R.G. Barry Corporation F4Q09 (Qtr End 06/27/09) Earnings Call Transcript

Sep. 4.09 | About: R.G. Barry (DFZ)

R.G. Barry Corporation (NASDAQ:DFZ)

F4Q09 Earnings Call

September 4, 2009 11:00 am ET

Executives

Roy Youst – Director of Investor Relations

Greg A. Tunney – President and Chief Executive Officer

Jose G. Ibarra – Vice President Finance and Chief Financial Officer

Gary Sandefur – Corporate Controller

Analysts

Heather Boksen - Sidoti & Company

Jeffrey Stein - Soleil-Stein Research LLC

Douglas Ruth - Lenox Financial Services

Operator

Good morning and welcome to the R.G. Barry Corporation’s fourth quarter and fiscal year 2009 operating results conference call and webcast. (Operator Instructions) This conference is being recorded.

Now I will turn the conference over to Roy Youst. Mr. Youst, please go ahead.

Roy Youst

Good morning and thank you for joining us. A copy of our earnings release should have been sent to all of you who requested it. All of our news releases are available online at www.rgbarry.com. You can also contact our Investor Relations office at 614-729-7275 and following this call we will see that you receive a copy of today’s release.

On the call today are R.G. Barry Corporation President and Chief Executive Officer, Greg Tunney; Senior Vice President Finance and Chief Financial Officer, Jose Ibarra; and Corporate Controller, Gary Sandefur.

Statements contained in this call which are not historical fact should be considered forward-looking statements that are subject to all of the Safe Harbor qualifications set forth in our news releases, investor communications and SEC filings. Actual events affecting the company and the impact of those events upon our operations may differ materially from what is currently anticipated. For a list of risk factors, please refer to today’s news release.

And now let’s turn the call over to Jose.

Jose G. Ibarra

Thank you, Roy and good morning. As we all know, fiscal ’09 was one of the most difficult economic periods since the Great Depression. Despite that, we once again generated results that met or exceeded our internal expectations and have placed R.G. Barry among the best performers in our peer group.

For the year, net sales rose 4% to nearly $114 million and we earned slightly more than $11 million in pretax income. Our net earnings were approximately $7 million or $0.65 per share as you saw in today’s earnings release. Increases in our business in the warehouse clothes channel during ’09 helped us offset softness in several other retail segments and helped to offset as well the loss of retail doors due to store closings and bankruptcies reported during the year.

The erosion of our annual gross profit both in dollars and as a percentage of net sales was disappointing. It was, however, in line with our previously discussed expectations for the year and reflected the following. High cost from our suppliers for products purchased for the full 2008 selling season and increased levels of promotional support provided to our retail customers. We believe the [visionary] conditions that negatively impacted our gross profit in fiscal ’09 have reversed. Oil prices have come down, the availability of manufacturing capacity in China has increased and we have internally analyzed margin related processes for efficiency and cost effectiveness. We expect our annual gross profit as a percent of net sales to return to a more traditional rate of about 40% for fiscal 2010 and beyond.

Our selling, general and administrative expenses for the year rose 2.6% in dollars, but were basically flat as a percentage of net sales at 29%. The increase in SG&A spending principally represents an investment in repositioning our business for growth over the next three years. Greg will talk more about our new, three year growth strategy which we have named Team RGB Playing to Win later in this call.

We generated more than $17 million in cash from our fiscal ’09 operations. Our working capital ratio was 6.2 to 1 at year end. Principal changes in working capital during fiscal ’09 included the following, lower accounts receivable of about $3.2 million and lower inventory levels resulting from the more efficient management of our supply chain, and continuing efforts to minimize end-of-season returns from retailers. While inventory was at a record year end low of $8.5 million, down 21% versus last year, we met or exceeded the [inaudible] required by our customers.

We believe that the inventory story is a good example of the kind of operational excellence we are pursuing in all areas of our business. Despite the highly publicized retail closings, bankruptcies and financial issues for the past year, we ended fiscal ’09 with no collection issues and an allowance for doubtful accounts of less than one-half of 1% of our net sales.

We offset about $3.5 million of our fiscal ’09 tax liability by utilizing our deferred tax assets. We expect our remaining annual carry-forwards to offset a portion of our tax liability in the first half of this year. Our effective tax rate in fiscal ’09 was 37.5% and for those of you who are using our results to model the business, we’ll use a rate of 37.8% for fiscal 2010.

Cash is always a topic of great interest on these calls and it continues to reflect the company’s financial health and growing strength. Cash, cash equivalents and short term investments totaled over $39 million at year-end, up by almost 51% from a year ago. We plan to use cash to fund operations, capital expenditures and any dividends that are paid out under the dividend policy. It is also our intention at this point to fund a portion or all of our future acquisitions with our own cash.

Due to our very strong cash position, we have not needed to access our credit line since its initiation in 2007. We do feel that having an [inaudible] in place is very important. We recently extended our unsecured credit facility with our long time banking partner, The Huntington National Bank, through calendar year 2011. Terms of the extension are quite favorable and offer us a great deal of financial flexibility.

Last year our capital expenditures totaled $1.4 million, which was in line with our traditional levels of spending. Our ’09 CapEx was primarily comprised of improvements on our New York showrooms and purchases of warehouse and computer equipment.

Shareholders equity was relatively flat for the year of nearly $46 million, primarily reflecting the negative impact of a $5.7 million charge to equity related to the decline in our pension planned assets and the $2.7 million impact of a special one time cash dividend paid to our shareholders in June of this year. The decline in our planned assets resulted from the market downturn last year, required that we increase our pension liability by about $9 million. This increase resulted in the charge to equity that I just spoke about. In fiscal 2010, we expect to make the cash contributions of more than $1.2 million to our planned assets.

And now, here’s Greg.

Greg A. Tunney

Thank you, Jose and good morning to everyone and thank you for joining us on our conference call today. Before turning to fiscal 2010, I want to reinforce that our 2009 performance was solid during an incredibly tough year for many retailers and suppliers. We are pleased with our results. We generated profitable sales growth during a year in which we estimate that we lost potential annual sales of as much as $7 million to retailer bankruptcies and closings. Our performance not only speaks for itself to the diversity and strength of our operating model, but also to the quality of the team we are building and what we can accomplish, even in very difficult economic times.

Fiscal 2009 was the final year of our three year strategic plan, Success in Unity. Over the three year life of the plan we averaged organic growth of slightly more than 3% for the three year annual average. New business initiative growth was more than 120%, gross profit averaged 39% of net sales, SG&A expenses at about 29% of net sales, operating margin is 11% of net sales, inventory productivity we’re at 4.5 turns annually, and return on shareholders equity easily outpaced our 15 to 17% target per year.

During our last call I told you that we have been developing a new strategic plan that would be our roadmap for 2010 to 2012. The plan has been finalized and as Jose mentioned, work under has already started underway. Team RGB Play to Win builds upon the foundation we laid with Success in Unity. Over the next three years we will use Team RGB Play to Win to transform our business into a true consumer-concentric, brand management company driven by innovation.

While Team RGB Play to Win dramatically alters the way in which we think about our place in accessory footwear business, the values, beliefs and goals and strategies under which we have operated for the past three years are basically unchanged. We plan to continue leveraging our category leadership in areas such as design and product development, sourcing quality and value, consumer brand marketing, retail category management, supply chain logistics and partnership building to profitably grow. We will continue implementing best practices and processes throughout our organization in order to further enhance our position of category leadership.

Some of the critical tools we will be implementing or refining this year include the use of cross-functional, strategic business unit teams in AdvancePro Space and Logility software planning systems and expanded internal performance management and other planning tools. We will also continue to make sure that all business cost centers are operating as efficiently and as economically as possible.

Previously we told you about reorganizing our products into three categories, owned brands, licensed brands and private brands. This new structure has just been implemented and is allowing each business to have a more focused, distinct performance metrics that reflects economic realities and our long-term goals. Under this model the many diverse resources supporting our brands have been united and are being focused on the consumer. We believe that this change will maximize our resources and ultimately add significant value to our most important assets, our brands.

Under owned brands this is a very exciting time for Dearfoams. You will see over the next three years significant changes in product offerings, brand differentiation and the level of marketing support given this important corporate asset. We will offer existing and new Dearfoam consumers an inspired blend of modern style, ultimate relaxation and authentic unparalleled comfort.

Our other principal owned brand, Terrasoles, was developed to fill the niche between active and casual footwear. With its relaxed styling and exceptional comfort, we have found that Terrasoles really does speak to those in search of an authentic comfort experience. Over the next three years we believe that Terrasoles will continue to refine its identity and expand its appeal to a growing consumer base that we have.

The private label business offers us a significant growth opportunity as retailers continue to seek to differentiate themselves through private label goods or seek to add new product that can minimize risk while adding to the bottom line. They are going to seek out the best resources to meet their individual needs. As the accessory footwear category leader, we will continue to leverage our value-added strengths to capture a growing share of this important market.

On the license front, we are positioning ourselves as brand extension specialists. Going forward, we plan to partner with meaningful licensed brands that are profitably at seasonal, demographic product or a channel differentiation. For example, our Levi’s brand footwear is just hitting J.C. Penney’s and Kohl’s stores for its fall introduction. We are very excited about the strong growth opportunity it presents.

We have always said that when an initiative fails to meet our expectations we will move on and that is what we have decided to do in order to exit the NCAA licensed [inaudible] college business. The lack of license exclusivity and the continued over-saturation of this product in the marketplace has hindered our ability to build a meaningful business for the long-term. Thus, exiting MCF has had no material financial impact for us on fiscal 2009 and beyond, and we will be exiting out of that business.

We continue looking at a variety of accessory-related businesses as potential acquisitions. We hope our search bears fruit sometime this fiscal year. With that said, we are not being driven by the calendar. Our prudence is rooted in our desire to make an appropriate investment that is a good operational and cultural fit with our existing business, that will be immediately accretive to earnings and it will allow us to quickly and profitably diversify into another aspect of the accessory or accessory footwear business.

As Jose told you, we entered our new fiscal year in a very healthy financial position. We have a solid strategy for profitable growth in our new Team RGB Play to Win strategic plan. We have a record of proven performance even in tough economic times and we feel very good about R.G. Barry’s future.

We believe that it is important to provide a credible, reasonable view of where we think our business is headed and we worked very hard to do that. But we are seeing short-term economic volatility, primarily driven by store closings and bankruptcies, delayed or reduced orders from retailers and potential instability in the cost structures of overseas suppliers. Consequently, we have decided to defer offering any kind of annual guidance for our fiscal 2010 until after the Christmas season when we will have a much higher visibility of our results.

Before turning to your questions, I want to take just a moment to say that I was very honored in June to be named one of the winners of the Ernst and Young Entrepreneur of the Year competition. While I accepted the award, it was actually recognition for all of the R.G. Barry team and what we are accomplishing here at R.G. Barry. At a time when many businesses are backing away from investments in people, we continue strengthening our culture and building a high performance team. I believe organizational investments such as these will benefit our business for many years to come.

And now, operator, we are ready for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Heather Boksen - Sidoti & Company.

Heather Boksen - Sidoti & Company

Greg, I know you don’t want to side for holiday revenues, but maybe you could talk about what parts of the business you think have the biggest opportunities this holiday season and what areas or what factors have you most concerned.

Greg A. Tunney

Sure. I would tell you this. Right now what we’re seeing at retail is that the replenishment business continues to trend very strong. As retail has gotten tough, the retailers do what they do best and that was cut back on their inventories. And I think they found themselves a little short on their seasonal purchases, so the only way for them to keep their shelves full is to take advantage of replenishment programs that we have. And so we have seen in the last 90 days our replenishment business has significant increases. And so right now as we are going into the season, we are looking at stronger margins than we had last year at this time. Right now everything’s on track. We have not seen any decline in our backorder position. In fact, it’s good. It’s up over last year.

And we feel pretty good going into the season. You know the only caveat I’ll put into that is we hope that we will have a normal, seasonal weather pattern for our product. You know we hope there’s no special tropical storms that make it unseasonably warm. But right now you know we’ve had no disruption in any type of shipments. Things are going as planned. And so we feel pretty bullish right now about what’s going on in the marketplace with our product, especially in the replenishment side of the business as well as going into the holiday season because we think the retailers are a little short on merchandise and we think that there’s some opportunities to maximize that.

Heather Boksen - Sidoti & Company

I know last year you benefited from gift purchases, you know shoppers trending to buying cheaper gifts. Any feedback from some of the guys who buy your product mostly for holiday as to how they’re planning what they think the consumer’s going to do this year?

Greg A. Tunney

Well we don’t think it’s a less inexpensive gift. We think it’s a more valued gift, Heather. You know right now I’ve been through this cycle a few times in the accessory world and at the end of the day when you look at that holiday business, it’s a gift-giving business. And every year for the last 60 plus years R.G. Barry for some reason Christmas always comes. And I think last year you’re right, we did benefit from people looking at more value oriented items. You know it wasn’t the year of the big screen TV and you know the big iPods and everything else. It was more value. And we think right now that quite frankly it’s a similar type of season. You know last year we had outstanding sell throughs in a pretty tough economic time. There’s nothing right now that shows us that that should change.

And I will tell you that our customers, Heather, right now with the way that they’re shipping products right now in our category, it seems to continue to weather the storm. So we don’t see that there should be any downturn as far as gift-giving and especially in our category. I think big tickets are going to be affected and that’s where we start to see some changes in the marketplace. I think a lot of our key retail customers are concerned about big ticket items.

Heather Boksen - Sidoti & Company

And switching gears a little bit, just want to talk a little bit about the Wal-Mart business given the changes they’ve been making on the footwear side there. How does that impact you? Does it impact you?

Greg A. Tunney

The new team in Wal-Mart in New York is in place. I well tell you we still have our full team in Bentonville and a lot of the supply chain and replenishment business is all still done out of Bentonville. So that is still in place. The team in New York is focused really more on the seasonal and the fashion side of the business. And I will tell you that so far we have not seen any change in their approach to our business. There was talk in the marketplace about some of the facings of how many pegs and things they were going to be doing in the footwear area and we have recently been told that that would not be affecting our area this year. They’ve decided to focus on some other areas and so we don’t see that there’d be any disruption there and we would see our Wal-Mart business continue to grow like it has been.

Heather Boksen - Sidoti & Company

And also maybe just an update on where you stand in terms of looking for acquisitions?

Greg A. Tunney

I will tell you that we continue to be out there. We continue to spend a lot of time in it and where there’s opportunities. I will tell you two things that kind of have a concern for me is even though we have seen a lot of them, [of] quality of them have not been there. There’s a lot of distressed properties out there so that has been a concern for us. The other part of it is is we’re finding that on the seller’s side they are just starting to kind of come to reality of the good old days where multiples were at very high ranges, you know I think there was a thought process Heather that those multiples, even though they’ve really fallen way back that you know they’d start to come back strong.

The fact of the matter is is no different than the real estate market or the stock market, those multiples of businesses are not going to go back to those historic highs that were there just 12 months ago. So we still think it’s very opportunistic. We think that people are going to. There’s going to be opportunities for us this year so it’s not a matter of if but when we get one done this year. And we think there’s a lot of potential out there for us to take advantage of.

Heather Boksen - Sidoti & Company

Just curious, seasonally last year holiday sales were very December quarter loaded and the year before that things were more evenly spaced. What I’m trying to figure out is timing wise does holiday seasonality more resemble the year you just completed or more like fiscal 2008?

Greg A. Tunney

Well I will tell you that even though last year you’re right at retail, it was a late selling season for all of retail. I will tell you that our traditional pattern really has always been kind of a freight train at the end, the last three weeks there. So it really wasn’t that much different for us. It really kind of responded the way it had always for us, so that there really wasn’t that much change. We’re not anticipating any great changes this way and we still think that those three weeks before Christmas will be critical for our category. We can’t see that changing, Heather.

Heather Boksen - Sidoti & Company

So there shouldn’t be any September, October shifting, craziness this year?

Greg A. Tunney

No. The only thing I will tell you is you know for the back-to-school period there was some discussion that Labor Day being later kind of hurt people, etc. You know for our business it’s not an important part of it, so I don’t think we’re really affected by it. You know our key thing is right now is between now and October 15. I mean we will ship a significant amount of product out to the marketplace and right now we’re not getting any hold backs. People are bringing them in as planned and that’s a good sign that retailers are healthy and healthier than they have been and that they have planned appropriately for our inventory. So we’re convinced that if we get timely on the floor that our inventory will sell through.

Operator

Your next question comes from Jeffrey Stein - Soleil-Stein Research LLC.

Jeffrey Stein - Soleil-Stein Research LLC

Wondering if you could talk a little bit about the SG&A line and what your thinking is on that for fiscal 2010 given perhaps a little less certainty on the top line.

Greg A. Tunney

Yes. I would tell you that you’re going to see, Jeff, a continual shift. You know we’re right now running about 29% of sales or less and I would see that number, believe it or not, staying more flat. But you have to understand the shifts that are taking place in that. We’re actually starting to implement a pretty significant long-term marketing strategy on the Dearfoams brand to get out into the marketplace with consumers and make them more aware of the Dearfoams brand. And so what we’re seeing is each year where we’re continuing to see great savings in our cost of administration, our processes, all through the organization we are getting significant savings.

This year you know I will tell you you’re seeing shifts of significant dollar amounts that are going more toward the marketing strategy and away from things such as insurance costs, whatever they may be, and so even though the number’s staying relatively flat it’s really to shift those assets and to use them [more] for what we think can help grow our business for the long-term. I can’t see it, Jeff, shifting much more differently this year as far as the total or the percent to total.

Jeffrey Stein - Soleil-Stein Research LLC

And therefore are you planning your SG&A dollars to be up year-over-year?

Greg A. Tunney

No. We’re not planning total SG&A dollars to be up. They will be flat and in line at that 29% level. The only change is within that mix. It’s much more, you’re starting to see a bigger shift in the marketing dollars and away from the administrative costs.

Jeffrey Stein - Soleil-Stein Research LLC

So that would seem to imply that you’re kind of budgeting kind of flattish sales for the year, if your SG&A dollars are flat and your percent is flat. Would that be correct?

Greg A. Tunney

Yes. I mean from a planning standpoint, Jeff, I would tell you yes, we’re planning flat which I think in our business is the right way to do it because it allows us, if we keep our expenses in line and things like that, as the business takes off and we need to respond we have a variable enough model we can jump on those opportunities. So instead of planning it up front and having the expense burden us or anything like that, we’re planning it pretty much flat but you know like right now our replenishment business is running up double-digit over last year and its pretty healthy, and we’re able to respond to that in season.

Jeffrey Stein - Soleil-Stein Research LLC

And can you talk a little bit about your success so far, your successes in building the private label channel?

Greg A. Tunney

Well you know it’s an area that we quite frankly have been under penetrated in for many years and it’s something that you know when you’re the brand leader you kind of have a certain amount of charisma about you that you want everybody just to buy your brand. And what has happened is there are a lot of retailers with strategies that they want to have exclusive brands for their specific channel distribution, etc. And so even though we have a very important brand that is important for a lot of people, we have some customers such as Kohl’s where we will sell them our brand, Dearfoams, and they will do a portion of their business with Dearfoams.

They will also buy our license business in something like Levi’s which they’re doing and they’ll also buy, we will do the Vera Wang private label business for them as well. So they actually play in all three buckets if you will of our business. And I would just tell you that as a company our penetration, we’re under penetrated in it, it’s an opportunity for us and we now have a team that is focused on it. That’s their segment of business and we think that there’s an opportunity to take it from as a percent of total of our business to increase it significantly from where it was.

Jeffrey Stein - Soleil-Stein Research LLC

Greg, would you describe that more as a longer term opportunity as opposed to a fiscal 2010?

Greg A. Tunney

Yes. I mean the planning is really this year is the first year where you kind of go out and tell people that we’re doing this and we see it as a long-term opportunity for us that you know we would help over the next five years we’re adding on another $15 to $20 million in that category for ourselves.

Jeffrey Stein - Soleil-Stein Research LLC

And looking at the licensing business for this year, does the Levi’s business represent a material increment for you this year in terms of what you see developing on the books?

Greg A. Tunney

No. I would tell you that even though we’re launching it with Kohl’s and we’re launching with J. C. Penney’s and some other key retailers out there, you know our whole strategy this year on that was really to test it. We went after a much younger demographic. The stores that are testing it are testing it in the 100 to 250 store range. And we really want to chase that business and learn about it and I think as we have successes that we can build upon those successes. But I would tell you that it’s less than 5% of our business.

Jeffrey Stein - Soleil-Stein Research LLC

One more question and that would be with regard to your gross margin, what kind of visibility do you have into the future on kind of a 40% target margin? In other words, [oil] prices were to begin to spike again six to nine months from now, would that be a negative for fiscal 2011 or do you believe that you can do you know perhaps do some things to try to protect yourself so that that margin would be sustainable perhaps regardless of where oil prices go?

Greg A. Tunney

That’s a good question and to really answer it, it really all depends on where we’re at in the buying cycle. If you go back to spring ’08 when we were purchasing for fall of ’08, you know that was right when the oil prices really kind of took off. It was a time also that China was you know going full capacity, you know really didn’t have any excess capacity and it was really before the economic turn took place in the fall. Well while we were buying during that season, we were paying premium prices just because there was no excess capacity, oil prices were going to the moon and everything else. It’s interesting as we went through this buying cycle that we just got finished with this spring, you know all the factors were completely going the opposite way.

And I will tell you, Jeff, probably more what drives the price that we’ve seen than even the oil, even though a large percentage of our products are petroleum based, is we’re seeing the capacity issue have a much bigger effect on pricing than anything else. I mean there is excess capacity in China. We still have great buying leverage because of who we are. And there’s not many people that are coming to the party with as much purchasing power as we are. So with the new capacity issues there, we think it’s very advantageous for us and [audio impairment]. You know this year has already been bought, I mean the products already [inaudible] and its being shipped out to the retailers, etc. So you know we’ve kind of dodged that bullet. As we look out to next spring, I could see that oil could be trending up like it has been lately, but quite frankly its only a part of the total cost. I can’t imagine capacity when we get to next spring really going robust like it was in spring of ’08. And so I think that’s a bigger driving factor for us, more so than oil.

Jeffrey Stein - Soleil-Stein Research LLC

And maybe one for Jose real quickly, the accrued retirement costs on the balance sheet, that went up about $7 to $8 million. I presume that was the retirement benefit that you alluded to?

Jose G. Ibarra

Yes it was.

Jeffrey Stein - Soleil-Stein Research LLC

And the $1.2 million contribution to assets, is that booked as an expense?

Jose G. Ibarra

No, that’s a cash contribution, Jeff, that we’ll make in fiscal ’10 to our planned assets.

Jeffrey Stein - Soleil-Stein Research LLC

But that will not run through the P&L as an expense, correct?

Jose G. Ibarra

No.

Operator

Your next question comes from Douglas Ruth - Lenox Financial Services.

Douglas Ruth - Lenox Financial Services

Greg, that was a terrific job on the inventory. That was absolutely outstanding.

Greg A. Tunney

Well thank you, Doug. That’s an area where I can tell you our supply chain did an outstanding job, Glenn Evans and his team. If you look at that, to come in 21% lower than last year on sales growth of 4% it’s just you know just when we think we’ve got our inventory down to a low level, that was just an outstanding job. I’ve shared with the Board my concerns of being able to continue with such record low inventories, but it was really just that whole team doing a great job and just continuing to get better and better each quarter.

Douglas Ruth - Lenox Financial Services

Can you tell us anything more about what’s happening with the Board of Directors and the size of the Board of Directors and compensation of the Board?

Greg A. Tunney

You know I think that you know it’s been of interest to everybody, but last year we kind of challenged ourselves to honestly review all the cost centers to insure that our business was operating as efficiently and economically as possible, while still successfully achieving its strategic goals. And as a result of those efforts we were able to increase invest spending in our brands while at the same time keeping our SG&A down like I explained to you that I was explaining to Jeff earlier on the call.

The Board of Directors at the same time reviewed its costs with the same goal in mind and as a result the Board has looked at that opportunity and examined it and the Board has voted to reduce its size from ten members to nine, which will have an immediate impact on compensation cost when its implemented at the upcoming shareholders meeting that we’ll be having here in October.

And the directors also voted to seek out an additional cost savings which included possible other savings that they think that they can accomplish. And the Board’s goal right now is to reduce its costs by $300,000 annually no later than 2011 calendar year. So I think that the Board has you know really understands our business. They understand how important it is for us to be cost effective and I think that they’ve identified that they need to do everything that they can in their power. And I think that with all of the complexities you have of a Board as far as the size and all that other stuff, I think that they’ve done a great job of just adopting the new economic environment that we live in.

Douglas Ruth - Lenox Financial Services

And can you tell us where we are with the dividend and is there a dividend declared for the next quarter or where exactly are we at with that?

Jose G. Ibarra

The cycle will be at the end of the first quarter. When we come to that point and the Board decision, the Board will examine and evaluate the results and the forward-looking of the business for fiscal ’10. And at that point the Board will make a decision to award the dividend as part of the dividend policy. But it’s in that cycle where we’ll present to the Board the numbers and the fuller view of the year and based on that, they’ll make a decision.

Douglas Ruth - Lenox Financial Services

We were talking about when the next report comes out, which would be like approximately mid-October? Is that when we would hear something?

Jose G. Ibarra

It will be early November when.

Douglas Ruth - Lenox Financial Services

Mid-November, yes. So we would hear possibly some sort of dividend news in early November and would that dividend still be paid in calendar 2009? Would that be the intent if the dividend were in fact declared or?

Jose G. Ibarra

When the Board makes a decision in that October Board meeting everything now that I explained, that will be the cycle that will play out.

Douglas Ruth - Lenox Financial Services

And tentatively it’s a nickel a share?

Jose G. Ibarra

Correct. For the policy that was established back in June.

Douglas Ruth - Lenox Financial Services

And with the large increase in cash is it possible that the dividend could be larger than a nickel do you think per share?

Jose G. Ibarra

The Board will examine that. At this point it’s difficult to make a statement to that effect. Based upon the first quarter results which we’ll present to the Board in that October Board meeting and everything else that we do, to project our business for the rest of the year, that’s what will be the basis for the Board to examine and consider whether they will do what they need to do with respect to the dividend policy.

Douglas Ruth - Lenox Financial Services

Greg, you had talked some about the company’s relationship with Wal-Mart. Could you give us a little bit of flavor what’s happening with Penney’s and Kohl’s?

Greg A. Tunney

I would tell you that I guess starting with Kohl’s is our business there continues to grow. They are a valued partner of ours and you know I can tell you this year we have significant growth opportunities with them and their plans. And they are ones that recently upped their replenishment requirements because they’re just over achieving what we originally thought the sales plan was. And so a very valued relationship there. They’re one of our partners that we actually participate in all three segments of their business and that’s really our goal with everyone that we deal with is our ability to be able to focus on all three segments of the business. So that continues to be healthy.

I can tell you at J. C. Penney’s right now with a few of the new store openings that they’re having, etc., they continue to hit their sales plan and they’re also pretty robust in our sales plan that we have there for fall as well.

Douglas Ruth - Lenox Financial Services

And back to Kohl’s for a minute, is there any one segment that’s doing better than another segment with them?

Greg A. Tunney

You know I would tell you right now, well first of all Dearfoams is doing very well because its in there right now. Levi’s really hasn’t been delivered. I mean its being delivered as we speak right now, so it’s a little premature to say how Levi’s is doing on the license side of it. And Vera Wang right now, because we do a lot of their seasonal items in Vera Wang, that’s actually being delivered right now as well.

Douglas Ruth - Lenox Financial Services

And have we sold Vera Wang to Kohl’s before?

Greg A. Tunney

Yes. This is our second going on our third season with them on doing the Vera Wang seasonal product with them.

Douglas Ruth - Lenox Financial Services

And you alluded that there’s a lot of opportunity in the private label. Is there significant growth in Vera Wang to Kohl’s?

Greg A. Tunney

Well if you look at Kohl’s right now and you go into any Kohl’s store you’ll see that the Vera Wang label that they have done has been very successful for them. It’s throughout the whole store. They’re carrying it in ready-to-wear, they’re carrying it in footwear, they’re carrying it in cosmetics as well as home. So it’s throughout the entire store and it has been one of their more successful private labels that they have. So you know right now it continues to be a hot brand and we’re glad that we’re one of their partners for our category.

Douglas Ruth - Lenox Financial Services

Could you just comment a little bit on what’s happening with Terrasoles and what’s happening with Nautica for fiscal 2010?

Greg A. Tunney

Yes. Let me first of all start with Nautica. You know in the Nautica business for those who are familiar with the brand and the label, you know the mother ship if you will of the apparel side of Nautica you know it’s been out in the public markets and how they’re doing. And they’ve had a tough couple of seasons and when you’re the accessory side of a license like that as goes the brand so does your results from it. And so needless to say it has been a struggle there. They have closed down their women’s side of their apparel business which typically tends to be our stronger side is the women’s versus the men’s side of it, but we have a program that’s going into the stores this fall. I can tell you that our product margins are much more improved than they were the first season out of the box and so we learned a lot from it. And we have a new mix as well as a new price point strategy for them and that product starts to hit the market here in about three more weeks, it’ll get out. But we’ve had modest, Doug, I would tell you we’ve had very modest results in the Nautica business.

On the Terrasoles side of it you know that’s one of our own brands and we’ll continue to invest in that, learned tons of stuff in the last two years with that brand and we continue to focus it and get it refined. And we think long-term that Terrasoles is a business that we should be in. It’s something that quite frankly we’ve seen a lot of our competition try to knock us off in that category, so we know that we’re on the right course on that.

Douglas Ruth - Lenox Financial Services

And is there any particular outlet that seems to be the best for selling the Terrasoles?

Greg A. Tunney

Well I will tell you with Terrasoles definitely the more true outdoor, specialty stores tend to have a better sell through with it. I think as you get into some of the department store areas we’ve had a challenge of having the customer really understand the product and what it represents. But when you have it in the right environment and it resonates with the customer, it really does well. In places such as catalogs and Internet that can even tell a better story about what Terrasoles is all about, because we are going after new space out there. I mean it is a cross-bred product if you will out there. So it continues to trend better in places such as Internet as well as catalog that can tell the entire story. So I think our big challenge there is how do we continue to market this to the consumer and help them understand that.

Operator

At this time I’m showing no further questions. I’d like to turn the call back over to our moderators for any closing remarks.

Greg A. Tunney

Thank you operator. Before signing off we’d like to make you aware of several upcoming events. On September 15th on Tuesday we will be one of the presenting companies at the Invest Ohio Equity Conference here in Columbus. Our presentation will be 11:15 AM and we will be available live on the Internet. Instructions for logging on will be available at the Conference and R.G. Barry websites prior to our presentation. On Thursday, October 29th at 11:00 AM we will be hosting our annual meeting of shareholders at our offices here in Pickerington, Ohio. We hope to see all of you at the meeting. If you cannot attend it will also be available live on the Internet. Instructions for logging in will be posted at our website prior to the meeting. In closing, thank you for your interest in our company and for taking part in today’s call. We look forward to your participation in our first quarter 2010 conference call, planned for early in November. Until then, thank you and good bye.

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