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Joe's Jeans Inc. (NASDAQ:JOEZ)

Q2 2009 Earnings Call

July 15, 2009 4:30 pm ET

Executives

[Laurie Nimbico] – General Council

Marc Grossman – President, Chief Executive Officer

Hamish Sandhu – Chief Financial Officer

Analysts

Elizabeth Pierce – Roth Capital Partners

Ronald Bookbinder – Global Hunter

[David Raskin – Clear Research]

[Richard Sosa – Private Investor]

[Boris Schwartz – Daily Retailers]

[Brent Net – Private Investor]

Operator

Welcome to Joe's Jeans fiscal 2009 second quarter call. (Operator Instructions) I would now like to turn the presentation over to your host for today's conference, Miss [Laurie Nimbico], General Council for the company.

[Laurie Nimbico]

Thanks to everyone for joining in the call. Present on our call today to discuss our results are Marc Grossman, our President and CEO and Hamish Sandhu, our CFO. Before we start, let me review the company's safe harbor language.

Today's call may contain forward-looking statements which are statements of the company's or managements intentions, hopes, beliefs, expectations or predictions for the future. These statements are subject to risks and uncertainties that could cause our actual results to be materially different. You are cautioned not to place undue reliance on forward-looking statements which speak only as of the date they are made.

I'd also refer you to our reports that are filed with the SEC which includes our 2008 annual report on Form 10-K, our first quarter 10-Q and our second quarter 10-Q filed today. These reports include information that could also cause our results to be materially different from those contained in any projections which may be made during this conference call. By making any forward-looking statements the company undertakes no obligation to update them for revisions or changes after today.

Finally, a copy of our earnings release and a recording of this call will be available on our web site www.joesjeans.com and a telephone replay will be available for one week from today. Now I'll turn the call over to Marc.

Marc Grossman

Thanks to everyone for joining us today. I'll first speak about the second quarter results, and then I'll turn the call over to Hamish for a discussion of our financials. Finally, we'll end with a Q&A session.

For the second quarter of 2009, we are reporting net sales of $17.2 million and net income of $1.13 million or $0.02 per share. Our sales declined 4% versus last year. Our domestic women's net sales deceased while we saw growth in our domestic men's wholesale business and our international business and added sales from our company retail stores.

It's important to note that we've made a number of merchandising changes to our denim product offerings during the first half of this year. More specifically, we have phased in a new core basic program and skewed the product mix on the retail floor in favor of fashion washes and silhouettes.

In order to do this we've been cleaning up our retailers' floors, removing old product and reducing inventory levels. With the second quarter close, we feel this merchandising effort is for the most part behind us. The increased level of returns and swaps we have made over the last six months will return to a more normal level going forward.

It is also important to note that our better than expected sell throughs through our department stores points towards the successful merchandising transition.

Within our domestic women's business, department store sales saw not only a sequential improvement over the previous quarter but also a slowing of the decline. In the first quarter our sales to department stores fell 8% on a year over year basis. In the second quarter our sales to department stores fell only 2%.

Not only did our quota replenishment program perform above our expectations, but we also received a number of reorders during the quarter. For the spring season all of our department stores planned their business down double digits. However, we have managed to maintain our current level of business and even gain market share in some accounts.

For example, we experienced gross sales increases with Sax, and Bloomingdale's. Thus, some of the macro pressures on the business were mitigated by our merchandising initiative that included revamping the core basic program and increasing fashion washes and percentage of our mix.

Our women's specialty store business experienced the most difficulty this quarter. While our anthropology business remains quite healthy, the majority of our small independent boutique purchases were down from the previous year concurrent with their weak financial performance.

This market segment continues to have the most difficult time in this economic climate. They do not have the ability to promote like the department stores, and thus they are not able to turn their inventory as quickly in order to generate the requisite cash to pay for new product than indeed they were just 12 months ago.

As a result, we saw a decrease in our average order size. That said, given that we start shipping fall product in August, we believe that our specialty store sales will be up in the third quarter.

Our men's domestic business continues to be a growth driver with an 18% increase in net sales for the quarter. Men's department store sales saw a 21% increase in net sales over a year ago. We continue to see strong sales growth in Bloomingdale's and Nordstrom. In addition, we nearly doubled our Macy's business as we rolled out new doors based on strong selling.

Men's specialty store sales were up 14% over the prior year period as we saw average order size increase in a number of specialty stores and we're just testing with us in the year prior.

Our international business grew 24% over the previous year as a result of strong sales in Canada and Japan. Similar to our domestic department stores, our sales gains were driven by the introduction and strong selling of our new core base area. Most importantly, we are still on track to open additional Shop and Shops in Galleria and Lafayette. Hence we are very optimistic about our growth plans for France and Europe as a whole.

Our retail business generated sales of over $1 million during the quarter. We continue to be very pleased with the trajectory of this business. During the quarter, our gross margins and our full price doors increased 5% sequentially to 75% due to reduced level of promotional activity. Our gross margins in our outlet stores increased 2% sequentially to 62% for the same reason.

Finally, over the fourth of July holiday weekend, we opened an outlet store in Southern California at the Camarina Premium Outlet, bringing our total outlet stores to three and our total store count to five.

Our company wide gross margin continues to trend upward as planned due to the addition of our own retail stores and a continued shift of bulk production to Mexico and Morocco. During the quarter we saw margins at 51%, an improvement over the prior year period of 47%. As a result, we generated net income of $1.3 million or $0.02 a share during the period.

Subsequent to quarter's end, we signed a $22 million licensing agreement for children's apparel. As a part of the agreement we received a non refundable advance royalty payment of $1 million. To date, our children's offerings have largely been limited to denim. By licensing this category to a company whose principals have been successful in building children's apparel businesses; we will be able to accelerate the expansion of this category for the Joe's brand.

A new line of children's products will be available for the holiday shopping season. More importantly, the addition of another licensee furthers our goal of building Joe's as a brand across multiple categories. We are committed to making licensing a priority for categories that fall outside our core competencies.

I will now turn the call over to Hamish to discuss our financial results.

Hamish Sandhu

During the second quarter, net sales decreased slightly to $17.2 million from $18 million over the prior year period. Our sales decline was partially offset by an 18% increase in our men's domestic business and a 24% increase in our international business as Marc just discussed.

Gross margin came in at 51% during the quarter compared to 447% in the second quarter of 2008. This was also a solid sequential improvement over the first quarter of 50% in the fourth quarter of 2008 of 48%. This is attributable to sales from our retail channel which carry a higher margin and a greater quantity of our production being sourced from Mexico and Morocco.

During the quarter, our non U.S. production accounted for over 90% of all goods shipped compared to 76% in the second quarter of 2008. Our higher margins resulted in a $245,000 increase in our gross profit from the quarter to $8.7 million compared to $8.4 million for the prior year period.

Our second quarter SG&A was $6.9 million, an increase of only $500,000 from $6.4 million a year ago. This increase over last year is most attributable to additional rent costs associated with our five new retail stores.

In summary, these results led to net income of $1.3 million compared to net income of $1.6 million during the prior year period. Earnings per share for the quarter were $0.02.

Turning now to our six months results, despite the tough retail environment, on a year to date basis, net sales increased to $33.7 million compared to $33.2 million for the prior year period. This was mostly due to growth in our men's and international business and the addition of sales from our retail stores.

Gross margin for the six month period were 50% compared to 46%. During this period we continue to procure product from more economical production facilities and added sales from our new retail distribution channel. As a result, gross profit increased by $1.7 million to $17 million from $15.2 million in the prior year period.

SG&A for the six month period was $14 million compared to $12.5 million. The increase over the prior year period is attributable to increased advertising costs and expenses required to support our retail initiatives; namely rent expense and head count increases.

For the six month period, we generated net income of $2.1 million compared to $1.9 million or a 10% increase. Earnings per share was $0.04 compared to $0.03 in the prior year period. We are pleased with our ability to increase our bottom line by 10% while continuing to improve our margins and limiting increases in our SG&A expenses primarily through our retail initiatives.

Looking at our cash position, during the quarter we generated $3 million in cash flow from operations bringing our cash balance at the end of the quarter to $6.8 million.

We are now ready to open the line to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Miss Elizabeth Pierce – Roth Capital Partners.

Elizabeth Pierce – Roth Capital Partners

In the press release you talked about your second half being optimistic based on the bookings. Any additional kind of commentary you might give us?

Marc Grossman

Relative to our backlog when we look at where our numbers stand, right now we're seeing high single digit increase in our backlog. There are a number of areas where we think we might pick up some re-orders etc. so right now we're looking at high single digit increase on a total basis.

Elizabeth Pierce – Roth Capital Partners

On the boutique side of things, has there just been almost a complete turnover of accounts? Have you been able to maintain some of these accounts and help them through or has this been kind of a good exercise in terms of trading up to get some better boutiques, better opportunities?

Marc Grossman

It really hasn't been that we're having a massive turnover in our boutique base. As we had mentioned, out boutique business in up in the first quarter. What we're finding is they're buying heavily into a couple of seasons; namely spring and fall. You're not seeing that reorder business, just kind of a level of purchases that they're making. So it's more an average order size and the timing of when those accounts are making those purchases.

It's not that, and I've got to be clear on this. It's not that we're seeing the base turn over in a dramatic fashion. It really is more about the level of order that the boutiques are able to place.

Elizabeth Pierce – Roth Capital Partners

So they're just not coming back for the reorder, kind of waiting for new goods.

Marc Grossman

Exactly. So if they're buying spring, they're not going to be coming in and placing any substantial orders for summer. So they're not buying heavy into four seasons, spring, summer, fall and holiday. They're really making their big buys for spring and their big buys for holiday and maybe filling in a little bit for summer and for holiday, and that's what we saw happen if you remember correctly, remember in the fourth quarter, same thing where we weren't seeing the same level of reorders coming in.

It really feels like it's a strong 1Q, 3Q business. When I say strong, on a relative basis in that 2Q, 4Q are the softer quarters for the boutique business.

Elizabeth Pierce – Roth Capital Partners

You introduced a lower price, it was $149?

Marc Grossman

$138.

Elizabeth Pierce – Roth Capital Partners

Did it perform up to your expectations?

Marc Grossman

I would have to say it didn't perform to the level we thought it was going to perform and I think that's more of a result of there wasn't this massive price sensitivity that we thought there might be at that segment. So the $145 to $158 jeans are still performing very well and $138 didn't open up the floodgates. People were still comfortable buying the $158, the $179. That price point level as opposed to rushing to $138.

So I don't thing there's the massive price sensitivity in premium denim. If you're used to buying something between $160 and $190 just because they put something out at $140, it's not going to sway your decision in any major fashion.

Elizabeth Pierce – Roth Capital Partners

Will you continue to carry it?

Marc Grossman

Yes we will. They're good washes. They're on our core program. Don't get me wrong, they're not bombs in any way, shape or form. They're good selling jeans. It's just I can't point to that and say wow, look there's this massive price sensitivity in terms of making a commentary on the elasticity of demand. It's not the price sensitivity in the categories. They're performing well and they're good washes at a good price. It's just I've got to reiterate this. It's not a massive price sensitivity in premium denim that we're seeing.

Elizabeth Pierce – Roth Capital Partners

Which I guess would be good news?

Marc Grossman

Yeah it is, absolutely.

Elizabeth Pierce – Roth Capital Partners

I looked in the Q, but I didn't see it. Can you break out the selling and G&A for us? You've got it jumbled together. I didn't know if you were not going to break it out anymore?

Hamish Sandhu

You want us to break out the selling component?

Elizabeth Pierce – Roth Capital Partners

Right.

Hamish Sandhu

Commission runs at 6%. On a dollar basis that is, out of the $6.9 million on a dollar basis, the selling component of that was about $1.35, so about $1.4 million. And the other component was general.

Operator

Your next question comes from Ronald Bookbinder – Global Hunter.

Ronald Bookbinder – Global Hunter

Who does your factoring?

Marc Grossman

CIT does our factoring.

Ronald Bookbinder – Global Hunter

Now if there's a bankruptcy this afternoon or some time next week with CIT, have you been in talks with other people to handle factoring? What would happen to your specialty retail business that really depends on losing accounts receivable or their accounts payable? How is it going to affect them and what's the plan?

Marc Grossman

Let me handle that in two ways. One is our working capital and our cash flow and then second would be how does it impact the boutiques. The first thing I would say is I don't have any inside information other than what we both read on the internet. I will tell you that it's been business as usual for us. We pulled down our line.

Every morning we take down every component, every piece of our line that we can. We don't leave a dime with them, which is just a practice that we've been doing back in the days when we were cash strapped. We ended the quarter with about $6.8 million worth of cash on the books, so from a working capital standpoint, we've got plenty of time and plenty of capital to be able to weather any storm if there is a storm, because the majority of what we borrow against is our factored receivables.

So the transition, and again in the most draconian event, if we had to make a transition, we wouldn't see a hiccup from our own working capital perspective because we have enough cash on the books to continue to meet payroll, make our purchases of fabric, etc. So really there would be about a 30 day gap for us.

That kind of answers your question so we don't see this having a meaningful impact. In terms of have we talked to other guys, we have the names of everybody. They're constantly coming in, but we're quite happy in our relationship with them. They've been there for us and we're going to continue to be there for them provided that we can.

In terms of the boutiques, we haven't seen an impact yet. It's how that would play out; I don't have the answer to that. I will tell you our boutique business; it is the boutiques that would be impacted by such a thing, the true mom and pops of our business. That's roughly 10% of our business, so there's not this massive exposure.

Not to downplay 10% but you're not seeing this massive we're going to lose 30%, 40% of our base. The total dollars at risk would be 10% and then within that, we'd have to go through, and this is a worst case scenario, pick and choose the accounts that we want to carry paper for that we felt would be stronger than others.

So that can frame the issue where it becomes an issue but I can't really provide any insight as to what would eventually happen to the boutiques. I'm sure some would go away if they didn't have access to capital and couldn't switch over to Wells Fargo or one of those fellows.

Ronald Bookbinder – Global Hunter

Looking at the gross margin, you had a nice increase but you mentioned that you still had to clean up some more of the old core. What sort of impact do you think that cleaning up might have had on the gross margin and what should we look for the gross margin in the back half of the year?

Hamish Sandhu

We've been cleaning up the core product line. Basically we've been taking back a high level of returns during the last couple of quarters as compared to what we historically have been taking back. When that happens obviously we issue credit memo's as well as take back product, so we don't think any decrease in the returns are going to impact the margin going forward because of the fact that we are issuing credit as well as taking back product.

Ronald Bookbinder – Global Hunter

So you've just been moving that product into your outlet and clearing it through that way. Could it actually have been helping gross margin? It gave more product for your outlet stores.

Hamish Sandhu

Not really, no because once again, the outlets are fairly small. You had a $1 million in the quarter, half of which, a little bit more than half came from the outlets and the rest came from sales.

Marc Grossman

More of the real impact here is on our top line. The gross margin impact is relatively minor so quantifying it is the Morocco/Mexico shift definitely has much more of an impact. When you look at our top line, that's where the dilution really impacts you in terms of showing what the real pace of the business is.

Ronald Bookbinder – Global Hunter

Have you seen any shifts in style as we're heading into the fall? Are we getting away from skinny? Is skinny still in? Dark wash destroyed looks, could you talk about any of that?

Marc Grossman

We're not getting away from skinny. Actually skinny is becoming very meaningful going into fall and it always does because it's a little bit more versatile. What we're also seeing is that skinny is becoming a little bit more mainstream than it was in the past so we're putting it into other fits and instead of having in the past, we had a Chelsea which was our skinny and to some degree a cigarette was our skinny, we're now kind of tailoring our skinny's to the individual fit so we have a skinny provocateur, a skinny honey, because we feel like it's become a lot more mainstream.

So that I think is going to have even more importance going into the fall. I think gray is going to be important for us. Black will be important for us and yes, everything is still vintage inspired. They want an aged look, a ripped up look, and what we're also seeing is, it's becoming more motorcycle inspired, at least from our perspective in terms of pin tuck, chunky zippers, etc. So that's kind of the direction we're seeing, the direction we're taking with our line.

Ronald Bookbinder – Global Hunter

On the department store replenishment business, it took a hit awhile back while the department stores were trying to clean up their inventories and bring those down. Have you seen a return to normalcy and/or have you actually seen any sort of increase in the replenishment business at department stores?

Marc Grossman

What we saw is we took down the percent of replenishment that would be on the floor. So if you went and you have one replenishment jean and one fashion jean, what we didn't want to do is take down that percentage so that the fashion starts switching more towards fashion and away from core. But what we did find is, when we replaced all that old core and updated it, stuff that had been on there two, three years, our core started turning really quickly.

So one thing we found is it needed to be updated and needed to be updated a little more frequently than it had in the past. So we definitely saw a pick up in our core business as a percentage of our business. We're still trying to limit it to the same number of SKU's on the floor in the mix that we're looking for.

Ronald Bookbinder – Global Hunter

Do you see that the department stores have their inventories in line or do you think they're a little bit lean going into the fall, and that you could see a pick up in replenishment, or what do you think?

Marc Grossman

Let me frame it from our perspective and not try to extrapolate this out to the rest of the market. What we saw was we had a two prong strategy; one getting their inventory level down, and two, getting up their floors. That's largely behind us and that was about a six month process. It started later than we thought it would start and lasted longer than we thought it would last. That's why it dribbled into this second quarter.

In terms of where they stand today, what we've done is, we were getting planned down like everybody else in the double digits range and so we had brought our inventory down to that appropriate level, and what we're seeing is us, they're a little bit thin because we're beating our plans. I can say for us based on our turns, they're probably a little bit thin.

Operator

Your next question comes from [David Raskin – Clear Research]

[David Raskin – Clear Research]

I just want to let you know that everybody I've talked to that owns a pair of Joe Jeans is very happy with them and intends on buying future pairs, so I thought you would like to know that.

In regards to the Joe's Jeans next model campaign, I was just wondering how do you expect this campaign to improve the brand image of Joe's Jeans?

Marc Grossman

Really the contest was more about really exposing ourselves to the internet so I wouldn't say it wasn't as much as changing the look or the feel of the Joe's brand or identity, it was more about doing something that was online just to get the flow and the blog activity around Joe's moving because we had re-launched the site. So it was less about any change in direction of brand inspiration and more about getting that online community talking.

[David Raskin – Clear Research]

Do you feel like it was as much as you expected. Did you get what you were hoping for?

Marc Grossman

We didn't really have any expectations of our first time doing it, but it was when we look at it, for us the most important thing is going to be finding a girl and a guy that we can put on boards that we feel represent the face of the brand and so far, going through it, we definitely feel there are a few people that we could use.

I'm going to give you one piece of anecdotal evidence. There was a girl from a small town. I can't remember what it was. And they had put in their small local newspaper that she was on that campaign and she got like 50,000 hits or something like that. The entire town came to the site to stand behind her.

[David Raskin – Clear Research]

In regards to the license agreement for children's products, I'm just wondering what kind of impact you expect this to have on any future revenues.

Marc Grossman

The guaranteed minimum royalties stand at about $1 million a year. That business was doing about $1.5 million a year and we have no expense for that, so in terms of the headwinds you're flying into, it's about $0.5 million a year. The profitability of it is exponential, but there's zero overhead associated with that whereas our kids business, the gross profit, pattern making, design, etc. So profitability, much better and a small little headwind that you fly into.

Operator

Your next question comes from [Richard Sosa – Private Investor]

[Richard Sosa – Private Investor]

First and foremost, a lot has happened in the last year and you have definitely done a pretty good job of staying on plan. I wanted to commend you on that.

Clearly your stock has had an adventurous last couple of days. I know there's not too much recent coverage on your company, but do you expect that to change since you have a lot of boutique shops opening up with all the recent turmoil in the markets. Have you had a lot of conversations to that effect?

Marc Grossman

We have an analyst covering us obviously; Liz who I think does a tremendous job. We have a number of folks kind of circling around. I think the hard part for an analyst looking at our stock is just the actual price, being under $1.00. So obviously we need to overcome that and get our trading volume up, etc.

So we're working on those metrics which would make it easier for analysts to pick up coverage. That said, we're still invited to conferences. I think we're still very relevant on Wall Street in terms of being at the front end of the premium business and having a real look into what's going on in the industry, so that's definitely a help.

And the analysts, not only the official one that covers us, but the others that are kind of on a tangent, have offered to take us on the road. So we're definitely going to keep trying to get the word out there, speak at conferences and where we're invited and also set up some of these road shows to visit accounts which I think are probably two more important pieces, or equally important as just having paper written after every quarter.

[Richard Sosa – Private Investor]

Clearly the commercial real estate market has been tough and is probably going t6o get worse. Have you seen any opportunities in real estate as you go on and get new stores leased up?

Marc Grossman

I would say no. I don't think we've seen the level of decline in the commercial real estate market that we were expecting. What's happened is the pace is definitely picking up in what we're seeing and what we're being offered and how many times we're being offered something. So that pace is picking up which leads me to believe that they're getting a little bit more desperate day by day.

But we haven't seen anything to where when we pro forma the numbers out it's just so silly that you can't not do it, so I think just form our perspective, we'd like to see the rates come down a little bit, but we haven't.

In the A+ locations where we're looking, we haven't seen those fall too dramatically, and certainly not in the malls. Street seems to be dipping a little bit more than the A+ malls.

[Richard Sosa – Private Investor]

What are your thoughts on second stimulus? In the past has it had any effect on your business that you could talk about?

Marc Grossman

That question is a little too broad for me I would say. Definitely anything that causes the consumer to spend money is great for us.

Operator

Your next question comes from [David Raskin – Clear Research]

[David Raskin – Clear Research]

How much market share would you say you have in the women's U.S. apparel industry?

Marc Grossman

Market share in overall women's apparel industry?

[David Raskin – Clear Research]

Yes.

Marc Grossman

We're doing on our domestic women's business, it's a $50 million plus business. The overall size of the women's apparel industry is billions so I wouldn't be able to be around there.

[David Raskin – Clear Research]

In regards to the growth in your men's international sales, did this growth exceed your expectations and if so, why?

Marc Grossman

It's definitely product. In this environment when everybody is down double digits, for us to be up solid double digits is fantastic. We're really, really excited about that. And it's product. The product looks amazing. Our fits are really good. We were at the front of the trend towards the consumer wanting a skinnier jean so we've been very aggressive marketing our skinnier jeans for men.

The product looks amazing. That's the feedback we get and it's selling really well, which in this market is all you can ask for.

Operator

Your next question comes from Elizabeth Pearce – Roth Capital Partners.

Elizabeth Pearce – Roth Capital Partners

How long has it been now since you moved from Savvy to TTD at Nordstrom's. Has it been a year?

Marc Grossman

Yes.

Elizabeth Pearce – Roth Capital Partners

So just kind of summarize what your thoughts are now that this is behind you now that you changed out the core mix and do you see some opportunity in the back half of the year for business at Nordstrom?

Marc Grossman

We moved over in March of last year and what we've seen is our business is up at Nordstrom, moving from Savvy to TTD. So that affect has been positive and going forward, we going to continue to do what we do which is push for more expansion within the doors and as we're selling, and strong selling continue to sell more product.

The one thing I would say is we have anniversary coming up and they have their pre-sale and the pant that we put in sold out basically and they've already placed a reorder and this is before the anniversary even starts. So Nordstrom continues to be a great account for us. We know we're taking market share in the department and we want to continue doing that.

Elizabeth Pearce – Roth Capital Partners

Any comments on the collections business?

Marc Grossman

The collection, what we're seeing is that our woven shirts are doing really well right now. We kind of look at the different classifications. The one call out would be our woven shirts and we've booked a lot of business, so we'll talk about that in the third quarter in terms of how much we booked etc.

But in terms of bookings and kind of an abnormality relative to where we've been historical, 6% of sales being collection, it was really our woven shirts that we feel that like we've been trend right with. We'll have more to say about that in the third quarter.

Elizabeth Pearce – Roth Capital Partners

On the stores, you said they did about $1 million, it would have been just the four stores since you just opened the one at Camoreo, right?

Marc Grossman

Correct.

Elizabeth Pearce – Roth Capital Partners

Are they tracking in line with what you expected and the sales the number you were thinking about originally?

Marc Grossman

Yes. I would definitely say it's bifurcated because the regular priced stores are in line a little bit lower than we had originally anticipated and the outlets are definitely above where we anticipated. But that makes sense given the environment we're in. We're seeing the same thing on our wholesale side.

Operator

Your next question comes from [Boris Schwartz – Daily Retailers]

[Boris Schwartz – Daily Retailers]

I wanted to piggy back on what Liz said. I was wondering if you could clarify the assortment. Are you saying that more men's products are more popular than let's say Tee's and shirts rather than they are with jeans?

Marc Grossman

No. What I was saying is when we're looking at our men's business, just talking about the trend where when we really launched the business in 2007, is really relaxed fit business, the baggier pant, and we've really been aggressively pushing even at that time for a slimmer fit, and we've seen that trend. I was talking about the trend that we've seen in denim.

[Boris Schwartz – Daily Retailers]

I was wondering if you could clarify a little bit of your licensing. How are your handbag licenses doing? Are you running at the same expectations that you had or they kind of wobbling a little bit?

Marc Grossman

We talked about this a little bit in the past. We had originally signed the bag license I think where we were positioning product was too high, so we had to pull back, reorganize sales and really bring out price point back down. And then we started seeing traction in that business over the last six months.

So I would have characterized it as not doing as well as we expected. Now I characterize it as really kind of meeting the expectations that we wanted to meet.

[Boris Schwartz – Daily Retailers]

With regards to the boutiques, are you seeing any pick ups anywhere around the country with the boutiques struggling, they might actually have an order or two to place. What I'm asking is, are you seeing anywhere around the country where boutiques are having reorders?

Marc Grossman

Not a whole lot. It's pretty much we've looked at it at just mom and pop boutiques all the way up the major boutiques. This is excluding anthropology and we couldn't really find one spot by region, by price point, by type of account that we could pull out and say you know what, this is a nugget, a positive nugget versus here's something that's negative. It's very wide and broad in terms of the impact that it's having.

Operator

Your next question comes from [Brent Net – Private Investor]

[Brent Net – Private Investor]

I had a question about your share price and the talk that you had about doing what you can to get that up. If we would see any influx of more press releases, things like regarding store openings and such forth.

Marc Grossman

Yes. We put out the kids release. We have a couple of other things that we're working on. Hopefully we'll have more to say on the licensing front, but duly noted. We'll be a little bit more active in terms of putting out press releases when positive things are happening.

[Brent Net – Private Investor]

Do you know how many, I don't know if you can tell us anyway, but how many more stores you're anticipating on opening this year?

Marc Grossman

This year we were doing just Camoreo, but we are actively looking. We're supposed to have two stores open at full price at Santa Monica place here in California and that got pushed to 2010.

[Brent Net – Private Investor]

Was that because of the construction was delayed?

Marc Grossman

I think it was just the overall mall. Yes, the construction is delayed but I think it was them pushing it out over the economy and not wanting to open in 2009. So that one we're pretty much at the mercy of when they want to open.

We're really excited. I was down there this weekend. Third Street Promenade is absolutely packed. It seems to be the one bright spot in LA where you're getting a lot of traffic, so we're excited about opening that store. It's just we're waiting for it to open.

That said, there are a lot of deals out there that are immediate deals that can be done. I know there are outlets that we could open should we choose to do that. So there are a lot of things that you're not necessarily getting in the queue like you did in the past where you can have a faster opening. So we're looking at the opportunities out there and if something comes along that we feel is right for the company and can't be passed up, obviously we'll do it.

We've got the capital in order to do that, more than sufficient. We've gotten our build outs down. I think Camoreo was $250,000, actually a little bit less than that to build out from an outlet perspective. So capital wise, we feel very comfortable that we've got the money to act on an opportunity when we see it and right now it's finding those opportunities.

[Brent Net – Private Investor]

Do you see yourself going in a direction similar to the true religions of the world where they are trying to open and maybe get up to 100 retail stores?

Marc Grossman

If I had to compare ourselves to true religion, yes I would say in that we have what we consider to be a strong healthy wholesale business that we do want to augment that with retail. I think it's best for the brand, for the financials, etc. So yes, we are definitely going down that path.

Now it's not unique to just true religion. Others have done the same thing so we feel from a brand perspective that that's kind of the next evolution is to have our own branded source in addition to our wholesale. Lucky is another one with a great wholesale business and a huge retail business. So yes, there are a number. It's not limited to just true religion but that's definitely a path we want to go down.

All right, I think with that we will close it up. If anybody has any questions, please feel free to call us, and thank you for everybody's interest.

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