Good morning, everybody. Welcome to UBS's 2025 global consumer conference. It's great to see everybody here. I'm Jay Sole, UBS's retailing department stores and specialty soft lines analyst, and I'm super excited to be joined by John Vandemore, CFO of Skechers. Skechers is one of the great stories in soft lines over the past 20 years: double-digit growth on an annualized basis. Anyways, I'll let John tell the story, but I do want to read the disclosure statement real quick. I think you've got to get this out of the way once for the conference. As a research analyst, I'm required to provide certain disclosures relating to the nature of my own relationship and that of UBS with any companies on which I express a view at this conference today. These disclosures are available at www.ubs.com/disclosures. Alternatively, please reach out to me, and I can provide them to you after the event. Now, what we're going to do is, John and I are going to do a Q&A session. We're going to go for about 42 minutes and 38 seconds. We've got a little clock up here, and then, and that'll be it. First, John, I want to start big picture and then dive into some of the details later. Skechers is the third-largest footwear company in the world, and I think it, you know, you and I—I know you say that all the time. I say that all the time. Like I just mentioned, the company's grown its top line at a double-digit rate for over two decades, which I think is a remarkable accomplishment. I know these facts surprise people. I guess, what's been the key to this exceptional top-line growth? First, thanks for having us. We appreciate it. Thanks also for mentioning we're the third-largest footwear provider in the world because that saves me from having to say it 3 more times later. You know, I think really when you think about footwear, it's a very competitive business. What distinguishes Skechers from some of the other players, particularly some of the bigger players, in fact, is our breadth and our depth. Breadth in the sense that we offer a lot of different categories of footwear. What you generally find in footwear is, you know, a brand will stake out ground in a particular category. You know, some will be focused on basketball, some on running, some on cleated, some on, you know, collabs, clogs, what have you. What I think distinguishes Skechers is we play in almost every single one of those categories to a degree. Our focus is less on a category than delivering what we always cite as kind of our four main value propositions to the consumer: style, quality, and comfort at a reasonable price. I think that focus on delivering, really, at the end of the day, characteristics of footwear, not just a category, is very unique. The depth is our distribution. Most people do not realize how large Skechers is, particularly domestically, because 62% of our revenue derives from outside of the United States. One of my most treasured moments, pretty much every single week, is when some of you or others I know travel, and they will be in Portugal, and they will snapshot a Skechers store. They will say, "Beautiful store in Portugal. Who knew?" I said, "We have 5,600 stores. I knew. It's really that footprint, that global footprint, which is incredibly unique for a company at our kind of stage of development. What it allows us to do is to take that breadth of product assortment, which includes price points as well as categories, and put it in almost every corner of the globe. Today, we operate in roughly 180 countries across the globe, which, in case you don't know how many countries there are, is a pretty high percentage. That combination, I think, of both where we position ourselves as well as where we are able to reach the consumers is what makes us so unique. John, I want to follow up on that point, talking about the distribution model, because, you know, there's some brands, if I want to buy something from their brand in New York City, they may have a flagship store here in Manhattan, and then they might have an outlet store an hour north of here at Woodbury Commons, but they have no other physical distribution. You know, it could be a very big brand. Skechers is amazing because Skechers can be anywhere the consumer is, whether it's DTC, whether it's outlet stores, neighborhood stores, flagship stores, you know, stores in A-malls, B-malls, C-malls, whatever outlets, plus all the wholesale distribution. Can you just talk about how that's developed and how that makes that distribution model really unique versus all the competition that's out there? Yeah, this is where I would normally try to convince you all. It was a very strategic move early in our lifetime to be a balanced DTC and wholesale player, but in all honesty, that's not the truth. When we started as a brand, what we knew is we had very good product that met consumer needs. What we also knew, though, is we were not going to get carriage from a wholesale perspective to really do justice to what we were developing. We started very early with a strong DTC component. I do not have a picture, but if you ever saw our first DTC representation, you would all get a pretty good chuckle out of it. What it allowed us to do then is develop the business kind of side by side with a very healthy wholesale base, which gives you incredible economies of scale, incredible turns from a working capital perspective, but also then to nurture a DTC business alongside that. Today, we're almost perfectly balanced between the two, but what it gives us is the ability to attack any market from either side, and ultimately, usually both, so we can have a thriving wholesale business alongside a DTC business that spans both stores and online. It is largely underpinned by our philosophy that we're not in any position to determine where consumers should buy our product. We just want to be in their path to purchase in some way, shape, or form. We want to put the product where the consumer wants to buy it, not necessarily where we want them to buy it. We want to make that as bountiful and plentiful as possible across the globe. What we'll normally do is attack a market from one angle or the other to begin with, but then ultimately spread to both, because what we are very talented at doing ultimately is operating bimodally in almost every market. Got it. All right. I want to talk about gross margin, too, because I think one of the under-talked-about stories of Skechers is how consistent and steady the gross margin has expanded over the last 10 years. If you go back roughly 10 years ago, it was about 44%. If you look at last year, I think it was 53%, and that was up 125 basis points year over year. What's important to note is this has been an environment where a lot of your competition has been very promotional. There's been a lot of dislocations, COVID, everything. All these things affect—you know, it's kind of moved against companies, U.S. companies, I should say. Yet, Skechers, just the gross margin has been so steady and so steadily growing. What's been the key? Actually, it's never one thing, right? I think there's been a concentrated effort we've applied to drive gross margin, but really, gross margin is just a sign of driving value for the consumer. You know, one of the things we've done is, like others, gone through and tried to clean up where we can any sort of discounts or, you know, pernicious programs in place that weren't contributing to the gross margin in one way or another. Really, the primary focus has been on product, developing product that delivers more value to the consumer. We always say, you know, we're not looking to be an inexpensive shoe, a cheap shoe. That's not what we're doing. What we want is to carefully balance the value we're contributing to the consumer with what we charge. I think we've done a lot on the product side, particularly from the innovation side, to drive that. That has improved our gross margin. I'm going to assume everybody here has seen, you know, judging by the group, about 10 Skechers Hands-Free Slip-Ins commercials on CNBC or some other channel. It is a really good example of where we've implemented technology in line with one of our core focuses, which is, you know, comfort, and driven more value at the consumer level. What that's allowed us to do over time is to give more to the consumer, but also get more in return. What we've really seen over the last, you know, I'd say 10 years is that, you know, consumers are incredibly savvy. In footwear, they want something that contributes positively to them. They want innovation. They want newness. When you deliver that, they will deliver back in appropriate pricing. We have been able to capture that and increase the gross margin. It also does not hurt that as we build kind of both sides of the business, we get the accretive effect of a DTC business that is growing a bit faster than the wholesale business. The primary driver has been delivering more value to the consumer and being able to extract more value from a price perspective in return. Makes sense. Maybe as part of that, we can talk about inventory management for a second, because, you know, for people in the room who've been watching Skechers for 20, 25 years, I mean, there were points in the past where inventory got a little bit out of control, but the last 10 years have been very steady. I think it's another one of those elements that maybe doesn't get talked about enough because it's like, you know, you only notice it when it's a problem. Can you just talk about what does Skechers do that has made the company so good at supply chain, made it so good at controlling inventory, and sort of keeping the inventory not just on trend, but in the right amounts in the right places? I think anybody who hasn't been in retail doesn't probably fully appreciate, you know, what inventory can do, both from a positive and a negative standpoint. David, our Chief Operating Officer, has a saying that if you're not watching inventory every day, you really shouldn't be in retail. I think that really emphasizes the importance we put on inventory management. It's a tricky thing. I think it's getting trickier by the moment here in the most recent month or two, but even over, you know, the time span of COVID and the effects thereafter. Core focus for us is really making sure the inventory remains healthy, not as much for financial reasons, although that is important, but really to make sure that we are able to continue to deliver newness and new innovation to the consumer. You know, if you have stale product that starts to clog the channel, what you're prevented from doing is getting your best, newest, most value-additive product to the consumer. To us, that's the main objective, is you've got to keep the inventory clean so that you can continue to deliver innovation and newness to the consumer. Now, there's a lot that goes into that. You have to watch channel inventories carefully. You have to watch your own inventories carefully. You know, the other thing that we don't do that some other brands do is we don't take a lot of inventory risk. We don't like to take inventory risk. Generally speaking, when we're dealing with inventory, it's either a booked order or it's intended for our retail distribution. I think we're advantaged on the retail side in particular for having, you know, a store, a state, a format that we can move product through if we ever need to. I mean, ideally, you never have to do that, but I think managing the totality of what you have in the inventory in order to make way for new product is our primary focus. Okay. One more sort of big-picture question. I want to kind of dive into some of the 2025 topics, but the company's always kept a fortress balance sheet. I mean, I think even today, almost a billion-dollar net cash position. Can you just talk about how, you know, why the company's taken this approach to always have a fortress balance sheet and how it's really served the company well over time and why you will continue? I mean, it partly links to, quite frankly, your prior question. You know, in an industry where inventory can be a tremendous, you know, immediate drain or source of, you know, working capital needs and then cash, you really need to be positioned to withstand that without, you know, quite frankly, relying on other parties. I think COVID's a great example of this. Our balance sheet during COVID was a tremendous asset. We didn't have to go to banks. We didn't have to go to anybody to navigate through the short-term and then the longer-term duress of both too much and too little working capital requirements. At one point in 2023, if you recall, you know, we probably had to put about $500,000,000 into inventory. It was all good inventory, orde r-backed inventory, but we had to put that in because of the supply chain disruptions that we had seen post-COVID. That's not something you can do unless you have the balance sheet to absorb that. I think the experience that our executive team has, in particular in retail, particularly in footwear, gives us some insight into the necessity of maintaining a very strong balance sheet to withstand those moments, because those are the moments, quite frankly, where, you know, companies either live or die. Obviously, we want to live. Maintaining that fortress-like balance sheet for us is a preeminent focus. I would say from there, when we feel like we have the strength we need to withstand kind of the vicissitudes of the market, you know, we do look at other ways to deploy capital, including returning cash to shareholders, but that rock-solid balance sheet is really important. I would highlight in the current environment, even more so. This is the type of environment we're in at the moment where having that balance sheet is going to be incredibly important. We want to make sure that we maintain that posture of strength. Okay. Great. Thank you. Let's talk about 2025. You know, you just alluded to it. It's been a wild start to the year. Maybe let's just talk about what you're seeing there from the consumer first in the different regions. First, you know, what are you seeing from the consumer in the U.S.? Yeah, I mean, my big update's going to be, you know, no major update at this point in time, which I think hopefully is news to a degree. I would say we have seen, you know, interesting patterns emerge in the retail environment in the U.S. that are not quite what we had expected going into the year. We've seen more volatility week to week owing to factors like weather, the timing of tax refunds, fires, you know, a lot of exogenous events, quite frankly, that we believe have been impacting the consumer and consumer traffic. On the plus side for us, what we've seen is a lot of consumers then pivot out of store activity into online activity, and that's been incredibly healthy. The net effect of all of that, quite frankly, is at the moment, what we see is, you know, a consumer who continues to be interested in spending on the right things, still a careful consumer making good value judgments, and a consumer for whom our brand continues to resonate, particularly our focus on comfort and comfort technologies. That all being said, you know, I think it'd be silly not to acknowledge that there's been a lot of noise lately, the last six to eight weeks, particularly. We're watching kind of the state of the consumer pretty carefully. At the moment, at least in our business and for our brand, we haven't seen a material change of note that I would call out, but it is something we're watching carefully. Okay. Maybe sticking with the U.S. for a second, I mean, what have you heard from your wholesale partners in terms of, you know, their view of just all the noise that's out there and their willingness to place orders and sort of continue to do business as normal? Yeah, I would first acknowledge when we're talking about, you know, wholesale partners, they're always a little bit skittish, right? It's a tough business. It's been a tough business for a couple of years. I think we have coming up a pretty decent holiday. I would say generally kind of the uncertainty that is prevailing in the market as a whole is having an effect on at least the psychological positioning we see thus far. You know, we haven't gotten deep into conversations about order books for, you know, later in the year and early next year. It's a little tough to tell with any degree of certainty how that's going to impact their order flow as of yet. I would certainly say there's a more cautious tone than there has been, you know, maybe the last two years. I would also point out over the last 2 years, we've seen incredible swings, right? 2023 for us was a very challenged year on the domestic wholesale side. 2024 was a fantastic year. Some of that, I believe, is simply inherent in kind of the state of affairs in retail broadly. You know, I think what will tell for us the most is when we actually get those partners in front of product and we can actually give them product presentations. We can show them what we're working on, because that's usually when you get the best feedback. I would note, you know, sometimes what we hear is different than what other brands hear. I think that will need to kind of ferret out over time. At the moment, I would say there's definitely more cautiousness borne of the uncertainty that's prevailing writ large in the economy. I think that's probably the best way to characterize it at the moment. Okay. I'm sure there's a lot of talk out there about a potential U.S. recession. How do you think about, you know, the company and the brand, you know, in that potential scenario? I mean, would you expect trade down? You know, would you think that, you know, people would, you know, the Skechers maybe as a value brand could maybe outperform other brands a little bit if that's the case? Let me be clear. I certainly do not wish for any reason, you know, a recession. I do not think that is, you know, a rising tide that lifts any boat bluntly. That being said, in an environment where consumers are feeling more pressure, and because we believe footwear at some level is less of a discretionary purchase than a necessity, you know, we certainly would prefer to be, you know, a value-oriented brand, a brand, again, delivering good value for the money at a more reasonable price range than, you know, other brands. It is not to say other brands will not do well, but I like our positioning in that type of environment because we do believe we deliver to the consumer a unique assortment or selection, you know, with very reasonable prices to choose from. Like I said, there is a piece of footwear that is not discretionary. You can't send your children to school without shoes. At least I don't think so. And so, you know, one of the things that we rely on is there's a steady-state demand built into the footwear industry that is just by necessity fulfilling needs for work, school, and the like. And so for that reason, we believe there's a little bit more durability to some of that demand than maybe in other categories. But I want to be clear. I mean, we're not wishing for that. We certainly don't hope that. We much prefer an environment where the economy is thriving. That certainly is the most positive, you know, propellant for consumer behavior. Okay. We talked about the U.S. In terms of consumer behavior, what are you seeing in China? China is performing basically in line with our expectations, which I think from a positive perspective would lead you to believe there's some stability emerging in the market, which is good. Still, you know, a market that we think has vastly more potential than what we're seeing in the consumer behavior right now. I would add, you know, it still looks to us very much like a macroeconomic-driven issue. When we look at what other brands are talking about in China, what they're experiencing, what kind of our partners downstream are experiencing, you know, the general tale is that it's a consumer discretionary pressure that's applying on the market broadly. There are a couple of brands out there who have noted that they have slightly better performance, but when you really look at those, they tend to be smaller, you know, very nascent brands in the market. You know, I'm optimistic that China will begin to improve upon, you know, where it's been sitting for the last two to three quarters. Our hope is that with stability can start to reemerge some consumer discretionary demand patterns that we've been missing. Also would hope that, you know, the government starts to apply a bit more stimulus than they have to date. That's something that we've heard about. We haven't seen yet. We'd like to see, particularly in the consumer discretionary space. I would say most importantly, though, there's nothing in our view that has diminished the growth opportunity in China, you know, on the long term. You know, we continue to invest in that market, particularly at the moment with distribution capacity. The brand is very strong. It resonates with consumers. We've got good distribution. More importantly, we've got very good prospects for continued growth when we get past, you know, this point in time. We are excited about what China offers us. I think just in the near term, there's probably going to continue to be a bit more headwinds. As we noted, as you probably recall in the last earnings call, the Q1 is going to be the most challenged for us because last year it was probably the last robust quarter of growth. We do expect the first half of the year to be a bit more challenged. Again, seeing stability with the potential to some churn. You know, we are going to be taking efforts in that market to be a bit more stimulative with our consumer, you know, particularly around our comfort technologies that we think will yield some fruit. Okay. And then maybe just lastly, if we think about the rest of the world, you know, Europe, obviously a lot of stuff going on in Europe as well. I mean, what are you seeing broadly outside of the U.S. and China? Yeah, I mean, sticking with Asia-Pac for a bit, I mean, really outside of the challenges that we've seen in China over the last couple of quarters, the balance of Asia-Pacific has been doing phenomenal. A lot of really good long-term prospects for us there. India, which we didn't talk about yet, but hopefully we will. A thriving market, one where we believe we're getting past some of the regulatory hurdles that have been a bit of a supply obstacle in that market. Even just thinking about Malaysia, Indonesia, the Philippines, Thailand, Vietnam, all very verdant markets for us. We are excited about that. South America continues to be a very good spot for our brand, you know, very good brand recognition, really good success in certain markets and some really good opportunities that we're exploring in others. Europe, which, you know, to be honest with you, I have undercounted for a couple of years now and will do so no more, continues to be a very strong market for us, both on the developed side but also on the developing side. Despite innumerable challenges in that market, we've continued to see very strong growth and really good resonance with the brand. The European consumer, you know, very much appreciates functionality in footwear. It's one of the key differentiators between the consumer there and in the U.S. Delivering things like comfort technologies, but also technologies like waterproof, water resistance, those have resonated really strongly in that market. It is one we continue to be very excited about and seeing really, really good results. Just on that point about comfort technology, I mean, are you seeing any trends in the market? I mean, are you seeing any fashion trends or opportunities that have emerged this year? I mean, we firmly believe in the message around comfort. I haven't yet met a consumer who would say, "I prefer an uncomfortable shoe," which is unfortunate because I have a lot of suggestions there. What we then see as, you know, kind of big trends, you know, you're still seeing stack heights, you know, in certain categories. You are seeing low profile emerge in others. What we see with our consumer is actually continued gravitation to our premium technologies, which are very focused on comfort. It's Skechers Hands-Free Slip-Ins. It's Arch Fit. You know, it's Max Cushioning. It's our Hyper Burst technology. I mean, honestly, Wide Fit continues to be a very in-demand product we hear, you know, more and more needs for. Our focus on comfort really is what we're delivering to the consumer and what we're seeing the consumer come to our brand for. It is not without, you know, those influences of fashion. You know, in addition to innovating around comfort, we're innovating around style and look. We have a couple of, you know, products that are coming out, some of which I won't talk about here, but if we're in readings, you can see some of the examples later, some newer products that are coming out that are resonating really, really well. That is even before we market against them. I think what you can continue to expect from Skechers is that we'll be bringing innovation at the consumer fast and furiously, but with an eye towards, again, staying on trend with style, comfort, and quality at a reasonable price. Got it. Okay. A lot of talk out there, maybe, you know, not for Skechers, but other brands have said maybe, "Oh, it's consumers a little choppy. There's noise fires and all these things and tax refunds that have impacted the consumer in the first half, first part of the year." Where do you see in terms of the promotional environment? Has some of that stuff led to maybe inventory build in other places where now you're starting to see brands get more promotional events, both U.S. and globally? You know, what's your take? I don't know that we've seen a lot of change in kind of promotional depth or cadence. I would say there is a lot of uncertainty. I think at the moment that's more headline-driven than actually business-driven. I mean, look, when promotions work well, they stimulate either traffic or conversion or when they work really well, both. And we're still seeing those as effective solutions to offer consumers. You know, where we're seeing promotions, they're generally having the desired effect, which is to get people into store, get people to convert. I would say our promotional cadence has been fairly consistent kind of year on year. We haven't really changed anything markedly. I don't know that you've seen anything in the market that has changed materially. I would expect that, you know, if uncertainty continues to prevail, that's something we're going to have to watch, you know, particularly from other brands just to make sure that we're cognizant of what's happening in the market. I think on the flip side of that, and I suspect at some point in time you're going to utter the T word, you know, there's also the effects of what we're seeing from a landed cost basis. If that's going to get pressured, then, you know, I think that companies across the board are going to have to look at things like pricing. There might be kind of polar opposite effects taking place at the consumer level. Okay. I want to get to that T word in a second, but just I guess the promotional environment, that makes sense. In terms of just the inventory, when you look across, you know, from your brand, obviously in other brands, I mean, how do you feel about the inventory situation that you see out there globally? I think it's good. I think it's good. I mean, we're coming from a period in 2022 and 2023 where there's some pretty tremendous challenges from an inventory perspective. When we look at channel inventories, we look at our inventories, we feel really good both about the quantum, but also the composition and, you know, how much of it represents some of the newer products from us. Haven't really heard a lot about inventory congestion being a near-term focus for some of the brands. Now, that's always a concern that's just not too far away, you know, against any sort of subpar performance should that emerge. At the moment, I would say generally pretty good, pretty healthy. Okay. Maybe, all right, let's talk about tariffs for a second. Obviously, it's changing constantly. For what we know today, I mean, how are you thinking about the impact of tariffs on the business this year? Let me first applaud. We went 22 minutes before we really got into the tariffs. That is a record. First, I would say, you know, you know, we are not a fan of incremental tariffs, you know, certainly in our industry. For those who are not aware, there are pretty sizable tariffs to begin with. It is not like we are starting from zero and we are applying tariffs on top of that, the 301 tariffs from 2017, 2018, you know, still in place. It is a pretty heavily tariffed industry to begin with. You know, without being political in any way, shape, or form, you know, we are certainly not believing that is going to be incredibly good for the business. We are going to have to manage through it. I would say today, much like we have said, you know, for the last five years, right? If there are landed cost issues, concerns, you know, we have three primary tools that we can use. When it comes to tariffs, those are honed pretty specifically. You know, one is working with vendors on price and price concessions, you know, even in some respects, maybe value engineering to affect kind of the FOB price. The second is looking where we produce for which market. That is a very difficult calculus because what it involves for us is not just transit from, you know, a market like China or Vietnam to the U.S., but rather all the transits we do globally. From Europe to, you know, Vietnam and China to Southeast Asia. I mean, there are a lot of different routes we have to consider. What we are optimizing for is kind of the global tariff cost, not just what happens in the United States. We can look at reshoring in different instances. And then, you know, obviously looking at price. It is going to be a measure of those three solutions. I think what will be variable is, you know, how much of each we pull, you know, how much intensity we apply to each. What I think is most nettlesome at the moment, though, is simply the unknown element, the rapidity with which, you know, each incremental wave of tariff has been announced, the scope of potential other, you know, issues or tactics that are going to be applied to other markets. I mean, all that is creating a significant amount of unknown. That is just very difficult to plan against. Just as a for example, you know, if there was a cost motivation to move from market A to B, that cost motivation comes into question if you start thinking about tariffs on both A and B. If it was just, you know, A, then it's easy, move it to B, be done. When, you know, B might be threatened or other markets might be threatened, or you might see, you know, a global coordination to be tariffing against the same country. I mean, all that creates a level of uncertainty that just makes planning very, very difficult. You know, we always say if you give us a problem, we know how to solve the problem. If the problem keeps moving daily, hourly in some instance, it makes it much more challenging. What it puts us in a position to do is we're going to have to make an interim decision to adjust in some way, shape, or form one of those 3 levers. If it's insufficient, we'll have to go back and do it again. That's what's probably giving us most pause at the moment. Okay. All right. That's interesting. Thank you. Can we just talk about some of the company's key strategic priorities for 2025? You touched on them some of the call. Obviously, you mentioned investments in China and distribution centers. Just broadly speaking, what are your key strategic priorities? It'd be largely similar to what we've focused on for the last decade and a half, to be honest with you. You know, one is continuing to grow our international business. We think there's tremendous continuing opportunity in a lot of the markets in which we operate and making sure we're plotting a course both for near-term growth, but ultimately, you know, long-term opportunities. Coincident with that, there are investments we need to make to grow the business. You know, some of those are in distribution. Some of those are, you know, in things like stores and technology. Making those investments that really are facilitating not this year's growth, but quite frankly, the next two to five years, you know, worth of growth. I'd be remiss if I didn't mention product. You know, continuing to innovate on product is incredibly important. I'm always impressed by the pace at which our design teams innovate. It's clearly a point of focus, has always been a point of focus. You know, every season when I go into the showrooms, I see something new. It's truly incredible. Some of it is reflective of what we're seeing in the market. Some of it is wholly new. I think it's that balance, quite frankly, of being, you know, responsive to trends, but also trying to bring new innovation to the market that serves us so well. Obviously, running the business, you know, as efficiently as we can, given, you know, all the balls that tend to be in the air. That proves more challenging in environments of heightened uncertainty than in others. I think, quite frankly, really laying the groundwork beyond, you know, even the next two to five years' worth of growth for five and ten years forward. What we know is the Skechers brand is not fully penetrated. It's not at its maximum potential. There's a lot more to do. Investing behind categories like performance and others, Street, et cetera, those continue to be really big opportunities. Continuing to invest in those for the long term so they can contribute five, ten, fifteen years out is incredibly important. Okay. Maybe just to follow up on that, I mean, how should we think about the Skechers' long-term growth opportunity? You mentioned India before. You talked about some new categories, performance. When you think about long-term revenue growth, I mean, how should we think about it? And sort of what are the key drivers of that plan? Yeah. I mean, we've said, you know, our growth algorithm is pretty well defined at this point. As much as we'd love to tell you that the, you know, domestic footwear market's going to grow at 20% a year for the next ten years, that's probably not very realistic. We expect that, you know, this domestic market we're in will be healthy, will be profitable, but it's probably not going to be the fastest growing market. There may be years where we excel or others do. By and large, we expect that to be kind of a mid-single-digit growth market, which is great. Quite frankly, very profitable for us. The anchor upon which, you know, we moor our ship for the rest of the world and where we design, you know, and develop from. You know, I would say the two big thrusts of growth for us have always been, you know, international development going into some of the markets we talked about across the globe, but also continuing to grow that DTC business. What we see in the DTC business opportunity is a better and best representation of our brand, the best opportunity to represent the entire assortment we have available for consumers, and quite frankly, the ability to get to know consumers directly. I think that is both stores, you know, and e-com. We're seeing e-com develop in markets that heretofore have not been heavily penetrated from a digital point of view. Those continuing to grow together represent for us probably, you know, one of the most significant growth drivers, you know, particularly outside the United States, although I would say even in the United States, we still see more opportunity. Got it. I guess, you know, you mentioned some of the performance categories. Basketball, soccer are two categories the company got into last year. Give us an update on how it's going. It seems like company's made nice progress. I would love to hear a little bit more. Yeah. First of all, I'd be curious how many people in here are aware that Skechers is developing performance product. That's a pretty decent penetration, but not anywhere near where we need to get it. Please tell everybody you know. A couple of years ago, we launched our first cleated product. This was on the back of some, you know, pretty long-term development to bring cleated solutions to the marketplace. We partnered with a, you might not have heard of him, a football player by the name of Harry Kane, who coincidentally scored a winning goal in yesterday's match, the UEFA match, taking Bayern to the round of eight and started to roll out what we believe is a very solid solution in kind of cleated, focusing first on football, soccer for you Americans, and taking it then even to other cleated sports like cricket. We also followed that afterward with basketball. What we're trying to develop for the brand is a full suite solution in performance footwear. We've had for a long time, as you know, Jay, golf and running. We found that those were under-optimized because they were so isolated. We couldn't offer a full suite to sporting goods retailers across the globe. What we want to be able to deliver is a performance solution set that still focuses on style, quality, and comfort at a reasonable price, but also has the characteristics required for performance footwear to serve the world's best athletes and then even folks like you and me. What we're developing is a portfolio of performance product that we can put in our own stores that we can offer to sporting goods retailers that spans everything from cleated to basketball. We're going to be relaunching our running line this year. We have court shoes, pickleball for those who play, padel for those internationally, and we'll look at others. The goal is to develop a suite of performance-related products that actually help both what we offer consumers and offer wholesale partners, but also, quite frankly, elevate the brand. Because performance is one of the primary testaments to the quality of goods. What we know is that our quality, look, if Harry can score a goal in a UEFA match, it's a good product. It works. Being able to convey that to consumers, use that as an entry point for some, but also to testify to the quality of the brand, that's going to be very valuable for us. What we are in the position of being able to do, which I think is pretty unique, is to nurture that over a period of time. We do not need to force it. It does not necessarily have to contribute outsized to the next revenue goal we have of $10 billion and even the one beyond that. That is a really unique position. If you think about most footwear brands in the performance space, they have started out there. By necessity, they have to succeed. What we have is the luxury to nurture that for a period of time, to build it into the marketplace, and then roll it out slowly across both our stores and wholesale partners. What we think is that there's absolutely a need for yet another solution in the performance space, but one also that, quite frankly, has a bit more of a reasonable price point. You'll see us have both the premium stuff that competes more directly with some of the premium players, but also a much more reasonably priced solution set below that. We think that's going to be a winning formula both for the brand from a branding perspective, but also from a product perspective. For anybody who hasn't tried the product, if you try, you'll see it's equal or better, certainly at the price point to anything out there on the market. Got it. Okay. Great. I think that we talked about long-term sales opportunity. We talked about the long-term margin opportunity. You know, how do you think about that long-term margin opportunity? Operating margin specifically. Yeah. First, I'd point out that I think we've done a good job reconstructing kind of the pre-COVID margin over the last three years. It's not been easy. Last year, we put the margin, the operating margin into the double-digit range, very close to that. Pre-COVID, as you know, we've had to suffer through a lot of different challenges between that point and last year. Happy to see that operating margin get into that double-digit range. What we've always said is that structurally, the business has an operating margin that's in that kind of 11% to 13% range. Could be a little bit higher, but to be a little bit conservative, we want to keep it range-bound. We still think that's absolutely the case structurally. The one thing I would always point out is we will continue to invest for the future. You know, we could achieve that level of operating margin today if we were not investing for the future. The example we always give, but it is also most instructive, is, you know, this year we plan to open between, you know, 180 to 200 company-owned stores worldwide. Unfortunately, when a store opens, it is not contributing at the operating margin. You know, you would expect longer term. It just takes stores a while to get up and running. Each one of those stores in the short term is a bit of a drag from an operating margin perspective. Long term, they will over-contribute and then also continue to grow the top line. Those are decisions we are making on a pretty consistent basis that are consciously detrimenting the margin short term, but with the ability to add to the growth of the business long term. There will absolutely be a point in time when the quantum of kind of growth investments for us declines, and it'll be much more modest. That is when you should see the operating margin increase. In the near term, what we want to be conscious of and, quite frankly, very, very clear about is our number one goal is to continue to be the third largest footwear brand in the world and maybe someday challenge for number two or number one. We'll see. That requires us to continue to invest in the business. Okay. You know, we talked about tariffs without the Red Sea issues. I mean, that's been a volatile spot in the world and creating some pressure on costs. What are you expecting for this year and beyond? Oh, good. I thought you were going to ask us to solve that one. That was a tough one. Yeah. I mean, the Red Sea continues to be our preferred route of transit for goods, particularly from Asia to Europe. Unfortunately, that remains closed. Hoping that maybe we'll see some sort of alleviation of that issue in the short term. Our expectation right now is it'll probably take a year before we get to see that loop back around. There are two consequences to that. One is it just increases travel time for goods. Goods going from, you know, Asia to Europe have to go down around the Cape of Good Hope. That's obviously significantly longer than going through the canal. That has added as a result inventory. If you look at our third and our fourth quarter, you saw a meaningful step up from an inventory perspective. Most of that, if not all of it, was driven by merchandise in transit because of the elongated transit times in Europe. You know, that's one issue. Obviously, it costs a little bit more to make that transit. There's more fuel, there's more time, et cetera. What we'd really like to see is kind of a return to normal transit times. That would be very, very helpful. Unfortunately, that's a little bit out of our control. We're willing to help, but probably don't have the solution. We'd like to see that get back to normal. We also think that would be good for the overall health of kind of the logistics side of our supply chain. We're still in a wait-and-see mode on that. Okay. Last topic, I want to talk about shareholder returns. Specifically, I want to talk about ROIC. First, John, how does the company think about ROIC? We measure it pretty carefully. We watch it carefully. I wouldn't say it's the primary driver of our overall kind of financial guidance because what we find is ROIC, particularly if you're not looking at it on a kind of a trended basis, can be a little bit misleading at any given point in time. Largely, our goal obviously is to accrete from both an operating margin perspective, as I mentioned, but also from an ROIC perspective. Now, what's really important in that is the balance between what your near-term investments are required for the business, but also your opportunity to then generate returns on the back of that. I think sometimes that's a struggling measure for anybody who's growing because you're constantly growing your invested capital base ahead of the return base. The best example I can give you for that is any investment we've made in distribution. This year, we'll be making a sizable incremental investment in our U.S. distribution. It's something we know we need to do in the next two to three years. Now is the time we've chosen to do that. It's a once-in-a-decade investment for us, maybe even a decade and a half. But it's something we have to do. Now, we're going to have to make that investment today because unfortunately, when it comes to distribution, you can't incrementally invest one shoe at a time, which is what we'd prefer, but it's not possible. You know, what you're forced to do often is countenance the investment you have to make, but also against the return for the future. There is a balance to be played there. I do think, you know, we try to keep both sides of the ledger in mind, but more importantly, you know, if it's a good business decision, if it's a good business long-term decision, we're going to make that and we'll take the ROIC hit in the short term in order to facilitate that in the long term. Maybe if we think about the long term, I mean, it sounds, I mean, can ROIC move higher was going to be the question. I think the answer is yes. But maybe tell us a little bit how. I mean, both sides of the ledger. I mean, I think what we certainly aim for, and this is, I'll just leverage this example again, you know, we're going to make a DC investment this year in the U.S. That will set us up really for about the next 10 to 15 years of growth. That means every year subsequent to making, while we'll have a fixed IC base relative to that specific investment, we will generate superior returns from a distribution perspective. We'll drive down our cost per pair versus what either what have otherwise been or where it is today. You know, we get the increasing benefit of that over time. Now, the obstacle would be if we have to make another incremental investment to facilitate growth. Again, with these sizable investments like that, you know, you're making them once in a decade. You get about nine years to harvest after making that initial contribution. That is really how we like to look at it. If you take that to a microcosm, you know, it is really looking at the IRR of a lot of these individually. Generally speaking, those two should line up. Also, just from an ROIC perspective, obviously maintaining your profitability is very important. You know, withstanding the vicissitudes of the market in a way that allows you to maintain margins and margin structures is always important. That is kind of table stakes. That is obviously a piece of what we do, but it is something we focus on. Okay. Maybe just talk about CapEx this year. I think on the last call, I talked about a little bit elevated this year because those big investments that are being made. Maybe going forward, like where do you think CapEx as a percent of sales should be just on a normalized basis? Yeah. I tend to not think about it as a percentage of sales basis because I think that gets a little bit loose later on. Hopefully, you'll appreciate that discipline when the sales get to $20 billion. I would say we think about it very much on kind of a project basis. You know, there's a certain amount of maintenance we need to apply. There's a certain amount we're going to invest in new stores. You were being generous. This year, we're spending a lot more on CapEx. It is particularly two investments that we're making. You know, one in the U.S. for this added storage capacity in the distribution center there. The other is we're continuing in an amendment to our distribution footprint in China that aggrandizes that to a point where we actually believe we can be fully self-sustaining. Those are pretty sizable this year. They are nearly doubling kind of our normal CapEx run rate. I would say though, with CapEx, I found, you know, large projects tend to move at their own pace and speed. This is what we know now. What we'll see is those projects materialize, you know, exactly the timing. The net of it is, you know, we are over-indexing kind of our normalized CapEx rate this year in order to make those investments. Generally speaking, we believe, you know, those bleed off. The next big one we'll make will be about a year, year and a half from now with our European distribution center. Another really good example where we're going to spend over a short term a significant sum in order to consolidate and expand what today is in a nine-building footprint into one. The return that generates by being able to consolidate in the investment automation, reduce labor exposure is very, very high IRR. We are happy to make those. I think, quite frankly, one of the abilities that we have as a company with an anchor shareholder like we do is to make those long-term decisions for the benefit of the business, even if in any one year they do not actually resonate as well. Right. That makes sense. Look, personally, I think it's fantastic. A lot of companies don't have the ideas and the opportunities to invest large sums of capital that can drive a strong IRR and that can maintain that strong ROIC going forward. I think it's great that there's still so much opportunity out there. Yeah. We're excited. I think it's a great place to stop. John, thank you so much for doing this today. This was awesome. Thank you, Jay. Thank you, everybody.