Maidenform Brands, Inc. Q4 2008 Earnings Call Transcript

| About: Maidenform Brands, (MFB)

Maidenform Brands, Inc. (NYSE:MFB)

Q4 2008 Earnings Call

March 4, 2009 8:30 am ET


John Nelson - Vice President, Finance

Maurice S. Reznik – President and Chief Executive Officer

Christopher W. Vieth - Chief Financial Officer, Chief Operating Officer


Scott Krasik - C.L. King & Associates, Inc.

Omar Saad - Credit Suisse

Eric Beder - Brean Murray, Carret & Co.

Jody Kevin Kane - Sidoti & Company

Mimi Bartel - Telsey Advisory Group


Welcome to the Maidenform Brands’ fourth quarter and full year 2008 earnings conference call and webcast. (Operator Instructions) I would now like to turn the call over to John Nelson, Vice President of Finance.

John Nelson

Good morning. Welcome and thank you for joining us today on this conference call to review the fourth quarter and full year 2008 financial results for Maidenform Brands. I am John Nelson, Vice President of Finance. Joining me on the call is Maurice Reznik, Chief Executive Officer of Maidenform Brands, and Chris Vieth, Executive Vice President, Chief Operating Officer, and Chief Financial Officer. Maurice will provide an update on overall business conditions and business drivers as well as highlight some of our strategic focus areas going forward. Chris will then review our financial performance in the quarter and full year, as well as our expectations for 2009 prior to taking your questions.

As always, elements of this presentation may include forward-looking statements. These statements are based on our best view of the business as we see it today but by their nature are uncertain. The company’s actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the company’s future results please see the description of risk factors in our annual and quarterly reports file with the SEC. I would also refer you to the forward-looking statement disclaimers and Safe Harbor Statement set out in the press release that was issued earlier this morning and is available on our website and in our filings with the SEC.

Now let me introduce Maurice Reznik.

Maurice S. Reznik

Good morning everyone. It is no surprise that the economic environment continues to be challenging and tumultuous since our last call: increased inventory pressures, consolidations of retail, great margin expectation, a handful of vulnerable retailers, and low consumer confidence. As a result, we closed the fourth quarter short of our initial expectations in 2008.

However, despite this backdrop, our sales and the intimate apparel category in total were significantly more resilient than other women’s apparel categories. In fact, based on MPD consumer panel data, industry-wide sales of women’s bras, panties, and shapers in aggregate were +2.8% in the fourth quarter of 2008.

Our position in this environment was to be more aggressive while driving innovation and retail partner support. We responded to the needs of our customers and simultaneously aligned ourselves with the needs of the consumer by supporting our retail partners with promotional and marketing assistance that provided a return on our investment as they got behind big ideas like Maidenform’s Custom Lift and Total Solution collections, as well as our shapewear brand, Control It!.

As a result we were able to pick up overall market share with only a modest topline sales decline quarter-to-quarter and year-on-year.

There were many highlights in our performance as we executed against our strategic initiatives. These accomplishments will help us capitalize on significant opportunities ahead.

Let me recap our achievements in 2008. We further diversified our channel of distribution by increasing mass merchant channel sales by 13%, continues to leverage our strength in Shaper with double-digit sales increases, built our cash reserves and strengthened our balance sheet, increased our brands at wholesale market share, grew sales in our direct-to-consumer segment, invested in the launch of new brands and supported existing ones, secured the intimate apparel license for Donna Karan and DKNY and positioned ourselves to launch these brands in the first quarter of 2009, developed revolutionary new products like Custom Lift and our upcoming major launch of Total Solution™, and strengthened our management team with strategic new hires. I will expand on a number of these as I review our results with you today.

Turning to the quarter, as the retail environment deteriorated our customers, most significantly in the department store segment, focused on reducing inventory levels resulting in unusually low replenishment volume, particularly in the month of November.

Additionally, we made a conscious decision to support our retail partners with promotional and marketing assistance as they became more aggressive in their pricing and inventory strategies.

Somewhat offsetting this pressure in the quarter was our successful launch of a multi-channel bra program, called Custom Lift. This collection, which provides women varying degrees of lift based on their cup size, drove significant replenishment orders at the end of 2008 and will be a major contributor to our 2009 volume. Already in the month of December Custom Lift was one of the top bras in department and chain stores.

Our diversification strategy in the mass market continued to gain ground in 2008 with sustained expansion and penetration of our Sweet Nothings brand in the bra and shapewear category, along with the launch of our Inspirations brand at approximately 1,400 doors, and the addition of a new program with the warehouse customer. These successes provided us with a stronger base for growth and positions us well as consumers increasingly look for value in the current economic climate.

Our success in shapewear, one of our core competencies, continues in 2008 across all channels of distribution, both internationally and domestically. Our innovations in product and marketing were reflected in our expanding market share and our company results, with shapewear sales us 28% for the year in 2008. The category in our brands in particular command higher prices, even in today’s economic state.

We also launched an all-new collection called Luleh in 2008. Luleh is a bridge line between luxury and moderate that provides chic essentials in bras, panties, and shapewear. The Luleh brand is just one example of our ability to develop and implement strategic partnerships with leading retailers.

2008 was a formative year for the management team at Maidenform as we welcomed Chris Vieth to the company as our Chief Operating Officer and Chief Financial Officer in May, implemented our CEO succession plan with my appointment as CEO in July, brought on Patrick Burns as our EVP of Sales of Marketing in October, and most recently appointed Karen Rose as our new Chairperson in January of 2009.

Looking a little closer at our financial results, total net sales declined 1.1% to $95.0 million in the fourth quarter and full year net sales of $414.0 million were down 2.1% from 2007. In department stores and national chains, sales decreased 7.9% to $47.0 million in the quarter and sales were down 6.4% to $210.0 million for the year. The decreases were primarily a result of the overall weakening demand from consumers, greater emphasis by our customers to manage inventory levels, and increased margin pressures associated with challenging market conditions.

Despite these circumstances, which affected certain product replenishment orders from customers in this channel, we experienced solid performance in Flexees brand, driven by our new ready-to-wear inspired collection. Additionally in this channel, we benefited from the ongoing replenishment of our Maidenform bra collection I previously mentioned, called Custom Lift, and the Luleh brand, which were not in our prior-year results.

In the mass channel, sales decreased 2.8% to $21.0 million for the quarter but increased 12.6% to $108.0 million for the year, as our brands continue to gain significant share in this channel. Our growth was driven by an expanded assortment of our Sweet Nothings brand and shapewear and new branded shapewear program with an existing warehouse customer and the ongoing replenishment from our newly created Inspirations brand.

The other channel was up 32.3% in the fourth quarter on sales to a specialty retailer where we began to shape our patent-pending cup technology, which I will expand on in a moment. For the year, other channel sales declined 19.3%, largely due to reduced sales to off-price retailers and a non-recurring private brand program with a specialty retailer that occurred in Q1 of 2007.

International sales, which are also included in the total wholesale segment, decreased $1.9 million, or 17.3%, to $9.0 million in the fourth quarter of 2008 with net sales decreases in a number of major markets attributed to the global economic decline. For the year we posted modest positive results in our international business with sales up 2.3% to $39.0 million led by shapewear. Additionally, we have made important strides in Benelux, Sweden, Germany, and in Asia that were offset by weakening market conditions in the U.K. and in Mexico.

Retail sales increased 3.5% in the quarter and 4.5% for the full year, driven in part by our direct-to-consumer sales via our Internet business, which is a key strategic focus going forward.

Same store sales for the year increased 1.3%. Excluding the 53rd week in 2008, same store sales would have been down 1.4% at our 78 outlet stores.

As we look ahead to 2009 we are cautious about the environment but comparatively optimistic about our prospects. Chris will provide the details of our outlook for the first quarter on broad guidelines for 2009, but before I turn the call over to him I want to highlight some of the key elements for our long-term strategic plan that I mentioned during our last call together.

As a reminder, we have been evaluating domestic and international investment opportunities that will focus mostly on organic growth. These investments will enhance our brand and further drive sales within our core competencies.

Our key initiatives include: one, driving innovation across all products and channels, including further driving Maidenform bras. In the bra category I will shortly be sharing with you one of these major product innovations that is patent-pending and positioned as the instant bust makeover; two, further diversification across channels and markets, especially in the mass channel and key international markets; three, continued growth in shapewear through product leadership and category awareness-building initiatives; and four, investing in our future through compelling brands such as our Donna Karan and DKNY license in intimate apparel. Worth noting here is that the majority of this license volume is focused on DKNY with bridge price points.

Chris will also be elaborating in a moment on investments and new internal systems to better manage our productivity and inventories, sensible human capital investments, and investments that will seek to optimize our direct-to-consumer sales opportunities via strategic improvements to our website.

On the innovation front, we have invented a revolutionary cup technology that is currently patent pending. This innovation, called Smart Zone Cup Technology, will be launched in our Maidenform brand in the first half of 2009 under the Total Solution collection.

Additionally, we will launch this proprietary technology with a major specialty retailer in the first quarter. This launch will be supported with extensive PR investments, dynamic in-store support, and media. The Total Solution bra lifts, contours, and rejuvenates a woman’s shape. This collection has been well received by key retailers. Additionally, we are evaluating a few global partnerships that will bring Smart Zone Cup Technology to new markets of distribution.

Channel diversification and leveraging worldwide shapewear strength converge in our domestic and international strategies. As a category leader we offer shapewear across multiple brands and channels of distribution, from the mass merchants to the better department stores. We have identified significant growth opportunities in shapewear through current destinations and by aggressively pursuing and inventing new ones.

We will also focus on generating trial and building category awareness as most consumers have yet to discover the magic of shapewear. For competitive reasons I cannot share too many specifics with you today but as we move through the year and these initiatives unwind, we look forward to updating you on these efforts with further details.

Finally, I want to express management’s confidence in the company’s ability to effectively innovate, compete, and win, even in this climate. We believe we are well positioned with our strong balance sheet, stable of diverse brands, history of product innovation, and unique core competencies.

Additionally, we intend to continue to employ strong disciplines around margin and inventory management, SG&A expense, and cash utilization.

Thank you for your interest in Maidenform. I would like to turn over the call to Chris Vieth, our COO and Chief Financial Officer.

Christopher W. Vieth

Turning to our results in the fourth quarter, our top-line performance reflected the awful retail climate we are operating in, particularly in our department stores and chains business. Nonetheless, we ended with net sales down modestly, 1% in the fourth quarter and 2% on the year.

And for the year, despite the pressures on sales and margins, we generated strong cash flow, strengthened our balance sheet, tightly controlled our inventories and spending, and posted solid gains in a number of our core businesses, as Maurice just outlined.

We are also carefully controlling everything we can, including cutting costs, so that we can fund investments and product development staff and technology, and offset business pressures and regional bankruptcies while we focus on actions to deliver profitable growth and maintain a strong balance sheet.

Cost control and continuous operational improvement are constants we have employed at Maidenform and the latest proofs of that include the workforce reduction in the fourth quarter in our capital allocation and in our expense management actions in 2008 and 2009, which I will expand on in a moment.

Turning to our financial results, reported EPS in the fourth quarter were $0.10 per share, down from last year’s $0.27 and just above our revised guidance. Excluding the special items listed in Exhibit 2 on the last page of our press release, adjusted EPS in the quarter were $0.16 compared with $0.26 last year. Year-to-date reported EPS totaled $1.05 per share compared to $1.43 per share in 2007. Excluding the special items listed in Exhibit 2 from our press release, EPS were $1.16 per share compared to $1.33 per share earned in 2007.

Our consolidated gross margins declined 600 basis points to 34.7% in the fourth quarter, primarily as a result of increased promotional activity as we worked with our retail customers to address inventories in the face of challenging market conditions, combined with the impact of customer and product mix, including a roughly 8% sales decrease in the higher-margin department stores and chains channel.

Full year gross margins were down 160 basis points to 37.7%, primarily reflecting changes in our channel and in our product mix as well as increased promotional activity and markdowns.

We expect our margins to continue to be under pressure in the first half of 2009 for all of the same reasons I just cited, however, we expect those pressures to begin to ease in the latter half of the year as customer inventory issues have been dealt with and as we begin to reap the benefits of our latest product cost actions with suppliers and vendors.

Turning to SG&A, our expenses totaled $28.0 million in the fourth quarter and $110.0 million for the year. During 2008 SG&A included spending of $2.5 million to develop and launch Donna Karan and $1.8 million for fourth quarter severance and one-time CEO retirement costs. Excluding these items in 2008 and the pension curtailment gain in 2007, our SG&A was down 3% in the fourth quarter and only up 1% on the year.

During 2008 we used the savings we generated from our company-wide cost actions to fund investments in product development staff and invest in selling and advertising to drive our business, while also covering unavoidable costs like the expenses associated with the regional store bankruptcies we experienced during the second half.

Adding all of that up, operating income in the fourth quarter of 2008 was $4.6 million, or 4.9% of sales, for the fourth quarter and $45.9 million, or 11.1% of sales, for the year.

The company’s effective income tax rate for the fourth quarter of 2008 was 29.5%, reflecting the benefit of non-recurring state tax benefits and our rate was 40.3% for the year. As I mentioned last quarter, we plan to utilize about $10.0 million of net operating loss carry-forwards on our 2008 tax return and as a result of these NOLs our cash tax payable rate was about 34% for 2008.

During the quarter we continued to strengthen our cash position while conservatively managing our balance sheet. Our net debt at the end of the fourth quarter was $45.0 million versus $73.0 million last year and the company ended 2008 with $43.0 million of cash compared with $17.0 million at the end of 2007.

We also continued to focus on managing the productivity of our overall inventory levels as well as our product cost initiatives to stabilize our gross margins. Our inventory position at the end of the quarter was down 6% from 2007 to $65.0 million despite stocking up to service a number of new brands, like Luleh, Inspirations, and Donna Karan.

Our capital expenditures totaled $1.8 million in the quarter and $3.2 million in 2008 versus $6.4 million in 2007. During the year we allocated capital to strategic technology projects and to improve infrastructure at our North Carolina and Ireland DCs and to construct five new retail outlet stores and build our Donna Karan showroom.

Our outlet store count remained unchanged at 78 in 2008 as we offset the five openings with five closings. In 2009 we plan to open two new stores and close six, ending the year with 74 stores.

Touching on a topic we have discussed with you in the past, during the fourth quarter we signed a contract with SAP to replace our product demand planning and inventory forecasting systems in 2009. This is the first phase of our technology replacement and business process improvement initiative that will yield significant financial and operational benefits for our company in the future and we’re really excited to be launching this project here in the beginning of 2009.

The majority of the investment spending for this phase of the project has already been made in 2008 and we will update you at the end of the year about our plans for any future phases and investments in 2010 and beyond.

Looking out to the first quarter and balance of the year, we are naturally cautious about the environment but confident in our business-driving initiatives as well as our ability to control our costs and smartly invest our cash to weather this storm and position the company for accelerated future success when we emerge from it.

We expect the overall economic and the retail marketplace to continue to be challenging for our customers and our retail partners in 2009. Despite limited forward visibility and recent regional customer bankruptcies that will cost us $6.0 million to $10.0 million in sales in 2009, we remain focused on offsetting most of these top-line pressures with net sales increases from our core shapewear products, continued mass expansion, launch of our Donna Karan and DKNY lines, and the worldwide launch of Total Solution, as Maurice mentioned earlier.

Based on these assumptions, we anticipate net sales for the first quarter to increase in the upper-single digits percentage range, including sales to a specialty retailer. Gross margins are anticipated to be around 34%, reflecting lower margin sales to a specialty retailer, increased promotional activity, an impact of channel mix with reduced retail store sales, and increased sales in the mass-merchant channel.

SG&A expense is expected to increase in the low- to mid-single digits over 2008 and SG&A is expected to be about flat, excluding expenses for our Donna Karan investments that didn’t exist in the first quarter of 2008.

EPS is expected to be in the range of $0.17 to $0.21 per share in the first quarter.

For the full year we are assuming that the environment doesn’t get any better, nor materially worse than it is right now. Sales are expected to increase in the first quarter, as I just mentioned, and to be flat to down in the low-single digit percent range in successive quarters with full year sales around flat with 2008.

Gross margins are planned at around 37% for the year with margins below 2008 in the first half from increased promotional activity and sales to lower-margin customers and margin rates about 2008 in the second half of the year as we leverage our latest product cost initiatives and from improving customer mix.

We will continue to control spending and costs will increase only modestly. During the year, expense reduction actions are expected to nearly offset increased costs for a full year of spending for our Donna Karan and DKNY businesses, targeted investments and product development, and for replenishment of incentive plan provisions.

Finally, EPS for the full year 2009 is expected to be in a range of $0.90 to $1.00. Capital expenditures will total $4.0 million to $5.0 million and include spending to completely re-platform and modernize our e-commerce website at, including state-of-the-art content, search optimization, and selling and commerce tools to continue the rapid growth of this arm of our consumer business.

During the year we will also make infrastructure investments in technology and in our distribution centers to improve process and efficiency and we plant to construct two new retail outlet stores.

Before we open up to take your questions, I want to reiterate that while we are planning our business cautiously for 2009, we continue to demonstrate our core strengths that will drive long-term shareholder value. Those strengths are: identifying and capitalizing on sales growth opportunities, continuously seeking methods to expand our gross margins, complying strict inventory and expense management, and generating strong cash flow that provides us with the financial flexibility that will help fuel our future growth objectives.

Some proofs of those disciplines and or our financial strength include that we are tightly controlling costs and our comparable SG&A expenses will be up only modestly over 2008. We generate substantial operating cash flow and EBITDA that we use to fund operations and we have applied our excess cash flow to increase our cash reserves to $43.0 million here at the end of the fourth quarter.

We maintain conservative leverage and have ample liquidity. Our net debt to EBITDA ratio is less than 1x and we have access to additional liquidity in our undrawn $50.0 million revolving line of credit.

We allocate capital resources only to those projects and investments that carry an appropriate return and our capital expenditures will total less than $5.0 million in 2009. We are carefully managing our inventory investments and our year-end balances will be flat or below 2008, despite the introduction of several new brands and programs, including the addition of Donna Karan and DKNY.

And most importantly, we continue to innovate with market-leading products to drive the top line here in 2009 and beyond. And with that, I will now turn the call over to open up the phone lines and take your questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Scott Krasik - C.L. King & Associates, Inc.

Scott Krasik - C.L. King & Associates, Inc.

I might be looking at this the wrong way, you say that MPD data is up for the quarter 2.8% in your categories yet your sales were down. Does that mean you are losing share or is that not apples-to-apples? How should I think about that?

Maurice S. Reznik

There is a lot of inventory pressure so basically we’re just turning faster.

Scott Krasik - C.L. King & Associates, Inc.

Okay, so destocking by retailers.

Maurice S. Reznik

Yes, so our stock to sales ratio basically our sales grew at a faster rate from a stock-to-sales perspective.

Scott Krasik - C.L. King & Associates, Inc.

Can you give us some sort of order of magnitude in terms what the stock to sales is at this point versus a year ago?

Maurice S. Reznik

I would have to give you a very broad range but I would just say that in general every retailer that we do business with, or expediting their, they basically have faster turnover requirements than they did in the past.

Scott Krasik - C.L. King & Associates, Inc.

Do you feel like you’re at the point now where the de-stocking is over, that these guys are working off the appropriate inventory, both in department stores and mass, or could we see some further reduction there?

Maurice S. Reznik

The only caveat is, obviously, inventories can always go lower but we did see signs in December, particularly where replenish orders were actually very strong. So we feel that our stock to sales is at a level now that retailers are buying back their sales, so we feel good. And it’s always about product relevance and those two components, and we feel pretty good about it.

Scott Krasik - C.L. King & Associates, Inc.

And I’m sure some of the cost benefit that you could get in 2009 are being masked by intense promotions, but maybe talk on the cost side, are you going to actually see some benefit there going forward versus what your original expectations were for 2009 and beyond?

Christopher W. Vieth

On the product costs?

Scott Krasik - C.L. King & Associates, Inc.


Christopher W. Vieth

As we have talked before, we have always had a pretty deep focus on cost savings initiatives at the company. We have taken that a step further and formalized the process. Actually we have dedicated resources in Hong Kong and here in the States and we have got people on the ground right now in Hong Kong, for the next three weeks, working with all our suppliers and vendors to partner to look at every single component that makes up our products and drive further cost savings initiatives.

We have generated, I don’t know, 75 ideas internally, probably 40 of those that we are pursuing, not just on product but also across operating expenses. We won’t get the benefit of that because it flows through our inventory, until the second half of the year but we will be able to further drive additional margin upside that will help offset some of this pressure that we’re seeing now, which is kind of what underlies our guidance here in the second half for things improving.

Scott Krasik - C.L. King & Associates, Inc.

And then in terms of going forward, hopefully once the promotional environment subsides, could we see at least a return to the high-30, not 39%, margins you saw in 2007 and maybe even better?

Christopher W. Vieth

Yes, we could see a return, I think, closer back to the margins that we had within each of the channels. Mix, of course, is going to play a major impact on that, depending on how things continue to grow. For us right now, the mass channel has been doing very well. That’s lower margin. And department stores and chains has been not doing as well, and that’s at a higher margin. But over time, excluding mix, yes, we could see a return back to those higher margins.


Your next question comes from Omar Saad - Credit Suisse.

Omar Saad - Credit Suisse

A question on the mix shift. It’s pretty interesting to see what’s going on in the shapewear business versus the bra and the panty business. What do you think is happening there? Is it the retailer or is it the consumer who’s changing their buying pattern?

Maurice S. Reznik

The first comment I will make is extremely self-serving, but we are really good at this and we are driving the shapewear business. So that’s part of it. If you look at our mix, as a percent of total, shapewear obviously is about 30% of our business.

The consumer is discovering the category. We did a very extensive consumer insight study and just to give you a couple of quick highlights, out of every 10 women that wear bras, only 2 are wearing shapewear. And we feel that the category is ripe as consumers discover, as I said in my script, the sort of the magic of what shapewear can do. There’s a whole new audience out there.

So I think that’s part of it. But it’s also a function of how good we are at the category of shapewear.

Omar Saad - Credit Suisse

I know it’s an attractive category, it comes with a nice margin. Where do you think your market share is in this category? That 2 out of 10 comment you just made, where do you think that can go? How big can it be? There’s some sort of change in trend here.

Maurice S. Reznik

And it’s not just the traditional consumer, either, that would normally be associated with a “girdle”. A lot of younger consumers, where shapewear has become more aspirational. We can clearly, if we can get 3 out of 10 women to wear shapewear, that’s a 50% increase in the category. So tangibly, where it could go, we are working a lot of initiatives and even new channels of distribution that we will unveil in the future, but it’s a great, great category. And like I said, we really have, it’s really a competency of ours.

Omar Saad - Credit Suisse

Do you have a sense for where your market share is? It must be much higher than what it is in the bras and panties business, which are much more fragmented.

Maurice S. Reznik

Depending on the retailer, without exception, with every major retailer that we do business with today, we are the leading supplier of shapewear.

Omar Saad - Credit Suisse

Do you think the growth of the category, is it dependent on marketing, raising awareness? Is it word of mouth? How is this spreading?

Maurice S. Reznik

I think it’s pretty accurate, everything you just said. Really, PR is critical, word of mouth, all of that is really critical. And trial is because you have a good experience and just discovering the category and what it could do.

Omar Saad - Credit Suisse

On the bra side, how much of that decline is retailer-driven versus consumer-driven, sell-through driven?

Maurice S. Reznik

Back to what Scott asked before, part of it is just pressure on the inventories being driven down by the retailers. The category in bras is relatively stable so I think even though clearly when there is less consumer shopping, there is less traffic in the stores, I think it’s really a combination of both, but at this point I think it’s more retailer-driven than consumer-driven.


Your next question comes from Eric Beder - Brean Murray, Carret & Co.

Eric Beder - Brean Murray, Carret & Co.

Could you give a little more color on the Donna Karan roll out and what are you seeing and kind of how has that been affected by the craziness we’re seeing right now in the high-end market?

Maurice S. Reznik

Initially we had said that Donna Karan would contribute about 5% of our gross and we’re scaling that back maybe 3% to 3.5%. The thing to note about Donna Karan, two things. One is that most of that volume is really in the DKNY business, which is distributed amongst better department stores, not the better best. So retailers like Macy’s, Nordstrom’s. And the price points are still “obtainable luxury” so we feel very good about it. We are getting great bookings, matching our expectations to the first quarter.

Clearly we are being cautious because, as you said, this segment has been getting hammered more so. But again, most of our business, though, is not the high-end price points, in the license.

Eric Beder - Brean Murray, Carret & Co.

This new instant bust makeover bra, you mentioned you are going to roll out exclusively with a specialty store. How long is that exclusive and when do you start to pass that technology or that particular product outside the specialty store to department stores and mass and other pieces?

Maurice S. Reznik

If I said exclusively, I misspoke. I mean the specialty retailer is the first to launch it. Clearly the specialty retailer has such scale that in a sense it’s almost immaterial if we roll it out with anybody else in the U.S. but the category, as far as the technology, that we’re rolling it out in Maidenform, and basically within the first half of the year. So we are really excited about this.

Eric Beder - Brean Murray, Carret & Co.

So we assume that’s going to roll out in department stores first? And then go down to mass?

Maurice S. Reznik

We will keep you abreast, no pun intended, of what’s going on as it develops. The department stores will definitely be distributed.


Your next question comes from Jody Kevin Kane - Sidoti & Company.

Jody Kevin Kane - Sidoti & Company

Could you talk a bit about the sell-through rates or the demand that you are seeing from your more specialty products business, your more regular products?

Maurice S. Reznik

Specialty products? What’s the distinction?

Jody Kevin Kane - Sidoti & Company

Things that a person who needs special needs as opposed to just your regular run-of-the-mill products.

Maurice S. Reznik

Two points of view on that. Almost everything we do is positioned as every day. So I mean, there are some nuances within that, some things are like strapless, etc., but really the majority of our volume is positioned as every day.

So what we have seen, by the way, in some of our core products, is that the business in our core frames is actually pretty stable right now.

Jody Kevin Kane - Sidoti & Company

Would you say more sell-through of the full-figure versus the regular figure?

Maurice S. Reznik

I think it’s pretty constant, frankly. If it’s a good product, really it’s about every day product, whether it’s full-figure, average figure, or shapewear. So it’s pretty consistent. The mass we have seen faster sell-throughs in general.

Jody Kevin Kane - Sidoti & Company

Can you update us on the backless bra that you introduced a couple of quarters ago?

Maurice S. Reznik

It was a small item. The brand definitely got a lot of benefit from it, as we received a lot of PR, but it’s just Maidenform always thinking and executing against new ideas. It’s been a relatively significant factor for our online business, which, gain, is relatively a small business.

Jody Kevin Kane - Sidoti & Company

Are you expecting to increase your number of doors through which you sell through overseas in 2009 or is it going to stay flat or down?

Maurice S. Reznik

It’s an interesting question. We see, in the Donna Karen and DKNY business for sure, an expansion versus what was there before. Again, that’s what we’re so excited about strategically, about this license, that it really gives us the ability to penetrate markets and retailers that we haven’t sold before.

We see the shapewear category potentially increasing in penetration. But clearly we’re cautious about international in general. But strategically it is a very, very important initiative for us.


Your next question comes from Mimi Bartel - Telsey Advisory Group.

Mimi Bartel - Telsey Advisory Group

Just a quick follow-up on the shapewear. It is obviously phenomenal growth there. Is that more driven by units or pricing or maybe you could just speak to the magnitude of that.

Maurice S. Reznik

Pricing is relatively stable. You get issues in pricing as far as mix is concerned. For example, big piece shapewear has higher retails on cost than small ones. But in general, that’s relatively stable.

Interesting, by the way, to note that again, that in MPD the out-the-door price in general is stable, in this category also. It’s less promotional than other categories.

So pricing is a little bit of a factor. We talked about it the last call, but it’s a very small factor. We have modest price increases, as we talked in the last call, in shapewear. Very surgical, frankly, where we felt that the price/value relationship was right.

But it’s really not so much about pricing as it is about just product.

Mimi Bartel - Telsey Advisory Group

Just following up on the cost of the Donna Karan and DKNY, you said SG&A is expected to be flat, excluding that. Can you quantify the costs of that, just for the quarter or for the year?

Mimi Bartel - Telsey Advisory Group

The expenses on Donna Karan will be in the kind of $4.0 million to $5.0 million range on the year.

Mimi Bartel - Telsey Advisory Group

And is that then included in that $0.17 to $0.21, in terms of the first quarter?

Christopher W. Vieth

Absolutely. Those are GAAP numbers.


There are no further questions in the queue.

Maurice S. Reznik

Thanks a lot. We really appreciate your interest in the company and look forward to seeing you all in person.


This concludes today’s conference call.

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