly every country where our product is available. From our performance division, the Gold Run Razor 3 took the top modern in runner's world, as it was awarded Gear of the Year in its September/October issue, marking the fifth win this year for our collection of Hyper Burst shoes. To support our diverse range of key initiatives, we have a team of global and local athletes, celebrities and influencers that appear in our marketing campaigns. In the third quarter, we signed Los Angeles Dodgers, All Star pitcher and three time site award winner, Clayton Kershaw, to our team. Clayton will be playing in SKECHERS' performance cleats, designed specifically for him, and is collaborating on several training styles for 2020. We're looking forward to the future marketing campaigns with this all-star and certain Hall of Famer. SKECHERS' continued growth concluded -- including record sales for the third quarter is a testament to the strength and demand for our diverse product offerings around the world. Based on early readings from our direct-to-consumer business and feedback from our key accounts in numerous markets, we see our momentum continuing in the fourth quarter. Now turning to our domestic business in detail. Our domestic sales increased 6.7%. This was driven by a return to growth in our domestic wholesale business of 5%, where we saw payer ship increased by 2%, with an average price increase of 3.1%. Further propelling growth domestically, our direct-to-consumer business increased 8.7%, with comparable same-store sales increasing by 6.8% for the quarter. We also saw month-over-month acceleration in the direct-to-consumer business, with September achieving a high single-digit comp. At quarter end, we had 488 company-owned SKECHERS retail stores in the United States. In the third quarter, we opened 12 stores across eight states and closed 1 location in Seattle. We also remodeled two stores and expanded two locations. To date in the fourth quarter, three company-owned stores have opened in the United States, with another five planned before the end of the year. In our domestic business, the biggest increases came from our new men's Casual, Street and Sport lines, women's Gold Walk and Sport lines and SKECHERS Work. We are pleased that our BOBS footwear is also continuing to show growth in the United States. Due to its success, we have been able to help more than 750,000 pets since the inception of the program several years ago. To support our domestic business, we ran numerous marketing campaigns, including ads in fashion magazines for our Chunky shoes, digital campaigns and numerous television commercials for our Kids footwear, Sport Heritage and GOwalk footwear and our men's lines, starring football legends, Tony Romo and Harry Long. Based on October sales in our direct-to-consumer business as well as feedback from our wholesale partners, we believe our domestic business will continue to show positive growth in the fourth quarter. Not looking in detail at our international business, which represented 58.8% of our total sales in the quarter. Sales increased 21.9% or 25.7% on a constant currency basis and reflects growth in our subsidiary, joint venture and distributor businesses. The biggest drivers were China, which grew 21% on a constant currency basis, and Mexico, which transitioned to a joint venture earlier this year, powered by the United Kingdom and Japan. Additional growth drivers were India, Germany and Spain within our subsidiaries, and our distributors Russia, Turkey and the UAE, who handles the majority of our business in the region. Specifically, the sales growth was the result of a 21.7% increase in our wholesale business and a 22.3% increase in our direct-to-consumer business, with a 9.9% increase in comparable store sales. At quarter end, there were 2,819 international retail stores, an increase of 124 in the third quarter. Of those stores, 2,528 are owned and operated by international distribution partners, joint ventures and a network of franchisees. In the third quarter, two company-owned international stores opened: one in the U.K. and 1 in India, and two company-owned stores closed. To date in the fourth quarter, 4 company-owned stores have opened in Europe, with another 5 to 10 planned before the end of the year, including a flagship store in Rome. In the third quarter, 171 joint venture or third-party opened stores opened across 38 countries, including our first locations in Andorra, Ghana and Serna. New store openings included 87 in China, 14 in India, 5 in both South Korea and Australia and 4 each in Taiwan, Spain, Malaysia and Indonesia. 47 stores closed in the third quarter, including 17 in China. Six third-party owned SKECHERS have opened so far in the fourth quarter, with another 130 to 150 expected for the remainder of the year. To support our global business, television, outdoor, digital and print campaigns drove consumers to stores where SKECHERS are available. This included the underground in the U.K., and France, merger boards of sporting events in Canada and Mexico, music and dance festivals in the Netherlands and China and in-store events in support of the Kids Day across South America. Our growth, product innovation and marketing leadership also resulted in SKECHERS being awarded Best Brand of the Year from Shoe Career in Germany. This is an achievement we are particularly proud of as Germany was one of our first subsidiaries, and we view the country as one of the leading European markets for SKECHERS. We believe international remains the primary growth driver for our business. Nearly every international distribution center that we operate had double-digit increases in pairs shipped in the quarter, which we believe will continue into the fourth quarter. Additionally, we are benefiting from the conversion of India to a subsidiary in the first quarter and Mexico to a joint venture in the second quarter, both of which we feel will result in significant additional growth over the coming years. With strength across every region, we believe the momentum we are seeing in our business worldwide will continue in the fourth quarter and into 2020. Now I'll turn the call over to John to review our financials and discuss our outlook.

Thank you, David. Our third quarter sales totaled $1.35 billion, an increase of $177.6 million or 15.1%. On a constant currency basis, sales increased $202.5 million or 17.2%. This quarter represents a new quarterly record for the company and illustrates the power of our strategy and our experienced executional capabilities. SKECHERS grew in all segments and in every region, this despite unforeseen headwinds from foreign exchange rates and the announcement and introduction of incremental domestic tariffs. International wholesale sales increased 21.7%, including a 27% increase from our wholly-owned subsidiaries, a 24.2% increase in our joint ventures and a 4.4% increase in our distributor business. Direct-to-consumer sales increased 13.3%, the result of an 8.7% increase domestically and a 22.3% increase internationally. Domestic direct-to-consumer sales growth was driven by a 6.8% increase in comparable store sales and the net addition of 23 new stores. International direct-to-consumer sales grew 22.3% due to a 9.9% increase in comparable store sales and the addition of 14 new stores. Our domestic wholesale sales returned to growth in the quarter, rising 5% or $14.2 million primarily due to increases in both our men's and women's divisions. We continue to see encouraging signs for SKECHERS business among our domestic wholesale customers and currently expect fourth quarter sales to grow year-over-year. Gross profit was $653.1 million, up $89.2 million compared to the prior year. Gross margin increased by 30 basis points to 48.2% primarily due to margin expansion in our international businesses. Our domestic gross -- our domestic wholesale gross margins were lower year-over-year due to increases in the average cost per unit, which were partially attributable to increased tariffs effective during the quarter. Total operating expenses at a -- as a percentage of sales were flat to prior year at 37.8% but increased in dollar terms by $67.1 million or 15.1% to $511.9 million in the quarter. Sales expenses increased by $7.4 million to $97.5 million due to higher advertising expenses in international markets. General and administrative expenses increased by $59.7 million to $414.4 million, reflecting additional spending of $24.4 million to support the growth of our international businesses, including in China and the addition of operations in Mexico and $18.5 million associated with 37 new company-owned stores, including 14 that opened in the quarter. Earnings from operations increased 19% to $147.4 million versus the prior year, and our operating margin improved 40 basis points to 10.9% -- or 10.5% in the prior year. Net income increased 13.6% to $103.1 million or $0.67 per diluted share on 154 million diluted shares outstanding compared to net income of $90.7 million or $0.58 per diluted share on 156.3 million diluted shares outstanding in the prior-year period. On a constant currency basis, earnings per diluted share outstanding was $0.71. Our effective income tax rate for the quarter increased from 13.7% in the prior year to 15.8% primarily reflecting the impact of the Tax Cuts and Jobs Act enacted in 2017. We now expect our effective tax rate for the full year to be between 17% and 19%. And now turning to our balance sheet. At September 30, 2019, we had over $1 billion in cash, cash equivalents and investments, which was a decrease of $44.4 million or 4.2% from December 31, 2018, but an increase of $40.5 million or 4.1% from September 30, 2018. We called it earlier this year, we invested over $180 million to purchase the minority interest of our former joint venture in India and to form a new joint venture in Mexico. Our cash in investments represented approximately $6.66 per diluted share outstanding at September 30, 2019. Trade accounts receivable at quarter end were $662.4 million, an increase of $158.4 million from September 30, 2018, driven by higher sales, especially in our international wholesale business. Total inventory was $890.4 million, an increase of 3.1% or $27.1 million from December 31, 2018, and an increase of 17.9% or $135.3 million from September 30, 2018. The increase was primarily in our international markets, where we believe our inventory levels leave us well positioned to support our growth expectations. Total debt, including both current and long-term portions, was $122.7 million compared to $87 million at September 30, 2018. The increase reflects borrowings associated with the construction of our first distribution center in China. Working capital decreased $95.5 million to approximately $1.52 billion versus $1.62 billion at September 30, 2018. Capital expenditures for the third quarter were approximately $48.9 million, of which $16.9 million was related to the construction of our distribution center in China, $16.3 million related to retail stores worldwide and $8.6 million related to our worldwide distribution capabilities. For the remainder of 2019, we expect our total capital expenditures to be approximately $85 million to $90 million. This includes the construction of our new distribution center in China, enhancements to our existing distribution center in Europe, the expansion of our corporate headquarters in California and an additional 15 to 20 company-owned direct-to-consumer stores and 8 to 10 store remodels, expansions or relocations. Now turning to guidance. We currently expect fourth quarter sales to be in the range of $1.225 billion to $1.25 billion, and net earnings per diluted share will be in the range of $0.35 to $0.40. This guidance incorporates the view that all 3 of our segments will continue to grow in the fourth quarter at rates similar to the third quarter. And now I'll turn the call over to David for closing remarks

Thank you, John. The third quarter presented a new quarterly sales record driven by growth in our domestic and international wholesale and direct-to-consumer businesses. We believe this is a significant achievement given the brick-and-mortar retail environment as well as economic and political tensions around the globe. Even with these challenges, we believe the momentum we experienced in the third quarter will continue and our brand will flourish, both domestically and internationally. Along with further developing our infrastructure and logistic capabilities at home and abroad and growing our store base with another 145 to 165 SKECHERS stores planned around the world before the end of the year, we are designing more resident product and propelling it with marketing to drive sales. Our fourth quarter sales have started off strong. Our backlogs are growing, and based on our order book, we believe this positive trend will continue through the fourth quarter and beyond. And with that, I would now like to turn the call over to the operator to begin the question-and-answer portion of the conference call.

[Operator Instructions]. Our first question is from Jay Sole with UBS Investment Bank.

So I just want to follow up on the sales growth. If you could, sort of, detail in maybe a little bit more color, what contribution to the growth came from e-commerce and, sort of, the initiatives that you've had there? China specifically, you've been talking about the growth rate in China. And maybe you if you could talk about the driver if you get to that 5% domestic wholesale growth in terms of what channels online are priced. If you can give us some help there, that will be terrific.

Yes, Dave. Absolutely happy to add some color. As you know, we -- when we look at the sales from a direct-to-consumer standpoint, we are agnostic as to whether or not it arrives through one of our retail stores or online. I think the really encouraging thing coming out of this quarter is that we saw strength in both. Obviously, the e-com rate is meaningfully higher than the brick-and-mortar, it's also starting off from a smaller base. But it was a significant growth driver in those rather robust comparable store sales numbers to begin with. In the U.S., it was in the 70s percent [ph] internationally, it was about 50%. China, I think as we mentioned on the call, China, on a constant currency basis, grew over 20%, really a very good performance given the headwinds. If you recall, when we were last with you all that the lawn was it about 6.8, 6.9 [ph] and we ended the quarter much closer to an average of 7.1 [ph] so there were some significant foreign currency headwinds even if you strip that out though, you are close to 17% quarter-on-quarter growth rate in China. The domestic number, I hate to say it but we have to take the opportunity, we've been talking about a return to growth in domestic wholesale for about 6 or 7 months now. It's what we saw on the backlogs, it's what we saw in the demand for the product. This is just a fruition of that foresight that we provided after Q1 and Q2. And again, we are encouraged by what we see. We definitely expect growth year-over-year in the fourth quarter as well.

Got it. And then if I can follow up on gross margin, it sounds like mix was a significant impact, tariffs might have a small effect on FX. Is it possible if you could sort of quantify the impact of each of those are drivers and if there is a fourth 1 that would might have been?

Yes, I don't want to get into abundant details other to say that the broader impact that we felt were positive came out of the international markets, where there was some price and there were some mix benefits, obviously determined a bit by FX in some of those markets. Domestically, it was early impact from the new tariffs as well as a few other cost elements that came through in the quarter. Those are broadly, irrespective of the markets, those are broadly the pressure one way or the other.

Our next question is from Laurent Vasilescu with Macquarie Research.

John, I think in your last prepared remarks, you said that we should expect similar growth across the different segments in the fourth quarter. Is that implying we should think more like that mid-single-digit for domestic wholesale? And if that's the case, was there any shift between 4Q into 3Q or anything to consider on that front?

Yes, I think we're trying to give some good guideposts for you to use, similar rates to what we saw, that could be plus or minus in any given segment, some of that is going to be timing. There isn't anything from a timing standpoint on the domestic front we are planning on at the moment. But as we've mentioned before that, that tends to be latebreaking. We will have the inventory for it in particular because we have the tariffs that could be forthcoming in December and we're preparing for that as well as what we already have on hand. But we're not currently planning anything on that from a timing standpoint, hitting domestic wholesale.

Okay. Thank you. As then to follow up on Jay's question about gross margins, maybe near term fourth quarter, should we think gross margins are up? I mean it was pleasantly surprising to see TMs up so just thoughts on fourth quarter. And how do we think, without getting into guidance for next year, how do we think about just List 4A and 4B as we think about next year? Any mitigation factors we should consider?

It's just on the gross margins for fourth quarter, where we were direct you come at the moment is probably something to flat, maybe even down slightly. We are still absorbing the impact of the first round of 4A tariffs. We have put in place mitigation efforts, those are ongoing. We've made some decisions to absorb certain elements of the increase in the short term to the benefit of our customers. So I -- right now, I'd point you at flat to potentially down slightly, and by that, I mean maybe 10 to 20 bps. We do think the overall mix benefit to continue to trend more sales internationally and more direct-to-consumers helped offset that but there is obviously a quantum differential that we'll have to take into account once we have a better handle on exactly how holiday sales turn out.

Okay. And then last question, John, is on G&A. On the international G&A, the $24 million increase, can you parse that out into Mexico and China? And how should we think about that for the fourth quarter? And then it looks like it implies the domestic G&A was up meaningfully after, kind of, muted growth in the first 2 quarters. Any thought on how we should think about that going forward for the fourth quarter?

Yes, I don't want to be overly precise on picking the G&A numbers further other than I'll tell you that Mexico and China combined were probably more than 60% of that international increase. The remainder support, a lot of the growth you're seeing elsewhere in the business. The other major driver that I mentioned and certainly that affects domestic is the domestic direct-to-consumer business but also the international direct to consumer business. You know, domestic wholesale, they were -- it was up by largely the business elements that support the broader business or supports distribution, which, keep in mind, we keep that to those distribution warehousing costs in our G&A profile, where others are putting that in the cost of goods so just keep in mind there is some volume relationships associated with the payers, both sold and shipped, that are impacting G&A there. And then [indiscernible]. Todd, I was just about to say you saw operating leverage this quarter, we certainly is what we are looking at most prominently when we're looking at the business and we're certainly proud of that. We think, again, that reflects the benefits of the investments we made as well as the ability and the opportunity of the business.

Our next question is from Omar Saad with Evercore ISI.

One thing that jumped out at us is the significant increase in the operating consistently in the last couple of quarters, especially in -- when we think about margin sales, rebound, combined John coming into the Board. Can you talk about how the management of the business has evolved and how you're being able to drive some of the more consistently performed that we think the market really appreciates?

Well, everybody contributes to that so I think I'll take on a piece of that as well. I think John certainly had significant input into it and we've taken but I think what you've seen what we talked about in the past coming to fruition as well. We've built a significant piece of the startups behind us and just absorbing Mexico and India, which have been running in the past. We have no startups and no unquestionable amounts that we have to push into the marketplace to see what it is we have to drive the business and how much risk we have to take and what it is we might have taken over from our prior distributor or a joint venture. So I think what you're seeing is more consistency around the world as the world tends to grow together, and there's not an influx of any new marketplaces. So what you're seeing is the maturity of the business, growing in those places, all places continue to leverage, none of the really deleverage now, even if they are not up to what we believe what their full potential is they continue to reform better on a relative basis than they did the year before. So barring a few complications which are obviously based politically, like something that would happen in Hong Kong or something that is going on in Chile right now, where they have turmoil and things closed down, we have very -- much more mature business that continues to grow. And while we do push it sometimes and we do have to invest somewhat more as we hit critical mass, they are more predictable as they go through their growth process.

Is there maybe an accelerated digital investments cycle ahead that we see feel about or you feel like you got that room or the headroom to make the investment that you need and have more consistent predictable trends that we've been seeing?

Well, we've already started to make some. So you would assume, or we assume, that as it continues to grow it just like new ventures, it will now leverage. It's starting to leverage for us already in the United States, we've had to carry it out worldwide, it's growing in all marketplaces. We will continue to invest and the biggest investment yet to come is within going to upgrade some lower distribution centers as already begun and we've been talking about it in the past to be able to carry increased capacity on one at a time. So I think that will continue to leverage. That's just like a newer business that's now starting to mature that will now leverage upon itself rather than require significant investments from scratch.

Our next question is from Chris Svezia with Wedbush Securities.

I guess first, John, for you, I just have a one on U.S. wholesale. I think previously you've talked about flat to up slightly for the year on your wholesale, to kind of get there with 5% in Q3 implies double-digit growth in Q4. Just wonder if you could maybe address that observation relative to prior comments you made about that? And then secondarily, if you think about going forward on U.S. wholesale, what sort of a growth rate we should think about, kind of, given the trajectory and the ramp up throughout this year? Just any thoughts as we think about going forward into 2020. Is there a mid-single-digit growth segment, are we back to that level again? Any color about that will be helpful.

Yes. I mean, so we've spoken about attempting to get flat. That's our goal, that's still within sight. It's bound by our guidance so it's close in there depending on a few shipments here or there. Certainly not something we're taking on our eyes off of. But again, domestic is probably one of the markets where you can see timing impact. But that's still our goal. We still, I guess, expect the return to growth to continue in the fourth quarter. We see that in the backlogs, we see that in the order flows. The reality is we are already the holiday season so that's going to be a factor. As far as extrapolating that much further into 2020, I could tell you that what we see right now it remains very encouraging, still early in terms of full year order books to build up. But so far, what we see is -- are very encouraging signs. I think there's also the impact of the tariffs that we have to take into consideration, which is an unknown. So far, again, that has not materially impacted our bookings or baking volume or booking pace. But there's still the potential out there that the dealers have to react to that because it hasn't really flown through the supply chain in every capacity. And in some instances, we're choosing to absorb some of that as an aid to those retailers to help them continue to maintain the volume we've seen them take through on the SKECHERS brand.

Christopher, I'll be a little more upbeat as usual on some of that stuff, but I would pass along even though we don't talk about that often that our incoming order rate from our domestic and subsidiary base, and it was fairly evenly distributed with the best we've ever had at SKECHERS, and the year-over-year growth is dramatic. So as we sit here today with what we know, we know that we've, barring any shifts from December to January or vice versa or things like that, we will be up in the fourth quarter. We will be up in the first quarter. We have first quarter booked to a point where we anticipate at least mid to high single-digit growth rates. Now to the capacity of moving from January to December that might be, we may have a slightly bigger fourth quarter and a slightly small first quarter, it would be hard to believe we wouldn't grow mid-singles and above in both quarters as we sit here even if it slips. So the backlog and orders that we've received have come in at a dramatic pace and indicate that positive growth happens. Now as John said, we don't have as significant a cycle into the back of the year, but the reception to be got from the front lodges of our back-to-school on for 2020 certainly gives us -- certainly gives me anyway and a result of changes indication I think that barring a major economic or macro shift somewhere would slow down from that point.

Okay. Thank you, Dave, for the color and I've never known you to be less than optimistic, so I appreciate that.

But always within reason.

Just on the direct-to-consumer side, you've seen a nice acceleration in the comp globally. Just any thoughts as we think about Q4, you've still got an easy conversion and even as you cycle into the first half of next year, you still have some easy comparison on direct-to-consumer side, given some of the initiatives that we've done on e-commerce, loyalty, is it fair to think that these growth rates are sustainable, if not accelerate, from this level?

Well, what we think anything is possible. What we know for the fact in the first 3 weeks of October, we've had an acceleration on the comp store basis across the DTC group to -- in October from September in rate of growth over prior year, so that's always a positive sign in what is not obviously the most telling month of the quarter and usually one of the smallest one. But going into the last quarter of the year and having such significant comps in the first 3 weeks is certainly a positive way to sign so I think we will bring a sense in that direction.

Okay. Final thing for me, just on the European distribution center. When can we anticipate getting some efficiencies flowing through the P&L, the automation being completed? Just any thoughts about timing on all that?

Well, the most obvious part is Q1. We are in testing now, so barring any changes [indiscernible] we hope to be up and running and get some of that flowthrough in the first quarter.

Our next question is from Jim Duffy with Stifel.

This is Peter McGolden on for Jim. I was curious within the international business, what type of lift you saw from Mexico within wholesale and retail. Is that tracking to your plans, as early as it is and does it change your thinking in motor ship structure from any of the other international markets?

Mexico continues to perform as expected, slightly better, to be honest with you. We still have high hopes for the market. It's incremental this year to what was a licensing business. So really, if you look at a year-over-year basis, it's tough to draw any conclusions. But it contributed, it grew sequentially from last quarter. But I would just point out that even without the addition of Mexico, you saw our international wholesale business grow quite nicely in the high teens level. So I think the remarkable thing about this quarter, and really the last, is how pervasive the growth is across all of our regions, across all of our businesses.

And then could you speak a little bit about inventory rescission heading into holiday? Are there any regions or product categories that you're seeing excess in or are there any specific product bets that you've made into holiday that you're looking for consumers to respond to specifically?

Yes. I mean, inventory is well positioned given where the growth is. I mentioned that most of it is international. In terms of bets, we don't take a lot of bets. We are seeing tremendous response to a lot of new product. We're very excited about that product come both in terms of what we think the sell-through and what we've seen in the backlog, so it's a very encouraging sign. I would tell you from an inventory standpoint, we feel like we've got the right inventory in the right place to grow. The only thing I will point out though is something like a Mexico, again, that's incremental inventory that we wouldn't have consolidated last year. So there's a piece of that as well as which is just taking on board the inventory of what is now a joint venture, which was previously a licensed relationship in the overall total.

Yes. We should also point out that our direct-to-consumer business is growing. And that historically, for everybody, had a slower churn than the wholesale business. So as that shifts, we'll be carrying a little more inventory because the turns are not quite the same as wholesale so you got to keep that in mind as direct-to-consumer grows as a bigger piece.

Our next question is from Tom Nikic with Wells Fargo.

I just want to ask about tariffs. You mentioned that you saw an impact in Newark's wholesale business but no mention of the U.S. DPC region. Is there a reason why maybe you would have affected wholesale but not DPC? Can you just help us kind of understand maybe magnitude of the impact in Q3 and how much of it is embedded in the Q4 guidance that you gave today?

Yes. I mean the impact predominantly held in domestic wholesale because that's the inventory that came in that went right back out. It will take a while for the newly tariffed product to reach our retail stores. That will begin in the fourth quarter. I'll also point out, the impact wasn't significant in the sense of the overall cost of product, or quite frankly, of what we expect the tariffs to yield on a long-term basis. But it was also mistimed in that we haven't had the ability to implement all of our mediation strategies. Those are going into effect, they will go into effect in the fourth quarter. So we are being a little bit conservative vis-a-vis our domestic wholesale margins and our overall margin guidance to account for the possibility of the tariffs and all that timing not working out perfectly. However, I would tell you, we have been very aggressive about all 3 of the mediation strategies we've mentioned before, looking at potential to change distribution points in the U.S., looking at vendor concessions and looking at price. All those efforts are underway. And we think long-term, probably after the first quarter of 2020, perhaps that the -- that this really becomes a mitigated effect. We'll obviously be working on that to happen sooner but that's the efforts we've put into place today.

And just one more for me. On the G&A expenses, I think, you've had sort of a wide range of growth rates this year, Q1 was up 1%, Q2 was up 6%, Q3 was up 17%, which was a pretty, sort of, dramatic change in the growth rate. Just -- did that G&A line come in higher than what you expected? What drove that? And I know that you have quarterly volatility in the G&A but just, was there some sort of steady-state rate of G&A growth you can give us a guidepost for, it would be fairly appreciated.

Yes. I thought you were going to compliment us for precisely matching the G&A, the operating growth rate to the top line growth rate, which is what we've said is the upper bound, and that really is the upper bound of what we're managing. Again, that's going to vary from quarter-to-quarter. In this instance, we're a little bit towards the top end of that. But obviously, we're looking to be at that level or lower from a growth standpoint. I will point out that one of the components in operating expenses this quarter that contributed to that was the decision on our part to press marketing, press media. We see the product resonating across the globe. This is an opportunity for us to continue to invest in that and to get back to putting more dollars to work and that's something we did this quarter that we hadn't done in the prior 2 quarters. So quite frankly, that's more of an opportunistic press on the media spend to continue to see the brand resonate against this really great product lineup. Going forward, again, we'll keep the parameters in place that we had talked about previously, which is trying to keep it at a top line growth rate or better. Sometimes, it varies on quarter-on-quarter. I think you can expect we will press advertising again this quarter because we have a hot product. We've got good line up and we want to make sure that gets into consumers awareness and the 360-degree approach that David mentioned.

Nice job getting the SG&A growth exactly in line with sales growth.

Thank you. I appreciate that.

Our next question is from Sam Poser with Susquehanna Financial Group.

Can we just follow up on the inventory? Can you give us some idea of what that incremental inventory was to support Mexico? Can you apples-to-apples the inventory for us because, I mean, you're bringing in a ton and a lot of it -- I thought some of it that is any of that inventory right now came in early for preemptive for tariffs in the U.S.? Number one.

Yes. There is absolutely a little bit it that was preeminent. It wasn't an enormous component of the overall and wintry mix because we didn't have enough time to react. If you recall, when we last spoke to you, the tariffs didn't exist. And then within a couple of weeks, they were tweeted and subsequently enacted. So there's a little bit of growth in the inventory associated with the tariff inaction. I would say, probably 1/3 of the growth year-on-year in inventory is attributable to the introduction of Mexico inventory into the accounting. So it's a contributor for certain.

Okay. And then when you think about, you mentioned -- David, I think you mentioned but -- given the growth of the DTC that the turn would slowdown. I guess the question I have is what is the -- what is that turn as you think forward in the way mix is changing that you guys are looking as, sort of, a go-forward turn so you can judge the inventory? Because the year-over-year is unless we do it right now because of the noise.

Well, as we've said before, we don't really speculate significantly on the wholesale inventory. So that turns relatively quickly, that turns for us in probably 45 to 60 days. I think you would anticipate on a retail business because it flows as they come in and replenishments, we believe probably have an include the transit probably a 90-day or a 90-day plus, 90 to 100-day turn on the inventory, especially with the direct-to-consumer. So it's not as significant right this minute but you look if you take that into account for China as well as for ourselves and Europe, there were some slight increases that this have to do with holding 1 inventory for our retail component. So they're all little bit pieces and no one of them sticks out significantly.

And any of that inventory -- I mean, how much of that -- what percentage, let me ask it this way, what percentage of the overall entry was in your DPC this year versus last year? Maybe you could break up the DTC inventor growth versus the others something just to help us -- because when you see your forward weeks of supply go bananas, your year-over-year inventory is up a lot more than your sales are and you're not looking for 60% growth going forward. So is it -- could you maybe give us more specifics on how that all gets put together, please?

Well, we'll have to give it to you but we'll take a look and we can give it to you. We have 65 more stores. If you just take the average size of stores in the inventory, we end up with a significant number of pairs, could be in excess of 100,000, 150,000 pairs. So that in and of itself is a few million dollars that gets put into physically and then you take into account the stores are going opened we opened 14 stores in the quarter, that's obviously domiciled and just goes out there. So I don't track that number in my head. I will get it for you.

And also just add to that, Sam, keep in mind with e-commerce becoming a more pronounced component of our direct-to-consumer business, that's not -- you don't see an equivalent number store doors increasing that you can attach to that growth rate but obviously the facility e-commerce business, you need to have that inventory in-house.

That's a fast growing stores, look out [indiscernible] 10 stores.

Got you. Okay. And then lastly, you -- when -- can you just dive into the some of the categories a little bit more? Because work really are the drivers? What's really driving the categories in which are still, sort of, lagging or -- and have the opportunity? I think you talked about men's, can you give us more details on, sort of, the categories, subcategories by gender? I guess, that's the what do it, gender and style?

Well, it'll be a long category we have. It takes a long time to walk through those things but I think...

You mentioned men's and you mentioned some components of men. Can you -- but which sort of not where they need to be? We've heard that women's isn't not quite doing in general versus -- vis-a-vis men's, BOBS and works. Can you give us some positioning there?

Well, women's is a bigger business so growth percentage is obviously -- gets delayed or held back from what it is. I don't know what you've heard about women's, I think our women's is performing quite well and has grown faster than the whole domestic wholesale business on its own. So -- and you know, categories get divided. We have many subs. I think what we said in the past, which is true now, we have more categories and more different styles that are selling well and showing increases. We're not dependent on a single style, we are dependent on a single category things come and go, and we increase, especially in our direct to consumer because we have more shelf space to play with. GOwalk has come back. Obviously, something that -- it's not moving quite as quickly GOwalk is taking significant shelf space, but we can go through a trade and we have to do that on a more one-on-one personal basis. I think just to fill it out, men's has grown and continues to grow, women's grow and continues to grow. We've had some issues but I've seen the light at the end of the tunnel we believe kid's is getting at the lighted footwear that makes the comps difficult and a lot sales in the marketplace, I think, as it exists. So we think kids are coming back, we're getting a lot of movement in it. But our adult business is doing very well, it's doing well on a very broad base. And I think you know what is well enough. There's a category that's not doing well, this time, it will do well in the next 6 months or we'll bring something new to Back-to-School, just as we when you had issues with performance or women's or one of the other categories, we brought them back. We tend to develop product, we tend to bring it back, to concentrate on 1 category or 1 product is not what we're about. And it isn't broad-based, geographically and by category.

Sam, I would just add to that. You know, in doing channel checks, I would just ask you all to recognize that most of the channel checks we're getting our domestic. So it's not always true what holds for domestic market, it's holding internationally. And so there's -- if there's a category that is in the U.S., it's performance outside the U.S. has been strongly seen that before. So as David mentioned, we're seeing broad compressive growth across most of the divisions when you take into account the global footprint of the brand. And that's, again, another hugely encouraging sign in addition to the growth rates on the top line that we just put up.

Good luck in the holiday season.

Thank you.

Our next question is from Kimberly Greenberger with Morgan Stanley's.

This is Alex on for Kimberly Greenberger. This want to touch on operating expansion you guys have delivered, it was pretty nice year-over-year questions but just maybe a little shy of what the Street was expecting. We were hoping you could provide us may be an outlook for 4Q as well as how you guys think about your medium to long-term targets as you move forward.

Yes. So one, I think it's noteworthy that the expansion we saw in the quarter, it follows in our two quarters of contributing to the operating margin line. As we look forward to Q4, we expect to be, kind of, flat to up slightly. Some of that is going to be the impact of the gross margin nuance we mentioned earlier in particular around the impact of the tariffs. But our objective at the moment is to aim to be flatter up in the fourth quarter. In terms of our long-term goals, they remain consistent with what we have said in the past. We will continue to invest in this brand to achieve these above-market growth rates for as long as we see the runway, we will want to harvest those investments as you're seeing the success of now to drive operating margin. We certainly believe the long-term operating margins can rest between -- in the low teens range is that we've mentioned before. We're not changing that guide. The only caveat we give is that if there is an opportunity to our invest of because that has been successful in driving an increasing rate of growth on the top line so far this year and continued growth that we expect in Q4 and beyond.

And our final question is from Susan Anderson with B. Riley FBR.

I guess just a follow-up really quick on the kid's business. So it sounds like it was maybe negative in the quarter. Can you just remind us when you fully start the cycle the tougher comparison for the lighter footwear?

Yes, it will start in the first quarter of next year -- first and second quarter of next year that we'll start to cycle through. Again, to David's point, we're certainly seeing some positive trends in kid's now and it's a very difficult comp it was a very successful product for last year and the year before. So believe that we'll be getting closer to a range of stability, if not, returning to growth soon in the kid's business.

Great. And I guess just one more question. I think you mentioned on the Golf line getting into some green grass shops, I guess, how big do you think the opportunity could be longer term? Is that something that could potentially move the needle for you guys?

I think that it moves the needle for us just in imaging golf is only so big we're picking it up worldwide and it is going and it's a nice piece to have. But I think we look at it in that the golfer, both male and female around the world, are our core customers to begin with, and that's just another way to keep us top-of-mind and in their closet and looking forward. So just with any technical shoe, we use it as an umbrella for the product to show the quality and what we can build. But in golf in particular because it does move along demographics and think older and it is our core customer, it just keeps top of mind of what we can do and making comfortable as we go. So we think it's very positive. It's just an addition to the brand and looks like the brand can go.

Ladies and gentlemen, we have reached the end of the question-and-answer session as well as the conference. I would like to turn the conference back over to the company for closing remarks.

Thank you again for joining us on the call today. We would just 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' filings with the SEC. Again, thank you and have a great day.