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Shoe Carnival, Inc. (NASDAQ:SCVL)

Q4 2013 Earnings Conference Call

March 20, 2014 04:30 PM ET

Executives

Cliff Sifford - President, CEO and CMO

Kerry Jackson - SEVP and COFO

Tim Baker - EVP, Store operations

Analyst

Jeff Stein - Northcoast Research

Mark Montagna - Avondale Partners

Jill Nelson - Johnson Rice Investments

Sam Poser - Sterne Agee

Steven Martin - Slater Capital

Operator

Good afternoon, and welcome to Shoe Carnival's Fourth Quarter Earnings Conference Call. Today's call is being recorded and is also being broadcast via live webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited.

This conference may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. These forward-looking statements should be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speaks only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements talked about during this conference call or contained in today's press release to reflect future events or developments.

I will now turn the call over to Mr. Cliff Sifford, President, Chief Executive Officer, Chief Merchandising Officer of Shoe Carnival, for opening comments. Mr. Sifford, please begin.

Cliff Sifford

Thank you, and welcome to Shoe Carnival's fourth quarter and fiscal year 2013 earnings conference call. Joining me on the call today are Kerry Jackson, Senior Executive Vice President, Chief Operating and Financial Officer and Tim Baker, Executive Vice President-Store operations.

For today’s call I will review the company's overall performance and provide some insight into the current quarter and Kerry will review the financial side of the business. We will then open the call up to take your questions.

After our half single digit comparable store sales gain in October and November which also included record sales for our Thanksgiving and Black Friday a bit. Mother Nature decided to give us a slowest and coldest winter in more than a decade. With that we experienced declining traffic throughout most of December and January in most of our geographies.

At one time or another during the months of December and January, we experienced over 500 instances where individual stores were either closed for an entire day or had to close for a partial day due to inclement weather. This contributed significantly to our comparable store sales decline for the quarter of 2.5%. Other than traffic which was down mid-single digit for the quarter, all other metrics we measure ourselves by were in line.

Conversion was basically flat, average transactions were up mid-single digits which was driven in part by average unit retail and increased in units per transaction. Fashion boots for men, women and children were our best categories with a comp store increase in the mid-teens.

Gross margins for the quarter in our fashion boot categories ran 855 basis points higher than the same time period last year. This provided an opportunity for our merchants to be more aggressive in liquidating the categories of merchandise that do not normally perform in harsh winters like we had this year.

As a result, our per-door inventories at the end of the quarter were down 2.4% with merchandise margins down just 20 basis points. As mentioned on the last two calls, we initiated a strategy to increase inventory turns in our stores. We field this strategy, along with our strategic initiative to raise our women's percent to total, will give us the ability over the next few years to not only improved cash flow but merchandise margins as well.

Our strategy includes flowing seasonal products into our stores on the timelier basis and aligning our lower volume stores inventory closer to customer demand. We are pleased with the way our merchants are managing our overall inventory. Unfortunately, we were not able to leverage our expense structure under this more than anticipated fourth quarter sales volume in reported earnings per diluted share of $0.03 which was at the low end of our most recent guidance.

For the year, sales on the comparable basis were flat to last year; we experienced slow single digit comp store sales increases in both the women’s nonathletic as well as childrens shoes and our low single digit comp stores sales decline in adult athletics and men’s nonathletic departments.

Moving on to merchandise highlights for the fourth quarter, in our women’s nonathletic department, comparable stores sales for the fourth quarter were up low single digits. As I mentioned earlier, fourth quarter 2013 was all about boots with the harsh winter weather beginning early in the quarter and continuing throughout the quarter, we experienced comp stores sales increases in our boot categories in the mid-teens. Riding boots, fur-lined boots and weather boots all produced robust sales growth. After the past several years of declining boot sales, it was nice to see this category perform at this unexpected level. We ended the quarter with boot inventories down in the mid-teens on a per-door basis as compared to last year.

In our men's nonathletic department, we ended the quarter with a mid-single-digit decline on a comparable basis. Once again, it was all about casual boots which experienced robust sales growth in the mid-teens on a comp store basis. Our children’s nonathletic business ended the quarter with a low single-digit comparable store sales decrease. As in the women and men’s, the nonathletic department kid’s boots were the story for the quarter producing comp store sale increase in the 30s. In athletic for adults and kids combined, comparable store sales were down mid-single digits for the quarter.

As we have always said, our customer bought us today what they’re going to wear tonight or tomorrow. The winter weather patterns kept outdoor activity to a minimum and we experienced decline in most categories of athletic. We believe based on sport scan data that this was a trend felt throughout the family footwear channel as the only athletic gains in the quarter came from marquee launches in the athletic specialty stores.

Turning now to store expansion. For 2013, we’ve opened 32 stores and closed 7, ending the year with 376 stores in 32 states in Puerto Rico. In addition to new store growth, we also relocated 9 stores to stronger centers. Next week, we’ll celebrate the grand opening of 7 new stores and relocation of 2 stores as we execute our strategy of opening 30 to 35 new stores this year. Two of those grand opening stores are in Detroit market where we will open an additional 3 stores during the second half of the year given us a total of 6 new or relocated stores in this market. The other 5 stores opening next week will be infield stores as we continue to fill out existing markets where we are underpenetrated.

Our management team will continue to review our annual store growth rate based on our view that the internal and external opportunities and challenges in the marketplace. Our goal over the next decade is to double our current stores base serving markets throughout the United States.

Moving to e-commerce. I’m very pleased with the continued progress with our e-commerce business. As you all know, we had a leadership change in this business during the second quarter of 2013. Our first challenge centered on the performance of the site and the customer experience of the site. We initiated major enhancements to the site in time for back-to-school and we saw immediate results. We continue to tweak key elements of the customer experience through holiday and with each change came improve sales results. Although we don’t report e-commerce sales separately, we are pleased with sales increases we’re experiencing.

For 2014, we will be moving away from our third-party fulfillment arrangement and transitioning to shipping from our DC and stores. This is beneficial in many ways but most importantly it will allow us to increase the overall selection on the site and it will better utilize our overall store level inventory.

Turning now to marketing. As we’ve previously announced, we will launch our first ever national cable television ad campaign in two weeks. Our marketing team along with our agency has put a great deal of effort into our overall marketing strategy. As we go forward with our long-term growth plan and it’s vital that we reinforce the Shoe Carnival brand not only within our existing markets but also to create main brand recognition with potential customers in new markets. National cable TV advertising should also increase our exposure in our existing markets where we don’t currently advertise on TV along with the exposure it gives our e-commerce business on a national scale. In addition to national cable TV advertising, we are very pleased with the progress of our Shoe Perks customer loyalty program.

For 2013, we doubled our membership and we are looking to double it again in 2014. Shoe Perks customer accounted for more than 20% of our overall sales in 2013. Importantly, our shoe per members shop as more often and on average spent almost 40% more than nonmembers.

Moving to current sales trends. For the first quarter to-date in 2014, we continue to experience cold wet weather across our store base. During the first two weeks of February, we lost 199 stores selling days due to snow and ice. Traffic for those two weeks was down in mid-teens. However, once roads were clear and customers could get out, we saw a rebound and traffic in sales which resulted in a low-single digit comparable store sales loss for the month. Unfortunately, we experienced similar weather issues first weeks in March and currently our comparable store sales are down 4% for the quarter. However, we are this year very clean on fall and winter seasonal product which allowed us to produce merchandize margins that are significantly higher than the same time period last year.

We believe once spring weather patterns begin and we get closer to Easter, we will see a more positive trend. This belief is driven by the fact that even though we have experienced one of the most challenging winters in recent memory. Through this past Saturday our sandal business for the family is up in the mid-teens on a comparable store basis. In addition to sandals, we’re also seeing robust sales of our fabric casuals and canvas categories. As I said earlier our customers definitely a buy now, wear now consumer. Our inventories are fresh and trend right and we are well positioned for spring. This completes my prepared remarks and now I’d like to turn the call over to Kerry Jackson for details on our financial results.

Kerry Jackson

Thank you, Cliff. We reported net sales of $200.3 million for the 13-week fourth quarter of fiscal 2014 as compared to net sales of $205.7 million for the 14-week fourth quarter of 2012. Comparable store sales for the 13-week period ended February 1, 2014 decreased 2.5% as compared to the 13-week period ended February 2, 2013. The components of the change are third quarter net sales included an increase in sales from new stores net of store closings of $11.5 million offset by declines in sales of $4.2 million in comparable stores at $12.7 million due to the net effect of one less week in the quarter. The gross profit margin for the quarter decreased 0.8% to 28.5%. Our merchandize margin decreased 0.2% while buying distribution occupancy cost as a percentage of sales increased 0.6%. The increase in buying distribution occupancy was primarily in our occupancy cost.

Typically we need 2% to 3% comp increase to leverage our occupancy cost at our current rate of new store growth. Selling, general and administrative expenses $1.2 million in the first quarter of fiscal 2013 to $56.1 million or $28.0 million per percent as percentage sales. The increase was attributable to expenses related to new stores, partially offset by one last week of expenses due to the shift in the calendar along with lower incentive compensation expense. As a percentage of sales, SG&A expenses increased 1.3% as we were unable to leverage the increase in expenses due to a decline in comparable store sales and one less week in the quarter. Store closing cost and non-cash impairment charges included in SG&A expenses in Q4 this year were $809,000 compared to a $139,000 in Q4 last year. Net earnings for the fourth quarter of fiscal 2013 were $598,000 or $0.03 per diluted share.

For the fourth quarter of 2012, we reported net earnings at $3.3 million or $0.13 per diluted share. I’d like to transition to our fiscal 2013 fiscal financial results. Net sales increased $29.8 million to $884.8 million for fiscal 2013, a 3.5% increase from net sales of $855 million for fiscal 2012. Comparable store sales for the 52-week period ended February 1, 2014 remain flat compared to the 52-week period ended February 2, 2013. The increase in sales for the year was due to 49 net new stores partially offset by $10.7 million decrease in sales due to the net effect of one less week in the fiscal year. The gross profit margin of fiscal 2013 decreased to 29.3% from 30.1% in the prior fiscal year. Our merchandize margin decreased 0.4% while buying distribution and occupancy costs as a percentage of sales increased 0.4%.

SG&A expenses increased $6.7 million for the year due in part to a $10.6 million increase in expenses for 63 new stores net of 14 stores closed since the beginning of fiscal 2012. These increases were partially offset by a decrease in incentive compensation of $4.5 million as compared to the fiscal 2012. As a reminder included in fiscal 2012, SG&A expenses for $1.2 million of net expense related to the retirement of our former president, CEO. Total pre-opening costs for fiscal 2013 were $3.4 million, a decrease of $700,000 over last fiscal year. Of the total pre-opening costs incurred in fiscal 2013, $2.1 million was included in SG&A and $1.3 million was included in cost of sales from preopening rent and freight. We opened 32 stores during fiscal 2013 at an average cost of $66,000 as compared to 31 stores last year average cost of $88,000. The decrease in the average expenditures per new store was primarily result in decreases in expenditures from onside training and support and advertising. New store closing costs and non-cash impairment charges included in SG&A expenses for fiscal 2013 were $1.2 million compared to $646,000 in fiscal 2012.

Now turning to our cash position information affecting cash flow. During fiscal 2013, we declared and paid in each quarter a cash dividend of $0.06 per share to our shareholders. The cumulative amount returned to shareholders in fiscal 2013 was $4.9 million. No purchases have been made this year under our share repurchase program. We currently have $20.3 million available under our existing repurchase authorization.

Depreciation expense was $4.6 million in Q4 and $17.4 million on a full fiscal year basis. During fiscal 2013, we expended $31.0 million for the purchase of property and equipment of which $26.3 million was for the construction of new stores, remodeling and relocations. Lease incentives received from landlords were $8.1 million. We opened 32 new stores, relocated 9, and closed 7 stores during fiscal 2013. We remodeled approximately 9% of our store base.

Capital expenditure is expected to be $32 million to $34 million in fiscal 2014. As Cliff mentioned, in 2014 we expect to open between 30 and 35 new stores, which will account for approximately $15 million to $18 million of our total capital expenditures. The remaining capital expenditures $8.3 million will be used for store relocations and the remodeling are approximately 8% of our existing store base. Lease incentives we received from landlords are expected to be approximately $8 million to $9 million.

My final comments today will focus on sales and earnings expectations for the first quarter of fiscal 2014. We expect first quarter net sales to be in the range of $232 million to $241 million with comparable store sales in the range of flat to down to 3.5%.

Earnings per diluted share in the first quarter of fiscal 2014 are expected to be in the range of $0.45 to $0.52. Included at the high end of the earnings estimates for the first quarter is the expectation of a significant increase in our merchandise margin and moderate deleveraging our volume distribution occupancy costs and a slight deleveraging of our SG&A expenses? The deleveraging of the expenses are due primarily to the flat comparable store sales expectation.

This concludes our financial review. Now I'd like to open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) We'll take our first question Jeff Stein with Northcoast Research.

Jeff Stein - Northcoast Research

Good morning, guys. First question on national advertising, wondering how this will affect your ability to leverage SG&A in the current fiscal year. In other words, does the leverage point for the full year go up, and if so, what is the leverage point?

Cliff Sifford

You know Jeff, if you want -- we don’t have full year guidance. But if you assume a low single digit comp increase for the year, it will be difficult to leverage our SG&A. It won’t be a dramatic deleveraging; I will call it more like a moderate deleveraging. But it’s not only the advertising which is a big number, but since we are going to be opening more stores potentially, if we hit the high end of our range, plus we are opening at large markets, our pre-opening cost are probably going to be in the middle point of the store openings for next year, we are going to increase our preopening cost about $1 million. And on top of that we have acceleration, our EPS, which we would expect well within low single digit comp increase, we will see an increase in our incentive compensation. So while we will control our expenses to the best of our ability, those three items, but most particularly the advertising increase will cause us some deleveraging.

Jeff Stein - Northcoast Research

Will there be an increase, Kerry, by bringing your ecommerce fulfillment into the DC into (multiple speakers)?

Cliff Sifford

This is Cliff, that we actually don’t think that we are going to see a deleveraging -- we don’t believe we will see a deleverage this year, in fact next year, once complete that transition, we will be able to leverage the e-commerce shipping. You would see, probably a benefit, let me say it this way. There is more of a benefit in ’15, than it will be in ’14.

Jeff Stein - Northcoast Research

Okay, so maybe neutral to slightly positive this year?

Cliff Sifford

That’s correct.

Jeff Stein - Northcoast Research

Okay. And can you talk at all about how things are going with your women's tests, expanding the better brands into 70 stores, how that played out in the fourth quarter, and how it's progressing so far in Q1?

Cliff Sifford

We are very happy and glad you asked that question. I was going to talk about it in my prepared remarks, but it really was all about boots this past fourth quarter. We’re very pleased with the performance of our test and, in fact we have taken it from the initial 50 store test we have taken it up to over 100 stores today. And by the time we hit fall, believe that number is 140, somewhere between 140 and 150 stores. The stores have really gotten behind that that the customers are reacting very favorable to the product. So we’re very happy with it. There are some brands obviously are doing better than others but overall we’re happy with the test.

Jeff Stein - Northcoast Research

Okay. And Kerry, wondering if you could talk about how you see the store opening plans for the balance of the year? It sounds like maybe some stores have been pushed back to Q2 and beyond?

Kerry Jackson

It is, Q2 is going to be a very big opening or us to get the stores open for back to school. As Cliff said, we’ll be opening seven in the first quarter. We could have approximately 19 stores open in second quarter with the remainder of the stores opening at the end of the third quarter or beginning of the fourth quarter.

Jeff Stein - Northcoast Research

So how would that affect -- can you just -- if you do open 19 in the second quarter, what would your store opening costs look like year on year?

Kerry Jackson

You’ll see Q1 to be relatively flat. We fit it in the approximately $1.8 million increases in expenses Q2. But we’ll see some of those expenses come -- against the prior year it will come down in Q3, somewhere in the range of $600,000 to $700,000 and then we’ll probably be beyond $150,000 at the midpoint of the store openings will be down about a $150,000 in Q4.

Jeff Stein - Northcoast Research

Got it, okay. Thank you very much.

Kerry Jackson

I should say they made effective of that is about a million increase in pre-opening cost.

Operator

And we’ll continue on to Mark Montagna with Avondale Partners.

Mark Montagna - Avondale Partners

I just want to verify a number that I think you said Cliff in terms of sandals. How much did you say it was up?

Cliff Sifford

Our sales were up in the teen’s year-to-date. So, it was in all categories.

Mark Montagna - Avondale Partners

Okay. So then is any of the weakness pretty much all centered on athletic, or what other any comments on the other categories?

Cliff Sifford

Athletic is definitely trending down. If -- Mark, you’re good at athletic, she understand what happens. You need the weather not to be wet and snowy for athletic shoes to sell and the weeks where we’ve seen temperature is moderate and the weather be drier we’ve seen good results of athletic products, it’s just that weather is not been conducive to selling athletic shoes. Though it has been conducive to selling women’s dress, I mean where we can -- women's dress or women’s casual it’s been all about women’s short shoes actually in the south sandals and canvas and fabric products.

Mark Montagna - Avondale Partners

Okay. And then so, Kerry, it sounds like if you, with the first quarter guidance, if you comped down 3.5%, it sounds like you are -- that would imply a slight comp deceleration from where you are right now. Because I know you said you were up -- down 4% quarter to date, but it sounded like things might have decelerated a little bit.

Kerry Jackson

Well, we were going into Easter last year, we’re approaching now. So, Easter is much later this year, so what we’re seeing is comp comparisons will get worse as we approach Easter but then -- post comparisons last year but then when we get past Easter of last year and we start accelerating into Easter of this year, we’ll see hopefully a strong rebound and that where we think that why our range is better than it is where we’re right now.

Mark Montagna - Avondale Partners

Then last two questions. Just regarding inventory, do you have any sort of specific goal in terms of inventory turn for this year or some sort of rate of gain in inventory turn in coming years? And then really that's the question.

Cliff Sifford

We don’t normally talk about the turn as on the conference call for our goals. But I can tell you that we’re looking over the next several years to significantly increase the inventory turn our store. We believe first of all that our lower volume stores can operate as efficiently and produce sales results with lower inventory than they currently have on hand and we think actually believe our larger volume stores, inventory levels are just fine. So, that along with effective we’re going to bring our product down on a timelier basis and flow the product through the seasons and not front load quarters with product I believe you’ll see significant changes in our inventory turn.

Operator

Thank you. We’ll go on to Jill Nelson with Johnson Rice.

Jill Nelson - Johnson Rice Investments

Good afternoon. Quick question. I think, Kerry, you said for first quarter, you are expecting a pretty nice increase in merchandise margins. If you can just talk about some of the factors behind that.

Kerry Jackson

The biggest factor Jill is the fact that we can clean on boots. We think clean not only on boots but we think clean on what should we would consider to be fallen winter times sport shoes. What we saw was when December started trending away from us, and the weather, we saw the customer traffic trending down. We had our IRs take accelerated markdowns on the product that we are not selling that at really good rates. And we could afford to do that because of the margins we were making boot categories. Then as we went on through the rest of December and end of January, our boot business continued to be fairly robust and we ended the quarter with boots down in the teens on our per store basis, inventory wise. That then did not require us to take the deep markdowns that we took into the first quarter last year on boots therefore that’s reason the margins were up significantly this year.

Jill Nelson - Johnson Rice Investments

I appreciate it. And then could you just talk about a bit more on athletic, I know weather has been an impact. I think in a previous quarter you talked about maybe the customer shifting away from her traditional technical athletic product. Can you could talk about how you continue to see that shift and maybe some of the catalysts that are working to replace that?

Cliff Sifford

What we’ve seen and when you look at our athletic business, we don’t categorize some product that’s selling very well in athletic where some of our competitors in fact most of our competitors do categorize in athletic. So in fabric product with walking product that kind of casual kind of products for athletic, if you can’t play a sport in it, we don’t put it in athletic, let’s just say that way. If that can’t play a sport, it goes on our casual business and that product is still selling, running it does not sell when the weather has been, like it’s been and that really is a driver of athletic. If you’re not selling running product then you’re not selling yourselves in athletic and not trending up, at least in our stores.

Operator

(Operator Instructions) we’ll go to Sam Poser with Sterne Agee.

Sam Poser - Sterne Agee

Good afternoon. Thanks for taking my question. As a continuation of the conversation about getting clean in boots, you are expecting -- based on the guidance on current trends, you are expecting acceleration going into April with the later Easter and so on. But how much -- if we think about into Q2 -- and I know you're not giving guidance -- but how much of the lost sales of spring so far do you really think you'll be able to recapture, and how do you avoid the risk of going things are going great and maybe buying too many sandals and then have that cut off early? You know what I'm saying? It seems to me the season may be a little shorter. How do you avoid getting ahead of yourself if the momentum just does pick up?

Cliff Sifford

I’m going to take it back two years, Sam. Two years, ago we had early spring, first quarter was very moderate from a temperature standpoint. We sold sandals and spring product early February, March, April and reported a pretty first quarter. This is boot from the second quarter to the first quarter and consequentially our second quarter was not as good from sandal and spring product standpoint. Last year, it was just the opposite. We had colder more seasonal weather in the first quarter, not quite like it was this year, but it’s also colder more seasonal weather in the first quarter and sandals and spring and summer products sold later, it came in April and May and June and you remember I was talking about that last year.

So what we did is we’re not going to take - we’re not going to get excited and take markdowns on the sandals and spring product today because weather what it is and we’re going to, we believe, and we believe this because what we’ve already seen in the South, we believe this is going to accelerate as we move into April and weather gets more seasonal. And then obviously as we go into May and June well at least, hopefully as we go into May and June, we’ll see more moderate trend from weather perspective. It doesn’t mean we’re going out and buying more sandals because we’re not. We feel that the sandal flow that we have today and some of that is still coming in is a good flow and that we’ll just transition ourselves later in this quarter and into next quarter.

Sam Poser - Sterne Agee

Thank you. And then -- thank you. You are trying to build up the women's business, that's a big push for you guys to increase penetration of women's. But there doesn't appear to be a lot of big trends out there that are identifiable to drive it outside of maybe items in sandals and so on. How are you planning on attacking that looking into this year? I don't need brands or anything…

Cliff Sifford

Almost entirely by average unit retail, as we elevate the level of the product in our stores, we are seeing average unit retails escalate and especially in our women's area. And we may not sell as many pairs because as you said there are not a lot of identifiable trends today other than items, but the average unit retail that we achieved at the door will be the driver.

Sam Poser - Sterne Agee

And then how are you -- I mean how are you looking at like the boat shoes this year compared to last year and some of the big ones that we were driving? Last year boat shoes did a nice job of driving some sales in the spring? I mean how do you look at that when you're lapping that right now?

Cliff Sifford

Here’s the way I’ll answer that, as we see nice increases in our fabric and canvas product and we do see that the young people are moving away from the more traditional leather kinds of products and we’ve, I think we talked about that at Back to School last year and that continues on through the fourth quarter, we’re seeing that in the first quarter, we left that as get closer to Back-to-School this year but that young customer that we’ll find boat shoes a, or leather boat shoes a year ago has definitely transitioned to more fabric and canvas product.

Operator

Thank you; let’s take our final question from Steven Martin with Slater Capital.

Steven Martin - Slater Capital

I won’t ask you the obvious question that relates to your cash balances so you don’t have to do that one.

Cliff Sifford

And we appreciate you’re not.

Steven Martin - Slater Capital

Canvas. There's two or three areas of canvas, you've got the BOBS, you've got the Vans kind of shoe, and you've got more of the rubber bottom sneaker Keds and Converse. Can you give us a little more specificity on what is working in canvas?

Cliff Sifford

And I do appreciate your asking the question but we won’t get specific on brand.

Steven Martin - Slater Capital

What type of shoe?

Cliff Sifford

Casual, canvas or fabric shoes for women, kids and even men’s are all selling well. And whether that’s boat shoes or just canvas casuals.

Steven Martin - Slater Capital

Okay. When you look at -- when you look out to 2014 and I know you're not giving us guidance for the full year, can you talk about ASPs? Obviously with that women's test or rollout and expansion, the ASPs for that category are going to improve. But when you look out across the rest of your categories, how do you see ASPs evolving?

Cliff Sifford

We are definitely looking for ASPs to escalate and women’s and in athletic. I believe that ASPs and kids will be somewhat flat and men’s will be somewhat flat. So overall I believe ASPs are going to escalate in low to mid-single digits.

Steven Martin - Slater Capital

Okay. And in the line category, recognizing that it's been retarded by the weather, what is the new or what are the NIKE technologies or other technologies that you've gotten into help drive that business versus the last couple of years?

Cliff Sifford

Well you know good part about NIKE is that they continue to bring innovation to the family channel, where they are giving us -- and I don’t really want to get specific with that as well because we got to remember our competitors that listen to this call and I don’t want to tell them which way we’re headed but they give us new technologies and we with those technologies, some are exposed some are lightweight in nature but they are all new and not all new, excuse me, I didn’t mean to say it that way, but they’re new and exciting quite frankly when you look at them and very sellable and very commercial. And they are by far the leader in that, you know everybody else seems to, everybody else in the performance arena and with some of our fashion brands in athletic continue to bring innovation as well.

Steven Martin - Slater Capital

Okay. And in the basketball category? Obviously you guys would love to get some Jordan launch product, but…

Cliff Sifford

… Jordan knock offs. But the good news is…

Steven Martin - Slater Capital

What’s NIKE doing -- in that area?

Cliff Sifford

Well, again I’m not going to get specific there, but I will tell you this, any time athletic performs in the mall and it has a halo effect and eventually it comes down to our channel. And all the major brands take what works in the mall and they try to interpret that as best they can for the family channel and we usually benefit from that.

Steven Martin - Slater Capital

Okay, one last one, since I was the last question anyway. Have you seen any change, improvement in J.C. Penney?

Cliff Sifford

You know, not really sure where you’re going with that, we shop them often, but I am...

Steven Martin - Slater Capital

I meant in their footwear assortment obviously.

Cliff Sifford

I can’t go there right now. I am going to talk about my competitors on a conference call.

Operator

And gentlemen we do have a follow-up question from Mark with Avondale Partners.

Mark Montagna - Avondale Partners

I didn't want Steve to have the last question, so I figured I just have to slip in here.

Cliff Sifford

Mark, we appreciate that.

Mark Montagna - Avondale Partners

Yes, yes. So is the rise in average selling price in women's, is that solely related to the new higher-priced line in women's, or are you seeing it across the board?

Cliff Sifford

Actually there are three reasons. One the newer price lines, newer higher in lines are obviously delivering higher ASPs than we have had in the past. What we have learned from that Mark, is that we don’t have to -- if we are developing a sandal or something even in our product-label program we can build that up. Our customers understand, and have shown us that they understand the value and better products. So we have even taken our some of our product label or unbranded product and moved that up in quality. And I think that the customers recognize that and bought into that. And number three, and as importantly is that we came into the New Year so clean on our inventory that we haven’t had to clear product which obviously drops average price down. And so the three of those combined will drive average price this year.

Mark Montagna - Avondale Partners

Okay. And then in the pockets of warm weather, is it more pockets, or is it like a region when you say the South, and is the strength in these regions, is that more than just sandals, such as perhaps athletic in these areas where it's actually perked up in terms of weather?

Cliff Sifford

It is more pockets than it is regions because our regions are kind of -- are somewhat broad , but what we have seen and it’s not just the south where we have seen pops in sandals. Anytime we get a warm weather trend in any of our regions or any part of the country we see a pop in sandals. And that’s the positive thing. That’s one of the things that we are - one of the reasons why we are guiding at flat to 3.5% down instead of where we are currently. As far as athletics, our concern in those pockets that we have seen that has continued to have warm weather, the athletics business is okay. I’m not going to tell you it’s great, but some of that has to do with the fact that again we track a certain shoes in the campus and walking, if it can’t be played in a sport that’s the best way to -- say that can’t be used in the sport, it reports for our women’s business.

Mark Montagna - Avondale Partners

Okay. That's really helpful. I'll let you guys get ready for other calls after the NIKE call, and your other analysts will call you.

Operator

And gentlemen on that note we have a follow-up from Jeff from Northcoast Research.

Jeff Stein - Northcoast Research

Just a couple quick one’s for you. What were preopening costs for the full year, and what were they in the fourth quarter? I'm sorry if I missed it.

Kerry Jackson

For 2013?

Jeff Stein - Northcoast Research

Yes.

Kerry Jackson

$3.4 million for the full-year, and we’re at for the fourth quarter preopening cost in both (inaudible) SG&A were $477,000.

Jeff Stein - Northcoast Research

Okay. And do you have that number broken down just for SG&A for the year and the same quarter?

Kerry Jackson

SG&A was $286,000 for the fourth quarter, and $2.1 million for the full-year.

Jeff Stein - Northcoast Research

And you are expecting them to be up $1 million this year, and that’s across both SG&A and buying an occupancy?

Kerry Jackson

Yes.

Jeff Stein - Northcoast Research

Okay. So the $1 million increase covers both, right?

Kerry Jackson

Yes, it does.

Jeff Stein - Northcoast Research

And depreciation and amortization estimate for this year?

Kerry Jackson

It will be in the $20 million range that will be up from about $17.4 million this year.

Operator

Thank you, we have no additional questions in the queue. I would like to go ahead and turn things back over to our speakers for any additional or closing remarks.

Cliff Sifford

I want to thank everyone for participating today and look forward to speaking to you again in May. Thanks again.

Operator

And again, ladies and gentlemen, that does conclude today's call. Thank you all again for your participation.

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