Greetings, and welcome to the Wolverine Worldwide Third Quarter 2022 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Alex Wiseman, Vice President of Finance for Wolverine Worldwide. Thank you. You may begin. Good morning, and welcome to T hird Quarter 2022 Conference Call. On the call today are Brendan Hoffman, our President and Chief Executive Officer, and Mike Stornant, our Executive Vice President and Chief Financial Officer. Earlier this morning, we issued our earnings press release and announced our financial results for the third quarter 2022. We also issued a separate press release and filed an 8-K outlining changes to our brand groups in reportable segments which took effect in the fourth quarter. References to financial performance in today's call reflect the pre-existing structure. These two press releases are available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. If you would prefer to have a copy of the release sent to you directly, please call Allison Malkin at 203-682-8225. This morning's earnings press release and comments made during today's earnings call include non-GAAP disclosures which adjust, for example, for the impacts of environmental and other related costs, net of cost recoveries, foreign exchange rate changes, and costs associated with the integration of Sweaty Betty. Prior year non-GAAP disclosures include additional adjustments for debt extinguishment costs and costs associated with the acquisition of the Sweaty Betty brand. These disclosures were reconciled in attached tables within the body of the release. We have added a supplemental table on our website under the Investor Relations tab at the Webcast and Presentations link to show financial results with and without adjustments for abnormal air freight levels in 2021 to facilitate year-over-year performance comparisons. I'd also like to remind you that statements describing the company's expectations, plans, predictions, and projections, such as those regarding the company's outlook for fiscal year 2022, growth opportunities and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under U.S. securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. With that being said, I'd now like to turn the call over to Brendan Hoffman. Thank you, Alex. Good morning, everyone, and thank you for joining today's call. While we were pleased to deliver third quarter revenue growth of 9%, 12% on a constant currency basis, both revenue and profit came in below our expectations, reflecting ongoing supply chain disruption, heightened promotional activity, and deteriorating macro conditions. Despite these external headwinds, we saw notable strength in our international business. Within our portfolio, Merrell continued its strong momentum, delivering 34% revenue growth, 39% on a constant currency basis. Merrell's performance demonstrates that when we lead the market with product innovation, engage our consumers with powerful and relevant market storytelling, and have access to key products and inventory, we will win. We continue to strengthen the foundation of our business through a refined corporate strategy that is focused on prioritizing the brands that have the highest potential for growth and optimizing the brands that create value through strong profit and cash flow contribution. As we shared in a separate press release issued this morning, last week, our board of directors approved a new brand group and reportable segment structure that aligns with this approach. This change is effective immediately and includes new leadership appointments to guide these groups. We have also established a Profit Improvement Office to identify and execute initiatives that will unlock margin expansion, ensure we are directing resources to areas of the business that are expected to give us a strong ROI, and enable the new structure. I am excited about these changes as they pave the way for Wolverine to become a stronger company that is more powerfully positioned. Mike and I will provide more information on this later in the call. First, I will share the specific factors that led to our Q3 revenue and profit results, highlight some current strengths in the business, and discuss actions to normalize our inventory position. Our third quarter sales increased 9% to $691 million. Excluding the unfavorable impact of foreign exchange rates, global revenues increased 12%. Adjusted operating profit decreased 10% to $62 million, due mostly to the higher promotional sales in our DTC channel as compared to unusually low promotions last year, discounts in wholesale due to late deliveries, and the impact of unfavorable foreign exchange rates. I'd like to provide more context around the factors that impacted revenue in the quarter. First, starting with U.S. wholesale, which represents our largest channel and the largest miss versus our outlook for the quarter, as Sperry, Keds, Sweaty Betty, Wolverine brand, and Saucony were heavily impacted by the following key factors. Logistics and warehouse congestion. This starts with our own distribution centers that are currently operating way over capacity, making it difficult to receive new product and process outbound shipments. Ongoing congestion within inland transportation networks also remains challenging. This is our number one operational priority. Mike will go into more details regarding our efforts to increase efficiencies in order to improve the flow of our products later in the call. Many wholesale customers are currently dealing with heavy inventories and warehouse constraints. This resulted in certain shipment delays, causing some elevated cancellations and additional discounting. Logistics delays and integration timing on Sweaty Betty's U.S. wholesale business limited the brand's ability to service its U.S. wholesale orders. Sperry underperformed our expectations as logistics and warehouse congestion led to late deliveries and slowed the introduction of newness, which was further exacerbated by declining trends in the boat shoe category, and with the unusual warm weather, a sluggish start to the boot season, all of which led to shipping delays, discounts, and order cancellations. Our global direct-to-consumer channels, which includes Sweaty Betty, were leveraged to clear inventory during the quarter, which drove 4% revenue growth, 9% in constant currency, in line with our expectations. However, higher than expected promotions resulted in lower gross margin during the quarter. Challenging macro conditions in Sweaty Betty's home market, the U.K., put extra pressure on performance in the quarter. Keep in mind that this time last year, lead times were extremely long, up to 365 days in some cases, as we faced factory closures in Vietnam, among other supply chain disruptions. We, like others, moved up deliveries, especially in core evergreen product to ensure we had ample supply to meet our backlog, which was at a historic high. While we have not navigated the supply chain as seamlessly as we would have liked, we have plans in place that should allow us to improve the flow of goods, increase the rate of on-time deliveries, and reduce inventory levels. These actions include reducing forward purchases with our suppliers, especially in core product that we have in the warehouse, and forcefully moving through seasonal products. Mike will walk you through our inventory actions and expectations for inventory levels during his remarks. Notwithstanding these challenges, the quarter included noteworthy accomplishments. As I mentioned, the Merrell brand continues to resonate well with customers. Third quarter revenues exceeded expectations of 39% constant currency growth. The Merrell team has done a great job extending the brand's reach to younger lifestyle consumers with targeted marketing and innovative product launches. It was encouraging to see product availability improve compared to last year when certain Vietnam factories were closed. Our international expansion continued with strong results in the quarter. International revenue was up 43% on a constant currency basis, with strong growth across regions. Although we are cautious about macro and political instability in several international markets, we continue to see significant international growth potential for our key brands. saucony.com revenue was up 30% in the quarter, 33% on a constant currency basis, reflecting not only an increase in promotional activity, but a strong consumer response to new products showcased in the quarter. Overall, we expect the environment to remain challenging, which is reflected in our updated guidance, but we've already taken many proactive steps to address the situation and position the company for 2023 and beyond. We remain confident in our ability to elevate our brands and position the company for sustained long-term growth. Our go-forward brand group structure is a critical step. This new structure will allow for better collaboration and increased efficiencies across brands, especially those that are innovating in similar product categories, targeting similar consumers, and trading in similar distribution channels. The new brand structure will also allow our centers of excellence to operate more efficiently and effectively. The new groups will be Active, consists of Merrell, Saucony, Sweaty Betty, and Chaco. The footwear brands will report to Chris Hufnagel, and Sweaty Betty will continue to report to me. This group includes brands with the highest future growth potential. Work, led by Tom Kennedy, consists of Wolverine, Caterpillar, Hy-Test, Bates, and Harley-Davidson. This group includes brands that will produce stable growth while contributing profit and cash flow to support our highest growth brands. Lifestyle, led by Katherine Cousins, consists of Sperry, Keds, and Hush Puppies. This group represents our turnaround brands. Combined, the group delivers positive cash flow, but the brands are not achieving their potential. We are evaluating the best go-forward options for each brand. Next, we also established a Profit Improvement Office that will be led by a new Chief Profit Improvement Officer who will report into me. We are targeting annual growth savings of $150 million and expect a portion of this to be recognized in 2023. This office is an essential enabler of our new corporate strategy and long-term plans for our highest growth brands. The benefits harvest will allow us to accelerate the return to our historical peak operating margin of 12% as a sustainable foundation upon which to leverage over time and also invest in the highest growth in ROI initiatives. We believe each of our brands has potential, but our new strategy is focused on simplifying the business, prioritizing brands with the biggest growth opportunities, and optimizing brands that can create value through strong profit and cash flow contribution. The assessment of our portfolio may require some tough decisions as we address underperforming businesses. This work is one of our top priorities. Now we'll move on to discuss the performance of our largest brands. Merrell delivered a record third quarter, with revenue of $199 million, up 39% compared to the prior year on a constant currency basis, with strong growth across regions, channels, and categories. As we look at the assortment, we were pleased with the performance of the long-delayed Moab 3, as well as newer innovative categories like Light Hike with Bravada, our trail-ready hiking sneaker. Lifestyle offerings, including Hydro Moc, and camping and trail running categories continued to be top performers. Our shift of focus to purpose-led brand messaging, as well as other community-focused ESG efforts, helped broaden the brand's reach. Now I want to highlight a number of differentiating factors that contributed to Merrell's results. We believe we can leverage our learnings from Merrell and transfer them to other brands to help them grow awareness and shape their digital marketing efforts. First, MTL, Merrell Test Lab, is our innovation incubator where all our top products come to life. We test and refine right on the trail using nature as our guide and elite athletes as our North Star to produce our best performing products. Next, we began building a more agile and nimble marketing structure 18 months ago, which included a new in-house photo studio and the addition of key creative talent, which are contributing to the brand's global growth. The agility built into the model has paid dividends, especially as we manage through the volatility in product launches and resulting marketing activation shifts due to supply chain instability over the past year. Finally, increased DTC distribution. Over 40% of Merrell's U.S. business is now direct-to-consumer. We have more control over the Merrell brand and how it is positioned when being operated in our own environment. Earlier this year, Merrell piloted the integration of a centralized e-commerce commerce commercial team directly into the brand team to more closely connect marketing, product, and digital functions to maximize agility and speed. This has been very successful, and we are rolling the structure to our other brands. The culmination of our efforts led to Merrell being named Brand of the Year by Footwear News, and will be recognized at the Footwear News Achievement Awards Gala on Wednesday, November 30th in New York City. Footwear News editors selected Merrell as the brand of the year for leading the way in promoting a more diverse vision of the outdoors through various efforts, including forming a women-centric hiking club, investing in Big Brothers Big Sisters of America to make the outdoors more accessible to youth, and supporting the National Recreation and Park Association to help create more urban green spaces. Merrell has been recognized recently with numerous product awards, including its newly introduced Moab 3, receiving an Innovation in Design Honorable Mention from Fast Company, its Moab Speed Thermo Mid Waterproof being selected for Outside's Best in Hiking Boots in the 2023 Buyer's Guide, and its MTL Skyfire 2 and Rogue hiking boot receiving ISPO awards for product excellence in the outdoor industry. As we look to Q4, we are very excited about the product pipeline and expect Merrell to deliver over 20% revenue growth and full-year revenue growth in the high teens. Moving on to Saucony. Third quarter revenue came in below our expectations at $130 million, down 1% compared to last year, but up 4% in constant currency, primarily due to late deliveries caused by congestion in our warehouse and inland transportation network, and weakness in the U.S. wholesale distribution. We were encouraged to see that consumer reaction to new product launches when we were able to introduce newness was very positive. To this end, both Tempus and Triumph 20 launched in the quarter and had strong sell-throughs reflecting the demand and interest in Saucony. However, limited flow of newness pressured revenues. Our goal with Saucony remains focused on expanding the brand's reach to everyday active consumers. When we are visible to these consumers, we see strong results. We are particularly focused on our own digital channel and those of our partners, especially digital titans, given the ability to gain share with these everyday customers. We are also seeing success with our efforts to target a younger lifestyle-driven consumer with Saucony Originals business, which continues to perform really well around the world. Saucony's international business was another positive story. Saucony sales through a China JV more than doubled in the quarter. In China, our multi-channel strategy is working well, including the addition of 16 new stores during the quarter. Efforts to drive brand awareness and excitement around the brand in China include a sponsorship of the Hood to Coast relay that took place in August. The Saucony team launched its House of Speed consumer activation booth at the start and finish line, which reached 2,500 runners and over 100 media outlets. Saucony sponsored 250 runners, including 15 athletes and 1 previous Olympic champion, as well as social influencers. As a result of this activation, we saw a significant uptick in the search index for Saucony on Tmall. Saucony's e-commerce third quarter revenue growth of 30% significantly outpaced the portfolio and was fueled by strong sell-through on the Endorphin 3 and Triumph 20 launches. Looking ahead, Saucony remains focused on driving market share globally across road and trail running categories, as well as expanding our lifestyle originals business. In Q4, we expect Saucony to deliver over 20% growth. Moving on to Sweaty Betty. Third quarter revenue declined 3%, but increased 13% on a constant currency basis. On a like-for-like pro forma basis, Sweaty Betty's revenue was down 28%, 16% on a constant currency basis. This performance was below our expectations due to logistic delays that negatively impacted shipments of U.S. wholesale orders. Performance was primarily challenged by tough macro environment in its home market, the U.K., where consumer sentiment continues to deteriorate significantly. Despite near-term macro challenges, we're very excited by Sweaty Betty's long-term global expansion potential. Two weeks ago, Sweaty Betty opened its first concept store in London at Battersea Power Station, one of the most covetable new retail developments in the U.K. The powerhouse store is a perfect physical expression of the brand's distinct positioning. The store has received a lot of positive publicity and early response from consumers. In the quarter, Sweaty Betty rolled out a new POS system across the entire fleet of stores, which is mobile first, and a great tech kit that allows for more seamless transaction in stores. We are exploring ways to leverage this technology in the near term across the other brands in our portfolio. Looking ahead, we expect Sweaty Betty be pressured by macro challenges in the near term and expect Q4 revenues down high single digits. Pivoting to the work brands. Wolverine's third quarter revenue came in below our expectations at $59 million, down 1% compared to the prior year. Congestion in our Beaumont, California, distribution center resulted in some customer order cancellations and shift in deliveries to Q4 for certain customers. Cat's third quarter revenues grew 36% on a constant currency basis, driven by strong growth outside of North America. Keds also experienced shipping delays in the U.S. market. The work category remains a steady source of growth underpinned by current industry trends. Warehouse footwear is one of the areas we experience continued tailwinds, particularly from female and Hispanic warehouse workers. We continue to leverage strong market share of Caterpillar and Wolverine, which account for 20% of the work boot market. All of our boot brands continue to attract younger consumers on digital channels, including Amazon and Zappos. From a marketing standpoint, Wolverine has been very successful with collaborations. The brand's third collaboration with Old Rip Van Winkle Bourbon launched on October 25 and sold out in less than 48 hours, earning 500 million media impressions. This month, we are launching our third collaboration with Rawlings, celebrating the iconic Gold Glove Awards. All recipients of the Gold Glove Awards will be sent a pair. Later this year, we will launch our fourth Metallica Scholars collection, as well as second Halo collection, following Q1's limited launch, which sold out in minutes and produced +20% email list growth. We expect Wolverine's Q4 revenues to grow high single digits, partly driven by a timing shift of some of the shipments into Q4 from Q3 due to logistical issues we cited. Moving to Sperry, Q3 revenue was down 12% as compared to the prior year, fell short of our expectations. Congestion in our distribution centers and delays in the U.S. inland freight network were more pronounced in our Louisville distribution center where Sperry resides. Keds is also in this distribution center and faced these same challenges, resulting in a revenue miss in Q3 versus our internal plan. Demand trends in the U.S. boat category and women's sneakers softened in the third quarter compared to earlier in the year. Retailers are being more cautious on buying into these categories, as evidenced by order cancellations we experienced in Sperry and Keds during the quarter. Their tolerance for accepting late deliveries on these categories is relatively low. Sperry continues to possess high aided brand awareness at 57% and is seeing a notable increase in search engine interest. We will leverage as we work aggressively to improve logistics and warehouse efficiencies so that we can bring in innovative product stories, including our JAWS, SeaCycled, and Moc-Sider boat lines. In boots, we also expect our Who What Wear Warm and Wonderful and our Herschel Supply Company brand offerings to be favorably received by consumers. Overall, we expect improvement in the U.S. to take time as Sperry continues to face inconsistent trends in the overall boat shoe category. That said, Sperry continued to make progress on increasing relatively low international penetration. Third quarter revenue from Sperry's international business increased over 250% versus the prior year, and we are seeing some green shoots from our efforts to build brand awareness outside the U.S. Looking ahead, we are planning Sperry's Q4 revenue to be down in the mid-20s range, given softer start to the boot season and a more conservative growth expectations in boat and women's sneakers category. Before I conclude, I'd like to point out that we remain committed to supporting our communities, protecting our planet, empowering our team, creating a diverse workforce, and managing responsible sourcing and supply chain operations. I am very pleased with the progress we have made and invite you to read through our Global Impact Report published in August, which can be found on our corporate responsibility section of our website. In conclusion, while the global macro environment and inventory challenges are expected to detract from our performance in the near term, we're more confident than ever in the future of our brand. We are actively working on improving our inventory positions across our brands to ensure we return to more normal levels as early as possible in 2023. Additionally, our review of the brand portfolio, improvements in planning across the business, enhancements to the technology, and DE&I and ESG initiatives are embedded in the business as continued processes. Today, we shared with you the resegmentation of our brands, leadership changes, and the Profit Improvement Office. We look forward to sharing more details with you at our Investor Day sometime in the first half of 2023. We will emerge from current challenging macro conditions as a stronger, more efficient, simpler company with a portfolio of brands ready to service our customers around the world. With that, I will turn it over to Mike to discuss our financial results. Thanks, Brendan, and thank you all for joining the call today. Brendan provided a thorough overview of our Q3 results, and I will add some additional insight. However, I'll focus most of my comments on actions to normalize our inventory position, our outlook for the fourth quarter, and margin opportunities from the newly formed Profit Improvement Office. The third quarter revenue performance included a 20% increase for the Wolverine Michigan Group and a 4.3% increase for the Wolverine Boston Group, and a 3.2% decrease for Sweaty Betty. In this morning's press release, we provided pro forma information for the quarter to show what the results for our new reportable segments would have been, including historical reference for 2021 and 2020. For Q4, we will be reporting results under the new structure. Adjusted Q3 gross margin of 40.3% was below our outlook, mostly due to higher promotions in our D2C channels and lower than expected wholesale revenue for Sperry, Keds, Sweaty Betty, and Wolverine brand. We took measures in the quarter to move seasonal and end of life inventory, particularly through our D2C channels. Our international distributor sales were a larger percentage of our overall mix in the quarter compared to last year. Adjusted selling, general and administrative expenses of $216.4 million were up $8.7 million or 4.2% compared to the prior year, including one additional month of Sweaty Betty expenses this year and higher marketing spend for Merrell and Saucony. Adjusted operating margin was 9% and below our outlook for the quarter, driven mostly by the gross margin shortfall previously noted. Adjusted and reported diluted earnings per share for the quarter were $0.48 and $0.56 on a constant currency basis. This compares to $0.56 in the prior year. Now let me provide some insight regarding our inventory. Third quarter inventory of $881 million grew 114% compared to unusually low levels last year, and represents our peak level for 2022. Higher logistics, handling, and other product costs represent approximately 15% of the increase. In transit inventory of $281 million was up from $57 million last year. This heavy in-transit position was caused by inland logistics congestion and limited capacity in our distribution centers. At this time last year, we faced significant manufacturing challenges, including the shutdown of key factories in South Vietnam that heavily impacted our Merrell and Saucony brands. The volatile sourcing environment resulted in extremely long lead times of over one year, at a time when we saw very strong demand for most brands, supported by an historically high order book for our wholesale businesses. In the fourth quarter of 2021, we committed to invest in core inventory for our biggest brands as a way to mitigate the long lead times and ongoing supply chain volatility. During the first half of this year, we saw manufacturing lead times stabilize, while logistics lead times lengthened due to vessel capacity, port congestion, and inland freight challenges. These logistics issues, combined with congestion at our own distribution centers, have hampered our ability to receive new product, resulting in delayed shipments and increased order cancellations. Since late June, we have seen demand moderate for our brands, especially in our U.S. wholesale business. This is partially due to the logistics delays just mentioned, but also to a more difficult retail environment and backlog of inventory for certain wholesale customers, especially in North America. All of these factors have contributed to the Q3 inventory position. The quality of inventory remains high, with over 80% representing core and carryover styles that will be carried into 2023. Importantly, nearly 60% of our own inventory is for Merrell, Saucony, Sweaty Betty, and Wolverine brand. We have reset monthly inventory targets with the goal of normalizing inventory by Q3 of 2023. We expect year-end 2022 inventory of approximately $840 million, a $40 million improvement from the end of Q3. Our key actions to reduce inventory include the following: We've identified approximately $125 million of end-of-life inventory to be liquidated through our D2C channels and key partner relationships. This action will negatively impact our gross margin in the near term, especially in the fourth quarter, but will improve the operations of our distribution centers and improve our ability to receive new product for spring 2023. Now that logistics lead times have shortened, we are working with our supply chain partners to reflow goods over the next few months. This action will allow us to reduce the level of in-transit inventory and reduce gridlock. In addition, we've established alternate processes to circumvent the logistics congestion to ensure that our key spring product is delivered on time for our customers. Because of the high quality of core inventory we are carrying into 2023, we are comfortable reducing our 2023 production levels significantly. Currently, our pipeline of in-transit and on-order inventory is down over 35%. We have also reduced our forward coverage targets for certain brands with lower growth potential. We are implementing a new integrated inventory planning process that is designed to allow us to be more nimble and responsive to changes in demand or future supply chain disruption. This new process includes people and tools that will improve our visibility and accountability. We are confident in our ability to manage the current inventory situation. We have an experienced supply chain team, and our brand leaders are focused on this as a key priority. Brendan and I will continue to prioritize this work and expect to see continuous improvement over the coming months. Now we'll turn to net debt and liquidity. We ended the quarter with net debt of $1.35 billion and liquidity of $400 million. Our bank-defined leverage ratio was 3.4 times. This leverage position is a peak for this fiscal year and relates mostly to the increase in inventory in the quarter. In the first month of the fourth quarter, net debt and liquidity have improved by approximately $100 million. We expect to generate $250 million-$300 million of operating free cash flow in the fourth quarter, bringing our bank-defined leverage ratio down closer to three times. Now let me cover our Q4 outlook and our full year outlook. Our revenue outlook of $650 million-$675 million represents growth of approximately 4% at the midpoint of the range and approximately 9% in constant currency. This performance includes over 20% growth for Merrell and approximately 20% growth for our international business. We now expect fourth quarter adjusted gross margin of approximately 38% compared to 42% last year. The decline reflects the aggressive inventory reduction plan and overall higher promotional environment. Higher logistics and handling costs carried in our on-hand inventory and foreign currency. Adjusted selling, general and administrative expenses are expected to be approximately 37% of sales in the fourth quarter. This is higher than Q3 of 2022 because of the higher mix of Q4 D2C revenue, including Sweaty Betty. Adjusted diluted earnings per share is expected to be in the range of a loss of $0.15 to a loss of $0.05. For the full year, we now expect revenue of $2.67 billion-$2.695 billion, or approximately 14% constant currency growth at the midpoint of the range. We now expect adjusted diluted earnings per share of $1.41-$1.51. I will now add some details regarding our profit improvement office. This new office will provide the leadership structure and rigor to identify and harvest savings and margin for the company. The PIO will be responsible for profit improvement initiatives and will report to Brendan. Our internal goal is to identify $150 million in profit improvement initiatives with a goal of recognizing at least $65 million of this benefit in 2023. We expect the office to unlock savings and efficiency opportunities in the following areas. Supply chain costs. This represents about 65% of the company's cost structure. We believe the simplification of the business, prioritization of our biggest brands, and deeper focus on product costs will yield significant savings. Our operations team has engaged AlixPartners to support a cost savings project related to raw material procurement, which is expected to yield savings for H2 2023. As we streamline our factory and supply base, we are also negotiating for better costs and on-time performance, which will benefit 2023. SKU management. More focus will be placed here. We expect this will directly benefit our inventory management and warehouse operations while reducing product development and sample costs. There will also be more emphasis on allocating new SKUs to our growth brands. Portfolio assessment. The PIO will support our efforts to address the underperforming segments of our business. This will include organizational and cost savings initiatives that best align with the company's go forward corporate strategy. Each brand now has a clear role to play in the portfolio, and this context will help us to make more effective resource and investment decisions for the future. Indirect costs. Outside of the supply chain, we are identifying certain cost areas that can be better leveraged across the various business units. We believe our ability to aggregate spend and negotiate through a central procurement process should provide cost savings, improved accountability and higher quality vendors. Another key element of the new Profit Improvement Office is the ability to maintain the identified savings and efficiencies into the future. We plan for the Profit Improvement Office to be a permanent part of our business and to be very visible in the organization. Brendan and I believe that this added level of accountability will be fundamental to accelerate and embed the savings we realize. We are also excited about the work that is already underway and the early successes we are seeing. In closing, I'd like to thank our global team for their commitment and execution during an incredibly volatile time. I'll now turn the call back over to the operator. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. In the interest of time, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Jim Duffy from Stifel. Please proceed with your question. Oh, thank you. Good morning, guys. A lot to ask about here. I'll get things started. I wanted to start by talking about the advantages of the realignment of the segments and some of the early initiatives of the Profit Improvement Office. First on the Profit Improvement Office, have you staffed an additional executive, or is that something that falls under your responsibility, Mike? It's Brendan. Hey, Jim. We're in the process of identifying or looking outside for a Chief Profit Improvement Officer that will report directly to me. Mike will obviously be very involved, but that's the way we're gonna structure this, so the whole organization knows how important this is, and this person has direct pipeline. Okay. Thanks for mentioning some of the areas of focus like the SKU management, portfolio management, indirect costs, and so forth. You also mentioned potential for some hard decisions on the brands. When do you expect to declare that you have the brand roster where you want it to be and, you have the team on the field that you wanna play the game with? I think it's an ongoing process now that we've established the new segments and put the leaders in place. You know, we've identified, you know, which brands are our growth brands, which brands are our funder brands, and which brands are our turnaround brands. Through that lens, you know, we'll make decisions that help us achieve our objectives going forward. Okay. Very helpful. Maybe I'll leave it at that and let others ask questions on the fundamentals. Thanks. Thanks, Jim. Thanks, Jim. Thank you. Our next question comes from the line of Abbie Zvejnieks with Piper Sandler. Please proceed with your question. Hi, guys. Thanks for taking my question. I have two. The first one is, you know, inventory levels are obviously higher than you would like, and I understand about 80% of that could be carried over into next year, and you're able to reduce some of those forward orders. How will this impact newness across the brands? Then how are you thinking of balancing working through the current inventory position and then, you know, balancing that with powering product innovation? I think it affects newness in the sense that we know we needed to get more focused and prioritize our SKU management and use newness as a weapon to add excitement and provide energy stories for our brands and our marketing. I think we got you know. This will force us to be more disciplined. I think it will actually help our servicing the customer because we will be more focused on core, which is the lion's share of what our customer's looking for from us. I think at times over the last couple of years, we've neglected expanding our core at the expense of trying to get newness and enter into new categories that maybe the customer isn't looking for us from. I think in the short term, in terms of the inventory levels, as you said, 80% of it is carryover and, you know, we won't have to produce a Moab for a year. But the real challenge for us and why we're getting so aggressive at liquidating the 20% that's not carryover is just the gridlock it's caused in our warehouses and just how much that's impacting our ability to service our customers, particularly through our wholesale channel. That's the main focus there as opposed to perhaps other categories where it's more heavily fashion and you have a big obsolescence concern. Got it. Then just secondly, with Saucony being down slightly, I think, sorry, most of that was due to order cancellations at U.S. wholesale, a lot due to that congestion in the DCs. I guess, what are you seeing in terms of different wholesale partner behavior? Are there certain channels, you know, especially running, family channel, where you're seeing significant order cancellations? Then how do you feel about really the underlying demand of the Saucony brand? Yeah. I mean, I think it's fairly broad-based, you know, where we're seeing the challenges in terms of keeping orders moving. I think, you know, most retailers, certainly not all, have come off their forecasts over the last 12 months and have some of their own inventory challenges. Certainly, some categories are doing better than others. You know, Saucony is in a very competitive space, and right now, given the self-inflicted wounds that we have and some of the gridlock combined with the macro challenges, you know, these. Our wholesale partners are great partners, but they just have very little tolerance for any sort of delays or missteps. They're either looking for really large discounts to still take the orders or just cancellations in general. You know, we feel good about the growth we have in Saucony for this quarter. You know, as some of the newness comes in. We also, I'm encouraged by the performance of saucony.com in Q3, which was up like 30%. Some of that was promotion, but some of that was just there we have the ability to control the newness and the flow and showcase it to the customers. I think that's, you know, one of the other things that in this current moment we're a little disadvantaged about is our DTC penetration's lower than most of our peers because we don't have a store base like others do. We are overly reliant on the wholesalers and, you know, at this moment in time, that's a little more challenging to get the goods moving. I would just add one thing on just brand health too. Outside of the core U.S. wholesale distribution that we just talked about, the international business is quite strong for Saucony. It has been for quite some time. We continue to see strength in the Saucony Originals business, which is mostly an Italy, Europe-based business for us, our growth in Asia Pac and some of the other regions that Brendan already talked about. You know, fundamentally, a nice recovery in the fourth quarter for Saucony in terms of growth and you know, continued strength in the international markets, which is about over 40% of the total revenue for the brand right now. There's some solid positive there underpinning the Saucony business. Got it. Thank you. Thanks, Abby. Thank you. Our next question comes from the line of Jonathan Komp with Baird. Please proceed with your question. Yeah. Hi, good morning. Thank you. Just a couple of margin-related questions. I think first gross margin, the second half, it looks like you're guiding maybe about 80 basis points below the second half of 2019. I'm just wondering, as you look at some sort of a baseline, you know, how much of that might be temporary versus sort of a new baseline going forward? Then Mike, the comments on SG&A, I think you're still implying a pretty big uptick third quarter to fourth quarter in terms of like dollars. How quickly would you expect to be able to impact that? And 2023, are there scenarios where SG&A dollars would be down year over year? Yeah. Let me start with the margin comparison to 2019. I think for all the reasons that we talked about, you know, the big drivers for us relate to being much more aggressive on the promotions, certainly through our direct channels. Focusing on trying to accelerate the reduction of inventory as you know, quickly and rationally as we can. It's gonna have a more prominent impact on 2022 and certainly the back half. We'll see some pressure carrying into the first part of next year for sure, as we look at some of the liquidation that we'll do in the first quarter. I think that the emphasis here is to try to capture as much of that exposure as we can in the fourth quarter. We have some other costs, transitory costs that are impacting us this year, related to handling costs and some of the gridlock that Brendan talked about, which is adding to our logistics and handling costs this year. Some of that will be recognized next year in the P&L, but a lot of it's being recognized in 2022. We will get the full year benefit of the price increases that we put into place this year. Some of them didn't, you know, occur at the very beginning of the year, so that'll be a positive for us as we think about next year and the gross margin run rate moving forward. Really importantly, I mean, the profit improvement work that we've already started focuses very much on very much on gross margin and product costs and supply chain costs. We think the unlock there could be quite meaningful. It's gonna take a little bit of time to realize that in the P&L just based on how we turn the inventory. The savings visibility that we have in that particular category is very meaningful. On the SG&A side, you know, in the back half of the year, we continue to invest behind our big brands from a marketing standpoint. That's still, for the full year and in the back half of the year, exceeds 8% of revenue. That's a sort of a high point for kind of a more recent comparison and certainly compared to 2019 when it was much lower. We are through the work that we've done on the organization and group structure and the other profit improvement work that we've already started. We would expect to see you know improvement in the SG&A profile next year, Jon. We're not giving guidance as to what that number will be at, but I think you'll see us you know share that with more detail very soon and as we kind of unlock some of the profit improvement initiatives and share those more specifically. Yeah, that's really helpful. Thank you. Just one follow-up. We noticed last week they announced changes to some of the corporate bylaws. Brendan or Mike, to the extent you're willing to comment, any perspective you can share on the rationale and just a summary of the changes that were made? Thank you. Yeah, no, just basic maintenance as we were, you know, working through the bylaws with the board of directors. Really nothing to call out or report on that change. Understood. Thanks again. Thank you. Our next question comes from the line of Mitch Kummetz with Seaport Global. Please proceed with your question. Yeah, thanks for taking my questions. I guess first question, as I'm thinking about next year, Mike, it sounds like some of this end-of-life liquidation is gonna carry into next year. Maybe on the top line, can you speak to kind of where the spring order book sits? It sounds like you expect product to flow better for spring than what you've been experiencing for fall. How would you assess maybe the cancellation risk to spring orders next year? It's been a major focus, Mitch, and we probably should have mentioned that in our prepared remarks, that the focus on scrubbing the order book and validating the order book has been a key priority as we looked at, you know, not only the guidance for Q4, but how we see ourselves working through the inventory. I'd say there's a high confidence level there. There's a very, you know, sort of practical approach to cancellation and delay assumptions built into the outlook for Q4, and we'll be kind of viewing it that way for spring as well. You're right in saying that we feel better about how goods will flow as we enter into spring. We are making room, especially for our growth brands, for new product and making sure that that doesn't continue to be a headwind for our growth brands in the spring season. From that standpoint, you know, we're feeling more positive and more confident as we focus on the first half of next year. The overhang on the inventory, again, it's a relatively small percentage of the total that we called out in my comments that we have about $125 million of inventory that we're focused on moving to relieve that pressure in the warehouses, but also to get that behind us and really open up the opportunity for our growth brands to bring in new product in the middle to latter part of next year. In that respect, you know, we'd expect Q4 to have a bigger margin impact for that type of activity, whether it's moving faster through some of the oldest product or reserving for any future sales that might impact us next year. There'll certainly be some pressure in the first quarter on margins based on that. Got it. Okay. Thank you for that. On the gross margin, you guys are now looking for around 40%-41% this year. I know that freight has been a drag, it sounds like, with container rates and things like that. That's improving. Maybe less air freight. I can't remember how much air freight you guys were using, maybe a year ago. You know, is there any way to kinda frame the drag from freight that's embedded in that 41%, especially if you kinda anchor it back to kinda pre-COVID levels before freight kinda. Yeah You know, got a bit crazy? So. Well, the air freight this year is about $8 and a half million, and that was spent mostly in the first half of the year. You know, it was certainly part of the 41% margin that you're referencing. That's about double what it would normally be in whatever normal is anymore, but pre-COVID timeframe. The increase in our ocean freight, the extra handling costs that we're dealing with, demurrage and detention costs that are, you know, kind of part of our logistics costs, those are significant. I'd say you know, the incurred costs there are probably anywhere between $40 million and $50 million higher than last year. That includes holding containers right in the parking lot as we work through receiving and things like that. Some of that is on the balance sheet and impact our inventory costs at the end of the third quarter. We're starting to work through that inventory and starting to you know recognize that through the P&L. That's one of the reasons Q4 margins are down a bit. Some of that will carry over to next year. When you think about the run rate of costs and the transitory nature of, especially of the detention and demurrage costs that we're experiencing right now, you know, those are important, and I see that significantly improving by the middle of next year, for sure. Okay. That's helpful. Well- All right. Thank you. One more. Good luck for holiday. Yep. Go ahead. Yeah. Thank you. One more comment on the freight, too, is just as we're seeing the market rates improve, we're starting to see good improvement on the standard ocean rates, even compared to our contracts that we entered into in May. Would expect that, you know, to carry into next year as well and see some improvement year over year on the ocean freight side, next year. Got it. Okay. Thanks again. Thank you. Our next question comes from the line of Jay Sole with UBS. Please proceed with your question. Great. Thank you so much. Trying to maybe just take us into a deeper dive into Sweaty Betty, you know, what you're seeing in that business, sort of what, you know, what trends look positive, you know, give you confidence for future growth, maybe where it's been a little bit of disappointment, that would be helpful. Thank you. Yeah. Well, I mean, I think it starts with, you know, they're 80% based in the UK, and we all know what's happening in the UK right now. You know, in general, high streets where they do most of their trading are way down. I mean, I'd say, Jay, that's the single biggest factor for them. I mean, they've had some shipping delays as well that have delayed some of their newness. You know, and then just an overall decline momentarily in search for leggings, you know, more broadly. I think there's a lot that was working against them. I think they have a great runway ahead of them with the market they play in. As we get through the next year in the U.K., along with the world starts to heal itself, I think they're gonna be well positioned to not only expand their business in the U.K., but we're seeing really good momentum in China, albeit on a small base and an asset light base, you know, particularly through Tmall. We think there's opportunity there. In the U.S., some of the wholesale, a big part of the wholesale miss, as I called out, was self-inflicted on our part. There were just some integration problems that we did not anticipate with systems and just some of the mechanics of being an apparel business that cost us here in the U.S. The good news there was their primary partner still wanted the goods, so, you know, we had to provide a discount, and some of that will shift, but shows that there is that appetite here in the U.S. for Sweaty Betty. While we likely won't open stores in 2023, as we originally kind of teased out there, just due to the shifting economics, you know, we'll focus on the digital business here in the U.S. and, you know, still with an eye towards opportunistic stores, if not in 2023, in the future. Got it. Thank you so much. Thank you. Our next question comes from the line of, excuse me, Laurent Vasilescu with BNP Paribas. Please proceed with your question. Hey, guys. It's Zion Sion for Laurent. Thanks for taking our questions. Maybe on first, sounds like there were some shifts in wholesale from 3Q to 4Q. Maybe could you quantify that and help us think about 4Q revenue guidance by channel. It sounds like wholesale is benefiting maybe some shifts. Yeah, I mean. Yeah, what are they? Yeah. I'd be a little careful there. I mean, it is shifting, but I think we've said it shifted for the last six quarters just as this thing has been so inconsistent. I don't know if we're gonna provide that level of guidance at this point. You know, certainly, you know, trying to get it to the wholesalers in time for Christmas has been a priority over the last few weeks, as Mike said, particularly with our growth brands where we know we can get the response, so. Yeah. Um- I'd also, I mean, just to reiterate what Brendan said about the brand performance in Q4, Merrell and Saucony delivering at or above 20% growth in the quarter. Our international business will be over 25% or expected to be over 25% in the fourth quarter again. Another strong quarter from that region or that channel of our business. As we saw in Q3, we think the headwind or the pressure will continue to be in the US wholesale business and expecting to see our D2C business grow at a similar rate in Q4. Okay. Very helpful. Thanks. Maybe on just to dig in a little bit more on the $125 million of end of life that you're looking to clear, sounds like through the next two quarters or so. Is there any way to think about, I guess, revenue growth ex some of those liquidations? 'Cause, you know, obviously, that's a boost to revenue. Sure. How are you thinking about that? No, we're not providing Q1 guidance yet, so we wouldn't necessarily parse that out. I think you're thinking about it as we are that, you know, we certainly have an order book today on the core business and the global business, that would not include some of that incremental, you know, inventory reduction. As we sort that out and have more clarity on the timing of all that, we'll share it. Okay. Thanks, guys. Thank you. Our final question this morning comes from the line of Sam Poser with Williams Trading. Please proceed with your question. Thank you for taking my questions. I guess I'd like to know if you could talk about maybe the margin by brand. I mean, you know, the Merrell business was really good, but how was its EBIT on a year-over-year basis or gross margin as compared to the other brands? I have a follow-up. We don't, you know, necessarily talk about margin by brand. But, you know, Merrell's performance overall was the strongest in the quarter, including their ability to deliver normal levels of gross margin as we would have expected. Some of the other brands, you know, or channels were more impacted by the promotional environment than Merrell was. Also, the need to discount wholesale orders due to lateness, I think, you know, changes based on the kinda health and growth of the brand right now. Inventory position too. Yeah. You didn't face those same kind of order cancellations and discounts with the Merrell brand that you did with the other brand? Would that be an accurate assessment? I would say it's on a sliding scale. I mean, there was certainly actions that needed to be taken, but it gets progressive. It changes based on, as I said, the health of the brand and the inventory position of the brand. So Sperry, you know, would be more challenged there and have to provide, you know, greater incentives. I guess the question is how much of what occurred outside of Merrell was macro versus how much of it was, you know, we should have done a better job with the way we executed these brands? I'll just use that in a general sense from shipping to product to marketing and so on and so forth. Yeah. I mean, I'm not gonna handicap it. I think it's, there's both in there. We certainly, you know, hindsight is 20/20 and there are things that we would have done differently in some of these brands, particularly with the inventory flow. I mean, you know, when we saw business start to slow down over the summer, you know, at that point in time, we, in hindsight, would've been more aggressive with cancellations, even though that would've created some liabilities on raw materials if we knew then what we know now. You know, certainly, looking back on that and figuring out how we can correct that going forward with better processes and better reporting. I think, you know, specific to Sperry, Sam, which I know is your favorite. I think in retrospect, we tried to extend ourselves into too many categories and weren't as focused on our core business and just freshening up our core and expanding our core in boat and boots and got a little bit fragmented. I can see it now in our SKU management, how it kinda got out of whack. You know, that's something that in hindsight that wasn't a macro issue, that was a self-inflicted issue that obviously got exposed more 'cause of the macro issues. You know, I think, when we see you in a few weeks, you know, we can walk you through a little bit more of our line architecture, and I think you'll see some of the changes we're making going forward. Obviously, given the lead times, you know, there's work to be done to get there. Okay. Lastly, I know you report this in the 10-Q, but can you give us either the wholesale or the direct to consumer sales for each of the, I guess, the Q3 merchandise, the segments, Michigan Group, Boston Group and so on? Just for modeling purposes, even though that'll change when that's changing going forward. Yeah. The 10-Q comes out tomorrow, so we'll probably won't spend the time right now to go through that and provide that detail. We typically don't, so. All right. Well, thanks very much and good luck on all this. Thanks. Yeah. Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Hoffman for any final comments. Okay. Thanks everyone for participating in the call, and we look forward to keeping you updated and speaking again in the spring. Thank you. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.