Greetings, and welcome to the Columbia Sportswear 4th Quarter and Full Year 2013 Financial Results Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your speaker, Ron Parham, Senior Director of Investor Relations.
Thank you, Ron. You may begin.
All right. Thanks, Bob. Good afternoon, and thanks for joining us, everyone. Earlier this afternoon, we announced Q4 and full year 2013 financial results and provided our initial financial outlook for 2014. In keeping with our standard practice, shortly after the press release crossed the wire, we filed an 8 ks containing a detailed CFO commentary on the results and outlook, which can also be found on our Investor Relations website at www.investor.columbia.com/results.cfm.
With me today to discuss the results and answer your questions are our President and CEO, Tim Boyle Senior Vice President Chief Financial Officer, Tom Cusick Executive Vice President and Chief Operating Officer, Brian Timm and Senior Vice President and General Counsel, Peter Bragdon. Columbia's Chairman, Gert Boyle is traveling and unable to be on the call today. So I will remind listeners that this conference call will contain forward looking statements regarding Columbia's business opportunities and anticipated results of operations. Forward looking information is subject to many risks and uncertainties, and actual results may differ materially from what is projected. Many of these risks and uncertainties are described in Columbia's Annual Report on Form 10 ks for the year ended December 31, 2012 and subsequent filings with the SEC.
Forward looking statements in this conference call are based on our current expectations and beliefs, and we do not undertake any duty to update any of the forward looking statements after the date of this conference call to conform the forward looking statements to actual results or to changes in our expectations. Now I'll turn the call over to Tim.
Thanks, Ron. Welcome, everyone, and thanks for joining us this afternoon. Our Q4 and full year results were significantly stronger than we anticipated in our previous outlook last October. At that time, we noted that we had begun to see positive signs of stabilization in our North American and European wholesale channels and solid momentum in our U. S.
Direct to consumer channels. Clearly, both of these dynamics strengthened further with the onset of wet weather. Globally, 4th quarter direct to consumer sales grew 26% and were up 20% for the full year, accounting for approximately 34% of full year consolidated net sales. We're obviously very pleased with the results of our direct to consumer business during 2013. However, the ultimate objective of our direct to consumer strategy is to strengthen our brands in key markets enable our wholesale customers to grow their business with our brands.
After 2 challenging years in our North American wholesale markets due to a combination of weather and product positioning, channel inventories ended 2013 very clean, creating demand for a broad assortment of our fall 2014 products, which feature our newest technologies and our guest styles at more accessible price points. We're working closely with our wholesale customers to broaden their assortments and to encourage use of in store merchandising and marketing assets to accelerate consumer demand for our brands. As we have demonstrated at our branded stores and e commerce sites, when those outlets are brought together at point of sale, consumers embrace the innovation and enhanced design of our products. Our North American wholesale customers are demonstrating renewed confidence with advanced orders for fall 2014 up double digits, reflecting strength across both the Columbia and the SOREL brands. We expect 2014 sales and profitability growth to be affected by the following major factors: incremental sales and profits from the new China joint venture continued growth of our global direct to consumer businesses renewed growth in our wholesale channels beginning in the second half of twenty fourteen incremental costs related to our ERP implementation and increased demand creation investments.
The initial full year 2014 outlook we provided today anticipates global top line growth of between 15% 17% over 2013 and operating margin of approximately 8% of sales. The 15% to 17% sales growth expectation calculates to between $250,000,000 $285,000,000 of growth, which we expect to achieve through increases in each of our 4 geographic regions. Slightly more than half of that increase is expected to come from the addition of our new China joint venture. We expect the remaining organic growth of approximately 8% to come primarily from the U. S.
Region, with smaller contributions from EMEA, Canada and the rest of the LAP region outside China. The expected sales increase from the China joint venture equates to single digit growth on top of the revenue Swire generated in 2013 operating as our independent distributor. It should come as no surprise that economic growth has slowed throughout China over the last 12 months. In addition, a large influx of outdoor brands has resulted in excess inventory levels, triggering discounting and higher than normal promotional activity by some of our major competitors in that market. Now it seems that there has been some confusion among analysts about how to model the China joint venture into their 2014 financial projections.
So let me explain in general terms how we are including that business in our financial model. Based on our revenue estimate for the joint venture, we expect it to contribute high single digit operating margin and incremental EPS of approximately $0.13 per share after interest, taxes and minority interest to our consolidated 2014 results. While these expectations are lower than we had originally planned for the 1st year of the joint venture, we continue to view China as a very large long term opportunity. We expect our North American direct to consumer sales to continue growing at a double digit pace for 2014, including plans to open an additional 18 stores, comprising 12 outlets and 6 Columbia branded stores. The 12 new outlet stores will continue to help us manage excess inventories more profitably, while protecting brand image and integrity in wholesale channels.
The 6 new branded stores we have planned for 2014 will be much smaller footprints than our current branded stores and designed to showcase various product assortments, including a few stores specifically focused on our performance fishing gear or PFG products. We expect high single digit growth from our U. S. And Canada wholesale channels over the course of 2014 on a constant dollar basis, highlighted by anticipated double digit growth in the second half of the year. In the EMEA region, our new Senior Vice President of Europe, Franco Fogliato, joined us in early November and has been working closely with our Europe direct team through the fall 2014 advance order taking process.
The focus in our Europe Direct business is to strengthen relationships with key wholesale customers in targeted markets where we are focusing our efforts to grow the business. These targeted customers will be instrumental in helping us revitalize our brands across the continent. We expect continued growth in our EMEA distributor business and are optimistic for improved top line performance in our Europe direct business. Looking at our Latin America, Asia Pacific region, we expect the incremental sales from the China joint venture to more than offset the effects of the weakened Japanese yen and the geopolitical issues that have continued to strangle the markets of Argentina and Venezuela. We're working very closely with our independent distributors in Argentina and Venezuela, watching for any signs that those markets are unlocking, but we have no way of predicting when that might happen.
A few small but positive notes elsewhere in the LAAP region. We have successfully transitioned to a new distributor in Australia and New Zealand, and we're working together to drive renewed growth in those markets. Our distributor in Mexico is experiencing stronger sell through
of the Columbia brand products
of the Columbia brand products in its multi brand stores as compared to the 2 well known global athletic brands that it carries. Our new distributor in India opened its 1st model brand Columbia store in New Delhi's upscale CityWalk Mall on December 24, marking the first of many stores that it plans to establish in similar upscale locations across that country over the coming years. Before we shift to answering your questions, I want to remind everyone that our U. S. ERP implementation remains targeted for early April, supported by an enormous effort by our employees around the world.
We will share more about the implementation when we announce our Q1 results on Tuesday, April 29. This effort and our increased demand creation investments are muting operating leverage in 2014, but the strength we're seeing in our brands confirms that we are focused on the right strategic initiatives to grow our business and improve the profitability over the long term. We entered 2014 with renewed momentum in key wholesale markets and a balance sheet that's stronger than ever with more than $529,000,000 in cash and investments. Global inventory finished 15% lower than last December, excluding the $20,600,000 of incremental inventory acquired by the China JV. Our strong financial position and confidence in our growth prospects prompted our Board of Directors to authorize a 12% increase in the quarterly dividend to $0.28 per share.
We also entered 2014 with significant additions to our management team. During this year, we welcomed a new Senior Vice President of North American and European Retail, a new Senior Vice President of North American Sales and a new Senior Vice President of Europe. We also promoted new Vice Presidents of Apparel Merchandising and of Apparel Innovation and Design. As previously announced, the new President of our joint China joint venture brings experience and continuity from the many years of working for our joint venture partner Swire Resources. This management team together with our employees around the world is energized by the prospect of renewed growth in 2014 and aligned around our strategic initiatives to drive sustainable, profitable growth in the years ahead.
The successful introduction of TurboDown for fall 2014 builds on our powerful Omni Heat technology platform, which has become a $200,000,000 global business for us since its launch 3 years ago. In closing, I want to recognize the outstanding performances by the U. S, Canadian and Russian freestyle ski teams, while wearing Columbia uniforms featuring Omni Heat technology and a new patent pending waterproof zipper design, along with other innovations. We are proud to have played a part in helping these great athletes perform to their highest abilities and wish them much continued success in future competitions. Equally important, the enthusiastic positive feedback we receive from these world class athletes about the design and performance of our products is gratifying confirmation of our future as a leading innovator in the active outdoor space.
That concludes my remarks. I'd like to open it to questions. Operator, can you help us?
Thank you. Our first question comes from the line of Bob Drbul with Nomura Securities International. Please proceed with
Tim, I just have a couple of questions. I think the first one is in the Q4 in your direct to consumer, can you give us an estimate on how your own stores, full price stores and your outlet stores comped?
Yes, Bob, we emphasize that we're not a retail operation. In fact, the retail stores are really designed not only to help us manage our inventory levels, but also to really showcase the brand for other for consumers and other wholesale partners. So we don't release that comp store data, but I can tell you we'd be proud to do so if we decided to do so.
All
right. Tim, I just have two questions on the 14 outlook. The first one is, I think you talked about double digit increases for fall 'fourteen. How much of the order book visibility do you have done at this point? And is it still the March 31 deadline that you typically have?
Yes, Bob, we have
a very significant order book at this time and enough to give us comfort to be able to give the kind of guidance we gave today. So we're confident in our ability to hit those numbers that we talked about. We're gratified to be able to have enough information about really all the geographic regions to be able to provide that kind of guidance. So it's good. And we expect more orders for sure, but we have enough to be able to give us that comfort.
Okay. And then I guess the last question that I have is on the I guess if you look at fall 'thirteen versus your expectation for fall 'fourteen, can you put any numbers on like average price point of your outerwear? What's really happening with this more accessible price point strategy? How big is the change that you are undertaking here?
Yeah, the change is not dramatically different. It's really where we're focusing our time and effort. So if we go back to these more strategic good, better, best approach to merchandising, we emphasize the better components much more than the best. And that's really where our customers expect us to be. We had one significant customer who told us that we were always the best and better, and that's really where we want to maintain our position and focus our merchandising.
So as an example, TurboDown, which we expect to be a very significant contributor over the years, is a product that has high performance, in fact, industry leading performance, but has a very sort of moderate price point. So true to other Colombia examples of really significant products, we have great performance at really reasonable prices. So that's that would be an example of how we're approaching the merchandising strategy.
Great.
Our next question comes from the line of Camilo Lyon with Canaccord Genuity.
Thanks and congrats on a great quarter. Thanks. I wanted just to follow-up on Bob's question about the order book for 2014. So just to make sure I'm understanding it correctly, the 15 to 17 even though you don't have the full order book
in, that's what you projected to be given
the strong build in build in orders to date, right? Am I understanding that correctly? Or is there opportunity for that number to increase as the final orders trickle in?
Well, we, as you may guess, we spend a tremendous amount of time and effort on analyzing the order book and the future plans for the business. And so we've become pretty good at analyzing it. We don't have the full order book. We'll get orders all the way through the season as we did in 'thirteen, all the way through to the end of the year. But based on what we know, we've got a good handle on the order book and we're far along in the order taking will likely end up.
So we have a high degree of confidence in
the number we gave you.
Great. Okay. So then secondly, just moving on to inventory. In the release, you said that, that momentum from the Q4 has continued into the Q1. You also talked about your inventory numbers being down 15%.
How are you able to meet that continued demand? It sounds like you've done a really good job of clearing some of that excess carryover inventory from last year. Do you have enough? And where do you think that you're really going to focus on building out some of that inventory for the back half of 'fourteen? Is it going to be more on the SOREL brand or on the Columbia brand?
And I would assume it's more on the footwear side versus apparel. Is that the right way of thinking about the dynamics?
Well, as you remember, we had 2 really tough winter years prior to fall 'thirteen. And so we as well as our customers were conservative in terms of how we approach the future. As the weather played out certainly in North America, our customers liquidated inventories at a high margin level. And as we tell investors all the time, our 4th quarter is really driven by not necessarily a top line so much as the ability to convert inventory at closer to full price versus soft price. So that's what we ended up what ended up happening for us for this for 'thirteen.
Now as we approach 'fourteen, when we get closer to the end of our booking season, which would be end of March, beginning of April, we'll make a decision on how much speculative inventory we want to keep, which I
would argue, unless things change
dramatically, we're going to see something along the lines of what we've guided here to today in terms of a rather conservative approach to residual inventories. And then Tom, I guess, some more
inventory turns, our turns were at about 2.5x exiting 2013. And we're continuing to focus on improving that metric. So our intent would be to grow our inventory in 2014 at a slower pace than revenue growth.
Great. And then if I could just squeeze in one more. The commentary on the China JV accretion of $0.13 coming about that being a little bit lower than what you had initially planned. Could you just talk a little bit more about the driver of that accretion coming in a little bit below plan? Is it more the macro or is it something that really discovered with selling in that market?
No, I would say it's predominantly the macro effects of the China market and just the level of revenue that we originally planned for 2014 versus what we're currently planned.
That's really the promotional environment across the landscape that's
That's the major driver, yes.
Yes. Okay. Great. Thanks a lot. Good luck with the balance of the year.
Thanks.
Thank you. Our next question comes from the line of Kate McShane with Citi. Please proceed with your question.
Thanks. Good afternoon.
Hey, Kate.
I was wondering if we could hear a little bit more detail behind the opening of the 6 new branded stores. And can you repeat how many will be focused on PFG? And just as a tack on to that, it seems like some of the outdoor retailers, and Stream by Dick's and Cabela's and Bass Pro seem to expanding more aggressively. Is there further opportunities for retailers? And how do you think about merchandising and shop in shops with them?
Certainly. Well, we have a solid group of what we call branded stores as opposed to outlet stores where we have a display of our products and that have done well. But generally, they are too large. And so this is an approach to get ourselves a branded position in major markets in North America at a size that's, frankly, more profitable period. As it relates to the quantity of those stores that might be PFG, we have our best performing PFG products are in the southern part of the United States.
So we're looking at a few different markets and it really depends on where the right locations come up as to where how many are PFG and how many are more standard Columbia stores. As it relates to the wholesale customers, the Dick's Sporting Goods, Field and Stream, Cabela's Bass Pro, those are all great customers for us. And we have continuing in store investments in all those operations. And we would expect that we would have continuing and perhaps even a larger presentation in those stores over time. So as I said in my comments, the company really considers itself to be a wholesale company and providing products that retailers do well with.
And it's helpful for us to have these branded stores to allow us to really experiment with presentations that can enhance the visibility of the company's products and sales. But really it's designed to focus on our wholesale partners and helping them.
Okay. And if I could just ask a second question on the supply chain. If you could highlight maybe where you're seeing some pressure in supply chain this year, what your anticipation is with regards to higher labor costs or higher raw materials in your guidance for 2014?
Yes, this is Brian Cate. As we look to this year, both for spring and fall, I would say prices were moderating. And we did see some increases as it relates to fall in our down prices and whatnot, but all of that would have been priced accordingly and baked into the guidance that you got today.
Okay. Thank you.
Thank you. Our next question comes from the line of Andrew Burns with D. A. Davidson. Please proceed with your question.
Thanks and congratulations on great results.
Thanks. I
was hoping we could spend a little more time on Swire in the Chinese market. It sounded like there was some inventory in that channel. We've seen this in other categories, but just wondering your view on the amount of time it will take for sort of normal secular growth trend to reemerge in China? Is it a 1 season or perhaps 2 season phenomenon?
Well, I would just emphasize that our joint venture partner, the Swire Group, has been doing business in China since 1700s. So we're with a very experienced partner there. So our expectation is that this inventory overhang, which is prevalent on a macro scale across China, not necessarily in our business specifically, has just dampened the results that we would have otherwise expected from the JV. I think we're looking at probably a 1 season to maybe at the very most 2 season overhang with this kind of enthusiastic expansion. So it's really, I think, going to be more short term.
And frankly, with our balance sheet and the Swire Company's balance sheet and experience levels, our expectation is we'll be one of the firms that is able to take advantage of these kinds of tumultuous markets.
Great. Thanks. And with the second half guidance or commentary taking shape, it certainly seems like you're gaining some share in the marketplace. How do you view the competitive landscape? Could you speak to maybe some particular areas of strength, whether by category or by channel?
Certainly. Well, categorically, we've had really good growth in outerwear. If you remember, and we haven't spent a lot of time on this perhaps with the investing community, but our TurboDown product is really a hybrid garment that contains both down and synthetic. So it's it allows us to be competitive with a high quality product containing down that's not as impacted as other down jackets just because of the leverage of the synthetics. So that's been good from the outerwear category.
It's new, it's different, it's exciting and it's got a lot of features, including Omni Heat that support it. We've also had great growth and we expect further growth of SOREL, where as you know, it's well known as a winter boot, but the growth of that brand and its products in the fall season has really been rewarding. So we expect good growth from the Columbia brand specifically related to outerwear and then in the SOREL branded footwear and also the Columbia winter footwear brand has also been strong.
Thanks and good luck.
Thanks. Thank
you. Thank you. Our next question comes from the line of Lindsey Dreckerman with Goldman Sachs. Please proceed with your question.
Thanks. Good afternoon, everyone.
Hello. I
was hoping you could give a little bit more detail. I know you have some of the numbers spelled out in the CFO commentary, but just on the incremental investments in 2014, maybe just starting on the marketing side, the side, the demand creation expense. It sounds like I just want to make sure that if you talk about 10% of the Swire JV sales being reinvested in marketing, is that substantively all of the operating profit from that entity that you're going to be reinvesting back in marketing? And if that's the case, how do you think about when you'll be able to deliver incremental sales on that?
Yes. Lindsey, this is Tom. As it relates to China, the 0.13 dollars contribution to Columbia is after all costs, including marketing, including interest, including income tax. So that's a net net number. So we expect the China JV to generate high single digit operating income.
So it's not that we're investing all the profit from that business back into that market in the form of advertising.
Maybe then could you clarify the big buckets, because it is a pretty significant the 5.1% of sales is a pretty significant step up, especially considering how much revenue growth you're looking for in 2014. So where are the big areas where you're looking to deploy that?
The marketing spend itself or the SG and A taken as a whole or the marketing specifically?
The demand creation expense that you called out in the release, the 5.1% of net sales versus 4.6%?
Okay. We're going to have nominal increase across every market. But where we'll spend it in North America and Europe primarily will be a combination of TV, radio, out of home and digital. So that's where the bulk of the marketing spend will be.
And the magnitude of the increase, the large magnitude of increase, is that a function of feeling really great about the products you have to invest behind or maybe a catch up of some underinvestment as sales have slowed in recent years?
Well, I think we've and we've been clear that we haven't spent enough on marketing for the company. Those are areas where we think we can continue to increase our spend. And frankly, with TurboDell, we think we really have a potential product that when marketed properly can be a significant growth channel for the company. So we've got an opportunity today to have something unique and different to talk about and so we're going to take advantage of that.
Got it. And then on the ERP side, the $20,000,000 of incremental expenses, can you just talk specifically about what that initiative will cover and how we should think about the opportunity to generate returns on those investments timing wise and magnitude?
Sure. This is Brian. So in terms of what it covers, it covers our ERP system and then a host of other ancillary systems to help us communicate better with our vendors from a status perspective, our customers, etcetera. So it is a pretty good sized project that, as Tim mentioned, we continue to believe that April will be our U. S.
Go live. In terms of returns to the business, we foresee those being really around inventory utilization and affecting the gross margins of the business.
And as far as the timeline to generating those benefits, is that as soon as you go live? I mean, should we I guess what I'm asking is, does your guidance contemplate any reward from those investments as you go live and have a more efficient supply chain?
Yes, Lindsay, I would this is Tom. I would say that we begin to see leverage from those investments or return on that investments much more in 2015 than we've contemplated here in 2014.
Okay. Thanks very much.
Thank you. Our next question comes from the line of Laurent Vasculi with Macquarie Capital. Please proceed with your question.
Sure. Good afternoon. Thank you very much for taking my question and congrats on the quarter. As mentioned in your prepared remarks, direct to consumer represented about 34% of total 2013 revenues. How should we think about DTC's percent contribution for 20 14 revenues?
And if you could provide some color on the operating margin structures for both wholesale and DTC, that would be great.
Yes. So we're expecting a small increase, perhaps up to 36% contribution from DTC in 2014. And when we look at the net returns from the business today in 2013 and planned for 2014, I would say that the DTC business is slightly above the average in terms of operating income for the company on a standalone basis.
Okay, great. Thank you. And if
I may on Swire, last quarter,
it was mentioned that China did about $150,000,000 in 2012. I'm assuming twenty 13 was essentially the same and 2014 is at $155,000,000 Can you provide some color on how China revenues look like by quarter?
Yes. So maybe just one point of clarification. So Swire did about 100 $52,000,000 in 2012. In 2013, the increase was low single digits. And in 2014, about $155,000,000 of growth is on top of what we, Columbia, recognized in selling in to the distributor in 2013.
So the revenue for China is more in the mid $160,000,000 range for 2014. The $155,000,000 is the incremental component. Okay, great. And then by quarter, if
you can give some color on that?
I would say that the China business follows largely the same seasonal pattern as the consolidated Columbia business, a little over 1 third first half, 2 thirds back half.
Okay, great. Thank you very much.
Thank Our next question comes from the line of Chris Svezia with Susquehanna Financial Group. Please proceed with your question.
Good afternoon, everyone, and nice job on the quarter. A couple of questions. I guess, first, I'm just curious on the backlog comment up double digits. I guess the JV from China is in that. And if so, is there any way to maybe extrapolate what the North American or European wholesale or distributor businesses in terms of backlog growth was or what was doing?
I think you made a reference that U. S. You expect on the wholesale side to be up high single. So I'm just trying to extrapolate the backlog by region if possible.
So Chris, the double digit comment includes or excludes China. It really doesn't have an impact as it relates to fall 2014. So we're planning the fall business of double digits, whether or not you include or exclude China, just to be clear on that. And then as it relates to the by region, I think we gave a fair amount of color in the CFO commentary and in Tim's script. I think we're talking double digits in most regions globally with the in local currency terms with the exception of the European direct business and the LAAP distributor business and currencies negatively affecting our Canadian and Japanese businesses in 2014 in U.
S. Dollar terms.
Okay. That's helpful. And on gross margins, just you did a great job obviously in the Q4. Your inventories are clean. You're improving your inventory management.
Just curious why DTC is growing? Why not what's the opportunity for that to be potentially stronger? Just kind of maybe walk through some of the offsets in the CFO commentary, but I'm just curious, what's your thoughts about the opportunities there?
Yes. So on the gross margin, we're planning it up 50 basis points for the year. And there's a reclassification a reclassification component as we move the China former licensing income that was recorded in 2013 and prior years up into gross margin as we operate the JV. We expect a slightly higher proportion of direct to consumer and full price versus off price sales. Those are really the drivers of the expansion.
And then obviously our hedge rates given the weakness in the Canadian dollar and the Japanese yen are a headwind for us in 2014. And then we had a little bit of a tough comparison where when we look at our sales and inventory provisions in 2013, they were actually a benefit as we had very nice sell through and those reserves actually declined in 2013 creating gross margin expansion and we don't expect that to repeat in 2014. So that's about 40 to 50 basis points going against us as well.
Okay. That's helpful. And then just lastly, just on SG and A, the $100,000,000 increase, is that I assume that's off a GAAP $625,000,000 you did in 2013. And any color, I know you don't want to give quarterly, but I'm just curious first half, second half that would prevent you from growing earnings in the first half. Is it it's just really all the growth is really more second half versus first half just due to seasonality of the business?
Yes. As it relates to SG and A, we would expect SG and A to grow at a faster rate in the first half than in the second half as we comp against the impairment charge and higher incentive comp in the second half of twenty thirteen. As it relates to Q2 specifically this year, we anticipate higher operating loss this year compared to 13% as we'll begin to see the higher operating costs from the ERP implementation come online beginning in Q2. Okay.
Thanks very much. Appreciate it and all the best. Thanks.
Thank you.
Thank you. Our next question comes from Mollie Aroukhi with Stifel. Please proceed with your question.
Hi, guys. This is Mollie in for Jim. Just wondering if you could speak to the trends that you're seeing in the EMEA region, direct versus distributor, and what makes you optimistic about your direct growth in fiscal 2014?
Certainly. Well, over the last 18 months, I've spent a tremendous amount of time in Europe working directly with customers and analyzing their requirements and expectations from us as a brand. And so it's taken us a bit of time to get that merchandise the way they want it and our positioning in this place that they want it. That plus the new leadership we have, we talked about Franco Fogliano joining the company, his extensive experience and financial acumen is going to help us over time to get our positioning there in the right spot. We've also seen what we expect to be growth in that market from a direct basis.
And the expectation is that built into the guidance we've given you today that we'll have a solidly growing business there for 2014. So on the direct basis, it's all about focusing on a small, very narrow band of customers that can specifically give us the kind of growth that we need, as well as a more narrow band of geographic customer base. So it's all about focus in a direct business. In our distributor business, we've just had a tremendous growth and adoption from especially our Russian business together with the exposure we've received there during the games, and it's been really rewarding. Additionally, our footwear business seems to be really leading the growth area for Russia, especially in this coming year.
Great. Thank you. And then curious on the Mountain Hardwear brand, noted declines in Q4. What's going on there? And any color that you could provide going into fiscal 'fourteen would be helpful.
Certainly. Well, again, the expectations for hardware have been built into the guidance we've given you today. It's a focus a product focus for the company. We need to be having the hardware product needs to be closer to what consumers expect from that brand. We probably got ourselves in a position of lofty expectations for the adoption of very expensive product and the focus there is to getting ourselves compelling, high quality, high end product as well as what we're calling gateway price points to allow consumers to enter that brand at a more reasonable price.
So the focus there is again on product and the expectation is that we'll have good growth on that brand, but in 'fifteen beginning in 'fifteen.
Great. Thanks guys. Good luck in the next quarter.
Thank you. Thank you.
There are no further questions at this time. I'd like to turn the floor back to management for closing comments.
All right.
Well, thank you all for listening in today. We're obviously thrilled with the results, and we appreciate your continued support. Look forward to talking to you in April.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.