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Executives

John Nelson - Vice President and Chief Accounting Officer

Maurice Reznik - Chief Executive Officer

Chris Vieth - Executive Vice President, Chief Operating Officer, and Chief Financial Officer

Analysts

Scott Krasik - C.L. King 

Gary Giblen - Goldsmith & Harris

Spencer Hill – Credit Suisse

Eric Beder – Brean Murray

Mimi Bartel - Telsey Advisory Group

Maidenform Brands, Inc. (MFB) F1Q09 Earnings Call May 13, 2009 8:30 AM ET

Operator

(Operator Instructions) Welcome to the Maidenform Brands First Quarter 2009 Earnings Conference Call and Webcast. I’d now like to turn the call over to John Nelson, Vice President and Chief Accounting Officer.

John Nelson

Welcome and thank you for joining us today on this conference call to review the first 2009 financial results for Maidenform Brands. 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 the 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 as well as our expectations for the remainder of the year, 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. We assume no obligation to update the forward looking statements contained in this presentation as the result of new information or future events or developments. 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 the annual and quarterly reports filed with the SEC. I would also refer you to forward looking statement disclaimers and safe harbor statements set out in the press release that was issued earlier this morning and is available on our website and in filings with the SEC.

Now let me introduce Maurice Reznik.

Maurice Reznik

This morning we will cover our first quarter performance and provide you greater visibility into our expectations for the remainder of the year. In the first quarter we grew total sales by more than 16% over 2008 with a 19% increase in our wholesale segment and steady gains in our core business which along with tight cost controls led to EPS of $0.26 per share for the first quarter and above our original expectations.

In light of our stronger then anticipated performance in the quarter and trends we see in our business for the balance of the year, we are raising our full year EPS guidance to a range of $1.00 to $1.10 and our top line sales which are now expected to increase by mid single digits.

Against a backdrop where intimate apparel performed better then other women’s apparel categories our strategic initiatives that we laid out during our last call began to take shape. In aggregate, our brands and products outperformed the intimate apparel market picking up overall share across channels and categories.

Our ongoing strategy across all of our businesses is to offer innovative, high performance products at a compelling price value relationship. The consumer is telling us that it is more about value then price. Now more than ever this formula is resonating with our customers and driving market share gains.

As outlined during our last call we’re driving our business forward with laser focus on four key strategic goals:

Driving innovation across all products and channels.

Further diversification across channels and markets.

Continued growth and shapewear.

Investing in our future.

On the innovation front we continue to build on our leadership position with compelling products and bras and shapewear.

Let me take a moment to touch on a few highlights. Our newest product introduction in bras is Total Solution with smart zone cup technology. These patent pending bras lift, shape and virtually rejuvenate the bust line for instant bust make over, offering fuller coverage in the cups this new collection extends our reach as we target a growing number of women looking for additional coverage.

We successfully launched this technology in the first quarter with the specialty retailer. Our Maidenform and Lilyette brands will be launching Total Solutions sequentially in the second and third quarters. Additionally, we’ll be launching this program in select international markets over the coming months.

Another recent product innovation is custom lift which provides personalized fit by bra cup size. Since being introduced in the fourth quarter of last year, this collection has become an industry best seller in department and chain stores under our Maidenform brand and in the mass channel under the Sweet Nothings and Self Expression brands. In fact, the core of the MPD group and department and national chains are custom lift satin bra was the number one new style introduced in the first quarter of 2009. We are continuing to develop in this collection giving it strength in the marketplace across all channels.

We will also be launching a new comprehensive collection that spans bras, panties and shapewear called Decadence. Bras will ship in the third quarter of 2009 with shapewear and panties shipping in 2010. This department and chain store collection offers women Decadence that they can afford at every touch point with unprecedented comfort due to the technology and innovation we build into our products. With designer styling at value prices we believe this collection will have broad appeal and attract new customers to our brands as they look for compelling price value offerings in this economy.

In Shapewear we shipped a new program called Fat-Free Dressing in our Flexees brand in the first quarter of this year. This innovative and highly successful collection is made up of meant to be seen shapewear products that provide women all around shaping and hidden tummy control in everyday silhouettes like camisoles and t-shirts. Fat-Free Dressing has already become a shapewear best seller at many of our retailers. We are aggressively working on increasing our supply for these styles and expanding the category by adding new silhouettes to this collection.

Turning next to channel and market diversification. Maidenform is committed to offering our customers great products no matter where they shop. We are constantly evaluating opportunities across all channels of distribution. In the mass channel we have significantly increased market share by first increasing the footprint of our core styles and adding new bras and shapewears in our Sweet Nothings brand.

Second, adding new self expression program called I-Fit a personalized lift bra collection. Third, driving new sales through a new program with the warehouse customer and fourth growing bras and shapewear sales in our Inspirations brand which we launched in Q2 last year with a mass merchant in 1,400 doors.

In department stores we launched Donna Karan and DKNY licensed collections in the first quarter of 2009 with our domestic customers and select international retailers. The initial read on retail sales appear to be encouraging with the overall business expected to perform in line with the expectations we set on our previous call.

Although we launched these luxury brands in a challenging economic environment this was and remains the right long term strategy for Maidenform and we’re very excited to drive growth in 2009 and forward with these brands. International results were mixed with gains in Mexico, UK and Benalux countries offset by declines in Russia and from the impact of foreign exchange.

Despite current global conditions we remain committed to growing our international presence over the long term and to this end we hired Patricia Royak as Senior VP and Managing Director of International. In this newly created position she will oversee all aspects of our international business. We look forward to updating you on our international progress in the near future.

In Shapewear we have extended on our market leadership across channels with double digit market share growth. Our global Shapewear business grew 21% in the first quarter on top of growth of 53% in the first quarter of 2008, demonstrating a worldwide leadership in the category. Contributing to our performance in the quarter was our expansion of assortments in the mass channel, strong consumer response to new products in department and chain store channel like the previously mentioned Fat-Free Dressing collection, and secondary placement of Shapewear in women’s ready to wear areas in department and chain stores.

We aggressively view Shapewear a significant component of or future growth and are exploring new channels of distribution, alternative merchandising opportunities that trigger the need for shapewear and opportunities to educate consumers in the use of Shapewear.

Lastly, we have made investments for the future as we are focused on intensifying our leadership team, capital allocation, continued prudent cost management and maintaining a strong balance sheet. During 2009 we’re allocating capital to improve our internal systems to better manage our products and inventories as well as our website in order to optimize sales and strengthen our brand.

Additionally, we’re investing in our team with key new hires like Pat Royak in international as I mentioned earlier and Nanci Prado our new General Council.

In summary, while we are pleased with our first quarter performance the marketplace remains challenging and we are not resting. We remain focused on controlling every aspect of our business while simultaneously expanding our challenge of distribution, growing our Shapewear international businesses and develop innovative new products to bring to market in order to drive our company forward.

Thank you for your time this morning and you continued interest in Maidenform. I will now turn the call over to Chris Vieth our COO, Chief Financial Officer, who will provide you deeper insights into our financials and guidance.

Chris Vieth

We’re weathering the storm and off to a solid start to the year with good top and bottom line performance and tight expense and inventory control. As Maurice just outlined, our high quality value oriented products are performing very well in this marketplace and that in turn is driving our increase in guidance for the year.

Turning to our results in the first quarter, reported EPS were $0.26 per share flat with last year’s $0.26 and above our guidance on higher sales and reduced spending which more than offset lower gross margins. Net sales increased 16% over 2008 in the first quarter led by increased penetration of our products in the mass channel, 21% growth in Shapewear, the launch of DK and sales to a specialty retailer. These specialty retailer sales are included in the other wholesale category in our press release.

Sales in the department stores and chains channel declined 9% as DK sales were more than offset by planned investments we made with our customers to increase inventory productivity and loss of sales from bankrupt retailers like Mervyn’s that were solvent in the first quarter of 2008. Sales in the mass channel increased 30% as our diversification strategy into the mass market continued to rapidly gain ground with sustained expansion and penetration of our brands as Maurice just outlined.

Other sales more than doubled during the first quarter on sales to a specialty retailer of products using our Total Solution cup technology and higher sales to off price retailers. Replenishment sales of these Total Solution products over the second quarter are expected to be several million dollars more. Retail sales declined 5% overall as an 8% increase in our internet business was more than offset by a 7% decline in our outlet stores. Outlet store comps decline 8.4% in the quarter versus an increase of 9.4% last year.

Our consolidated gross margins were 32% in the first quarter 2009 versus 38.7% last year. The primary drivers of the change were our deliberate investments with retailers to address inventories and product mix with significant sales increases in the mass and other channels that occur at margin rates below those in our department stores and chains channel.

We expect our margin rates to continue to be under pressure in the second quarter of 2009 for all of the same reasons I just sighted. However, we expect those pressures to begin to ease in the later 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 $26 million in the first quarter and were 2% below last year as we used our cost reduction actions to more than offset increased costs for our DK businesses and select investments in sales and product development staff. Adding all of that up, operating income in the first quarter of 2009 was $10.6 million or 9.3% of sales for the first quarter versus $11.6 million or 11.8% of sales in the first quarter 2008.

The company’s effective income tax rate for the first quarter of 2009 was 39.4% versus 41.8% last year and is expected to be around 41% for the year. We’ll utilize approximately $5 million of net operating loss carry forwards on our 2009 tax return and as a result of these NOLs our cash tax payable rate will be around 37%.

As it has been historically, the first quarter is seasonally a cash use quarter from working capital for us as we come off our lowest sales quarter of the year and therefore have lower cash collections. This trend reverses in subsequent quarters. As a result, our cash balance at the end of the quarter declined $17 million from year end 2008 to $26 million. Our net debt at the end of the first quarter was $62 million versus $79 million last year and this debt matures in 2014.

We also continued to focus on managing the productivity of our overall inventory levels as well as our product cost initiatives to stabilize gross margins. Our inventory position at the end of the quarter was up about 7% from 2008 to $69 million as we expected and included stocking up to service a number of new brands and products like Lula, Inspiration, Donna Karan and Total Solution.

Our capital expenditures totaled $400,000 in the quarter versus about $300,000 in 2008. Looking out to the second quarter and balance of the year, we remain cautious about the environment but confident in our new products like Total Solution that we launched in department and chain stores this quarter, and in our other business driving initiatives and ability to control costs and smartly invest our cash. We expect the overall economy and the retail marketplace to continue to be mixed for our customers and retail partners in 2009.

Despite somewhat clouded forward visibility in the 2008 regional customer bankruptcies that will cost us about $10 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.

Based on these assumptions we anticipate net sales for the second quarter to be flat to up in the low single digits over 2008. Gross margin rates are anticipated to be in the mid 30% range reflecting an increase in promotional activities and higher sales to off price and specialty retailers. SG&A expense is expected to increase in the low to mid single digits over 2008 including expenses for our DK investments. EPS is expected to be in the range of $0.21 to $0.25 in the second quarter.

For the full year we’re assuming that the economy will not get any better nor materially worse then it is right now. Like the first half of 2009 we expect to continue to drive core top line growth with innovative products that provide value to our customers while controlling our costs and carefully managing our cash. Sales are expected to increase in the low single digit percentage range in the second half of 2009 with full year sales expected up in the mid single digits over 2008.

Gross margin rates are anticipated to be in the mid 30% range for the year reflecting an increase in promotional activities versus 2008 and change in the company’s channel mix with reduced department store and chain and retail stores sales and increased sales in the mass merchant channel and to off price and specialty retailers.

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 DK businesses, targeted investments and product development and the replenishment of incentive plan provisions.

Finally, EPS for the full year of 2009 is expected to be in a range of $1.00 to $1.10 and above our previous guidance of EPS in a range of $0.90 to $1.00. Capital expenditures in 2009 will total $4 to $5 million and includes spending to re-platform and modernize our ecommerce website at www.Maidenform.com including state of the art content, search optimization and selling and commerce tools to continue to growth of this arm of our consumer business.

During the year we’ll also make infrastructure investments in technology and in our distribution centers to improve process and efficiency and at our retail outlet stores.

Before we open up the call to take your questions I want to reiterate that while we’re 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 protect our gross margins

employing strict inventory and expense management

generating strong cash flow that provides us with the financial flexibility to help fuel our future growth objectives.

Proofs of those disciplines and of our financial strength include that we’re tightly controlling costs and our SG&A expenses will be up only modestly over 2008, we generate substantial operating cash flow and EBITDA, we maintain conservative leverage and have ample liquidity, we allocate capital resources only to those projects and investments that carry an appropriate return and our capital expenditures will total less than $5 million in 2009.

We’re carefully managing our inventory investments and our year end balances will be roughly flat with 2008 despite the introduction of several new brands and programs. Most importantly, we continue to innovate with market leading products to drive the top line here in 2009 and beyond.

With that I’ll now turn the call back over to the operator to open up the phone lines for your questions.

Question-and-Answer Session

Operator

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

Scott Krasik - C.L. King 

A lot of puts and takes in the department chain store division, you showed a decline. This quarter you had some new things and the Total Solution coming out for later deliveries in the year. How is that real core Maidenform business, is there a core Maidenform business that we can point to at this point and when should we see growth in that division?

Maurice Reznik

If you look at our business in aggregate in the department store and chain channel and again you factor out non-recurring businesses as Chris pointed out the Mervyn’s etc. and you factor out even new businesses like Donna Karan, we’re gaining share. There is a very solid core business within the Maidenform brand specifically bras, panties, and shapewear. Very, very stable and we anticipate that to accelerate for the balance of the year.

Scott Krasik - C.L. King 

What was the sales approximately to retailers no longer shipping to?

Chris Vieth

Roughly $3 million in the quarter.

Scott Krasik - C.L. King 

For the year how much will it be approximately?

Chris Vieth

About $10 million.

Scott Krasik - C.L. King 

That core Maidenform business if you will, you said you were taking share but you were impacted by de-stocking and lower inventory then general so that was still down?

Chris Vieth

That’s correct.

Scott Krasik - C.L. King 

When do we start to see that grow again?

Maurice Reznik

Our performance outperformed the category. You’ve got to put it in the context of what’s going on in that channel. The other thing that happened in the first quarter though as we mentioned on the last call was that we were going to offer assistance to our retail partners to improve the quality inventory, to improve turns. EDI activity actually started to accelerate during the quarter and we see that trend stable and our realization on our shipments particularly in department stores and chains evidenced by the margin projections going up for the balance of the year we feel very good about.

Chris Vieth

We ought to see it increase in 2010 and by quarter we’re going to continue to have some variability. It’ll be maybe down slightly, down very modestly in the second quarter, third quarter we’re up against some pretty tough comparisons so it might be down more than that in the third quarter. It ought to be flat or up modestly in the fourth and continue growth after that.

Scott Krasik - C.L. King 

What was that the Lula you’re comparison the third quarter there?

Chris Vieth

Last year we also pulled some things out of second quarter into third, some business there. As Maurice mentioned the promotional activity and what we’re doing with retailers to work on inventory productivity those are essentially recorded under GAAP as sales allowances. It not only impacts our margins but it also is reflected in our sales.

Scott Krasik - C.L. King 

The comment that the activity picked up, so department store customers are feeling better about replenishing goods and holding inventory themselves is that the message in this category?

Maurice Reznik

The category is doing better then non-intimate apparel and retailers are buying back their sales so clearly they’re turning faster then they did a year ago but inventory levels are at a good stock to sales level right now.

Scott Krasik - C.L. King 

What’s the outlook on Self Expressions; you obviously have a much wider roll out of product categories at Wal-Mart. Do you have the opportunity to do that at Target as well and K-Mart or what’s you impression, what’s built into the guidance in terms of introducing full figure bras, all store, shapewear, etc.

Maurice Reznik

I can’t give you specifics but we have important opportunities with both of those retailers to expand our footprint and our assortments. There are modest assumptions.

Scott Krasik - C.L. King 

Right now, how many different product categories are you selling into Target and K-Mart?

Maurice Reznik

In K-Mart we sell bras and shapewear in 1,400 doors. Currently at Target we sell bras only.

Operator

Your next question comes from Gary Giblen - Goldsmith & Harris

Gary Giblen - Goldsmith & Harris

Just to dwell on the retail outlet results, could you give us some color on the retail stores?

Maurice Reznik

Our retail stores specifically you’re asking about?

Gary Giblen - Goldsmith & Harris

Yes.

Maurice Reznik

The trend on the comps improved over the performance of before but they weren’t negative.

Chris Vieth

We were down $8.4 million versus being up $9.4 million last year.

Maurice Reznik

So we’re up against a tough comparison. The rest of our direct business which is our internet business actually positive results. The business is basically doing better then we had expected but still showing negative comps versus the base period.

Gary Giblen - Goldsmith & Harris

It’s more a function of the comparison then any.

Maurice Reznik

Yes. We haven’t seen any deterioration on the margins in our retail stores but just that we’re up against tough comps.

Gary Giblen - Goldsmith & Harris

Anecdotally when I’m in warehouse clubs like Costco I’m seeing more Maidenform product display. Is there any particular initiative beyond, any detail you can give beyond what you already mentioned about the specialty channels that’s happening in warehouse clubs?

Maurice Reznik

We have a very strong relationship with Costco as you mentioned. We’re looking to continue with that and to build on it particularly internationally. Nothing new on that front as far as any other club as of today.

Chris Vieth

It’s certainly an important part of our mass merchant business.

Maurice Reznik

No question, they’re a great partner.

Gary Giblen - Goldsmith & Harris

Refresh my memory, is it just bras that go into the clubs typically or is it panties and any shapewear?

Maurice Reznik

There is shapewear, there is some panties cycle through and there are bras.

Gary Giblen - Goldsmith & Harris

The lions share of club business is bras is that fair to say?

Maurice Reznik

Bras and shapewear.

Operator

Your next question comes from Spencer Hill – Credit Suisse

Spencer Hill – Credit Suisse

We were hoping you could talk a little bit more about the long term opportunities for Shapewear given the strength in the quarter and help us think about long term opportunities and how might pursue them. I think you mentioned new distribution channels, consumer education.

Maurice Reznik

We are really focused number one on continuing to expand our penetration in the retailers that we’re in. That has worked, as I mentioned on the call in my script we were up over 50%’08 to ’07 and 21% ’09 to ’08. Within current channels we see opportunities within the Shapewear category for Shapewear that women want to wear as opposed to feel like they have to wear. For example when I talked about Fat-Free camisoles, these are camisoles that are meant to be seen. It’s a whole new category of Shapewear that really is incremental.

Number one is we see a lot of opportunity within the retail channels and the customers that we sell. Secondly, within those customers we have had success by putting Shapewear in ready to wear areas and we’ve experimented with a couple of retailers and the business has been incremental. Basically where you’re buying your ready to wear how do you make the ready to wear look better and we’ve set up a secondary outpost there. We see that as a major growth opportunity.

Internationally our Shapewear resonates very strongly. We’re extremely under penetrated. On subsequent calls we’ll update you on what we’re doing there.

Additionally, we are looking at different media through the internet, possibly electronic, through some other channels which frankly I can’t really divulge just yet. Hopefully on the next call we will.

The major headline though is Shapewear. Out of every ten women that wear bras only two are currently wearing Shapewear. We see that as a huge opportunity from an education, particularly our Shapewear. Once they wear it they love it.

Spencer Hill – Credit Suisse

Maybe discuss the international opportunity you touched upon, is that two out of ten similar metric in Europe and other markets?

Maurice Reznik

We don’t have as much data, we’re developing it. The numbers may be more dramatic internationally. In some markets that we’re in it really is a discovery. We hired Pat Royak as our managing director to really help us shape, no pun intended, our strategy internationally. We’re very serious; we’re still extremely under penetrated as a company. We have a presence in over 40 countries. We see Shapewear as being a significant differentiator for us versus the local brands in just about every market that we’re in.

Operator

Your next question comes from Eric Beder – Brean Murray

Eric Beder – Brean Murray

You talked about the tax rate going to be for the year 41%. What should we be assuming; obviously it was lower this quarter. What should we be assuming for the rest of the year in terms of the tax rate?

Chris Vieth

Let me get back to you on that.

Eric Beder – Brean Murray

You had this nice blip from the specialty retail account in terms of that category, how should we think about that business, is that going to keep on flowing into Q2, how should we think about that specialty retail business?

Maurice Reznik

The way to think about that is, I’ll give you a three part answer. One is that our business without that specialty business is extremely solid. We view that business as opportunistic. As we see that business second quarter to be a much smaller contributor for the balance of the year but its very opportunistic. From a modeling perspective I would be conservative.

Chris Vieth

I’d just use around 41% for each of the quarters going out.

Eric Beder – Brean Murray

Could you talk a little bit about Donna Karan’s two different lines? Donna Karan DKNY could you kind of talk about the split between those how you’re doing that and what the response has been between the different lines?

Maurice Reznik

Most of the business is DKNY which has a much broader distribution from Macy’s, Nordstrom, internationally. The price points are also more attainable, affordable then Donna Karan. Donna Karan is distributed in retailers like Neiman’s, etc. and Nordstrom’s too at much higher prices. Bras that retail at $70, $80 versus DKNY their retails is in the high $30 to $40.

We anticipated the business to be much more weighted towards DKNY and that’s basically what’s going on. As we mentioned in this script we’re really committed to this business long term and this year we view that business as strategically extremely important and also we don’t anticipate it to be dilutive. In a perfect world we would have picked the economy was better but the opportunity arose when it did. By most of the businesses DKNY.

Operator

Your next question comes from Mimi Bartel - Telsey Advisory Group

Mimi Bartel - Telsey Advisory Group

I wanted to first touch on the website. Obviously I know that’s something you really haven’t been focused on the last two years. What are some of the initiatives there and how do you view this because it obviously is a high replenishment business. What are the opportunities there?

Maurice Reznik

We’re really committed financially and in every other way to exploding that business. We have not invested in this. We have mentioned on the previous call that we were doing a very important site rebuild. That business, there is a lot of repeat business, as you mentioned in the category. When a consumer finds something she like clearly it’s very opportunistic.

Beyond just as a commercial model we also see this for obvious reasons as a great way to connect with consumers to build a more aspirational branding. Also, because of the amount of technology that we put into all of our products very often you can tell those stories even better on the internet. If you go on our site right now there’s a video on our Total Solution bra which is all sonically produced, sonically sealed, foam technology.

We see the opportunity not just domestically but also internationally. We saw much business on the web. One last comment, if you look at our categories; Shapewear, full figure bras in particular, hard to find sizes, those consumers also are disproportionate amount of the business on the web.

Mimi Bartel - Telsey Advisory Group

On the Decadence, how does that fit in, I know you mentioned the designer style element with value pricing. How does the pricing fit in the overall portfolio?

Maurice Reznik

If you think about we build our architecture of our brand and this launches first on the Maidenform. Maidenform retail prices are in the $30, $31 range some a little bit higher. This will be about $34. It has a very proven fit. It’s not a premium, it’s still very attainable. It will be in the stores in July. The reason why we call it Decadence other than because this product basically has the feel of something that really feels unattainable. Stay tuned to that one too. It’s a big, big launch but the premium is very minor.

Operator

Your next question comes from Scott Krasik - C.L. King 

Scott Krasik - C.L. King 

On the Decadence, will that be Decadence by Maidenform or is that branded something.

Maurice Reznik

It’s definitely Maidenform. We’re really all about brands. It’s really a layer on our best selling collection called One-fab-fit. It’s a proven fit, its usually one of the key selling bras with most of our retailers, it just takes it up a notch.

Scott Krasik - C.L. King 

And raises the AFP a little bit.

Maurice Reznik

And it raises the out the door price too.

Scott Krasik - C.L. King 

Bras in Q3 approximately how many doors?

Maurice Reznik

When we launch our major products it goes into the usual suspects; Kohl’s Macy’s, JCPenney. Its broad distribution across the department and chain store channel.

Scott Krasik - C.L. King 

It can be 1,000 plus doors right off the bat.

Maurice Reznik

It will be more than 2,000.

Scott Krasik - C.L. King 

Maybe that replaces a bra buy of something else.

Maurice Reznik

Hopefully somebody else’s not ours.

Scott Krasik - C.L. King 

When you do have a big order like this Total Solution and for a specialty retailer this quarter, how does the gross margin compare let’s say to your mass gross margin?

Chris Vieth

It would be slightly below mass. It would be the lowest margin part of our business.

Scott Krasik - C.L. King 

I know you plan this conservatively. I don’t know what their approach to this will be but is this a piece of business that you are trying to grow?

Maurice Reznik

Yes. We have a very strong relationship with the specialty retailer. What we are very cognizant of is not to build our business models around unbranded businesses.

Chris Vieth

That has a high degree of variability and volatility and are somewhat opportunistic. To answer your question, yes. It will remain somewhat opportunistic we believe at least for the balance of this year and we’re focused on trying to make it less opportunistic if we can. One of the punch lines that I’d like to leave you with is that even excluding this business with the guidance we’ve given you on revenues for the year our core businesses are still up without this opportunistic business. The deeper focus is on that.

Scott Krasik - C.L. King 

You read in the trade there’s been a couple of interesting licenses signed recently. You have your hand full with DK, DKNY, and Ellen Tracy. How do you view these new entries into the space? Any thoughts there?

Maurice Reznik

Anytime somebody puts bra on the market there’s a potential to cannibalize on one of our bras. It gets our attention. Our focus and it really is working to focus on our products, focus on our brands, understand the competition and be better. As overly simplistic as that sounds that is our mission. We do look at obviously all of the competition but we really want to focus on businesses that have scale.

Scott Krasik - C.L. King 

In terms of acquiring new licenses.

Maurice Reznik

We are always open. As Chris said, we have cash on our balance sheet, we generate cash. We are always open to opportunities if they are right, if it’s the right thing for us. It goes through a rigorous litmus test that we have. We’re open.

Scott Krasik - C.L. King 

A hole maybe at this point in your portfolio you have the high end with international potential in Donna Karan, you certainly have the core department store business pretty well fall and then growing that business. Where would there be a hole in your?

Maurice Reznik

I’m not sure that we would view it as a hole. We love bras, we love shapewear. If the opportunity arises in any of those channels you mentioned and its right and we can be even more important and we can add value and grow it that’s really the major litmus test.

Chris Vieth

There are areas that might come to the top of the list would be smaller shapewear brands and/or companies, and then second to that would be international intimate apparel companies or brands that we could acquire that were strategically right and financially attractive where we could take those and add them to what we already have an make one plus one equal more than two.

Scott Krasik - C.L. King 

Do you think you can impact the higher end shapewear business through DK, DKNY?

Maurice Reznik

That’s definitely our goal.

Operator

We appear to have no further questions. I will now turn the call back over to Mr. Reznik.

Maurice Reznik

Thank you very much. We look forward to our next call. Have a great day.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.

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Source: Maidenform Brands, Inc. F1Q09 (Qtr End 04/04/09) Earnings Call Transcript
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