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Executives

Jean Fontana - Managing Director

Brian P. Woolf - Chief Executive Officer and Director

Thomas W. Stoltz - Chief Financial Officer, Chief Operating Officer, Executive Vice President and Treasurer

Analysts

Stephanie S. Wissink - Piper Jaffray Companies, Research Division

Jeremy Hamblin - Dougherty & Company LLC, Research Division

Mark R. Altschwager - Robert W. Baird & Co. Incorporated, Research Division

Body Central (OTCQB:BODY) Q3 2013 Earnings Call October 31, 2013 4:30 PM ET

Operator

Well, good day, ladies and gentlemen. Thank you for standing by, and welcome to the Body Central Corporation Fiscal Third Quarter 2013 Earnings Release Conference Call. Today's conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Ms. Jean Fontana of ICR. Please go ahead, Ms. Fontana.

Jean Fontana

Thank you. Good afternoon, everyone. Thank you for joining us today for Body Central's Third Quarter 2013 Earnings Conference Call. Hosting the call today will be Brian Woolf, the company's Chief Executive Officer; and Tom Stoltz, the company's Chief Operating Officer and Chief Financial Officer. You can access a copy of today's press release on the company's website at www.bodycentral.com or by dialing (203) 682-8200.

Before we begin, let me remind you that certain statements made on today's call during our prepared remarks and response to your questions may constitute forward-looking statements and are made pursuant to and within the meaning of the Safe Harbor provisions of the Private Security Litigations Reform Act of 1995 as amended. Such forward-looking statements are subject to both unknown and known risks and uncertainties that could cause results to differ materially from such statements. Those risks and uncertainties are described in the company's reports and registration statements filed with the SEC. Investors should not assume that statements made during the conference today will be offered at a later time. Body Central undertakes no obligation to update any of the information discussed on today's call.

With that, I will turn the call over to Brian Woolf.

Brian P. Woolf

Thank you, Jean. And thank you all for joining us. On today's call, I will briefly provide an update on the steps we have taken to get the business back on track for long-term growth and profitability and then review our third quarter results. Tom will then take you through details in our third quarter financial results and give you some business updates.

We are only several months into the company's repositioning initiatives. We firmly believe the direction we are taking is the right one. The new management team is working extremely well together and our assortments are more focused and dripping towards sexy evening and club wear. We now have lifestyle presentations that appeal to a wide customer mix. While it remains a very challenging time for women's apparel retailers, we are confident that these merchandising and marketing strategies will lead to improved sales and profits. Our focus remains on our strategic initiatives as follows: continued improvement of our product assortment; enhancing our messaging to our customers and becoming a true omni-channel retailer.

While we continue to implement our plans, we were disappointed in our third quarter results as the continuing challenging retail environment impeded our progress. While our comparable store sales and gross margin performance clearly did not meet our expectations, we do remain confident that we are taking the right steps to get our business back on track. We were encouraged by the favorable response to certain of our merchandising initiatives, specifically in our bottoms and shoe business, which both comped positively. In addition, we continue to refine our marketing initiatives, as we gain greater insights into our customer. I will provide some more details on both of these areas in a few minutes. We're implementing a cost-reduction program that Tom will speak about in more detail as well.

Now turning to some details about the third quarter. Comparable store sales were down 18% in the quarter. We attribute this to, among other things, a decline of mall traffic, particularly within our customer segment and the overall weakness in women's apparel. While traffic was down significantly, our store conversion rates remain relatively constant throughout the quarter. We had to heavily promote to move units and keep inventories in check, which led to significant gross margin deterioration. However, while our margin has declined, we proceeded to reduce our inventory per store, leaving us with a much stronger merchandise presentation. Therefore, we believe that we are better positioned to chase into categories, that should work well during the upcoming holiday season and beyond.

Overall, the direct business was down 14%. However, we have seen signs of improvement, particularly with the eCommerce business. We are now offering twice as many SKUs in our website and have expanded certain product classifications, such as lingerie and shoes. The eCommerce side of our direct business nearly tripled year-over-year, largely due to a product assortment that now mirrors the stores and gives our customer exciting new styles to shop. With the initiatives we have in place, we expect the eCommerce business will continue to increase during the coming months.

Despite a challenging quarter and headwinds in the women's apparel sector generally, we are seeing a number of positives in our product assortment. Our overall bottoms business, again, achieved positive comps during the third quarter through very fashion-driven themes like solid and printed leggings, maxi and mini skirts and our new Sexy Stretch line. Our new Sexy Stretch product line has been focused in the bottoms category initially with the opportunity to expand to other classifications. We believe we can utilize exclusive lines in the future to differentiate our offering from our competitors and grow the business. Also as I mentioned, shoes continues to perform well, and we have a great presentation of boots and dressy for the holiday season. And with cooler weather now, coats are performing better.

While tops and dresses both underperformed our expectations, we saw some areas in both categories improve, and we believe we are headed in the right direction for fall. More specifically, sweater dresses has performed very well online and are picking up steam in our stores. Mini dresses have done well as a new trend. In our tops area, core merchandise has been very good as part of the total outfit with more fashion-oriented bottoms. Also, there have been good indications that sweaters will do well for the fourth quarter.

Our research shows we are known for sexy attire and nightlife or club wear. Nightlife is our best act category and will be our primary focal point for our merchandise hierarchy. We have a strong evening presentation of stores currently for the fourth quarter.

Looking at the current customers base compared to the customer base during 2011, the company's best-performing year, we found that today's customer is much younger and less affluent than the customers that shopped with us in 2011. It will be our goal to expand the customer base through product assortment and marketing campaigns.

From the product standpoint, we will achieve this by carefully expanding the penetration of core and novelty core to the total. The right penetration of core and novelty core should give us the opportunity to better balance our custom mix going forward, and the product assortment is now very consistent across all channels, stores, eCommerce and catalog, as we strive to become a true omni-channel retailer.

In marketing, we continue to push our email capture on a weekly basis. We are aggressively expanding our email campaigns, and we'll continue to do so. Starting with catalog distributions in November, we will be able to direct mail to over 900,000 store customer addresses we have appended from POS transactions during the first half of this year. Our #1 challenge in opportunity is to drive traffic into our stores. In addition to the outreach to store customers just discussed, we have put our price point claims in our store windows that emphasize great value. We are promoting and taking hard marks in line to make certain we are price-competitive. Again, our email client campaigns are way up; and during November, we plan to kick off our first text messaging initiatives. And finally, we continue to invest more in social media marketing and to develop loyalty campaigns.

We also continue to test our new store formats in different variations of the full prototype in our Jacksonville market and in several new store openings occurring this fall.

In summary, we remain confident that these merchandising and marketing initiatives will result in reengaging our customer and will start to develop brand awareness for Body Central.

Now I will turn it over to Tom for some more business updates and a recap of the financial results in our third quarter.

Thomas W. Stoltz

Thanks, Brian. Given the business environment, the key focus for our management team is to reduce expenditures and use our cash prudently. We have eliminated approximately 18 corporate positions or about 11% of our corporate workforce. In addition, we are making reductions in store payrolls to better match sales trends through improved scheduling technology that allows us to schedule hours during peak traffic periods on a by-store basis. We also are making reductions in non-payroll expense areas that will result in additional savings. All together, these reductions will reduce SG&A expenses on an annualized basis by $5 million from our current run rate. The headcount reductions are now in effect and have been communicated throughout our organization. Our non-payroll-related reductions have either been made or will be initiated now through the end of the year. We will continue to review our payroll expense as we evaluate our business. The implementation of traffic counter system has allowed us to analyze the business down to the individual store level during the past quarter. We can now focus store management on converting traffic into transactions while driving our quality of sales with best practices benchmarking.

This system and the in-store behavioral changes taking place will also enable us to refine our store labor scheduling going forward to better match associate hours with peak traffic periods on a store-by-store basis. We believe we will save at least $2 million annually in store payroll over the next year without sacrificing customer service levels.

We continue with our strategies to upgrade systems and our DC capacity. We plan to move into our new facility during the first half of next year. System implementations will also continue throughout 2014. These large capital projects require about $16 million to $19 million in expenditures. The company is currently negotiating agreements to fund these capital additions through lease financing. If the proposed transactions do not close or do not close timely, some or all of these projects may be delayed. In addition, we are negotiating an increase in our current line of credit. We are working on closing this transaction by the end of December this year.

Based on our current projections, without additional financing, we believe our cash availability is sufficient for at least the next 12 months. We have reviewed our new store expansion plans for now and have targeted about 10 new locations for 2014 that represent great opportunities for us, and we may open in these locations next year, assuming our existing business stabilizes and improves. We have not yet executed any leases for the new stores in 2014.

In addition, upon reviewing leases that are up for renewals and leases with kick-out clauses, we expect to close about 12 to 15 stores next year. All of these projected closings are either based upon lease expiration dates or lease termination triggers without further rent obligations. We have reviewed our entire portfolio on a rolling 12-month basis through September 2013 and have concluded that we have 8 stores that are losing money on a four-wall basis. Five of these will be closed as part of the store closings that I just mentioned. Again, we believe that all of our initiatives will contribute to the growth and health of the business looking forward and that we are making good progress in repositioning the company.

Now I will discuss our financial results for the third quarter. Net revenues decreased 10.4% to $60.8 million for the third quarter this year from $67.9 million last year. Store sales decreased 10.1% to $55.7 million for the quarter from $62 million last year. This decrease was driven by net new store unit growth of 28 stores or 10.6% increase, offset by an 18.3% decrease in comparable store sales for the quarter.

Our comparable store sales decrease for the quarter was driven primarily by a decrease in the number of transactions per store and lower average unit retail. Direct sales, which include catalog, eCommerce, shipping and handling fees, totaled $5.1 million for the quarter as compared to $5.9 million last year, a decrease of 13.6%. This decrease was driven by a 23.7% reduction in catalog distribution and an approximate $0.38 decrease in revenue per catalog.

Simultaneously, we have expanded eCommerce efforts, which primarily include email, display ads, pay per click and affiliate programs. The revenue growth in these new market channels has approximately tripled in the third quarter of 2013 compared to the same quarter of 2012. As Brian mentioned, we'll continue to expand our email campaigns and look forward to our November catalog drops that include a large segment of our store customer addresses.

Gross profit for the quarter decreased 48.2% to $11.1 million from $21.5 million last year and, as a percentage of sales, decreased to 18.3% from 31.7% last year. Because we wanted to enter the holiday season with a fresh inventory position, we aggressively increased markdowns taken to clear slow-moving merchandise and ran numerous promotions to drive traffic into our stores.

Selling, general and administrative expenses increased 24.2% to $24.5 million for the quarter. The increase in total expenses resulted from, among other things, an increase in store operating expenses related to the growth of new stores, additional marketing spend for customer research and to drive traffic to the eCommerce site into stores and an increase in corporate expenses related to key employee hires within the past year. The company incurred approximately $474,000 in the quarter related to severance, relocation and recruiting expenses associated with the strengthening of our organizational structure. As a percentage of store sales, store operating expenses increased to 24.2%, resulting from deleveraging against negative comparable sales in the quarter. Corporate costs increased to 16% of overall sales. Overall SG&A expenses increased to 40.2% of sales, including corporate costs.

Depreciation and amortization expense increased to $2.2 million as compared to $1.6 million in the same quarter last year, primarily from the addition of new stores and new systems. As a result of these factors, operating income decreased to a loss of $15.5 million from $196,000 in income last year.

Finally, net loss for the quarter was $9 million or $0.55 per diluted share, based on 16.4 million weighted-average shares outstanding. This compares to net income of $153,000 or $0.01 per diluted share from 16.3 million shares outstanding last year.

Reviewing the year-to-date results, net revenues decreased 5.5% to $217.4 million from $230 million last year. Store sales decreased 3% to $195.3 million as a result of a 10.6% increase in store count, offset by same-store sales decrease of 13.6%.

Direct sales decreased 22.8% to $22.1 million as a result of decreasing catalog distribution from the prior year and a decrease in revenue per book. Gross profit contracted 470 basis points, primarily as a function of the sales and gross profit rate declines in the stores and direct business.

Excluding the impairment charge reported during the second quarter related to goodwill, we realized an operating loss this year-to-date of $16.4 million and had a net loss of $8.7 million or $0.53 per diluted share.

Turning to our balance sheet. Cash, cash equivalents and short-term investments were $20 million with no debt at the end of the quarter compared to cash, cash equivalents and short-term investments of $36.9 million and no debt in the third quarter last year. This reflects cash generated from operations of $477,000 and CapEx to $17.5 million for the last 12 months.

Our total inventories were $24.5 million and $20.9 million at the end of the quarter last year, which includes the direct business and inventories in transit. On an average store basis, inventory was down 12.4% at cost and up 4% on a unit basis compared to last year.

Now looking ahead to the fourth quarter. October sales trends have remained tough with comparable sales trends -- trending similar to the third quarter. We expect sales trends to improve from Thanksgiving through Christmas due to the improved merchandise assortment and our marketing efforts, although we manage our inventory levels and cash flows based on no improvement.

We expect gross margins to again be under pressure, as we have taken markdowns in October to decrease our per-store inventory ownership and we'll likely need to be promotional throughout the remainder of the quarter in light of the current apparel retail environment. However, we do expect to see some sequential improvement in gross margins from our third quarter this year. We expect total SG&A expenses to be in the range of $24 million to $25 million for Q4, slightly higher than the first 3 quarters this year due to increased store payroll to support higher sales volumes during the holiday season. In addition, SG&A expense will include $600,000 of onetime severance costs, connected with the job eliminations we've discussed during this quarter. As mentioned, based on the current business plan, we currently project that we will have sufficient cash availability for at least the next 12 months.

And now, operator, please open the call up for any questions.

Question-and-Answer Session

Operator

[Operator Instructions] Well, our first question will come from Steph Wissink with Piper Jaffray.

Stephanie S. Wissink - Piper Jaffray Companies, Research Division

Just a couple -- Brian, if I could start with one for you and then one for you, Tom, as well. Brian, I think you talked a little bit about kind of coming out of the last quarter this focus on what you think your best bet and you talked about nightwear and club wear. I wanted to just see if you could share a little bit about the strategies you've seen from some of the other retailers around kind of day-to-night fashion, if that changes your strategy at all around that competitive niche. And then, Tom, a question for you on the, what looks to be about a 5% cost reduction, your $5 million, and about a base of $100 million, is that really the variable expense components? Or are you starting to dip into some of the core fixed expenses? And is there more there to be cut? Or do you see this as a onetime event and then, moving forward, starting to add back to some of the expense structure?

Brian P. Woolf

Yes. Certainly, again, we keep doing updated consumer research and our consumer keeps telling us that she likes to come to us for the club evening wear and nightlife piece of our assortment. And we know over the past several years that, that's our best act category and that's obviously what we're known for. Coming out of the third quarter, we repositioned the nightlife piece of the business even more aggressively. We think we've got a lot of styles that are crossover between day into evening, so that is not exclusively club. And we think we have a really good balance in terms of the sportswear piece and the dress piece devoted to the nightlife piece of the business. So our level of confidence is pretty high. With regard to the competition, it's difficult to know with -- how aggressive people will stay with that in the fourth quarter. I think listening to the market, the amount of club business that's being produced and really the number of resources and retailers that are going to get into the club business, I think it's -- we'll just have to wait and see. But our level of confidence, certainly, in the dress piece of the business when it comes to club is high.

Thomas W. Stoltz

Again, as it relates to your question on SG&A, I'll make sure I've got your question exactly right. I think you were asking for the $5 million roughly in total SG&A expenses, how does that compare to annualized rate, is that what you asked?

Stephanie S. Wissink - Piper Jaffray Companies, Research Division

Yes, it looks like it's just over 5% of the total SG&A structure of what is has been tracking to.

Thomas W. Stoltz

Yes. That's correct.

Stephanie S. Wissink - Piper Jaffray Companies, Research Division

Is that the beginning of a plan of cost reduction? Or should we see this as the entirety of the cost reduction?

Thomas W. Stoltz

Well, at this point, I believe -- we think we've made the reductions in the corporate staff that are appropriate. I would say that we continue to look for other cost savings throughout the organization on the store side. We're looking for ways to cut our cost in terms of repairs and maintenance and supplies, and we think we've got some ways to do that. Some of that is incorporated in the $5 million, but I think we'll continue to search. But for now, the $5 million is a good number, I think, to base future projections off of.

Brian P. Woolf

And I think we'll also be looking at a phase in the DC and whether opportunities that are in terms of the supply chain.

Stephanie S. Wissink - Piper Jaffray Companies, Research Division

Okay, so we should flow that $5 million through the out-year as well.

Thomas W. Stoltz

Correct.

Stephanie S. Wissink - Piper Jaffray Companies, Research Division

Okay. And if I could just throw in one more, guys. I think, Tom, you mentioned the CapEx plan for the year and for the out-year, if you could just give us some sense of how that will sequence as you kind of roll out some of the lease commitments this year, and it sounds like no committed leases next year, but looking at sites still at this point.

Thomas W. Stoltz

Right, and as I mentioned, as our store sites and store leases go, we have about 10 sites that will be very good sites for us to open. But we're not going to commit to any of those in 2014 until we see the existing business improve.

Operator

[Operator Instructions] We'll move on to Jeremy Hamblin with Dougherty & Company.

Jeremy Hamblin - Dougherty & Company LLC, Research Division

I wanted to see if I could clarify something on the CapEx. So I think, originally, you were looking at your $21 million, $22 million for CapEx in 2013, and it looks like you spent about $5.8 million in the third quarter. What -- how does the CapEx fall out for the rest of 2013? And then in terms of a raw number for '14 obviously, is there some flexibility based on the stores? But you mentioned $16 million to $19 million in total, is that just -- will some of this that you were originally thinking would be spent this year that's just going to be pushed into next year?

Thomas W. Stoltz

Yes. Yes, the $21 million to $22 million was the estimate for 2013. That included opening the 22 stores. So that was part of that $21 million to $22 million and then roughly $15 million to $18 million or so of that was the systems and the new distribution center and the material handling equipment that goes in that. As we progress through the projects, some of that, particularly on the system side, will be delayed into 2014, particularly as it relates to the warehouse management system. We want to get -- move physically into the new distribution center first before we change the systems. And so that is sort of translated into moving that part of the system's initiation out into probably the latter half of 2014. So that can be $3 million to $4 million of this. In the fourth quarter, we're probably expecting somewhere in the range of $6 million to $8 million in CapEx related to the distribution facility and finishing that up in the material handling part. And there'll be some smaller amount of store capital as we finish up opening the final 3 or 4 stores here in the fourth quarter.

Jeremy Hamblin - Dougherty & Company LLC, Research Division

And so what -- can I assume then that you would expect to burn a little bit more cash in the fourth quarter, given kind of the AURs that you're realizing and kind of the comp trends combined with that $6 million to $8 million in CapEx?

Thomas W. Stoltz

Yes. Some of that will be dependent on getting some of this lease financing for the capital budgets in place. If that occurs in the next month or 2, we'll actually get some money back that we've already spent out as it rolls into a lease. So it will sort of depend on the timing on when the lease get in place.

Jeremy Hamblin - Dougherty & Company LLC, Research Division

Okay. And then, Brian, I just kind of wanted to ask a high-level question, because we really have heard a lot of your competitors struggling kind of in the teen and 20-something space. Can you put your finger on why you think this sector is struggling so much? Is it a lack of trend? Do you have any sense on that, Brian?

Brian P. Woolf

Well, I can only speak at a global level, and a lot of it is anecdotal from what I've been hearing overall in the marketplace. Denim, overall, is a category that remains under pressure. Our denim business here has been mixed. And I think in the teens sector, when everybody has a huge denim base and you're up against it, and that business isn't trending, I think the results become problematic. I do think that the trends in tops also are somewhat hit or miss. The screen business, some of it's good, some of it's not from what I've been hearing. The crop business, the same kind of thing. And I think the strength of our business, and I think from what I've been hearing also anecdotally, is that the core piece of the business for us and a lot of other people remains strong. I think the challenge that we would have and a lot of other retailers would have is the core, by definition, is somewhat price-sensitive and a lot of the AURs if those are the units you're selling are below a $10 retail. So I think that puts pressure, obviously, in terms of mix. So I think it's all of those issues that really add up to a difficult business environment, and the traffic remains tough. I think from a macro, and I hate to use macro as an excuse, or any kind of rationale for why business isn't good, but I do think in terms of the government shutdown, the talk of that -- the fact that ObamaCare is coming in. And a lot of the customers, our customers, aren't sure what that means to their pocketbook and how much they have in terms of disposable income. I just think there's a lot of nervousness out there, certainly, for the income group that does not have a lot of disposable income.

Jeremy Hamblin - Dougherty & Company LLC, Research Division

Okay, and you're seeing trends in October similar to what you've seen in the past quarter?

Brian P. Woolf

Overall, but I did speak to some highlights that we see on a per-style and per-classification businesses, where we see trends opening up. One thing I can speak to here is that we are confident in the assortment we will present to our customers. We are narrower and deeper and more focused. The one nervousness we have, which has been the big challenge for us and I guess a lot of other people, we can't speak to much better assortment, bringing in a lot more traffic. And that traffic challenge is not easy to overcome right now.

Thomas W. Stoltz

I would just add to that, that we are excited to -- for the catalog drop that we have in November, that a large percentage of that drop is going to be sent out to store customers that we know shopped in our stores throughout the first half of 2013. So that will be a change. In the past, that catalog has gone out to a different list, a more niffy [ph] catalog customer from the past. So we were hopeful that reaching out from the store customer will create some additional interest in traffic into our stores.

Brian P. Woolf

Yes. I mean, since we obviously view traffic as the #1 challenge, starting tomorrow, as a matter of fact, well, maybe it's Saturday, but I believe it's tomorrow, we will have 2 banners, one in each window, announcing our texting launch, where we will offer customers 20% discount if they will come in and sign up on a mobile code program. So they can opt in to our text messaging, SMS program, which we think, obviously we've been talking about it, will be very beneficial to us in terms of our messaging campaigns going forward. So we would hope now, because we did talk about marketing and messaging as being a big opportunity and a challenge up until this point, that we can really start driving our marketing campaigns and our messaging campaigns in the way that we would like and, more importantly, the way that our customer wants to be spoken to.

Jeremy Hamblin - Dougherty & Company LLC, Research Division

Okay. And Tom, how many catalogs were circulated in Q3? And how many do you expect to do in Q4?

Thomas W. Stoltz

In Q3, I think we circulated a little over 3 million. This year -- I'm trying to look at the numbers here, yes, 3.2 million this year versus 4.2 million last year. And I think we're going to be circulating in the range of 3 million to 3.5 million in the fourth quarter this year. I don't have last year's fourth quarter in front of me right at the moment.

Operator

And we'll take our last question from Mark Altschwager with Robert W. Baird.

Mark R. Altschwager - Robert W. Baird & Co. Incorporated, Research Division

Let me just start off with a quick follow-up, just on the trends topic. I think you addressed some of the reasons for the sluggishness we've seen in the sector. But maybe looking forward, are there any particular fashion trends that you're seeing that have the potential to reinvigorate growth in the sector? And if so, how are you positioning for that heading into next year?

Brian P. Woolf

Well, it's interesting. Because normally, we don't like to give out competitive information, certainly, but with what we're -- but we thought it was important to give everybody a little flavor in terms of where we're starting to see some strength. So I think that just -- again, we're seeing, and I'm sure other people are seeing, is that the sweater dress piece of the business is strong. Midi-dresses is strong. Sweaters look like they have an opportunity in the fourth quarter, certainly in November and December, to drive strength. And just taking a look competitively as some of our competitors are positioning leggings, skirts, both in maxis and midis, there certainly is an opportunity we continue to do well in those categories, too. And as the weather has cooled off, the outerwear business is definitely strengthening. So we -- unlike the third quarter, we are definitely starting to see some light in terms of the strength of certain classifications.

Mark R. Altschwager - Robert W. Baird & Co. Incorporated, Research Division

Great. And then I think last quarter, you talked about reevaluating some of the consumer research you've done to give you insight on where the brand needs to go? Can you provide us with an update on that and any conclusions you've drawn from it?

Brian P. Woolf

Well, again, as I mentioned, the customer base is younger now than it was in 2011. And the income level of that customer base now is under more pressure than in 2011. So with the positioning -- and everything we're talking about is balance and degree. With the positioning of our core and novelty core assortments going forward, we think that we will definitely broaden and expand our customer base going forward. We truly believe that when it comes to the fashion and trend piece of the business, fashion and trend is not an age, it's not a size, it's not an income level. And we think that we can definitely be more expansive that there are many customers in their upper 20s, 30s and 40s that can come in and buy our merchandise, and we are going to look to broaden that customer base.

Operator

Well, ladies and gentlemen, that is all the time we have for questions today. I'll turn the conference back over to Mr. Woolf.

Brian P. Woolf

Thank you. Again, just to recap, traffic is challenging. We remain confident in the positioning of our assortments going forward. We're firmly convinced that the strategies we have in place are the right strategies, And we will continue along those lines. Thank you.

Operator

And again, ladies and gentlemen, that does conclude our conference for today. We thank you all for your participation.

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