Dr. Martens plc (DOCS) Earnings Call Transcript & Summary

Hello, and welcome to today's Dr. Martens Q4 update. My name is Bailey, and I'll be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to Kenny Wilson, CEO of Dr. Martens. Please go ahead when you're ready.

Thank you. Good morning, everyone, and thank you for joining our FY '23 Q4 update call. The focus of today's call will be to update you on our Q4 trading ahead of our full year announcement in June and also demonstrate the strong progress we have made in resolving the issues at our Los Angeles distribution center. But firstly, let me talk about trading. Revenue in the fourth quarter was up 6% on an actual currency basis and flat in constant currency. By channel, our direct-to-consumer business grew 20% or 13% in constant currency, with wholesale down 4% year-on-year, which is 11% constant currency. This means overall that full year revenue was up 10% on an actual currency basis and up 4% in constant currency, which was at the bottom end of our guidance range. The costs associated with resolving the inventory issues at our Los Angeles distribution center and the wholesale underperformance in Q4 means that full year EBITDA is likely to be around GBP 245 million, which is a disappointing number. Jon is going to provide more color on these numbers. And I want to talk about the LA DC situation. Back in January, we told you that we had a major bottleneck at our LA DC and that we were taking 4 major actions to resolve that. The 4 actions were, firstly, securing overflow distribution centers to store all of the inventory, adding a third shift to improve capacity, accelerating the expansion of our New Jersey DC and landing our best distribution experts in LA to manage the problem. So what has happened in the last 14 weeks? While some of our best people are still on the ground in L.A., and I'm pleased to see that the throughput is now back to normal levels in Los Angeles, we have fixed the operational problem. We opened the 3 temporary storage facilities, which has enabled us to release the excess shipping containers and get stock into storage. The third shift has been added, helping us to unlock the bottleneck and transfer stock to the temporary warehouses. Work has also begun on enlarging and reconfiguring our New Jersey DC to enable it to pick, pack and store inventory for both our [ direct-to-consumer ] and wholesale channels in the United States. We also successfully ran a trial wholesale order from New Jersey in March. Therefore, we are on schedule to have this DC fully operational from the autumn/winter '23 season, which starts in July. The actual cost of resolving the issues in L.A. have been higher than we initially thought at GBP 15 million in this financial year, versus the GBP 8 million to GBP 11 million, which was anticipated in January. Our internal audit and legal teams have conducted a full review into what happened in Los Angeles and have recommended a number of changes that we are now working through. We will share some of the key themes at our year-end results in June. Finally, on Los Angeles, as I said in January, we have too much inventory in L.A., and that is what caused the initial problem. But it is now correctly stored. It is the right product, and it is not a seasonal markdown problem. We've told you many times before of the continuity nature of Dr. Martens' product and that 4 out of every 5 pairs which we sell are black. So we are now into our financial year '24, which started on the 1st of April. We're going to provide more detailed guidance in June at our full year results. However, we are maintaining revenue growth guidance of mid- to high single digit for financial year '24. We also now expect that FY '24 incremental costs associated with inventory at Los Angeles will be around GBP 15 million, driven primarily by the rent of additional space. So lastly for me, as you will have seen in a separate announcement this morning, Jon is retiring from his position as Chief Financial Officer. Jon will be staying in role until we find a successor to ensure continuity and also an orderly succession to our new CFO. I'd like to take this opportunity to publicly thank Jon for his contribution to DMs over the last 7 years, during which time revenues have grown from GBP 230 million to breaking through the GBP 1 billion this year. Jon has been a key member of our leadership team that has driven this growth. And I just wanted to say a big thank you, Jon. And now over to you for some more financial color.

Thank you, Kenny, and good morning. So I'm going to talk more about our Q4 performance and resulting full year numbers, which remains subject to audit. I'll then give a high-level summary of implications for FY '24 with detailed guidance, particularly in relation to margins scheduled as normal to be given at a year-end announcement on the 1st of June. So Q4, revenue in the fourth quarter was up 6% on an actual currency basis but flat on a constant currency basis. DTC or direct-to-consumer revenues grew by 20% in the quarter, which is 13% constant currency, driven by very strong retail, which was up 36%, 28% constant currency, with e-com up 8% or 2% on a constant currency basis. The fourth quarter saw a very strong acceleration of DTC growth trends compared to Q3 growth trends in both EMEA and Asia Pacific, with continued soft America trading. These trends in aggregate were in line with our expectations. Wholesale revenue declined by 4% compared to last year in the quarter, which was down by 11% on a constant currency basis and was mainly in America, with the planned -- with a planned reduction of shipments into the China distributor following our decision to not renew the distribution contract, part offset by growth in EMEA. In America, wholesale shipments from the LA DC are now in line with plan. And as Kenny said, the DC is operationally fixed. However, it took longer to ramp up pick, pack and dispatch capacity, which resulted in lower-than-expected revenue across the quarter. Turning to the full year. Revenue will be approximately GBP 1 billion, representing growth of 10%, which is up 4% on a constant currency basis. DTC revenue was up 16%, 11% constant currency, driven by very good retail, which grew 30% in the year, up 25% on a constant currency basis and was supported by steady e-com growth of up 6% or 1% constant currency. In the year, our DTC mix expanded by 3 percentage points to 52% from 49% last year. EBITDA will be around GBP 245 million compared to GBP 263 million in FY '22. This is below previous guidance due to lower wholesale revenue together with higher LA DC costs. The higher costs are in relation to taking longer than expected to clear the container backlog, with total costs now estimated around GBP 15 million being between GBP 4 million and GBP 7 million higher. The container backlog has now been cleared. Inventory at the balance sheet year-end balance sheet date will be approximately GBP 258 million, being broadly similar to the quantum of inventory at the half year balance sheet date. This figure is higher than optimal but is predominantly continuity product in nature with minimal markdown risk. Cash at the balance sheet date was GBP 158 million. For FY '24, we will give more detailed appropriate guidance of our year -- at our year-end announcement. We maintain revenue guidance of mid- to high-single-digit growth on a constant currency basis. In addition, in order to minimize risk and ensure continued smooth distribution, we intend to maintain the 3 temporary warehouses in Los Angeles through FY '24. As a result of the annualization of rent associated with these warehouses, we estimate an incremental GBP 15 million of cost will be incurred in FY '24 before normalizing in FY '25. Of this cost, approximately GBP 10 million will be incurred in the first half. Finally, you'll have read that I've decided to retire from executive life. I've been at DOCS for 7 years and feel is now time to hand over to someone new. This is a great brand, has really high margins, has strong cash-generative characteristics and loads of white space growth opportunity. Thank you, and we can now move on to Q&A.

[Operator Instructions] Our first question today comes from the line of Louise Singlehurst from Goldman Sachs.

Quick ones from me. I have to ask 2. Just on the DTC, I think by region, you highlighted the acceleration in Europe and Asia. Can we just focus a little bit on the U.S. and if there's been any incremental kind of softness during the period? This is the commentary that you made back in January. And in addition to that, can you help contextualize the mood across the wholesale and the retail partners specifically in the U.S.? And then my second question, just to clarify on that inventory position, are we right to assume that -- obviously, the year -- last year, it was a little bit low. This year, it's a little bit high. So it's obviously got to see some normalization during the course of full year '24. But when should we expect to see that inventory start to normalize? Is it more back-end loaded in full year '24 given the seasonality? And I did take your point about it being mostly evergreen and limited risk to the P&L, if that's correct.

So I'll take the DTC question and the USA question. And Jon can answer the inventory one. So you're correct. In the fourth quarter, we saw an acceleration in the DTC business in both Europe and Asia Pacific. We didn't see that in the U.S.A. So the trends in the U.S.A. for direct-to-consumer were broadly similar in Q4 to what we were in the third quarter. In terms of the U.S.A., overall, in your question about wholesale versus DTC, we saw the same trend in the fourth quarter that we did in the third quarter. And what I mean by that is pairs sold from our wholesale partners to consumers in the United States were up high single digit, which was actually better than our DTC performance. It's the only region in the world where wholesale sales to consumers were better than direct-to-consumer. Obviously, as Jon said, today, sales into our wholesale partners in the United States were down, which is what we expected. They were down a little bit more than we expected because of the 3-month operational ramp-up. So overall, DTC, very good in EMEA and APAC, bit slower in the United States, and we think the U.S. consumer environment will be flow through the balance of this calendar year, but wholesale sellout in the United States, a high single digit was actually pretty encouraging.

Yes. So inventory, you're absolutely right, Louise, predominantly evergreen, so minimal P&L risk. This year, we have higher levels of inventory than optimal. You're absolutely right. Last year, the comparable was though too low. So year-on-year, we've got too much this year, too little last year. So what we're looking at is obviously inefficient working capital rather than anything else. We'll give much more detail in terms of stock turn and weeks cover at the year-end. But in broad terms, we plan to have a much more optimal level of inventory by the exit period of FY '24, so March '24. And we'll achieve that by essentially buying less than we plan to sell because of the lead times involved in the business that, if you like, optimization will take a place predominantly through the second half.

The next question today comes from the line of Natasha Bonnet from Morgan Stanley.

First, could you please comment on the exit rates you've seen in March and current trading so far in [ April 1 ], please? And then on your guidance for financial year '24, so mid- to high-single-digit growth at constant currency, could you please tell us what gives you confidence that sales will accelerate next year? And then just a third question, please, on the U.S. specifically. Can you tell us what you've been seeing on the underlying trend? And most of all, on Louise's point, which you mentioned earlier on wholesale, can you tell us how wholesale orders are looking ahead for the financial year, please?

So in terms of the exit running rate, I mean, fourth quarter -- I mean our direct-to-consumer business was up 20%. And the retail grew 36%, and both of those numbers were higher than the full year number. So that says that, overall, our trend was accelerating. The -- I'll take the last question, and then Jon can take the middle one. The question about the U.S.A. and forward orders, the situation that we're within is we haven't finalized the order book. So as we did last year, our full year results in June will give an overview on the order book for autumn/winter '23. I think as we've said earlier this morning, what do we see as we look at the business is we see EMEA and APAC stronger, and we expect the United States to be weaker in next year. And that thinking is built into our conservative guidance of mid- to high-single-digit revenue for next year.

Yes. In terms of confidence in the revenue guidance of mid- to high single digit on a constant currency basis, what we've said so far is we will have a price increase worth approximately 6% from autumn/winter '23, which is in place. We have said that we are reducing sales into European e-tailer wholesale accounts, which [ pure-play ] e-comm accounts that will cost approximately 4 percentage points of growth. Going back the other way, you've then got the benefit, which we won't be guiding on this moment in time, but the benefit of the annualization of the stores that we've opened in this year, and we've opened a high 40s number of stores, including the Japanese franchise store takeback. The other benefit will be the DTC mix enhancement through next year, which is one's view on like-for-like retail and also e-com. And then what would go the other way, plus or minus, again, would be your view of underlying volumes based on the economics of the countries that we operate in. As we said, we are happy with the guidance as given the mid- to high single digit.

Next question today comes from the line of Doriana Russo from HSBC.

I just wanted to ask you a little bit more in terms of the acceleration of retail revenues -- sorry, retail and DTC revenues that you've seen in Europe and APAC. Can you elaborate a little bit more in terms of whether this acceleration is due to retail expansion? Or is it actually on a like-for-like basis in which countries? And also whether you have seen the traffic in the stores accelerate and the conversion actually normalizing that historically, if I'm not wrong, we're still behind pre-COVID. My second question relates to the -- sorry, can you hear me?

Yes. We can hear you. You said, your -- "My second question is," and then we didn't hear you after that, Doriana.

Yes, yes. But my second question is related to your price increases. I was wondering at what point shall we expect the new prices for -- to hit the market in terms of -- and whether you can give us some color in terms of take from sort of consumer reaction on the market so far of the price increases put in last year for autumn/winter and whether you have already -- we can find something for the new season. Any feedback on that one, please, the high single digit that you've put in for 2024, I'm referring to.

Okay. Well, we'll take those questions. I'll start off, and then Jon can add in. Yes, you're right. Obviously, Europe and Asia Pacific did accelerate in retail in the fourth quarter. That was a combination of very strong like-for-like performance and incremental space. So we've got more stores than we had a year ago, but the underlying like-for-likes are up. I'm not going to go into all the country detail here. We'll give a bit more color when we get to June. But fair to say that we've seen, in Europe, like-for-like improvement pretty much across the board. And if you take the U.K., which is obviously the company's most developed market, on a full year basis, we grew both with pairs and revenue. So we feel very good about both the like-for-like performance and also the new space that we've added in the European environment. In Asia Pacific, our biggest market is Japan. And effectively, there are a couple of things going on there. We're seeing good like-for-like growth in Japan. And obviously, we transferred successfully the 14 franchise stores that we said we would do in February and March. And those stores, after a couple of weeks, are now trading in line with the normal like-for-like state. So overall, it's both like-for-like and additional [indiscernible]. In terms of your question around traffic, traffic everywhere in the world is still behind pre-COVID levels. So that gives us confidence as we look forward to say fundamentally, there's still an opportunity to grow traffic. I think, in FY '24, obviously, we would expect that conversion comes back a bit because as traffic goes up, you tend to have more browsers. As a consequence, you lose a little bit on conversion. In terms of price increases, which was your second question, the autumn/winter price increases this year don't really flow through until July. We've taken an odd couple of products here or there where we pushed price up because demand is high for those products. But the main price increase will flow through in July. In terms of last year's price increases, we took price up in Europe, in all countries, and we took price up in North America. As we just discussed, we're seeing an accelerating trend in Europe. So that kind of says even with the pressure that consumer is under, the price increases moved through well. In terms of North America, the picture looks more mixed, but I don't think it's just down to price, Doriana, because our pairs sold to consumers through wholesale, which is our biggest channel, are actually up. Even with the price increase at DTC, as we said, the business is a little bit softer. So that one is a bit more nuanced. Do you want to add anything, Jon?

Just to build, I think in terms of -- I've now got the number in front of me. In terms of stores opened in the year, we've opened a gross 52 stores including the 14 Japan transfer stores and closed 6. So a net incremental store increase of 46 stores, which is pretty close to being double last year. So one of the earlier questions, confidence in next year, the annualization of space will help drive numbers. And I think guidance would have been -- with 25 to 35 stores, excluding Japan, we've done a net 32.

Yes. And just to be super clear, those Japanese stores came back and fed into March. So there's very little benefit from them on a revenue basis for financial year '23, but obviously, they give us a significant benefit as we move into FY '24.

Can I ask a follow-up question on the wholesale? I mean, obviously, the shipment in the U.S. have been affected by the LA issues. But what about the other regions? Can you give us a sense of what Q4 was like in EMEA and Asia, please?

Yes. I mean Jon mentioned this in his script. I mean effectively, U.S. was down. We planned Asia Pacific down primarily because of the fact that we knew we were going to ship less to the Chinese distributor because if you remember, that contract ends in June. And then there was a little bit at the end of the year in Japan where franchise stores became owned and operated stores, and the European wholesale was up in shipments and in sellout to consumers.

The next question today comes from the line of Kate Calvert from Investec. It appears we have lost Kate. So we'll move to the next question. The next question comes from the line of Alison Lygo from Numis.

A couple from me. I suppose looking kind of into next year and the color you gave around expecting the U.S. and DTC to be a bit soft, is that sort of changing or impacting how you feel about your store rollout program in the U.S. for next year? Or should we think about you kind of continuing the plan there? And then the second one is really around the kind of the moving parts in gross margin. I know you'll give us some more color when you speak in early June. But conscious there's a lot of moving parts, you've probably got some tailwinds from freight coming through. As that normalizes, there's also sort of a D2C mix shift that we should probably be expecting to support that. But is it reasonable to be expecting some sort of full price mix pressure as well coming through given the elevated inventory and just having more stock to actually sell rather than restricted inventory at this point?

Okay. So I'll take the first question, Alison, around U.S. DTC. Obviously, we said that it was our softest business in the fourth quarter. So therefore, we've made the assumption that it will continue to be the softest business going into next year. In terms of new stores, I think if I remember correctly, we've opened 14 new stores in the United States this year. Those stores are trading well. And in terms of next year, our plans are to open, let's say, broadly half of the number of stores. It's around 7 to 8 stores for the United States for next year. And that's really just about finding the right stores in the right locations. But our #1 priority in the United States is focusing on U.S.A.-existing DTC. That's our top priority for the U.S.

And the second question regarding any margin pressure next year. As we said earlier, the vast majority of our stock is evergreen. We do not anticipate any material markdown P&L pressure through next year. So we would not be -- we will give, obviously, more gross margin guidance on the 1st of June. But we would not anticipate guiding margins down in relation to anything to do with markdown or lower full price mix.

I think it's really super important. I mean we've always said we manage this business for the long term. And the stock that we've got in Los Angeles, we've got more inventory than we would want, but it's core black stock, and there is no way that we are going to mark that stock down because that undermines long-term brand value. So this is just about cash really. It's about an inventory-carrying cost for a period of time, but it's not a seasonal markdown problem.

The next question today comes from the line of David Roux for BofA.

So just 3 questions from my side. The first 2 is relating to the U.S. Just going back to D2C trends in the U.S., could you please tell us if growth in March was better than February and January? Secondly, on the wholesale channel, could you just give us a sense of where you think inventories are within the channel at your key partners? And then my last question is on the LA DC. I think in January, you had expected some knock-on impacts for 1H '24. So is the GBP 15 million costs that you flagged fully incremental from what you had expected in January?

Okay. If I do the first one, we won't be giving monthly trading performance. But across the quarter, there was no material difference in trading January, February or March. It's pretty much the same across the quarter.

In terms of your second question, which is around the wholesale inventories in the United States, at the macro level, we don't have significant issues around wholesale inventory. We've said previously that there are 2 customers in the U.S. that we think the inventories are higher than we would like. And therefore, as it was -- to an earlier question around the autumn/winter '23 order book, as we manage forward orders with those 2 customers, we'll just manage that down. So we manage the inventory down gradually over time because just like Dr. Martens predominantly has core stock, obviously, most of our key partners that are in the world also sell a lot of our core products. So therefore, they'll manage that down in a sensible way in partnership with ourselves. But there's not -- it's not like we're sitting here. We get inventory on a weekly basis from all of our key accounts around the world. So we know that there's only 2 accounts that have got a little bit more stock than we would like.

In terms of the GBP 15 million next year, the GBP 15 million is all incremental before it obviously normalizes or majority mainly falls away in FY '25. We estimate that phasing is roughly GBP 10 million in H1, GBP 5 million in H2.

Okay. So Jon, just a follow-up on that last question. So in January, you hadn't expected GBP 15 million in costs, right, just to be clear, for next year.

When we spoke in January, we hadn't defined -- we specifically didn't give EBITDA margin guidance. We haven't finalized what the cost structure would be. I think we said we expected some cost to run into FY '24. We hadn't, at that time, been able to quantify them. We were now able to quantify them. And as Kenny said, it's mainly in relation to rent on the 3 extra warehouses we're now keeping for the full year.

Yes, what we said in January because -- obviously, we were at the point of least visibility because we moved extremely fast to get the numbers out to the marketplace. We said that the impact from Los Angeles would continue through until September of this calendar year. The reality is the [indiscernible] part and operational part, absolutely, we fixed much that, but the bit that will linger on will be the storage space for incremental inventory in the U.S. So one bit is faster than September. The other bit is a bit slower.

The next question today comes from the line of Richard Taylor from Barclays.

Two questions, please. One is, what's your consumer feedback on the brand at the moment? Have you seen [indiscernible] in your key markets from the checks and the surveys that you do? And then secondly, you've given us gross cash and inventory in the statement. Can you give us the net debt number at year-end as well, please?

Great. Thanks, Richard. so we do a smaller pulse survey in January. The big survey we do on consumers is in November. And the consumer feedback overall is U.S., the metrics between November and January are broadly flat, which, I think, is probably in line with what we're seeing trading-wise, but brand awareness grew slightly, and familiarity slightly improved. But overall, I'd say a relatively static picture in the United States. We are seeing improvement, November to January, in Europe and specifically in some of the Continental European countries where we've seen a significant move forward. One example of that is Germany, where brand -- the brand has really moved forward. And then in Asia Pacific, our major market is obviously Japan, and actually, we've seen brand move forward there also. And again, that's in line with what we're seeing in terms of trading performance. So if I was calling it brand heat or top of mind, I would say, Europe and Japan, we got good movements between November and January. The U.S. is pretty static.

In terms of your net debt question, net debt balance sheet date was approximately GBP 287 million, Richard. That calculation, cash of GBP 158 million, bank debt GBP 293 million and then leases of GBP 152 million.

That's great. And just a response to the brand heat point, I think you said earlier that pairs and sales were up in the U.K. Could you quantify that or give us a sort of a range as to how that's doing at the moment?

Double digit, Richard. So the U.K. business, which obviously is our most mature, is up double digit. And that really gives us a lot of confidence because as we've talked many times before, there's a bunch of white space in other territories, and seeing our most mature market growing at those levels when probably the U.K. consumer is one of the most under pressure in the world, that gives us a lot of confidence that if we get our execution right, we've got a great iconic brand with a lot of space ahead of us, so long-winded answer. U.K. is up double digit is the short answer.

And that's pairs or revenue or both?

Both.

[Operator Instructions] The next question today comes from the line of John Stevenson from Peel Hunt.

Couple of questions from me as well, please. Just in terms of stock -- and apologies if this has been asked already, came on a little lake. But just thinking about sort of the number of weeks cover you hope to settle out by the end of next year, I guess, to get a sense of what sort of working capital inflow we should expect over the course of the coming 12 months. If you could maybe comment on where you hope to get stock down to and how that sits versus sort of long-term aspiration. And then another question on the U.S., just around that sort of softer DTC performance, how the new stores landing, you mentioned obviously brand awareness. Just what is it then that's not quite firing as well as some of the markets and how you intend to sort of maybe give a little boost over the coming year?

Okay. I'll do the stock point. I think we'll give much more detail on stock in terms of stock cover, stock weeks and targets at the year-end. But I recall at the half year, I -- we said that we had historic weeks cover at the half year of high 30s and a number towards the [ bottom ] end of the 30s makes more sense, and that's probably not unrealistic. We'll achieve that by buying less than we sell in, and that -- because the lead time on inventory in terms of placing the order to get delivered is about -- around about 7 months. This true-up will occur predominantly through the second half, but we'll give more detail on that, John, and the cash implications at the year-end announcement.

Yes, just in terms of that cash position. Then given the sort of 7 months lead time, you'd expect to be down at your kind of long-term run rate for stock covered by next year-end.

Yes. We will exit the new financial year at the optimal level of stock cover, correct.

And in terms of your questions around the U.S.A., specifically on the new stores question, we're -- overall, we're happy with our new stores performance in the United States that are in line with the expectations when we signed those stores off. And as we said, we're committing to sort of a mid-single-digit number of new stores for the U.S. next year. I think what we're seeing with the acceleration of performance in Europe and Asia Pacific is that we're very confident in the DOCS strategy. And in the United States, we need to sharpen up some of that implementation to make sure that it's as good as it can be. And we've just invested in a new Vice President of Marketing for the United States, which I think is really important because consumer demand generation, getting brand news out there is super important. And we've also just invested in a new Vice President of Digital for the United States as well. So we've always said, DOCS is our strategy, be clear about it and get the best people in the jobs to effectively get things done. I think those 2 heavyweight hires in the U.S. are an important part of the implementation of DOCS in the United States, and I'm going to be out there next week for the whole week with the team.

Okay. Perfect. And just on that point, I mean, has it been the sort of engagement rates online that haven't come very strongly, is there any sort of specific sort of areas or KPIs that have been a little bit softer, what you're looking to focus on?

I think overall, I mean, what we said earlier is that we're seeing stronger performance in wholesale in the United States in terms of sales to consumers that we are seeing in our own D2C. And our strategy is DTC first. So therefore, we need to make sure that just as we are doing in Europe and Asia Pacific, we're getting our own business growing faster. That's where our focus is: brand heat and making sure our own DTC is performing as best as it possibly can.

The next question today comes from the line of Kate Calvert from Investec.

I'll try again. Just a clarification question. Could you talk about the timing of the cutoff of volumes to the third-party online partners in EMEA when that sort of kicks in, in the year ahead?

So Kate, what we've been doing is we've been slowly bringing that down through the end of this year, the end of this financial year, so we've been bringing down wholesale volumes to e-tailers during that period. And then we're effecting the really significant shift from the start of autumn/winter '23, which is from July. But within that overall EMEA wholesale number growing in the fourth quarter, we did reduce volumes into some significant e-tailers. But the real big -- the 5 -- the 4 points that Jon talked about earlier, that will be starting from July.

The next question today comes from the line of Richard Taylor from Barclays.

Sorry, it's just to clarify. The U.K. double digit, was that Q4 or full year?

Full year, Richard. And obviously, as we said earlier, the EMEA business actually performed better in the fourth quarter than it did on a full year basis. So I think you can take the implication from that, that the U.K. also accelerated in the fourth quarter. But the double-digit growth in revenue and pairs was for the full year.

There are no additional questions waiting at this time. So I would like to pass the conference back over to Kenny Wilson for any closing remarks. Please go ahead.

Great. Thank you very much, everyone, for taking the time to attend the call. I think what we've seen is that we have fixed the operational issues that we had in Los Angeles. Obviously, there will be a knock-on cost impact of that into next year as we tried to articulate. And in terms of trading performance, as we've discussed on many of the questions here, we've seen an acceleration in our European business in the fourth quarter, an acceleration in our Asia Pacific business. And the area where we still believe that we've got work to do is in the United States. But overall, we look forward to next year where we'll give more guidance on the 1st of June, but we still believe in our mid- to high-single-digit growth for next year. Thank you very much for your time.