DSW Inc. Q3 2009 Earnings Call Transcript

| About: DSW Inc. (DSW)


Q3 2009 Earnings Call

November 24, 2009 8:00 am ET


Leslie Neville – Director IR

Michael MacDonald – President & CEO

Deborah Ferree – Chief Merchandising Officer

Douglas Probst – EVP & CFO


Jeff Black - Barclays Capital

Christopher Svezia - Susquehanna Financial Group

David Mann - Johnson Rice & Company

[Mike Shritka] – Longacre Fund Management

John Zolidis - Buckingham Research

Dana Walker – Komar Investments



Good day ladies and gentlemen, and welcome to the third quarter 2009 DSW Inc. earnings conference call. (Operator Instructions) I would now like to turn the conference over to your host for today’s call, Leslie Neville, Director of Investor Relations.

Leslie Neville

Good morning. Welcome to DSW’s third quarter 2009 earnings conference call. With me today in Columbus are Michael MacDonald, our CEO, Debbie Ferree, Vice Chairperson and Chief Merchandising Officer and Douglas Probst our CFO.

Before we proceed please note that earlier this morning we issued a press release detailing the results of operations for the quarter ended October 31, 2009. Various remarks we make about the future expectations, plans, and prospects of the company constitute forward-looking statements.

The actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those listed in today's press release and in our public filings with the SEC.

With that, I will turn it over to Douglas Probst

Douglas Probst

Thanks Leslie, good morning everyone. We will begin with the financial performance for the third quarter and then update our outlook for 2009. Net sales for the third quarter increased 14% to $444.6 million. Same store sales increased 8.7% for the comparable period versus a decrease of 4.1% last year.

By segment our comps for our DSW business were up 9.8% while our lease business comps were down 1.5%. The merchandise margin rate for the third quarter increased 220 basis points to 46.3% compared to last year’s 44.1% as we experienced significant regular price sell throughs throughout the quarter.

Occupancy expense rate decreased due to the positive comps and an increased focus on negotiating rent concessions from landlords. The improvement in merchandise margin and occupancy expense combined with leveraging in our distribution and fulfillment centers resulted in a gross profit rate increase of 520 basis points to a record high of 33.1%.

The SG&A rate increased to 23.0% in the quarter however excluding the increase in the year to date bonus accrual, the SG&A rate decreased 160 basis points to last year due to the increased sales, excellent execution in our stores, and marketing department, and an overall concerted effort to control expenses.

The net result was a 470 basis point increase in the operating income rate to 10.1% of sales. Net income for the quarter more then doubled to $26.6 million compared with net income of $13.2 million last year and the diluted earnings per share were$0.60 compared with $0.30 a year ago.

At the end of the third quarter inventories were down approximately 10% on a cost per square foot basis with over half of the decrease coming out of the distribution center. While inventories are a little lower then we anticipated due to the increase in sales, we are comfortable with our in store inventory position and will continue to plan inventories conservatively throughout the fourth quarter and into 2010.

We invented approximately $4 million of capital into the third quarter into new stores and our IT initiatives, and we increased our cash and short-term investments by $87 million in the quarter to $266 million and no debt.

Looking forward to the remainder of 2009 we have built the following assumptions into our annual guidance based on our performance through the first three quarters. Our comp expectation for the year is approximately 1%. Based on improving merchandise margins and occupancy rates, we now expect an annual gross profit rate of approximately 28%.

And despite the increased sales and improved focus on controlling expenses, we still expect our annual SG&A rate to increase over last year to account for our investments in marketing and IT as well as payouts on our incentive compensation plans.

Given these assumptions we are raising our estimate for 2009 annual earnings to a range of $0.90 to $1.00 per diluted share. With that I will turn it over to Michael.

Michael MacDonald

Thanks Douglas, good morning everyone. I’ll start by adding some color on our performance in the third quarter and then touch on the progress we’re making on some of our strategic initiatives.

The big turnaround that we experienced in the third quarter was driven by increased footsteps coming through our doors. For the quarter our traffic in comp stores increased quite dramatically. This factor was the key driver to the significant reversal in sales trend from a comp store stores decline in the second quarter, to an almost 9% comp increase in the third quarter.

I think there were three things that led to this improvement in traffic. Briefly those three things were an improved external environment, the fit of the DSW formula with the consumer psyche right now, and the strength of our execution in the quarter.

With respect to the environment we were fortunate to have a friendly weather pattern in the quarter. It was generally cool and that helped us drive early selling in the boot category. As to the economic environment, while the economic fundamentals remained weak, the financial markets have rebounded.

Despite government statistics to the contrary, I believe that market recovery has positively effected the consumers’ outlook. In addition the shoe category appears to have benefited disproportionately. New shoes not only dress up an old outfit, they also lift ones spirits, or at least that’s what some of our tween customers have told us.

Finally the comp store sales performance of a number of retailers showed improvement in recent months and some of the multi category players have specifically mentioned the shoe category as one of their strongest businesses. So for all of those reasons we do think the environment was more favorable to us in the third quarter.

Although the consumer may be feeling a bit more optimistic, she is also more savvy then ever. She has two very scarce resources that she want to use as efficiently as possible. Those two resources are her time and her money.

That mindset really fits perfectly with the DSW formula. We have a breathtaking assortment of shoes in terms of styles and brands and price points. Our discount pricing structure provides almost irresistible values on an every day basis.

And our assisted open sell format translates into a very simple, convenient, and efficient shopping experience for our customers. It’s a powerful formula that is especially right in today’s environment. The third element that drove traffic and sales in the third quarter, was our execution specifically in the areas of marketing, merchandising, and store operations.

In terms of marketing, our talking shoes TV campaign was quite memorable. Whether you liked it or you didn’t, it certainly caught your attention and drove awareness of the DSW brand. We also integrated our marketing efforts for DSW stores and DSW.com and that approach benefited both channels.

And then in the third quarter we used our precision marketing techniques to both stretch our budget dollars and increase customer response. DSW rewards numbers accounted for 85% of third quarter sales.

In the merchandising area we demonstrated our nimbleness in the third quarter. At the outset of the quarter we were forecasting a negative comp store sales performance for purposes of expense control.

For receipt control purposes our merchants were planning for a flat comp performance, but they had cancellable back up orders in place for key items. That buying approach afforded us both downside protection and upside opportunity.

As the quarter unfolded they were able to take those orders in and feed the improving sales trends. Of course the big driver of that sales trends was women’s boots which was up on a comp store basis almost 50% for the quarter.

We intentionally distorted this category in terms of both floor space and inventory investments. As a result the assortment of boots that we provided for our customers was second to none. And the style editing process our merchants employed, in order to create the floor capacity for the additional boot inventory, was very effective.

And the reason I say that is because we also experienced comp store sales increases in the balance of women’s footwear, in men’s footwear, in athletic footwear, and in accessories. The additional traffic and sales volume in the quarter provided a real challenge for our stores’ group, but they really rose to meet that challenge.

They did a particularly good job of processing freight shipments timely and filling in key styles during the day, on weekends, and big days. They also executed our unique selling model very well through the passionate, friendly, helpful, and real interactions with our customers.

Let me also comment briefly on our DSW.com business, as you know we view this business as being very intertwined with our stores business. Many of our stores customers also use the dot com channel for their shopping and buying convenience.

We are continuing to make the improvements to the site mechanics and to our dot com assortments and we were quite pleased with the progress and the results from the dot com channel in the quarter.

Now let me talk a little bit about progress we’ve made on some of our longest-term strategic initiatives. In the system’s area we turned down our size replenishment system in the third quarter. This system allows us to reorder styles by size, by store based on actual selling.

At this point we only have a few SKUs in the men’s area up on the system, but we are already improving our in stock ratio pretty dramatically in these styles. We will gradually add additional categories to this system and we expect that ultimately about 25% of our entire footwear assortment will be up on this system.

In terms of our merchandising strategy we said we want to increase our penetration of key items, that is items we can carry in most stores and that we can sell in very large quantities. Key items allow us to provide fashion leadership to our customers and they can also improve our profitability by virtue of more advantageous costing.

I don’t intend to share specific statistics with you today, but I can tell you that our third quarter success in women’s boots was accelerated by the number of key items we got behind and were able to fill back into as the sales trends materialized.

Another initiative we have underway is to make our customers’ shopping experience even more convenient and efficient. A few weeks ago we opened a replacement store in Rochester, New York. The design of this store reflects many new elements that we believe will translate into a better shopping experience for our customers.

These elements include a neutral color palette, [north] style fixture arrangements, and open views to the clearance area in the back, the inclusion of many more mirrors, overhead navigational signing, and category signing on the end caps.

We also recently rolled out a big deal planning package to all stores that highlights the best value throughout the store. We believe these types of changes can make our stores even easier to shop.

In summary we’re making progress on the implementation of our strategies, all of which are designed to support the three key elements of the DSW brand experience, namely, a breathtaking assortment, irresistible value, and simple convenience.

With that I’ll turn it back to Leslie.

Leslie Neville

Now for the question-and-answer session, please limit yourself to one question and one follow-up on the first round. That way we’ll have a better chance to get to each questioner, but please, remember you’re welcomed to get back in the queue as many times as you would like.

Question-and-Answer Session


(Operator Instructions) Your first question comes from the line of Jeff Black - Barclays Capital

Jeff Black - Barclays Capital

Nice quarter everybody, talk a little bit about the comp guidance, what you saw in October versus the two cold weather months and what’s happening so far in November, have we seen a slowdown in trend. It would just seem you have the potential to post some higher comps and also talk about inventory levels, do you think we’re a little too lean here, is there an ability to chase and build into a slightly better comp if in fact that’s what kind of trends we’re getting.

Douglas Probst

As far as the comp projections obviously its been a little difficult to project comps, we came in on October 15 and said 6% to 8% comps for the third quarter and we came in higher then that. I can tell you that the last couple of weeks of October were very, very good, beyond our expectations and the third quarter performance was a historical, in that we didn’t have any kind of historical performance that showed this kind of lift in our business.

So it has been a little difficult to project. Business has remained somewhat strong but all things considered, inventory trends, traffic trends, average unit retail, a lot of things came up with our 1% guidance for the year.

Again a lot of factors go into that. We think its our best estimate at this point and that’s what we’re coming up with right now with about 10 weeks to go. As far as the inventory positions, we’re comfortable with where they are.

As I mentioned in the script they’re a little lighter then we anticipated given the increased sales, but we still believe we have enough to do the business and we’re pleased with the in store positions.


Your next question comes from the line of Christopher Svezia - Susquehanna Financial Group

Christopher Svezia - Susquehanna Financial Group

Congratulations everyone, great job. Just on the boot category and the success you’ve had there, can you maybe just talk about what else is going on, what else you see happening and any thoughts as to how important and impactful it becomes to your fourth quarter relative to your third quarter and relative ASPs in that category.

Deborah Ferree

Let me just tell you that the third quarter performance in boots was up 20% of our total amount, it was significantly more then last year which was about 14.5%, so in terms of penetration that’s where boots came in.

What does fourth quarter mean relative to third quarter, fourth quarter should mean about a 30% penetration in boots versus 25% penetration last year at the same time. So boots continue to be a very meaningful category.

However as Michael and Douglas spoke on the earnings call, many other categories are performing very well so we’re seeing significant comp increases in most all of our other categories and that goes from fashion to classic, whether its dress shoes or casual.

In terms of the selling price the AUR of boots, we’re about flat to last year. What is most notable to talk about is the content of the AUR and AUTs in boots. So in the junior area the average unit retail actually went down a little bit and that was deliberate so that we could really hone in on some really big trend key items and get behind them and really maximize the [inaudible].

The increase in the AUR in this area actually came on [inaudible] around some temporary and better, as our increased sell through at regular price. So does that answer your question about boots.

Christopher Svezia - Susquehanna Financial Group

It does and I assume this potentially as your past experience has indicated, continues somewhat into the first quarter as well, I think we saw that last year and subsequent years, is that a fair assessment?

Deborah Ferree

Yes, I actually think that boots is a 12-month a year business right now. But you’re going to see an increase over what you did last year in boot penetration in first quarter for 2010 versus 2009. I think there are elements of the boot business that just continue.

Remember also on our last earnings call we talked about what we use for quarter [forks]. We not only make sure that the inventories are correct because we feel those are the kind of products [inaudible], but we use it as a testing ground for new items so that we can test out early and see what the big ideas and the new looks are going to be for the fall season.

And that’s the other thing that we do in third quarter that proved very, very [possible] for us last year.


Your next question comes from the line of David Mann - Johnson Rice & Company

David Mann - Johnson Rice & Company

Let me add my congratulations, can you talk about when we look into the fourth quarter sort of the sustainability of this kind of increase in merchandise margin, and also can you highlight for us what we should be thinking about incremental bonus in the fourth quarter as well.

Douglas Probst

As far as the margins, if you recall last year we were disappointed with our 39% merchandise margins for last year and we do believe we can improve upon that, but it is the fourth quarter, it is a period of time that we use to make sure we’re clearing out inventory that we don’t want to carry forward into the spring season.

But the 46% margins that we had in the third quarter were a record high and it will be difficult to assume that sort of improvement, but given our inventory positions, if we start to beat to the sales number again, you can expect that the merchandise margins will go up as well, but not to the levels that we had saw in the third quarter.

So improvement to last year but not an improvement to third quarter. And the bonus side of things, we’re all caught up year to date. We’re caught up to accruing for the appropriate bonus. You can probably do the math, but the impact in that third quarter was about a $9 million impact to last year and there’ll be a little bit of unfavorability but we’ve built that into our guidance for fourth quarter and there shouldn’t be a lot more that we’ll have to raise our expense projection on.

David Mann - Johnson Rice & Company

And then in terms of your clearance levels going into Q4, where do you stand on that.

Douglas Probst

We’re really comfortable with our clearance position. We’ve always said it would be around 5,000 units a store and going into the fourth quarter that’s about exactly where we were.


Your next question comes from the line of [Mike Shritka] – Longacre Fund Management

[Mike Shritka] – Longacre Fund Management

Can you just comment on the effectiveness or what your perceived effectiveness has been of your advertising this year and how you think how you’re looking at Q4 based on this advertising that you’re doing this year versus last year.

Michael MacDonald

I think as I mentioned in my script, I think the TV campaign was quite impactful. We definitely saw traffic on our dot com site spike when we ran the TV commercials and by the way, those TV commercials will continue running in at least some markets through the end of November. So we saw the spike in dot com traffic which often times increases traffic into our stores.

And we also saw an incremental lift in the store business from the TV campaign. The other thing that was pretty gratifying was the success and responsiveness to our what we call precision marketing but essentially its customer relationship marketing and its really getting to know your customers and what things they want to buy and what things they don’t want to buy, what things they’ll respond to and they won’t respond to.

And really taking a micro approach to looking at how they shop. So we were pretty pleased with that as well. The other indicator that we’re getting some pretty good increased awareness was data that we got from national surveys, unaided awareness of the DSW brand.

And from the first half of the year to a reading we took after the, let’s see I think it was in late October, we had about a I think we went up about 75% in terms of unaided awareness of the DSW brand as reflected in a statement that that’s where they would go to shop for shoes next time.

So we’re pretty pleased with the impact of our intensified marketing efforts this year and we went into 2009 with some questions but a commitment to significantly increase our marketing spend and I think that based on the results we’re seeing, we’re likely to continue to spend as a percent of sales at that higher level going forward.


Your next question comes from the line of John Zolidis - Buckingham Research

John Zolidis - Buckingham Research

Great quarter, question on kind of a longer-term outlook in the fourth quarter it looks like you’re setting yourselves up to have slightly better then expected or much better then expected results depending on how the sales fall out, but that is one of the smallest quarters or the smallest quarter of the year at least from a profit standpoint, historically has there been any relationship between the performance of the boots in the fall season and the sandal business in the spring season. Is there anything that we can draw, any conclusion we can draw about the potential performance of sandals and spring related goods based on what happened in the third quarter.

Deborah Ferree

First of all you have a unique advantage in the boot business that you don’t have in the sandal business and that is, is that boots can really sell 12 months a year and while we do feel that weather had a positive impact in the third quarter, we’ll also tell you that the change in ready to wear and wardrobe change really brought a strong sell through in the fashion area of our business as well.

So we don’t think that’s going to stop. We think that that continues through fourth quarter. As I said I think that the penetration will increase in the fourth quarter. I think we’re going to see out of the norm results in first quarter in boots as well because this trend just seems to continue.

So you have the opportunity to sell this category of goods 12 months a year. Sandals however has a little bit different perspective around that, and that is is to sell sandals you really need warm weather. So you really don’t have the same benefits around sandal business that you do in boots.

Having said that we feel very strongly about the sandal business for spring of 2010 because of the content shift and change relative to what we saw last year. There’s a lot of freshness and newness coming into the assortment but still you need weather to be able to really be able to drive the sales.


Your next question is a follow-up from the line of Christopher Svezia - Susquehanna Financial Group

Christopher Svezia - Susquehanna Financial Group

I just have two or three follow-up questions if I could, I guess just to focus on the inventories for a second, being down as much as you are, and maybe if you could just clarify it between the distribution center and what’s in stores, you made a comment there, if you can clarify that. I’m just curious what categories you’re weak and whether or not vendors’ heavy ability to still support your ability to chase product and chase inventory.

Douglas Probst

We mentioned in the script that it was down 10% on a cost per square foot basis and over half was through the distribution center. So as sales ramped up we had the ability to accelerate some of the inventory through the distribution center and if you compared this year to last year the big difference, at least half of that difference, over half of that difference, was due to the fact that we had less units of inventory in our distribution center.

So if you subtract that, maybe inventories at cost per square foot in the store are down around 4% and that’s a comfortable position for us. Obviously we proved in the third quarter that if it starts to ramp up we can chase that and make sure we have enough inventory to support the demand.

So from a total quantity, hope that gives you some clarity.

Deborah Ferree

What I would tell you is that its really important the merchants take positions, and take a stand on what they think the strong, big trend, key items are going to be for the season and so we spent a disproportionate amount of time really looking at what were going to be the big, big drivers for that category.

We put cancelled back ups in place so we were able to chase about half of that increase through our cancelled back ups. The acceleration of those back ups that would fill good selling items, cancelled those that didn’t work, and then we actually had a remarkable effect on working with our core vendors to be able to chase the balance of those sales.

So we were able to find what we wanted. That isn’t always going to be the case and so I would tell you that I still believe that its more in the planning up front and taking those positions on the big items, putting your stake in the ground, making sure that you support those and depending not as much on chasing on the back half.

But our increase allowed us to be able to do that so, it’s a blend.

Christopher Svezia - Susquehanna Financial Group

And just from a product perspective anything that you see, I mean a lot of talk on the fitness and toning category, what are you doing in that category as well at DSW.

Deborah Ferree

Well I believe that the [inaudible] what I kind of coin it as the coming revolution, I think its big and I think its here to stay and frankly I’m glad that there’s something this exciting that really has popped up as a big idea in the shoe industry because we always need a couple of these every single year.

So the position we’ve taken is we started with our key partner, Sketchers, and everybody has the shape-ups program. We tested that early, or late in Q2 early in Q3, saw some very, very promising results and positioned ourselves. Once again planned our inventory levels to where we position ourselves to be in a very strong position for fourth quarter going into first quarter.

So that is where we’ve taken the majority stake in the toning product. We are however testing product from other athletic resources in a good, better, best price point so we’ll test everything from a $39 all the way up to a $79 price point in addition to the $100 Sketchers shape up that’s out there right now.

Some of the early results from these test items have proved very promising. But now we’re going back to take a look at how big we think those can be as well. Even having said that I think you’re really looking at two, maybe three percent of your total business, the total DSW business being in this toning product where I think its going to be driven off a couple of key items and some assortment.

I think that its still only going to be two to three percent of the business, right now with the results with the results that we have. But we are taking the position in it, we’re positioning ourselves with our core vendors, we’re getting them to help get us cancelled backups in case this thing hits and hits big, we’ll be in a position to maximize it.

Christopher Svezia - Susquehanna Financial Group

Cash at year end, you’re at 265 now, does that just given your inventories, does that continue to build as you go into the fourth quarter off of that number.

Douglas Probst

Not significantly because we still start to build up our inventories going into the spring season, so traditionally we have a little bit of a decline in the cash balance going through the fourth quarter but it won’t be significant declines.


Your next question comes from the line of Dana Walker – Komar Investments

Dana Walker – Komar Investments

Could you address given the return to better results, how this makes you feel about new store activity, and then what type of progress you’ve made on the new store model, advertising, look, dollar spend, and productivity.

Michael MacDonald

One quarter is one quarter, so I think we need to show some consistency of performance. We’re pleased with the third quarter. We just have to make it a repeatable performance. In terms of new stores, we do believe that we can get to a store base of 400 over time. We have spent considerable time identifying on a very precise basis where those remaining 80 or 90 stores should be located.

Not just in terms of market but site-specific. So we know where we want to go, and the question is when those specific site opportunities come available. If you were looking for some guidance on how many stores we’ll be opening next year, we think right now the best guess is about 10.

As you mentioned we did have a new store task force that was studying our store openings from 2007 and 2008 and evaluating what things we could do to make those stores more successful because we were somewhat disappointed with their performance against their pro forma sales and profitability projections and we have applied a number of those learning’s to our store openings thus far in 2009.

And the performance of our 2009 stores is significantly better versus pro forma then our 2007 and 2008 stores were. I mentioned in my script that with the opening of our replacement store in Rochester, we affected many of the physical changes in the store that we think will make those stores more successful going forward and we’re going to have to monitor the results of several of the stores that we affect those changes in before we decide that that’s the store prototype going forward.

But it’s a long way, we want to grow, want to grow intelligently. We want to grow with the right situations that’s why we’ve been so precise in terms of mapping out where we want to put new stores. We want to apply the learning from some of our less successful store openings in recent years and it looks like that learning is paying off by virtue of the performance of our 2009 stores.

Dana Walker – Komar Investments

Happy to hear the better results. If you believe that 400 or thereabouts defines your boundaries, how many of your existing mix would you say you would like to re-site to better take advantage of limited counts opportunity.

Michael MacDonald

I don’t have that number right handy, its an ongoing process that we, is relevant at the time you have an opportunity to exercise some leverage with your existing landlords or with potential future landlords. I just don’t have, I don’t, I can’t hazard a guess on that right now.

I would not say it is, it is more like a 10% [inaudible], but then it is a 20% or 30%.

Dana Walker – Komar Investments

I’m sure the organization is energized by what’s going on, we’re pleased to see it.


Your final question comes from the line of David Mann - Johnson Rice & Company

David Mann - Johnson Rice & Company

A couple of follow-ups, on that big picture type of question when you look at your historical operating margin, obviously in third quarter you sort of bested what you’ve done in this quarter, give us a sense on your comfort level and getting back to anywhere in the 6% to 8% operating margin level.

Douglas Probst

Well I think in the longer-term obviously we’ve done 10% once before back in the first quarter of 2007 so to Michael’s point, one quarter does not make a complete change in our model but I can tell you that we do see that number, that operating income rate start to increase but it will take some time.

Over the next couple of years we expect it to get higher and higher as we continue to improve the operations of the business but the one key element of that model of course is the comp number. And obviously with some even low single-digit comps over the next couple of years, we could be in that 6% to 7% range reasonably.

But again we have to get a clearer outlook on the economic and consumer environment before we are too confident to predict that kind of rate, but clearly with some improved comps we’ve shown the ability to deliver some good operating income results and again with the environment getting better, we are pretty confident that its going to continue to rise that operating income rate.

David Mann - Johnson Rice & Company

And then in terms of the lease to [permanents], one thing I definitely noted in the, let’s say the [Stein Mart] stores, they didn’t have much of a boot assortment, can you just talk about the ability to improve the assortments there as well as the near-term and long-term profitability of the lease businesses.

Douglas Probst

We have a good team over in the lease business, absolutely and we’ve been looking at each of those businesses, Filene’s Basement, Gordman’s, Stein Mart, and even a Frugal Fannie’s store that we have and really focusing on the merchandise that’s appropriate for those chains, and they’re all a little bit different.

And I think the increased focus on that has enabled us to improve not necessarily just the sales, but also the margin rates associated with each of those businesses. So I think when we go back and examine the 2009 year, despite the fact that in a good quarter the lease business is down 1.5%, margins were significantly better.

The expenses have been contained, in fact reduced. And the profits have actually improved. So despite the issues that each of those businesses may be dealing with, we’re very comfortable with their inventory positions, how they’re assorted, and we’re doing business with those guys, and to remind you we extended the contracts with each of those businesses and we plan to be in business and grow those businesses for the years to come.

Michael MacDonald

And one thing I might add is just to emphasize what Douglas said is that the right answer for DSW stores may not be the right answer for Stein Mart stores, for Gordman’s stores, for Filene’s Basement stores. Hopefully what we’re doing is a service to our leased accounts, is we’re assorting those businesses in the proper balance according to customer preference in those markets.

So I think its probably a long way of saying if you have a more mature customer base, they may not buy boots quite as frequently as a younger customer base would.


There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

Leslie Neville

Thank you for joining us today. As usual, we will be taking calls all day today in our home office and have a great day. Thank you.

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