Ladies and gentlemen, thank you for standing by, and welcome to the Crocs, Inc. Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would like to now hand the conference over to your speakers today.

Good morning, everyone. Thank you for joining us today for the Crocs’ fourth quarter 2020 earnings call. Earlier this morning, we announced our latest quarterly results, and a copy of the press release may be found on our website at crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly, is subject to the Safe Harbor provisions of the federal securities laws. These statements include, but are not limited to, statements regarding potential impacts to our business related to the COVID-19 pandemic. Crocs is not obligated to update these forward-looking statements to reflect the impact of future events. We caution you that all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our Annual Report on the Form 10-K. Accordingly, actual results could differ materially from those described on this call. Please refer to the Crocs’ Annual Report on Form 10-K, as well as other documents filed with the SEC for more information relating to these risk factors. Adjusted gross margin, income from operations, operating margin, and earnings per diluted common share, are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, Chief Executive Officer; and Anne Mehlman, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions. At this time, I’ll turn the call over to Andrew.

Thank you, Cori, and good morning, everyone. As you saw from our release issued this morning, we achieved record fourth quarter revenues and profitability, and finished 2020 with very strong brand momentum. We are looking forward to an exceptional 2021 with accelerated revenue growth as we invest in digital, China, and our supply chain to support future growth. I am confident in our ability to continue to deliver best-in-class profitability and strong cash flow. The Crocs brand has never been stronger, and I am very excited about our future. Anne will review our financial results in more detail shortly, but here are a few highlights from 2020. Our fourth quarter had the highest revenue and adjusted operating profit of any quarter in Company history. We achieved record revenue in 2020 of nearly $1.4 billion, up 13% from prior year. Digital sales grew 50% in 2020, and penetration increased more than 1,000 basis points to 42% of sales, while DTC comp growth was 39% for the full year. Adjusted operating profit for the year was $263 million, an increase of 84% with margin expansion of 730 basis points to approximately 19%. Adjusted diluted earnings per share for 2020 doubled to a record of $3.22, and we achieved record cash flow, enabling investment in the business and a return to shareholders of over $170 million by share repurchases. The strength of our brand underpins these extraordinary results. The Crocs brand continues to resonate strongly with consumers around the world as a result of our iconic products and powerful marketing. We continued to launch a pipeline of exciting and innovative collaborations, ranging from global launches with Justin Bieber and Post Malone to a more regional partnership, like Rare Market in Korea. Throughout the year, Crocs garnered tremendous media coverage around the world from top publications, like Vogue, Bazaar, and Esquire. We were honored to be recognized by Footwear News as Brand of the Year for 2020. We’re pleased that our comprehensive marketing strategy resulted in strong brand desirability, relevance, and consideration, which increased double digits for the fourth consecutive year. In summary, the Crocs brand has never been stronger, and I’m confident of our ability to accelerate in 2021 and beyond. Now, let’s turn to fourth quarter highlights. From a channel perspective, digital remains our top priority. Global e-commerce growth was extraordinary, with revenues up 92%. This represents our 15th consecutive quarter of double-digit e-commerce revenue growth. Our digital business, which combines e-commerce and e-tail, grew 87% and represented 41% of fourth quarter sales compared to 34% last year. Over the long term, we believe our digital presence on both, our own sites and those of our partners, will allow us to serve our consumers in their preferred channel and will continue to be a competitive advantage relative to other footwear brands. The wholesale channel grew revenues 52% versus prior year. Performance exceeded our expectations, driven by incredibly strong sell-through in our top 20 brick-and-mortar wholesale accounts. With improved deliveries in the fourth quarter, we replenished on-hand inventories at wholesale. However, high consumer demand left inventories leaner than we anticipated at year-end. Turning to Company-owned retail. Fourth quarter comp sales increased 41% on top of 16% last year, led by the Americas and South Korea. We remain pleased with the makeup and profitability of our store portfolio, which is majority outlet and shop-in-shop. Turning to 2020 full-year results. We achieved the highest revenue in the Company’s history of nearly $1.4 billion, growing double digits with a particularly strong second half. Digital sales grew 50%, and our already best-in-class digital penetration increased over 1,000 basis points to 42%. Having achieved our double-digit operating margin target in 2019, we had incredible margin expansion to deliver 19% adjusted operating margins for the year. Last but not least, we delivered record cash flow and EPS. From a product perspective, our results continue to be driven by our four key product pillars: clogs, sandals, Jibbitz, and Visible Comfort technology. For 2020, sales of our clogs were particularly strong, increasing 33% year-over-year to represent 72% of total footwear revenues versus 60% in 2019. Early in the pandemic, we canceled several receipts as the initial store closures interrupted the peak of the sandal season. As such, 2020 sandal revenues declined by 19% and represented 18% of footwear sales versus 25% last year. Jibbitz sales accelerated, nearly doubling for the year versus 2019. Turning to 2021. We’re investing in our key growth drivers: digital, China, and our four product pillars. Digital is our top priority. In 2021, we’ll be investing to personalize our consumer journey globally, enabling differentiated and more effective communication with our diverse consumer base. We’re also investing in talent, technology, and supply chain infrastructure to support high levels of growth for the foreseeable future. China, as the second-largest footwear market in the world, remains one of our most significant long-term opportunities. We have repositioned our product portfolio to align with our four product pillars. We continued to drive focused investments to create brand heat and consumer demand through a proven playbook that uses high-profile celebrities, influencers, and global and regional collaborations. To that end, we are excited to have signed Chinese Actress Yang Mi as our brand ambassador for the second year, and we’re confident she will continue to build brand awareness and relevance through sustained marketing investment. We’re focused on optimizing our mono branded store network by selectively upgrading partners in certain provinces. We’re also renovating our store portfolio in China to improve our store environment by leveraging personalization to drive an interactive consumer experience. Similar to other areas of the world, we’re investing in digital, including elevating TMall and embedding personalization as our unique selling proposition. By the end of this year, we’ll have executed our playbook, setting ourselves up for strong growth in 2022. Finally, we’re very confident in our entire product lineup for 2021. Sell-in has been strong on a global basis, giving us confidence in our revenue guidance. We look forward to a full sandal season and restoring sandal growth by building on the early successes of Brooklyn, Tulum, and Classic Slide, as well as introducing a new two-strap plastic sandal. We’re excited about the innovation we’re bringing to clogs in 2021 and expect clogs to continue to outpace sandals for this year. As inventory levels improved on our Crocs at Work product, we have seen four consecutive months of strong double-digit growth. We anticipate strong growth in personalization through Jibbitz, based on investment in the consumer experience, both in-store and online. We feel incredibly fortunate to have outperformed in 2020 and are proud to have given back to our global and local communities through our Crocs Cares program. In Q2, our Free Pair for Healthcare program donated over 860,000 pairs of shoes, or nearly $40 million in retail value to frontline healthcare workers. In July, we partnered with Feeding America, a hunger relief organization in the United States. Thanks to the generosity of our consumers, we raised nearly $1 million in six months, enabling over 8 million meals to those in need. We look forward to continuing our commitment to provide comfort to our global communities with the philanthropic efforts in the coming year. In summary, we’re even more confident now than a year ago about the Crocs’ brand strength and our long-term growth potential. We’re incredibly optimistic about 2021 and our growth trajectory. Our four key product pillars and our powerful social and digital marketing are clearly creating exceptional consumer engagement. From a channel and region perspective, our digital-first strategy and our long-term focus on Asia, particularly China, will drive our growth for years to come. Before I turn the call over to Anne, I want to express my gratitude to the entire Crocs organization for their hard work and commitment to delivering best-in-class results. It was an incredibly challenging year for everyone. And I’m proud of how we have executed as a team and the results we have delivered for all our stakeholders. With that, Anne will now review our financial results in more detail.

Thank you, Andrew, and good morning, everyone. I’ll begin with a short recap of our fourth quarter results. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press release. Our fourth quarter results were exceptional. Fueled by the Americas and EMEA, we delivered record revenue and operating profit and generated record cash flow in spite of a global pandemic. Profitability was best-in-class as we grew gross margins and levered SG&A, increasing operating income and profitability. Fourth quarter revenues came in at $411.5 million compared to $263 million in the fourth quarter of 2019, a 56.5% increase or 56.1% on a constant currency basis. We sold 18.9 million pairs of shoes, an increase of 37.7% over last year’s fourth quarter. Our average selling price during Q4 increased 13.7% to $21.63, with the increase attributable to fewer promotions and discounts as well as greater sales of charms per shoe. For 2020, we sold 69.1 million pairs of shoes, up 3% over 2019 with an average selling price of $19.91, up 9.3%. We believe the increase in ASP is an indicator of brand strength. Now, let’s review our results by region. As Andrew mentioned earlier, the Americas had another strong quarter, with revenues doubling to $310.3 million. Retail comps increased 54.4% on higher traffic and increases in conversion. Growth was phenomenal in e-commerce, up 125% and stronger-than-anticipated in wholesale, up 130.5%, led by e-tail and our top 20 global brick-and-mortar partners. Our performance in the U.S. is the direct result of our commitment to driving relevance with the consumer through our iconic product and innovative marketing. In Asia, Q4 revenues were $51.8 million, down 19.5% from last year’s fourth quarter. Strong e-commerce growth of 19.2% was offset by declines in distributor in India wholesale revenue. India was heavily disrupted due to COVID-19 lockdowns, but we are optimistic about India returning to growth in 2021. South Korea continues to outperform and grew nicely during the quarter. EMEA revenues increased 14.9% over last year’s fourth quarter to $49.4 million. Strong revenue growth in wholesale, up 10.8%; and e-commerce, up 53.8%, were slightly offset by declines in retail due to COVID-related store closures. While our retail stores in Western Europe remain closed today, we do not anticipate this to be a material impact to our 2021 expectations. EMEA is beginning to benefit from improved brand relevance and consideration, created by our marketing and product innovation as well as our continued focus on digital commerce, which represented nearly 60% of EMEA revenue this quarter. Our fourth quarter adjusted gross margin was 56%, up 670 basis points from last year’s 49.3%. Gross margin improved in all regions and all channels, driven by fewer promotions and discounts, favorable product mix, and operating leverage. Our SG&A fell to 34.9% of revenues, an improvement of 950 basis points versus 44.4% in last year’s fourth quarter. The significant decrease in adjusted SG&A rate is a result of strong sales growth and operating leverage, even as we incurred variable expenses related to revenue growth and invested in additional brand marketing to support future growth. Adjusted SG&A excludes $21.1 million in one-time noncash impairments, including a $20 million noncash impairment taken on our 34th Street location in New York City. Our fourth quarter operating income increased to $64.6 million versus $8.4 million last year, and operating margin increased over 1,200 basis points to 15.7%. Adjusted operating margin increased over 1,600 basis points to 21.1% as SG&A leverage on strong sales growth added to gross margin expansion. In Q4, the Company recorded a one-time tax benefit of approximately $128 million related to changes in the tax structure of our operations. For 2021 and the next years, we expect our underlying GAAP tax rate to be approximately 25%, and our underlying non-GAAP tax rate, which reflects cash taxes paid to be approximately 16% to 18%. Fourth quarter non-GAAP adjusted diluted earnings per share adjusted for one-time tax credits increased over 780% to a quarterly record of $1.06 compared to $0.12 a year ago. With record fourth quarter cash flow, our liquidity position is strong with $135.8 million of cash and cash equivalents in addition to $180 million of long-term borrowings and $319.4 million of borrowing capacity on our revolver. Given the historically low interest rates, we may opportunistically seek to add permanent capital to our capital structure. If we pursue this, we expect to use proceeds to pay down our existing revolver balance and for general corporate purposes. Given our record cash flow generation, we restarted our share repurchase program. In the fourth quarter, we engaged in a $125 million accelerated share repurchase, or ASR, and received 1.5 million shares in the fourth quarter and an additional 500,000 shares in January of 2021. For 2020, we repurchased a total of 3.2 million shares for $170.8 million, including the impact of the final ASR share delivery in January 2021. The average price per share repurchased in 2020 was $46.50 per share. Inventory at December 31, 2020, was $175.1 million, up slightly from $172 million in the fourth quarter last year. As Andrew mentioned, inventory in the channel remains lean, given strong sell-through. We do not expect the same degree of inventory constraints in 2021 that we had in 2020. Turning to the future, I would like to share our current outlook for Q1 and full-year 2021. For Q1, we expect revenue to grow approximately 40% to 50%, and adjusted operating margin to improve between approximately 17% and 18%. Strong growth is expected in all regions as we see continued brand momentum and we anniversary some COVID-related closures that began in the first quarter of 2020. Barring significant additional COVID-related closures, we expect 2021 revenue to grow between 20% and 25%. We anticipate approximately $12 million to $15 million in one-time charges for our distribution center investments to impact gross margin. As revenue grows, we expect to be able to leverage SG&A, leading to adjusted operating profit margins of approximately 18% to 19% for 2021. As we invest in supply chain to support our digital growth, we expect capital expenditures to be approximately $100 million to $130 million this year. For 2021, we expect our underlying non-GAAP tax rate, which reflects cash tax paid, to be approximately 16% to 18%. Our GAAP tax rate will be approximately 25%. In summary, we delivered an incredible fourth quarter and full-year revenue growth, profitability, and cash flow. We are confident we have positioned ourselves for sustained profitable growth and strong cash flow generation for the future. At this time, I’ll turn the call back over to Andrew for his final thoughts.

Thank you, Anne. The Crocs brand has never been stronger. Despite an extremely challenging environment, our Company had an extraordinary year in 2020, and we expect acceleration in 2021. Looking to the future, I’m confident in our ability to continue to deliver best-in-class results. Operator, please open the call for questions.

Thank you. Your first question comes from Erinn Murphy of Piper Sandler.

Great. Thanks. Good morning. And truly a banner year. So, congratulations Andrew to you and the entire team. I guess, my question for you is on the digital-first focused strategy. I’d love to just hear a little bit more about the biggest pieces of incremental spend that you feel bullish about for 2021. And then, specifically on the fourth quarter, digital e-com was up 92%. Could you just share a little bit more about what you’re seeing from a new customer perspective versus existing customers with their basket purchases?

Great. Thanks, Erinn. I appreciate the kind remarks. I know the team will be appreciative of that. From a digital-first perspective, yes, I’ll probably put the spend in three big buckets. I think, the first bucket is all about sophistication of communication. And that’s about personalizing our communication so that we can speak to our very broad consumer base differentially. And obviously, the intent there is that we speak to them more personally, so they buy more and return more often, et cetera, because we really have that incredibly broad consumer base. So, I would say personalization of communication requires people, technology, and intent. I think, the second piece is just generally scaling of the business, right? So, it’s scaling of technology, scaling of talent. It’s building out our talent across our digital realm, which is not only in the United States but in Europe and Asia as well. And then, the third big piece is really supply chain, right? So, you saw us at the back end of last year scale the U.S. supply chain to meet digital demand. That was very successful and allowed us to have that banner quarter from a digital perspective as we were able to build out that capability. But, we need to do that across the globe. So, those are really the three buckets of digital investment. From a Q4 and kind of new and existing customers, I would say it’s a little bit of all three buckets, right? So, the first bucket being new customers, we’re absolutely bringing new customers to the brand. I think we had about 4 million new customers last year through our e-commerce businesses on a global basis. So, that’s a very significant number. It is also existing customers returning at key shopping occasions. And we can see some trends in terms of existing customers buying more; lifetime value has been ticking up. One thing to highlight is that when a customer buys Jibbitz online, their lifetime value is double that of the average customer. We are seeing increased penetration of Jibbitz through our online channels.

Great. That’s helpful. And then, if I could just ask a follow-up on the visibility that you guys have on the second half order book. It sounds like you’re seeing some early reads that are strong. But, I’m trying to marry that comment with just the way you guys have sloped the guidance for the year. So, Q1 being $40 million to $50 million at the full year hasn’t budged. So, it doesn’t seem like you’re giving yourself a lot of credit for the back half. So, any help on kind of marrying those two comments would be great.

Yes. I would say that it's still a bit early to evaluate the order book for the second half. We are definitely making reservations for Q3, but we still have a significant way to go regarding the back-to-school and holiday seasons. We are optimistic about our position, our product lineup, and the positive feedback we're receiving on what we're offering in the market, but it is still early.

Yes. I think just, Erinn, if you remember last year, in Q1 and Q2, we saw significant COVID-related closures in China early in the quarter followed by Asia later in the quarter and then obviously worldwide in March. In Q2, we experienced similar issues where much of our retail fleet was closed and our partners weren’t seeking shipments. So, while our business is very strong, we are re-anniversarying some weakness based on COVID last year, which is why the guidance looks as it does.

Got it. Just one last one, if I may, on Jibbitz. We’ve noticed you’ve been testing higher price points online. I’m really curious to see how that’s performing and if that’s something you would roll out to physical stores. Thank you so much.

Great. Thanks, Erinn. Yes. Look, I think, the test is still ongoing. Obviously, it’s out there on our U.S. site. We’ve raised the price of singles but also introduced a multi-buy offer. If people put more stuff in their basket during digital transactions, it really aids your package economics. We think this is the right way to go. We feel good about the test. It’s still ongoing. I wouldn’t say we have concrete conclusions, but we like where it’s heading.

Your next question comes from Jonathan Komp with Baird.

Could I just ask if you could clarify the clogs and the sandals growth in the fourth quarter? And then, I’m curious, it sounds like you expect clogs to outpace sandals still for 2021, which I’m interested in, given the difference in comparisons? And maybe just separately, one follow-up, Anne. It looks like maybe you’re embedding something less than 10% growth in the second half for total revenue. I just want to clarify that if you’re willing and understand that a little bit more as well.

Why don’t I start, Jonathan, with the clogs versus sandals and Anne can clarify the Q4 numbers and how guidance plays out. Yes. I think, as we look at ’21, clogs have been growing tremendously through ’19 to ’20, and we see that continuing in ’21. That’s partly due to consumer receptivity towards that silhouette and its utility. There’s tremendous innovation in terms of color, print, hike, et cetera, in our product lineup. We’ve got strong visibility to bookings and can definitely see clogs performing well in ’21. Sandals will return to strong growth in ’21. As I look through a multiyear trajectory, we expect over time for sandal growth to accelerate past clog growth.

And then, on the guidance, Jonathan. Again, we had a lot of interesting timing last year with Q2 coming out of Q2 with much of the closure. So, we had wholesale revenue that shifted to Q3. We’re guiding growth for the full year. We’re still making sure that we have good visibility. I think, we’re giving quite a bit of guidance. As we move through the year, we will be transparent. We have the best visibility in the first half of the year. We feel all of our underlying trends are extremely strong, and we don’t see anything changing from how the business was trending in Q4.

Yes. That makes perfect sense. Maybe just one follow-up then on the margin outlook. Guiding an adjusted operating margin for the year, 18% to 19%. I think you’re close to 19% in 2020. And I believe you mentioned expectations for SG&A leverage. So, I just want to ask about the implied gross margin outlook that you’re embedding. Any other color you have regarding first quarter versus full-year drivers for gross margin?

Yes, sure. Our full-year guidance, obviously, our revenue growth is 20% to 25%. We expect all regions to grow with the strongest growth expected out of Americas and EMEA. From a channel perspective, we do expect to have continued digital LED growth, but we also see really strong wholesale growth from distributors as they’re coming back. That wholesale growth might pressure gross margin a little bit, but underlines it remains really strong. We do expect the wholesale mix, especially with strong distributor return to put some pressure on gross margins, but it allows us to drive SG&A leverage while continuing to invest.

And just to clarify, would you not have maybe pricing opportunity and currency favorable offsets?

Yes. That’s a good question. Right now, we do have some currency tailwinds for the first time in a while. That’s nice to see. From overall gross margins, there are several puts and takes. We’re also seeing great pressure on inbound largely just due to the state of the global supply chain. But we are seeing that currency will offset the inbound freight, so, that’s likely neutral. Currency will support ASPs, and regarding pricing, we’ve done a lot of work that culminated in our 400 basis points of gross margin improvement in 2020, and we expect to look at that in 2021. But I do expect this year to be a little bit more unit-led than ASP-led.

Your next question comes from Jay Sole of UBS.

Great. Thank you so much. Andrew, I want to ask you about rain boots. It seems like in the quarter, there were good signals that maybe some of the kids’, men’s, and women’s rain boots did pretty well. You didn’t mention it in your four key drivers of product. Where do boots fit in? And can you just talk about what you saw in the quarter from that product category?

Yes. I would say, Jay, that’s not a huge product category for us. We do make a kids’ rain boot that’s been on the line for a long time, and I would say it has a very loyal following among mothers. It’s easy on and off and has the key attributes they’re looking for. Historically, we haven’t been significant in rain, and I think the category is somewhat bifurcated. There are a lot of low-end products with very low margins for manufacturers and retailers. We don’t see that as an attractive area for us right now. Looking to the holidays in ’21 and into ’22, we do have some interesting warm-weather boot developments that we’ve been showing to retailers. It’s not really a rain boot but a comfort boot. That’s been getting really good feedback from our wholesale partners.

Got it, interesting. Okay, thank you. Just on the margins, could you help us understand how to think about what the margins should look like this year based on the differences between where the margins were in 2019 and where they were in 2020? Are there drivers that should move the margins back to a normalized 2019 level or something that would keep them more at the 2020 level?

Yes. I’m going to talk generally because we haven’t guided Q2 and Q3 yet. We don’t expect gross margins moving back to 2019 levels and feel good that our 2020 gross margins are largely sustainable, which is implied in our guidance. There is a little mix impact, and obviously, Q2 was a very unique quarter last year because a lot of our retail was shut down. I wouldn’t say there’s anything particularly abnormal that you need to be concerned about at this point in time. We’ll certainly keep you posted. Our gross margins are really good, and we’re proud of all the work we’ve done. The major drivers have been pricing and pulling back discounts, which we think are sustainable.

Got it. Maybe one last one from me. You talked about a lot of investments happening in digital China products. A lot of that sounds like SG&A, at the same time, $130 million in CapEx. Would it be possible to elaborate on what the money allocated to CapEx will go towards and what that’s going to drive for the business?

Yes, sure. It’s distribution centers. It’s really building out our distribution network to support our digital business as that does operate a bit differently. We mentioned moving our Niwot distribution center and automating that. We’re looking at distribution center investments around the globe and continuing to expand our U.S. distribution center.

Your next question comes from Mitch Kummetz of Pivotal Research.

I guess I have a couple. Let me start with the line clog business. Is there any way you can say what percent of sales that was in the fourth quarter? Maybe how much it was up in the quarter? I’m curious if you’ve seen continued strong performance through the early part of Q1 in that business.

Yes. We don’t break it out, but, performance was extremely strong. The line clog performed extremely well here in the U.S., Europe, and parts of Northern Asia. It’s a very important part of our fourth quarter business. In terms of its continued performance in Q1, it also continued to perform well. We plan on being essentially out of stock as we come into Q1; we want to be out of stock and then reintroduced next year. We will continue to carry year-round on our e-commerce sites because we see year-round demand for that silhouette. It’s a strong overall and we haven’t found the top yet.

Got it. And then, on collaborations, are there any metrics you could provide regarding that when you think about 2021 versus 2020, maybe in terms of number, type and timing? Can you offer any metrics here?

Yes. So, I’d give you a little color. Collaborations will be stronger than they were in ’20 and will be more evenly distributed throughout the year. We’ve executed some already this year, and a key one in Europe did particularly well last month. Without the COVID impact, they will be spread more evenly throughout the year. There will be more than last year, and we’ll have more regional collabs than before. These tend to be smaller as we reach a more niche audience, but we do also have blockbuster names that we’re really excited about. The pipeline is full. We’re still getting significant inbound interest that’s carrying over into ’22.

If I could add, those aren’t financially significant on their own but they create a great halo for the brand and are an important part of our marketing strategy. You don’t need to worry about anniversarying from a financial perspective.

Your next question comes from Sam Poser of Williams Trading.

I just have a few. I’m just going to get one. What do you anticipate the share count to be for ’21 right now?

We didn’t guide share count, Sam. I would just use what we gave in our release, which I think was around $68 million.

$68 million.

Got it. Okay. And I want to talk about China a little bit. Can you provide a history lesson about what happened and why it’s taking as long as it has to get it turned around? Based on what I know, any other market, Europe, U.S., China was more negatively impacted by various things and hence taking longer.

Yes. A couple of key issues: Firstly, we had a network of partners operating single branded stores throughout China, and we were with the wrong partners who weren’t equipped to grow the brand as we wanted to. This is not inconsistent with transitions other brands have been through in China, but they’ve largely gone through it. We’ve reset our product strategy to align with our four pillars that we know work around the globe. The transition of partners is in process, and we expect it to complete by the end of ’21. We’ve made focused investments in brand awareness. We feel we have the right strategy; it’s just taking longer than expected.

Lastly, how does pricing compare in China and Europe versus the U.S.?

We price to market, and that translates to selling the clog at a slight price premium in China. In Europe, prices are a bit lower compared to the U.S., and we’re reviewing that.

Your next question comes from Laura Champine of Loop Capital.

Thanks for taking my question. It’s really on longer term CapEx. The CapEx budget is much higher this year; does that relate to catch-up with demand, or is this elevated level of CapEx spend as a percentage of sales likely to continue in future years?

Yes. It’s elevated this year as we’re investing along with the business. I don’t think we’re prepared yet to guide long term. Our maintenance CapEx is around replenishment of depreciation, which is around $30 million. We generate over $250 million in cash from operations this year, so we feel like investing is important to support our growth.

How much of your CapEx spend this year is about moving the distribution center in EMEA and therefore likely does not repeat?

All of this year’s CapEx relates to distribution centers, either EMEA or other centers to upsize or automate. I don’t believe any is repetitive on an ongoing basis. I hesitate to guide past that to ensure we can continue investing as we see revenue growth.

Your next question comes from Steven Marotta of CL King.

Good morning, Andrew. Congrats again on a great 2020. Q4 ended with leaner than desired inventories that you mentioned. Can you talk about the year-to-date remedy and how you see your inflow of inventory finally meeting outflow from a demand standpoint?

Yes. My comment was about our wholesale partners where we had significant shipments as our wholesale business in the U.S. was up 130%. They just sold a lot as well, so they didn’t end with the stronger inventories that we anticipated or they did. We’re catching up from that perspective and have ramped up production capacity significantly and can meet our expectations effectively, placing us adequately to fulfill wholesaler and DTC environments while easing logistics challenges. I think, over time, that will smooth out.

That’s very helpful. As you provided earlier, can you clarify how you expect gross margin will behave across the year?

We don’t guide gross margin by channel because our segments are Americas, EMEA, and Asia. We intend to maintain high gross margins but expect some pressure from the wholesale mix and will leverage SG&A while continuing to spend to invest.

Your next question comes from Susan Anderson of B. Riley Securities.

Hi. Good morning. Let me add my congratulations on a very nice year. On the wholesale front, I’m curious if you feel there’s still an opportunity for shelf space gains or new doors in 2021 or even adding Jibbitz to more wholesale doors? In terms of the door growth in the fourth quarter, was that impactful or significant in terms of wholesale growth, or did that mainly come from sell-ins?

Yes. The door growth in the fourth quarter wasn’t significant. Our rollout with new customers is going well and meeting expectations, but the real driver was accelerated sell-through. Yes, we do believe we have an opportunity to gain share of shelf in our major customers, both bricks-and-mortar and online. We can keep all of our clog SKUs and add sandal SKUs. We believe we can significantly grow Jibbitz in the wholesale environment as it had a really nice year last year, and we can do much better, particularly with multi-pack offerings. I just wanted to express my thanks for everybody and their interest in the Company. We’re looking forward to a really stellar ‘21 and continue to talk to you through the year. So, thank you.

Ladies and gentlemen, this concludes today’s conference call. We thank you for your participation. You may now disconnect.