rue21 Inc (NASDAQ:RUE)
Q3 2009 Earnings Call Transcript
December 8, 2008, 4:30 pm ET
Bob Fisch – Chairman, President, and CEO
Kim Reynolds – SVP and General Merchandise Manager
Keith McDonough – SVP and CFO
Anna Andreeva – J.P. Morgan
Jeff Klinefelter – Piper Jaffray
(Operator Instructions) We’ll take our first question from Brian Tunick with J.P. Morgan.
Great, thanks so much. Good afternoon guys. It’s Anna for Brian. First question to you Bob. I’m curious what kind of trends are you guys seeing in your strip centers
versus regional malls and outlets? I’m assuming your strip center channel is outperforming the other two. And as we look into next year, I was hoping you could talk about some of your store openings by real estate. Bob, I think you mentioned you’re entering some of the new markets in Washington and Oregon. Do you expect most new stores to come from existing centers or new centers? And you guys have obviously levered this strip center development out there, and some of those new centers have been drying up recently. How do you view the real estate pipeline for the next couple of years?
Okay. What was your first part of the question, because I couldn’t hear that, it
was coming in low.
I'm sorry. Can you hear me better?
I was wondering what kind of trends are you seeing strip centers versus regional malls and outlets?
Well, very interesting. I’m seeing consistent trends between strips, outlets and malls. All three are on all cylinders right now and are fairly consistent. It isn’t that strip centers are so much outperforming malls or outlets centers. The malls and the strip centers and outlet centers are performing fairly similar and consistent. To us, I think that’s a very important lever. These are all of our cylinders. That’s part of our three-pronged strategy.
And I think that, as far as for next year, I think there is two more parts to your question. Yes, we opened in Washington and Oregon as two new states and we’ll expand there. And some of our major rapid expansion will be more into the south and the southwest. And that’s where we see ourselves growing more rapidly.
We see right now, as probably everybody on this call knows, that there is going to be very little new store, new center openings this next year. But, there is plenty of back-fill opportunities. Unfortunately, other retail situations that we are looking at and have looked at over 250 to 300 locations that will be utilized to open up 100 stores. So, we do not see things drying up, and we see that our major growth will be in strip centers, and we will also be growing in value regional malls.
Okay. That’s great. And as you guys are signing leases, can you just update us of what are you seeing in terms of rents? I think you talked about your occupancy rates already coming down nicely this year. What do you expect for 2010?
Well, we see that nothing has really changed with the developers. And I think it could be still even tougher for them, because I believe that there will be more retail store closings and there are more opportunities. And I see ourselves being able to carve out more locations. And I would see a continuation of really being able to utilize this opportunity to get better rents.
Okay, that’s great. That’s helpful. And I guess, question to Kim. I think Bob, you called out in your prepared remarks that you saw strength by category in juniors, and men’s and accessories, with men’s outperforming juniors and accessories. Could you maybe give
us a little bit more color on that, specifically, what are some of the categories that are driving the business, and what do you see as comp drivers into 2010?
As was mentioned earlier in the prepared information, we have three families of business including guys, girls and accessories. Our third quarter comps were led by our edgy and fashionable guys division, and it was followed very closely by successful comps in both girls and accessories.
With regard to that, our denim business continued strong in both categories of business. Our accessory business continued to be strong and we’re starting to get some early
reads on what we consider to be spring trends.
Okay, that’s great. Very helpful. Thanks guys, and good luck for the holiday.
Thank you very much.
We’ll take our next question from Jeff Klinefelter with Piper Jaffray.
Yes, thank you. Thanks for all the detail, Bob and Keith. In terms of the composition of your comps, the promotional activity that you had planned and utilized during the third quarter, how did it track relative to your expectations going in, how much of an influence was the competitive environment, kind of how you are seeing that influence your business at this point, and what would you anticipate going forward?
Well, I think first of all, for comp and total sales growth, I think very comparable to last year, Jeff. We do not look to promote more this year sales promotion wise. I think it's very comparable to last year and under good control. And so, I see that’s similar and I think that we’ve been noticing a very strong regular price business, and price has not been an object when you have great value in fashion. So, we’re very encouraged to have a good balance between regular price and sale.
Okay. And then, in terms of your store opening plans, can you update us on your current situation with respect to remodels, and how many you would anticipate finishing going into next year?
Well, I think this year, most of our remodels are conversion store relocations, as you know, and I believe we did 26 in 2009. And I see approximately the same or a few more of that in that range for 2010. But almost exclusively, they will be conversion stores of relocation. And so, either within the same center or if you’re in a mall maybe going to a strip center right across the street, and of course, definitely having the strength also of the store store-within-store et cetera accessory concept with it.
Okay, great. Thank you very much.
You’re most welcome.
(Operator Instructions) I show no other questions coming in the queue at this time. I
will turn the call back over to Mr. Bob Fisch.
Thank you very much. I want to thank everyone for joining us on this call today. We are back to work tomorrow making sure we do all we can to make this a great holiday season for rue21 and our shareholders, and making sure we are delivering what our customers expect from us, making our customer feel good every day at rue. Everything is about taking care of our customers. So, I want to wish all of you a very happy holiday season, and I look forward to speaking and to meeting with you again next year. Do you rue?
Thank you very much everybody. Good day.
This concludes today’s conference call. Thank you for your participation.
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