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Genesco Inc. (NYSE:GCO)

F4Q 2014 Earnings Conference Call

March 13, 2014 08:30 ET

Executives

Bob Dennis - Chairman, President and Chief Executive Officer

Jim Gulmi - Chief Financial Officer

Analysts

Taposh Bari - Goldman Sachs

Steph Wissink - Piper Jaffray

Pam Quintiliano - SunTrust Investments

Mark Montagna - Avondale Partners

Steve Marotta - CL King

Jill Nelson - Johnson Rice

Mitch Kummetz - Robert Baird Investments

Chris Svezia - Susquehanna Financial Group

Ben Shamsian - Sterne Agee

Operator

Good day, everyone, and welcome to the Genesco Fourth Quarter Fiscal Year End 2014 Conference Call. Just a reminder, today’s call is being recorded.

Participants on the call expect to make forward-looking statements. These statements reflect the participants’ expectations as of today, but actual results could be different. Genesco refers you to this morning’s earnings release and to the company’s SEC filings, including the most recent 10-Q filing, for some of the factors that could cause differences from the expectations reflected in the forward-looking statements made during the call today.

Participants also expect to refer to certain adjusted financial measures during the call. All non-GAAP financial measures referred to in the prepared remarks are reconciled to their GAAP counterparts in the attachments to this morning’s press release and in the schedules available on the company’s homepage under Investor Relations.

I will now turn the call over to Bob Dennis, Genesco’s Chairman, President and Chief Executive Officer. Please go ahead, sir.

Bob Dennis - Chairman, President and Chief Executive Officer

Good morning and thank you for being with us. I am joined today by Jim Gulmi, our Chief Financial Officer. As in prior quarters, Jim’s detailed review of the quarterly financials has been posted to our website, along with the press release from earlier this morning. I will begin today’s call with remarks about our full year and fourth quarter results, our start to fiscal ‘15 and our outlook for the year. Then I will turn the call over to Jim for a review of the numbers and guidance, and after that, I will return and give a little color on our operating segments before opening the call up for your questions.

Our adjusted earnings per share for fiscal ‘14 were $5.09, a $0.01 below the low end of our guidance. We set expectations around the low end of the range when we last updated guidance in early January. Fourth quarter comparable sales increased 1% and overall sales roughly met our expectations. The miss on earnings was largely related to lids.com getting aggressive in January with dynamic pricing on clearance goods and on their digital marketing spend, which drove solid sales growth, but hurt profitability more than we expected.

Through last Saturday, quarter-to-date comps were down 2%. Sales have been choppy recently with the first week of the quarter down significantly due to a major winter storm, but then sales improved as more normalized weather arrived and the IRS started returning money to early filers. As a measure of the weather’s impact, comps in our stores have been roughly on plan for the quarter excluding the first week. And for the entire quarter-to-date comps have been positive in our west and southwest regions, where weather has not been much of a factor. Having gotten our inventories clean in January, we have maintained our typical promotional posture for February and for the quarter we expect gross margins to be solid. Looking forward to this year overall, the absence of a meaningful new fashion driver in the teen footwear space makes us cautious about Journeys and Schuh’s prospects in the first half of this year and customer traffic remains somewhat choppy across the whole company.

So our expectations for the company’s comp sales in the first half of fiscal ‘15 are modest. We are expecting a first half comp in the 1% to 2% range compared to the back half range of 2.5% to 3.5%. Overall, for all of our retail businesses, including direct, we are budgeting low single-digit comps for the year, which was split between low single-digits in our stores and high-teens in our direct business. Last year, direct accounted for 7% of our overall retail sales and we look forward to increase to 8% this year. And this year’s fourth quarter direct was 9% of retail sales.

We do see several opportunities for targeted growth in the coming year. We are concentrating store expansions in our under-penetrated retail concepts, namely Locker Room by Lids and Clubhouse stores in North America, Journeys Kids in the U.S., Schuh in the UK, and Johnston & Murphy in North America. Locker Room and Journeys Kids have delivered solid comp sales gains this year and Schuh’s new stores as a group, are performing ahead of budget despite the businesses’ tough comps over the past year. J&M’s steady improvements have expanded their potential real estate reach. Overall, we see the opportunity to add a total of 92 net new stores in these four concepts this year and a 125 net new stores overall. And this includes potential Locker Room by Lids acquisitions but does not include up to 175 new Locker Room by Lids shop and shops within Macy's. So the large majority of our net new stores are in our expanding concepts. We are opening stores much more slowly in our more mature concepts Journeys and Lids headwear being mindful not to over expand. Altogether, we are expecting to increase our net store count by 125 which is up 5%. Again excluding Macy’s which would add another 7% to that total.

Our other growth focus for the year remains the direct business and related omnichannel initiatives. Direct comparable sales increased 10% in Q4 on top of the 17% a year ago and gained 11% for the year on top of 11% in fiscal 2013. We are mobile optimized across all of our retail concepts and therefore an increasing percentage of these sales are coming from mobile and tablet devices. Our gains are in part a result of our operations providing a range of shopping options for our customers. For example, our customers in Journeys, Schuh and Johnston & Murphy have for sometime been able to access our concepts an entire inventory position from both stores and online our capability first established many years ago to service the stores.

Not only does this drive sales from customer shopping on their own devices, but it also allows in-store customers through our POS to access product styles not available in that store or to address size gaps within a particular store. As another example customers in all our concepts can buy online and return purchases to our stores. Many customers like this option because our very broad store network often makes in-store returns and exchanges easier than shipping merchandise back. Fully 5% of Journeys groups in-store sales last year were actually digital sales made online via POS terminals in the stores and shipped from our warehouse or another store to the customer. We report these digitally assisted sales executed within our stores as store sales, not direct sales but this capability obviously helps us compete effectively.

As we have discussed Lids is rolling out similar capabilities by late summer and the resulting online access to the full range of Lids inventory should provide a sustained boost to available SKUs online and to sales. All this underlines what we see as a key strategic advantage in having both bricks and mortar stores and a robust digital commerce presence since the two channels are truly symbiotic feeding and supporting each other so that the whole is greater than some of its parts.

We have a number of other initiatives underway or in the planning stages to enable us to provide additional direct and omnichannel capabilities to better serve our customers wherever and however they chose to shop. For example at Journeys, Schuh and Johnston & Murphy today customers are able to go online and check store availability for product they would like to buy before making the trip. And at Schuh they can also reserve product online. We pull that product off the shelf and hold it for them and they can then come into the store and try it on before actually buying. And this last capability will eventually be extended to the rest of our store brands.

In addition, to give customers access to an even broader range of products than what is carried in our stores, we are increasingly carrying internet only product online and for select vendors giving customers access to inventory and vendor warehouses for even greater selection. To improve delivery options and timing, we are experimenting with local shipping points and many warehouses in our stores in order to get merchandise to the customer faster.

Importantly, we are investing in the systems that enhance our omnichannel capabilities. We have previously mentioned to you a new order management system to streamline and enhance the process between a customer sale and product delivery which we expect to be operational later this year. The Lids warehouse is leading the way for us on innovation with a commitment to install a robotic system this year for faster and more efficient picking. We are implementing new front end e-commerce platforms in all of our North American businesses and we are continuously investing in call center and warehouse upgrades. All of this leads us optimistic for continued growth in direct and for improved service options for our customers overall.

So despite recent challenges and our muted expectations for the first half of 2015, we believe the fundamentals of our business remain intact and we are encouraged about our store opening plans and especially about taking our omni-channel initiatives to the next level. This year’s plan accelerates some of the investments we are making in our key growth initiatives. These investments are incorporated into our projections for fiscal ‘15 adjusted earnings per share growth in the range of 6% to 9%. We remain focused on successfully navigating through the current headwinds and driving towards the five-year goals we shared with you last quarter.

And I will turn the call over to Jim now to review the numbers for the quarter.

Jim Gulmi - Chief Financial Officer

Thank you, Bob. As a reminder, detailed information for the quarter has been posted online. So I will try to highlight a few important points in the reported results and focus in more detail in guidance for the New Year. For the reasons Bob has mentioned, the fourth quarter came in slightly below our earnings guidance, which was last updated in January. Consolidated net sales for the quarter were essentially in line and flat with last year. Excluding the additional week last year, total sales were up about 4%.

Comp sales for the quarter increased by 1%, with their direct business up 10% on top of 17% last year. Comps for the Lids Sports Group increased by 4% for the quarter reflecting strong Super Bowl related sales in our Seattle-based Lids Locker Room stores. Lids direct business increased 18% on top of 27% last year.

Journeys’ quarterly comps were flat. Journey direct sales increased 20% in the quarter compared with 14% last year. Johnston & Murphy continued its strong performance with a comp increase of 11% in the quarter. The Johnston & Murphy direct business was strong with a 26% increase on top of a 10% increase last year. At Schuh, both store and direct sales were down 7% with the direct results coming on top of a 17% increase than last year’s fourth quarter.

Adjusted operating margin for the company was 10.4% compared with 10.3% last year. Gross margin improved by 50 basis points in the quarter plus rather this increase was slightly below our expectations due to the factors Bob mentioned in his opening remarks. It was good to see as this marked the first quarterly gross margin increase in the past six quarters. The gross margin improvement was through for all business units with the exception of licensed brand – with the exception of the Licensed Brand Group, which experienced some margin pressure. We remind you that gross margin moves around for us depending on sales mix.

Adjusted SG&A as a percentage of sales was 38.3%, up about 40 basis points compared with last year. The tough sales comparison made it difficult to leverage in the quarter even with the lower bonus accruals compared to last year. Overall, SG&A expenses were up only 0.3%.

As we have just discussed before, we are expensing the Schuh acquisition-related contingent bonus quarterly, which is included in our guidance and in the adjusted numbers we report. For the quarter, the contingent bonus accrual of $6 million reduced EPS by $0.20 compared to $6.3 million or $0.20 per share last year. For the full year, the contingent bonus expense amount was $13.1 million or $0.43 per share compared to the $15.8 million or $0.50 per share last year. We expect to fully expense the remainder of this contingent bonus in fiscal 2015.

In addition, the Schuh deferred purchase price expense in the quarter was $3 million or $0.13 per share. Last year, the amount expense for the quarter was $3.2 million or $0.13 per share. For the full year, the deferred purchase amount expense was $11.7 million or $0.50 per share compared to $12.1 million or $0.50 per share last year. Consistent with past practice, we have excluded this from our guidance and from the adjusted results. This and the other items excluded from the adjusted results included the effects of the midyear change in our EVA bonus accounting are spelled out in the earnings release as well.

Approximately, £15 million or about $25 million of the deferred purchase price which has been accrued annually since we acquired Schuh will be paid in fiscal 2015. The final payment of £10 million or about $16 million will be due in fiscal 2016. Additionally, the cash payment related to the contingent bonus is expected to be approximately £28 million or approximately $45 million which includes payroll taxes will also be paid in fiscal 2016. So in short, gross margin improved by about 50 basis points and SG&A margin increased about 40 basis points resulting in a slight operating margin improvement of 10 basis points. We earned $2.16 per share for the quarter, adjusted as described in the press release compared to the same number last year.

For the fiscal year sales were $2.6 billion, an increase of 1% over fiscal 2013. Excluding the impact of the 53rd week last year, the sales increase was 2%. Adjusted operating margin was 7.5% compared with 7.6% last year. Gross margin was 30 basis points offset by 20 basis points of SG&A leverage due to lower bonus accruals despite the negative 1% comp for the year. For the year, on an adjusted basis we earned $5.09 per share compared to the $5.06 last year.

Turning to the balance sheet, year end inventories were up 12% compared with last year. Retail inventories on a per square foot basis were up 6% which is a nice improvement from the 10% increase at the end of the third quarter. Wholesale inventories which make up about 16% of total inventories were up 11%. Roughly half of the wholesale inventory increase was caused by licensed brands being very cautious and accelerating receipts to avoid any manufacturing disruptions arising from the Chinese New Year.

We entered fiscal 2014 with $59 million in cash, essentially flat with last year and with zero debt, down from 20 – zero U.S. debt down from $28 million last year. We do have about $34 million in debt in the UK including debt assumed in connection with the acquisition of Schuh and additional debt incurred in fiscal 2014 in connection with the new Schuh distribution center. Last year, the UK debt amount was $23 million.

During the quarter we did not purchase any stock. For the 12 months we have spent about $21 million repurchasing 338,000 shares at an average cost of $61.23. We currently have $66 million available under our Board’s most recent stock repurchase authorization. We spend about $14 million on small acquisitions in fiscal 2014 related primarily to Lids Locker Room. In fiscal 2014 we generated approximately $140 million in operating cash flow. Of this we spend about 70% on capital expenditures, 10% on acquisitions, 15% on share repurchases and the balance of 5% was used primarily to pay down debt.

Fourth quarter capital expenditures were $22.8 million and depreciation and amortization was $17.6 million. For the full year capital expenditures were $98.5 million and depreciation and amortization was $67.1 million. We ended the year with 2,539 stores compared with 2,459 stores last year. This excludes the 26 new Macy’s locations and three Schuh pop-up stores. Square footage for the year was up 6.1% excluding the Macy’s locations. A detailed breakdown of the store count is included in my discussion of the quarterly financials posted to our website today.

On our third quarter call, we gave some preliminary directional guidance for fiscal 2015. Now, I would like to spend a few minutes providing more details around our expectations for the coming year. Our fiscal 2015 EPS guidance is in the range of $5.40 to $5.55. This guidance is subject to the same adjustments as in previous years.

Excluding impairments, which are of course non-cash and other charges with respect to total about $3.1 million to $4.5 million pre-tax or $0.08 to $0.12 per share after-tax. EPS guidance also excludes the ongoing Schuh deferred purchase price expense, which is expected to be approximately $7.1 million or $0.30 per share in fiscal 2015. The final payment will be expensed in fiscal 2016 and is expected to be $1.6 million or about $0.06 per share. Consistent with past practice, this guidance includes the full year accrual for the Schuh contingent bonus built into the acquisition agreement, which we currently expect to be approximately $11.5 million or $0.38 per share in fiscal 2015. This should be the final year expensing this contingent bonus accrual. As I mentioned earlier, we expect a full amount of the accrual of £28 million to be paid in fiscal 2016.

In developing this guidance, we used the following assumptions. We are assuming comps, including direct sales, in the 2% to 3% range for the full year. We are expecting an overall sales increase of 8% to 9% for the fiscal year. Our plan is to open or acquire 169 stores in fiscal 2015. This does not include up to 175 new Macy’s locations. Our current plan is to close 47 stores during the year. We planned in fiscal 2015 with 2,664 stores again excluding the Macy’s locations. This will be a 5% net increase in stores. Net square footage excluding the Macy’s locations is expected to be up 6.3% for the year. A detailed summary of our plan for new and acquired stores is included in my financial review on the website.

We are expecting gross margin as a percentage of sales to be up slightly for the year. Expenses will also be up as a percent of sales compared with last year due in large part to added bonus accruals. This results in a flat operating margin percent. Our tax assumption for the full year is expected to be approximately 37.3%. We are assuming average shares outstanding of approximately 23.7 million for the year. We have not included any stock buybacks in this guidance. We are also expecting capital expenditures for the year of about $149 million and depreciation and amortization will be about $80 million.

In terms of the quarterly breakdown for the year, I remind you that historically we have generated about 55% to 60% of our sales and 70% of our full year operating income in the back half of the year. Fiscal 2015, we expect upwards of 70% to 75% of operating income to come in the back half due to the slow start at Journeys and Schuh and the increased contribution of Lids Locker Room, which is more heavily weighted to the fourth quarter than our other concepts. In addition, the early challenges at Journeys and Schuh will have a much bigger impact on their first quarter as compared to the second quarter.

I will now turn the call over to Bob.

Bob Dennis - Chairman, President and Chief Executive Officer

Thanks Jim. I will begin my review of our operating segments with the Lids Sports Group, where sales comped up 4% this quarter on top of a 10% decline a year ago and after a 5% gain in the third quarter this year. Lids’ fourth quarter sales gains were driven by solid growth in our Locker Room and Clubhouse stores and in lids.com. First quarter comps for the group were plus 3% through last Saturday.

Beginning with the Lids’ hat stores, snapbacks remain an important component of the Lids business although they continue to decline slowly as a percent of sales as our core fitted products slowly rebuilds a larger share of the sales mix. Snapback inventories are in good shape exiting the year and gross margin for this product remains strong. We really like the Lids store’s competitive position as the dominant player in the space. And while we see less growth in the hat store square footage, this business remains our cash cow.

Turning to Locker Room and Clubhouse stores, comparable sales increased double digits for the second consecutive quarter. This year the Super Bowl was a big factor in the fourth quarter numbers with our eight Locker Room stores in Seattle doing especially well running up to and following the Seahawks win. We ended the year with 128 Locker Room and 49 Clubhouse locations. And our current plan calls for adding approximately 40 to 50 new Locker Rooms and Clubhouse locations through a combination of organic expansion and acquisitions over the coming year. We continue to believe we have the opportunity to scale this business to a nationwide footprint which along with our digital business should give us a competitive advantage that mimics those that we currently enjoy in the headwear space.

This was the first holiday season, operating Locker Room by Lids departments at Macy’s. We are learning a great deal about the Macy’s customer in terms of their product preferences and shopping patterns and we continue to see good potential for this business. We ended the year with 26 shops and have plans to open up to 175 in fiscal ‘15. Finally, lids.com had another strong quarter. The work we have done repositioning the website as a one stop shop for sports license merchandise by increasing the product selection well beyond hats has driven healthy growth throughout the year.

Let’s discuss for a moment how this fits into the consumer sports market. Fans fall into two fundamental sets of customers, local fans and displaced fans, that is, fans who live away from the home market of their favorite team. Our platform allows us to hit both segments. Our brick and mortar locations cater to the local fan by carrying a deep and broad local market assortment as well as the top national teams. And indeed as an example of the importance of the local teams, our store sales and Locker Room and Clubhouse stores spike significantly when the local team has a home game. It is very much a need it now purchase occasion.

Our digital capabilities provide the displaced fan with the ability to shop our online inventory through their devices as well as through our recently installed in-store kiosks. We believe we will be able to build on this current momentum in the direct channel and boost store sales by implementing our initiative to enable online access to our entire system inventory, including inventory in stores later this year. We believe that the competitive advantage this will bring to all of the Lids group’s retail concepts is tremendous because it will enable them to better serve the total mass of fans.

In addition, we are positioned well vis-à-vis pure play competition with omnichannel capabilities provided by our store network. For example, fans can buy product online and return product to any one of our over 900 Lids locations and soon to be 200 plus Locker Room and Clubhouse locations. They will eventually be able to reserve online and pick up in a store giving you just some examples of the best of both digital and store worlds.

Now turning to the Journeys group, total comparable sales were flat for the quarter with a slightly negative store comp and a strong double-digit increase in Journeys direct. This is on top of the minus 1% comp for the quarter last year. As expected, the divergence between casual footwear and fashion athletic trends was pronounced during the fourth quarter with a solid gain in casual including boots. Due to the absence of a dominant new trend or a key new product launch our athletic business was softer.

We expect Journeys top line to be somewhat challenged until we move into the back half of the year where we have more visibility on positive fashion trends and the non-athletic casual product once again becomes a much better percentage – bigger percentage of the mix. But we view the overall trend in the casual as a plus, because we are distinctive as the go to store for many of the brands on that side of the store.

Comp quarter-to-date at Journeys group is minus 2%. To make one important point here that is easy to lose sight of in the middle of a challenging fashion trough, these troughs are a recurring feature in this space. Periodically, the most recent fashion driver wanes and we go through a period of determining what the next driver will be. But long experience confirms two things. There is always a next fashion driver and the Journeys team is very good at identifying it early on and making the most of it.

As a measure of this, if you look at the top ten brands today and then look back ten years, only two brands from this year’s lift has been in the top 10 for all 10 years over the period. So brand rotation is a consistent feature of this business and it will surely happen again. This is a time when we try to keep a slightly longer perspective. We have the strategic advantage as a branded retailer, but being able to shift into the next trend and there will be a next trend. Interestingly, the category trends that are challenging the Journey stores are not having nearly the same effect on Journeys Kids stores, where comps were up.

The fourth quarter increase was 2% on top of a 5% decline a year ago. Casual was definitely the stronger category. Thanks partly to boots, but we are also seeing athletic sales hold their own. We believe part of our recent success can be attributed to the concept’s unique position in the market. No one else does what we do in the Kids’ footwear space. We ended the year with 174 Kids stores in the U.S. and plan to add another 25 stores this year. Longer term, we think the potential exists for approximately 300 locations, which is currently contemplated in our five-year plan. Journeys direct comps were up 20% for the quarter driven by a big increase in traffic with a substantial increase in particular to our mobile side.

At Schuh, comps were down 7% on top of a 7% increase a year ago with store and digital comps performing similarly. Comps have remained challenged so far at minus 8% quarter-to-date in fiscal ‘15 as weather in the UK has been uncooperative marked by heavy rains and flooding. Despite the negative comps, Schuh continues to perform very well versus the expectations that were the basis of our decision to acquire the business almost three years ago. Like Journeys, the management team at Schuh has proven adept at successfully managing their business during periods without strong fashion drivers, while also being quick to identify and capitalize on new trends. And so as with Journeys, we keep a longer term perspective.

We believe during the current cycle that Schuh continues to have the right product offering in its market. However, we have had to become more competitive on price than we would like due to actions from several of our peers. In the meantime, we continue to utilize innovation and technology to distinguish Schuh’s service model. We continue to test the expansion of our mini warehouse program in fiscal ‘15, which has already extended the cutoff time for next day delivery on customer orders within the delivery zone from 5 PM to 10 PM.

Additionally, we are in the early stages of testing a platform for same day service throughout the entire UK. Growth through unit expansion was the story for Schuh during fiscal ‘14. Schuh added 19 new stores to end the year with 96 permanent locations and increased store square footage by 23%. As I said earlier, the new stores continue to perform above their pro formas and we plan to open 15 stores in the New Year again focusing primarily on increasing Schuh’s presence in Southern England.

Johnston & Murphy capped off a terrific fiscal ‘14 with its strongest comp of the year in Q4, an increase of 11% on top of the 2% increase a year ago. This marks the 14th consecutive quarterly comp increase. Comps through last Saturday were down 6% due in large part to J&M’s heavy presence in the Northeast, which has been so hard hit by the winter weather. The brand success is being driven by a very compelling line of premium dress and dress casual shoes.

The team has done a great job leveraging J&M’s heritage and authenticity into an updated, more modern version of the brand without losing sight of its past. And at the same time, new marketing initiatives have been very effective at telling the story and connecting with a younger and much wider audience, including women with our J&M women’s line. The same factors are also fueling strong results in J&M’s wholesale business, which was up 8% for the full year. J&M’s wholesale expansion strategy will continue to include a focus on Canada and on our women’s opportunities.

And finally, the Licensed Brands Group delivered another healthy operating margin performance for the year. So, as we begin fiscal ‘15, we believe we have a balanced plan in place to protect profitability in the face of some near-term uncertainty and to invest in areas of the business that strengthen our competitive advantages and provide the greatest opportunity for longer term growth.

And before we close, I would like to recognize our entire Genesco team for their continued efforts. It’s their collective skill and dedication that have once again proven that we have the people and the processes in place to successfully navigate through a choppy retail environment. It also reinforces the powerful strategic position of our businesses and even more clearly the value of the many years of experience and the commitment to excellence of our operating teams. So we are excited about the tremendous opportunities ahead.

And operator, we are now ready for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We will go first to Taposh Bari with Goldman Sachs.

Taposh Bari - Goldman Sachs

Hey, good morning everyone. Just a quick question on your footwear business, it seems like you are feeling stronger about the fall winter assortment as a whole versus spring summer. I mean, how are you feeling about and you don’t get into details about brand, but how are you feeling generally speaking about innovation in the category for spring? Do you feel like I guess a couple of questions there, do you feel like the brands are introducing enough newness? Do you feel like your merchants are taking enough risk on new styles? And do you feel I know it’s early, but you feel like consumers are responding to those initiatives?

Bob Dennis

Well, what we said is what we said. We don’t feel the first half, which is more driven by athletic. We don’t think we have visibility on the kind of newness that would really drive the business and we feel more confident on the back half, which is where casual becomes more intense and where we feel we have more visibility on what’s going on and have some excitement. That said, the team came back from Vegas excited by many things that they saw, which we are not going to get into here that is all subject to testing things in our stores. So the merchants do believe they are seeing new things emerge that give us the opportunity to test. The big question is whether those will resonate with the customers and whether they will become important enough to move the needle. We are not backing on that for the way we are looking at the business going forward for this year. So therefore, that’s why we are conservative in the first half and a little more confident about the back half.

Taposh Bari - Goldman Sachs

Okay. And the second question I have was just on the Locker Room/Clubhouse concept, good comps there particularly over the past couple of quarters, can you help us understand with the productivity curve for those stores look like post acquisition? So I am assuming once you acquire a region, you kind of infused new merchandising initiatives, a better execution, etcetera, re-branding and I am assuming that, that drives a pretty material spike in comps. Is that fair? And then secondly, how does that comp trajectory look over the course of a multi-year period since you have been doing this now for a couple of years?

Bob Dennis

Yes. It’s the right question. And we are not as clear on being able to quantify it as we would be for a normal business. And here is the difference between this business and normal, its teams. And so it is very hard to analyze, we are pretty certain we get nice comp increases and we are seeing evidence of that and we have written a new store model with our best judgment of what that looks like, but it’s going to take a few more years, where we can aggregate enough stores so that the team effect gets normalized out. So we have some markets where we killed it and obviously we called out Seattle as one. And we have the markets where it was awful, where the teams really disappointed this year year-over-year. And so we are trying to normalize for all of that, which is a little more challenging than you think. So with that said, we believe we are getting good steady comps. Our new store model for acquired stores and for particularly for de novo stores assumes that kind of classic two-year ramp up of mid to higher single-digits before it normalizes out.

The acquired stores, it depends on the store we acquired. To be fair, some of the stores we have acquired when we got our hands on them were wonderfully run. And so the opportunity to improve the merchandising on them is less the improvement than is the gross margin opportunity, because what we do believe we are going to have as we scale is an element of buying power, but some of the stores that we have seen to be perfectly honest to push, in a few cases we have learned something from them in terms of how to merchandise effectively. So that the acquired stores are also a mixed bag, that really well run ones were getting only margin and on some of them where we have been able to go in and affect change we have seen comp.

Taposh Bari - Goldman Sachs

Got you. Thanks for that detail. So just one final one if I could squeeze it in, are you willing to tell us what the comp has been quarter-to-date excluding that dreaded first week. And if you can, can you talk if it’s within that 1% to 2% range for the first half?

Bob Dennis

It was – we said it was positive and on plan. Perhaps I don’t have the number beyond that.

Taposh Bari - Goldman Sachs

Okay.

Bob Dennis

Maybe Jim will be able to give that to you later.

Taposh Bari - Goldman Sachs

It sounds great. Thanks.

Bob Dennis

The basic message is it’s a positive run rate and even within that after you get the first week, you can see the storms. You can see yesterday, there was a storm yesterday and you can see it in our numbers. So it sort of runs up and down, but the key for us was that after we got through that very horrible first week we have been positive.

Taposh Bari - Goldman Sachs

Got it. All the best. Thanks.

Bob Dennis

Thank you.

Operator

We will go next to Steph Wissink with Piper Jaffray.

Steph Wissink - Piper Jaffray

Hi.

Bob Dennis

Hello. Hello Steph. Anybody there?

Operator

Ms. Wissink, please check your mute button. We will go next to Pam Quintiliano with SunTrust Investments.

Pam Quintiliano - SunTrust Investments

Great, thanks so much for taking my question guys. So just had actually a few for you, first, you highlighted weather, can you talk about the store closures in January and also February and just how should think about that versus last year?

Bob Dennis

Yes, there were more I don’t have the number I am sorry. And it’s not just closures, it’s the traffic goes down. It’s a half a day of closure. Pam it’s really hard to tease it out. I don’t have those numbers for you. As I said the two comparisons we did to try and get our handle on it was dropping that first week and seeing that we were positive thereafter. And then we know that in the West and the Southwest which were largely unaffected by whether, we had strong business, so that gives us confidence on the assortment. The truth is on weather to be fair. When we have looked at weather in the past it’s always been our view that when you have bad weather you makeup some of that. So I don’t want to make too big a deal out of the weather. We know that our customer generally spends what they have in their pocket. And so oftentimes what you are getting is a shifting around, but it seems so extreme this year especially in the Northeast so unusual that we are assuming that it actually has taken a little bit away from our business.

Pam Quintiliano - SunTrust Investments

Others have mentioned up to three times the rate last year of store and partial store closures?

Bob Dennis

I don’t know, we haven’t, we don’t know.

Pam Quintiliano - SunTrust Investments

Okay.

Bob Dennis

But we did have – we haven’t quantified it for this call.

Pam Quintiliano - SunTrust Investments

Okay, alright. And then with weather even though you make up some of that, when I think about Journeys, I would have thought that the cold weather would have been somewhat of a benefit quarter-to-date, so just because you still have some of those boots etcetera and the customer is certainly not inspired to be buying spring product yet, did you see any of that?

Bob Dennis

Yes, I mean it helps to drive through the seasonal goods that we are still caring forward. But we get into the mode in first quarter of starting to reset the stores for spring and obviously the stronger you were in holiday and the stronger you were in liquidating in January, the less of that product you have and the more that you have moved into you spring goods.

Pam Quintiliano - SunTrust Investments

Which leads me to my next question which was just the composition of inventories and how we think even though it’s a come down from where you had been, just how clean you are and how comfortable you are with the inventories particularly Journeys and if there is any way to think about how you are approaching that going forward given your caution surrounding the first half of the year?

Bob Dennis

Yes, we are very comfortable with our inventories. We believe that the valuation that we have taken, puts us in a real good shape and the mix is favorable towards current season goods versus older goods. And in the sports business where some of that overage occurs, again, we manage that down. We have been managing it down with receipts because most of that is not seasonally at risk. Jim?

Jim Gulmi

I want to just reconfirm that we feel really comfortable with our Journeys inventories. We have run all kinds of models on it and it’s very, very clean, so we feel very good about the levels of inventory at Journeys.

Pam Quintiliano - SunTrust Investments

And then if I can just squeeze in one last one, you had mentioned how you have to be more competitive on price points at Schuh, domestically is there anything you are seeing any environment, I think that has caused concern that you think you may have to be a little bit more promotional than planned?

Bob Dennis

No, no, the history of Journeys has been that it is a full priced seller and our promotional position is largely oriented towards liquidation of slow selling and end of season goods. And that’s the way we have been able to continue to run the business. Our brands here seem to do a slightly better job of managing distribution in a way that encourages full priced selling which we are encouraging that kind of structure in UK which isn’t quite parallel to it.

Pam Quintiliano - SunTrust Investments

Great, thanks so much and best of luck.

Operator

And we’ll go to Steph Wissink with Piper Jaffray.

Steph Wissink - Piper Jaffray

Hi, guys. Just a couple of questions that you already asked group of questions on CapEx for 2014 I think Bob you mentioned that in the P&L that were some expenses related to the omnichannel initiative, can you talk about the expenses in CapEx versus the P&L just to help us appreciate what you’re capitalize versus expensing. And then secondly on the digital margins versus your store level margins any clarity there on how the margins mix shakes out for both Journeys and the Lids group. And then just on the Macy’s locations I think you mentioned up to 175 planned locations for this year. How should we model those kind of by quarter and then how should we think about the additive revenue is, are you thinking about those kind of per unit or per square foot? Thank you.

Bob Dennis

Yes. Let me just give sort of an overview of this and then Jim can possibly give you a few numbers. On – I will go first to the digital question. Our digital margins are significantly better in all of our businesses than the stores, essentially the four walls. And the reason for that is two. First, there are less markdown intense, but more importantly we tend to allocate all of our central overhead through the stores under the thesis that the digital business is incremental. Let us say we wouldn’t be in the digital business if we were not running stores. So they are very profitable and you could make the argument they are too profitable, because the debate we are having nowadays is we would be more aggressive on market share as opposed to profits. And a little bit of what you see in our earnings guidance is a bit of tilt towards trying to gain a little more share, which is just throwing a couple of switches in terms of being more aggressive on marketing and more aggressive on elements of pricing not the actual price, but things like free shipping, things that you can use to drive sales. And so that’s the position of our digital business.

On CapEx you will see that we are very aggressive on CapEx this year for a bunch of reasons. The first is that we are doing more stores than we have done in a while. And the reason is that we have a number of concepts that we believe are working. We know that’s countered to a lot of the rest of the industry given the greater growth that’s occurring in digital. But it’s why we emphasize the fact that most of our store growth is in concepts that we are still growing Kids, Locker Room, Schuh and J&M. And in those instances we track the new store openings from last year and make sure they are beaten pro forma which is set up to beat our capital hurdle and they are doing well.

Mindful of what’s going on in the mall we are writing those leases with a lot of protection. And so we are opening new stores, but were leaving ourselves were lot of wiggle room in terms of how we manage the future of those stores. But as long as we can continue to make money on the stores we will. And then another chunk of the CapEx is going towards non-store stuff, which would include both the DCs. So we have got a new DC in the UK and we have a new DC in our consolidation really of DCs in the Lids Sports Group. They have been – as they have grown, they have dotted basically Northwest Indianapolis with a number of facilities and that’s introduced inefficiencies of getting into one DC is going to help us out. And then we are making investments in the operating system, the new front end, all the stuff that we called out in the scripts are related to omni-channel. And so with all that said Jim, do you want to spend on that?

Jim Gulmi

I’d like to fill some of the blanks. The first question you asked was about on the Macy store, one of the questions you asked was about the Macy stores and how fast we are going to roll that out. And the general game plan is that again 175 stores. And we are looking at 35 to 40 in the first quarter, 90 to 100 in the second quarter, another 50 or so in the third quarter. And so that should add up to hopefully around 175. In terms of the capital expenditures in the new budget related to IT, related to digital area, it’s some of the stuff is really hard to breakout, because it’s serving different purposes, but a ballpark number, ballpark number is probably in the range of around $15 million mid to little higher, but that’s an estimate of the CapEx of our FY ‘15 calendar ‘14.

Bob Dennis

And then just to add to that, most of these investments we are talking about also have a bit of a P&L hit. So for example on new stores we now have to run that period, where we have depreciation expense during the build out of the store or the rent, we carry the rent forward. And so we have unproductive rent for all of those stores. So there is a bit of a drag on the earnings statement when you get more aggressive on store openings as we are doing this year.

Steph Wissink - Piper Jaffray

Bob, if I could pass in one more question here just based on the solid performance at Johnston & Murphy, I think you mentioned 14 quarters of positive comps. Has that shaped your outlook for potential acquisitions to layer in and maybe that more fashion footwear space?

Bob Dennis

Yes, I don’t say it’s reshaped it. We have thought that Johnston & Murphy is an extraordinarily strong brand given its legacy and its market position at very share in the area in which it competes. So I am not sure that’s the comp as opposed to the brand. And what we have been looking at, we have looked at both footwear possibilities and also other both men’s and women’s brands that would be complementary in non-footwear. As you know in Johnston & Murphy now, we are doing about a third of our business in our shops in non-footwear. And so we have been considering ways to try and enhance that and then also as you know we have been growing our women’s business. We haven’t gone crazy with it in terms of what we are expecting in terms of how soon it gets really big, but the percentage growth on it has been very healthy. And we have been giving some thought to ways to accelerate that growth if we had a women’s – small women’s brand that would be complementary to what we are already doing.

Steph Wissink - Piper Jaffray

Thank you. Best of luck guys.

Bob Dennis

Thanks.

Operator

We will go next to Mark Montagna with Avondale Partners.

Mark Montagna - Avondale Partners

Hi, good morning. Question just about Locker Room and Clubhouse, it sounds like they are really hitting stride and doing well, how many years until this actually reaches an EBIT rate of say 8% to 9%?

Bob Dennis

If you look at the five-year plan, I think we are three, four years out to getting there. A lot of what drives that is the comp we talked about before on our ability to scale to the point where we really start to get some help on gross margin. One of the things we have been doing is doing a consolidation on the hard good side, all the gift-oriented stuff. That’s the most fragmented of the licensed categories and that’s been an opportunity for us. So that’s a process that we are continuing and trying to be careful as we do it without making any mistakes, but that’s going to help drive margin up. Just as a reference point when we consolidated the headwear business as we got to the tail end of that process. So we have scaled and some of the businesses we acquired hadn’t, we were seeing 300 or 400 basis point differences and gross margin based on the power we had in the marketplace plus the rate at which we could fully liquidate because of the distribution system that we use. So we are not there yet in terms of that scale. And I am not sure but we have nice opportunity as we grow to continue to chase that.

Jim Gulmi

Let me just jump into that, if you look at it for the Locker Room and the Clubhouse businesses, the difference again is the Locker Room is multi-team and the Clubhouse business is team specific and the margins are pretty strong, pretty good in the Locker Room is more than the Clubhouse right now and that’s team specific. And that’s somewhat related to how well the teams do when they playoff sort of world series or the Super Bowl or things like that. So if you look at the Locker Room by itself which is multi-team and a lot of that – some of that was driven certainly by the Seattle Super Bowl impact. But we had a pretty good operating margin for the year.

Mark Montagna - Avondale Partners

So driving to that say in three to four years again so maybe 8% to 9% is that more parabolic or steady state – steady even games over the…?

Jim Gulmi

It’s probably steadier.

Mark Montagna - Avondale Partners

Okay, alright, I will jump off so you can answer some more questions. Thank you.

Bob Dennis

Thanks Mark.

Operator

We will go next to Steve Marotta with CL King.

Steve Marotta - CL King

Good morning everybody. Bob you mentioned earlier that these trends in – lack of trends if you will in the team footwear space are transitory in nature, in you experience what are the periods of time that this tends to occur, I mean right now you are saying that you have got some – you have got some clarity through to fall, have they been again and that’s sort of one to two quarters or is it sometimes four to eight quarters, so just wanted to know your experience there?

Bob Dennis

Well, I will first remind you of the opening statement by our operator who said the fastest prediction of the future, but our history would say when you go through it’s more as you go through two years of this. Last time we went through it, it was a really heavy athletic cycle and in that instance it really was I think about Jim Gulmi about two year event or so for Journeys when they had that last low. So if you – and we started having this issue – see this issue in the fourth quarter a year ago. So we are essentially five quarters in. So we use that as a measure. Our expectation that the back half might get stronger for us would be consistent, but again, no guarantees.

Steve Marotta - CL King

Okay, that’s great. And the other question I had is pertaining to the inventory you mentioned very specifically that you are happy with the inventory of Journeys and that there will be – I know you don’t promote anyway but there is no issues there, is there any anticipation of an increased promotional teams at Lids over the next 4 to 12 weeks?

Bob Dennis

No, Lids operates in normal times on a fairly fixed promotional calendar and we don’t see them being off that calendar all that much.

Jim Gulmi

It’s really that can be driven at least where they are today and won’t be driven by excess inventory.

Bob Dennis

The inventory gets I mean the inventory gets managed with the receipts more easily. One of the things that pushed the inventories up is that when snapbacks got really high and fitted slowed, we drove our inventory position in snapbacks up. We didn’t try to accelerate the liquidation of fitted because we knew that most of that fitted inventory wasn’t at risk and so we said we will just manage that down. And so that’s an example of really the dynamic for how we handle inventory most of the time at Lids.

Steve Marotta - CL King

Okay, alright, great. Thank you very much.

Operator

We will go next to Jill Nelson with Johnson Rice.

Jill Nelson - Johnson Rice

Good morning. Could you talk a bit about the lag – the Journeys fashion cycle on the athletic I know that there has been a lack of fashion newness but could you also talk because some of that weakness maybe you are not getting the allocation you want from preferred vendors?

Jim Gulmi

No, we are – our vendor relationships are – we are just fine and they are working with us as they are as anxious to see better things happen as we are. So I mean the only call out is there as you know for the last two years two or three years we haven’t had Nike in our mix. And so but that’s year-over-year there is no change in that situation. So that would be the only call out. But beyond that our vendors are working with us feverishly to try and find the next opportunity.

Jill Nelson - Johnson Rice

Okay. And then the lack of Nike do you feel – are you working to try to get that back in the stores or is that just really not a brand you want at Journeys?

Bob Dennis

Several years ago Nike decided not to continue Journeys as a point of distribution for reasons that we didn’t completely understand. And so if we were able to initiate a conversation with Nike we would give it a very careful consideration. We have a great relationship with the Nike by the way outside of that they are in Kids, they are major partner of Lids both in team sports and in our license stores especially that they now have the NFL. So very important vendor, very great relationship in those channels they just desire that Journeys was in part of the mix.

Jill Nelson - Johnson Rice

Okay. And then I know you don’t give EPS guidance by quarter, could you talk about – I believe you had a pretty significant benefit from a bonus accrual reversal in the first quarter of last year, could you talk about may be how that would impact this first quarter year-over-year comparison or anything we should note for quarter-by-quarter?

Jim Gulmi

Well, just the first quarter is going to be tough and as Bob said the first half where we don’t really see any – you saw it in the comp guidance we gave to the back half. So the first quarter we are expecting the comparisons to be very tough, maybe some improvement in the second quarter, but we really hit our stride in the third and fourth quarter. So we are looking for a slower first half and a pickup in the back half and the first quarter is going to be tough based on the initial rating for the month of February.

Jill Nelson - Johnson Rice

Alright, I appreciate it. Thank you.

Operator

We will go next to Mitch Kummetz with Robert Baird Investments.

Mitch Kummetz - Robert Baird Investments

Yes, thanks. Few questions, Jim on your cost outlook for concepts for the year?

Jim Gulmi

Yes, would I comment on that?

Mitch Kummetz - Robert Baird Investments

Could you?

Jim Gulmi

You want the usual routine?

Mitch Kummetz - Robert Baird Investments

Please.

Jim Gulmi

Yes, okay. Okay, comps for the first quarter flat to up slightly. Second quarter, in the 2% to 2.5% range, this is for total and in the third quarter 2.5% to 3%, 3.5% and then 3% to 4% in the fourth quarter.

Mitch Kummetz - Robert Baird Investments

Okay and then on a full year basis by the concept I assume maybe you hold strong on the Lids side, little weak on the Schuh side, but so you can kind of give us a run down on that?

Jim Gulmi

Yes, on – in terms of Journeys, let’s say 1% to 2%. Schuh in the – we are looking again as a pickup in the back half, but probably 1% to 2% there also. Johnston & Murphy in the 3% range and Lids in the 3% to 4% range.

Mitch Kummetz - Robert Baird Investments

Okay, great. That’s helpful. And then just on the earnings guidance, just want to reconcile you have taken down the earnings guidance a bit and there was 10% to 12% growth, now it’s 6% to 9% growth. Basically look like comp outlook has really changed or maybe it has and you are saying that 2% to 3% comp look forward, I think you are seeing a low single digit comp and (indiscernible) low-single digit comp before, there is something little bit better than 2% to 3% or is there something else going on in the business that I am not thinking about that takes down the earnings outlook?

Bob Dennis

Well, this is Bob. First the mindful of the fact that as we worked up our plan for this year we realized that we are going to be more aggressive on our investments, so more new stores that comes with the cost. We have taken the growth rate on digital up that will come at a cost. So there is a little bit of growth and share gain that is a trade off with earnings and so when you think about it a $30,000 fee, that’s a little bit of what’s going on. And with that said I will hand it back to Jim.

Jim Gulmi

Yes, it was – even though the comps were up we were expecting comps little higher than where we ended up in the plan. And 1% to 2% comp makes a big difference. So as the comps are still positive, but they are not as positive as we are looking initially.

Mitch Kummetz - Robert Baird Investments

Got it. Last question for you Bob. I know you don’t like talking about trends, but back and have to layers there seems to be a bit of exercise there online I mean is that something. And then on Journeys, that’s where they expense us with the kind of light-on-light is that starting to trend back, does that maybe provide some of the catalysts?

Bob Dennis

You are exactly, right that we don’t like to talk about trends. We are going to be carrying bucket hats this year and also we will be carrying y-on-y.

Mitch Kummetz - Robert Baird Investments

Okay, good enough. Thanks. Good luck.

Operator

We will go next to Chris Svezia with Susquehanna Financial Group.

Chris Svezia - Susquehanna Financial Group

Good morning everyone. I guess the first question I have was just on Journeys when you guys had made the comment that comps turned positive after the first week. Was that the case with Journeys?

Bob Dennis

I don’t know. We just talked about the whole company. And I don’t want to get down to talking about each business over a four-week period. So the whole company was sort of tracking to plan.

Chris Svezia - Susquehanna Financial Group

Okay. And a question just on the fourth quarter as it pertains to Journeys, you guys made the comment that you comp negative, slightly negative in store between the weather and the non-athletic casual trends, but what I mean, I guess if you can just maybe parcel out what was the biggest issue, was it just really traffic? I know we have traffic counters in Journeys, but why wouldn’t that have been a little bit more positive just maybe not get as much product as you wanted, just thoughts around that? The digital may be cannibalized and take share from the stores, just thoughts about that?

Bob Dennis

We think we are well-positioned with given the trends, which we don’t think are very friendly for us in spring. We think we are well-positioned on an assortment with that given what we have to work with. And so you have to look at the mix of the store and you have to look at it year-over-year and it’s actually dangerous to get too speculative based on five weeks of sales. The stores are heavily set for spring and we haven’t had a lot of spring weather and when we did for few days, we got a nice pop. So why don’t we just wait it out and we will see. We are feeling like our guidance is good guidance. Jim just gave you guidance for the year for Journeys and we are feeling like we are in good shape.

Chris Svezia - Susquehanna Financial Group

Okay. I was talking more specifically about the fourth quarter, I guess for Journeys?

Bob Dennis

For what went on in the fourth quarter?

Chris Svezia - Susquehanna Financial Group

Yes, I guess, I want to try and just parcel out real quick, just why the stores comp negative given some of the product momentum, favorable weather, did digital maybe take some market share? Was it a traffic issue, I know you don’t have traffic counters upon just trying to decipher why stores for Journeys was negative?

Bob Dennis

Yes. We don’t have traffic counters, but interestingly we are in the process of putting them into our highest volume stores. So next year, we can give a better answer on the traffic dimension. If you look at our digital business, it was very strong. And for the industry, digital was very strong. And so we don’t have full information on that, but you can easily postulate from there that digital was one of the factors, which is why we have gotten even more aggressive in expanding our digital business as a way of participating in that. So that’s a big component of it we are guessing again not having full visibility. The other factor is if you look at the mix, the mix in the fourth quarter went even more casual and softer in athletic than even we had anticipated. So we had the store aligned for a certain mix and the mix shifted even more towards casual.

Chris Svezia - Susquehanna Financial Group

Okay, got it. Helpful. Last one Jim for you, just the contingency bonus that flows through the P&L $0.38 that is after this year that’s done. There is nothing in fiscal ‘16, correct?

Jim Gulmi

It’s done this year.

Chris Svezia - Susquehanna Financial Group

Okay, alright. Thanks very much.

Jim Gulmi

‘16 the current year end?

Chris Svezia - Susquehanna Financial Group

Correct.

Jim Gulmi

If they hit their numbers, if they hit their….

Chris Svezia - Susquehanna Financial Group

I got it. I got it. So if they don’t, okay, okay, so they have to hit a 1% to 2% a slight positive comp for that to happen. If they go under that, then it could drag it into next year.

Bob Dennis

What would drag, what move into – to be fair to what would move into next year in that instance is still pretty de minimis.

Chris Svezia - Susquehanna Financial Group

Okay, got it.

Bob Dennis

Most of it will occur, if not all of it, most of it will be this year.

Jim Gulmi

Right.

Chris Svezia - Susquehanna Financial Group

Okay, fair enough. Thanks guys.

Jim Gulmi

I would say there is more than comp involved in it, but realize if they hit the 1% to 2% number, they should be there.

Chris Svezia - Susquehanna Financial Group

Got it. Alright, thank you very much guys. All the best.

Bob Dennis

Thanks.

Operator

And we will go to Ben Shamsian with Sterne Agee.

Ben Shamsian - Sterne Agee

Hi, good morning. Thank you for taking my call. Firstly, can you provide the same-store sales for the Lids hat stores in the fourth quarter and maybe for quarter-to-date?

Jim Gulmi

We don’t know we break that out.

Bob Dennis

Yes. We are not going to get in the pattern of breaking that out. You have got the Lids numbers right now maybe down the road as Locker Room gets bigger we will start considering that, but right now we are going to give a Lids number.

Ben Shamsian - Sterne Agee

Okay, great. And then I just want to clarify your comments on Journeys in the second half, is it that you are seeing some good fashion trends emerge in the back half or are you simply hoping to just get away from the athletic, from the athletic trends in the back half?

Bob Dennis

Well, it’s not – it’s that we have seen good trends in casual in all four quarters for the last several years and then casual becomes a greater percentage of the store it’s a pretty dramatic shift in the fourth quarter. And we think that, that’s a trend that’s continuing and we are writing that. And it will be a trend that we will participate in, in the first and second quarter as well, but it doesn’t move the needle enough, because it’s not a big enough percentage of sales. So when it becomes a bigger percentage of sales in the back half, then we feel like all of a sudden that trend actually is it moves the needle.

Ben Shamsian - Sterne Agee

Okay, that’s sort of just the numbers I guess.

Bob Dennis

Yes, it’s the numbers.

Ben Shamsian - Sterne Agee

Alright, great. Thank you so much.

Bob Dennis

You bet.

Operator

I would now like to turn the conference back over to Bob Dennis for any closing or additional comments.

Bob Dennis - Chairman, President and Chief Executive Officer

Well, we appreciate you all joining us for the call and we look forward to talking to you again in three months. Thanks everybody.

Operator

And that concludes today’s conference. We thank you for your participation.

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