We’re working on marketing. Nicolai is working very hard on the whole marketing campaign and how we think about presenting the brands and keynotes. He’s working on collaborations and so forth. And I will keep you informed when we have more to say, but overall it’s all happening. The initial numbers are very good. We think that the product is right on. The reception from our wholesale customers has been very, very positive, and the two events that I mentioned during my prepared remarks that Nicolai led have been incredible, number one, to really make this story known, also capitalizing on the history of our company and the experience that this company did on category, which is remarkable, and having discovered a strong washing at the time. So, not only that, but just the creativity that was displayed into this two events showing how the product has been treated, what the major change in sustainability that this techniques are going bring into the industry, it was really very compelling and people are just thrown away with the level of innovation that was displayed during the two events.
So, all that is a big way to really tell the story, we got tremendous coverage. I think there were — I don’t know how many articles, but my team, newspapers, TV programs, they all featured everything that was happening in both Milan and Florence. So, I’ll stop there. With respect to your second question on the special dividend, I think that your question was more about share repurchases, and you are right, we don’t have an open pool for share repurchase. But we will continue to be opportunistic in the way we use capital, and I think that we have proven that in the last five years a lot of things have been used to really reward shareholders, and we believe strongly on that. And our Board is completely just at the forefront of this, and we think that so far we have used the capital in a very smart way, and strategic, and the great thing is that we have plenty of capacity.
So, we have very strong balance sheet. I think that Markus said just when you think about our debt, just even if you consider the convertible warrants that we just exchanged in the last few months. And you put that against our cash at the end of the year, just we’re talking about nominal net debt, we’re talking about less than $100 million of net debt. So, the balance sheet is very strong, and that’s why the Board was encouraged and excited about declaring the special dividend.
Eric Beder: Great. Congratulations for the rest of the year.
Carlos Alberini: Yes, thank you, Eric.
Operator: Thank you. One moment for our next question, please. One moment. It comes from the line of Jeff Lick with B. Riley Securities. Please proceed.
Jeff Lick: Good afternoon, gentlemen. Congrats on a stellar quarter and a great year. Maybe just, Markus, maybe in Q1, you drilled down a little bit on everyone’s questions about the operating margin, it would appear relative to last year where the operating margin was 30 bips. There’s probably a 250 to 300 bip variance year-over-year. If you could just give us anything about where that’s coming from in terms of the gross margin, it’s probably like a $25 million, $30 million swing, so any help there would be appreciated?
Markus Neubrand: Thank you for the question. The Q1 guidance, some of the key initiatives that we have talked about benefits the later part of the year. First of all, we have GUESS Jeans and outerwear, often they benefit mostly in the second-half. We are having both transactions as we talk about before flows into the latter part of Q1, and will have relatively minimal impact compared to the rest of the year. Carlos and I talked about it in the prepared remarks. If you look at the timing of the shipments in Europe, there we expect headwind of roughly $50 million on revenues on the first quarter moving from the first quarter into the second quarter and third quarter, mainly due to a delay of product deliveries, I think, due to Red Sea impact.
I think we talked about, but more importantly, also in general, due to our delivery cadence that we have and how we plan to deliver the product to our customers for us to start our fall/winter products. If we look at the first quarter as well, and you’ve seen it also, our picks will be a headwind in the first quarter, but also in the second quarter as well. If you look at the operating margin, I think that you’ve seen our guide is minus 2.3% to minus 2.8%. We have incorporated the impact of the timing of the wholesale shipments, and we have talked about the Red Sea impact on freight cost as well that will impact, especially the first and second quarter, and after we expect that impact to moderate. And on top of it, also now rag & bone will close, but in terms of all the expenses, I think that also cost will also have an impact on later part of the first quarter.
And we incorporated all of these aspects, all of these factors in our Q1 guidance.
Carlos Alberini: Sorry, Jeff, I just wanted to say I think that Markus hit all the key points. I think that in the case of rag & bone, we will pick up one month of their operation, and just that is a significant number when it comes to the increase in expenses relative to our expenses. And of course, the first quarter is a low productivity quarter for us. So, that brings an additional level of pressure on the margin and profitability of the quarter. It all tolls towards the end of the year, of course.
Jeff Lick: So, you are saying rag & bone will close here probably in the next 10 days, and it’s going to close on April 25, because that explains — [multiple speakers]
Carlos Alberini: No, no. This numbers and our expectations assume that it closes reasonably quickly.
Jeff Lick: Okay, that make more sense in terms of there’s going to an expense drag without gross margin dollar pick up in Q1?
Carlos Alberini: Yes, exactly.
Jeff Lick: Okay, thank you.
Carlos Alberini: Thank you, Jeff.
Operator: Thank you. And with that, I will close the Q&A, and turn it back to Carlos Alberini for final remarks.
Carlos Alberini: Thank you. Well, thank you all for your interest in our company. We just closed a great year with a solid performance from our teams and strong results. As we look at the new year, we are thrilled about our opportunities really. And this includes our very exciting rag & bone acquisition. I’m sure you sense our excitement, and also the multiple growths that I mentioned, that we have identified, including GUESS Jeans and some of the others. We look forward to updating you on the progress that we make with our plans, and we will do these as the year progresses. Thank you. And we will speak with you soon.
Operator: Thank you. And this concludes today’s conference call. Thank you all for participating, and you may now disconnect.
