New York & Company, Inc. (NYSE:NWY)
Q1 2016 Results Earnings Conference Call
May 19, 2016, 04:30 PM ET
Faeth Bradley - EVP, Human Resources
Greg Scott - CEO
John Worthington - President and COO
Sheamus Toal - EVP and CFO
Nick Hyatt - SunTrust Robinson Humphrey
David Kanen - Aegis Capital
Good day and welcome to the New York & Company First Quarter 2016 Earnings Conference Call. Today's conference is being recorded.
At this time, I'd like to turn the conference over to Faeth Bradley, Executive Vice President. Please go ahead.
Thank you. Good afternoon everyone.
Before we begin, I'd like to remind you that some of the comments made on today’s call, either as part of our prepared remarks or in response to your questions, may contain forward-looking statements that are made pursuant to the Safe Harbor provisions in the Private Securities and Litigation Reform Act of 1995.
Actual results may differ from those projected in such forward-looking statements. Such forward-looking statements are subject to risks and uncertainties as described in the Company’s documents filed with the SEC, including the Company’s fiscal year 2015 Form 10-K.
And now, I’d like to turn the call over to Greg Scott, our CEO.
Thank you, Faeth. Good afternoon everyone. With me on the call today are John Worthington, our President and COO; and Sheamus Toal, our Executive Vice President and Chief Financial Officer.
I’ll begin the call with some highlights from our first quarter results and provide an update on the progress that we've continued to make against our key priority. Then I will turn it over to John to update you on credit loyalty program, eCommerce, store expansions and Project Excellence initiative. Finally Sheamus will walk you through our financial results in more detail and we’ll open the call for questions.
The first quarter was challenging for New York & Company and was below expectations and initial guidance. Overall sales for the quarter declined 3.3% while comp store sales were down 2.3%. We started the quarter strong with positive sales trends throughout the first 7 weeks, however during the week leading to the Easter holiday, we began to experience slowdown in our store traffic that continued through the month of April.
This also coincided with the plan reduction and our overall marketing spend versus the prior year which we believe impacted store traffic and what continues to be a difficult environment. Overall marketing spend was down $2 million in the quarter.
That said, we did continue to invest in digital marketing which continue to feel strong double digit growth in traffic and sales in our eCommerce business during the quarter.
In Q1 we saw strength in differentiated passion products in assortment demonstrating that our client is responding to passion while we did experience slowness in key seasonal basics. In the quarter, our Eva Mendes collection continues to perform above expectations and we are seeing the trend become stronger in Q2.
In June we will launch a unique collection of knit dressing, we’ll have a strong fall delivery in Q3 as we celebrate our anniversary with Eva and we enter our fourth year together. The September delivery will be supported by a strong marketing campaign.
Our Eva side-by-side and shop-and-shop stores continue to outperform the company and in the quarter we opened two freestanding Eva boutique's in South Florida and Northern California.
The Soho Jeans sub brand remains strong driven in the first quarter by Denim and our Soho Soft Shirt franchise. We’re looking forward to a launch of our new and expanded Jennifer Hudson Soho Jeans line in July. The question will feature strong Denim pieces supported by unique Jennifer inspired tops and jackets that will create excitement around the strong sub brand. We expect a positive customer response to this product as we remain focused on driving our Denim offering forward.
We also strengthen in our accessories category particularly shoes, belts and handbags. Looking ahead, we expect that shoes, sunglasses and belts could be key drivers of growth in this category in the second quarter.
This success in Q1 was offset by weakness in seasonal items such as shorts, crops and tees where we did not experience the typical build that happened in late March and April. We do believe that some of the lower demand can be attributed unseasonal weather in the Northeast, as we’re seeing better sales in the west and on eCommerce for some of these seasonal categories.
At the same time, dresses outside of Eva Mendes and eCommerce exclusive did underperform to expectations in Q1 driven by a weaker Easter assortment. We expect that when the weather improves, our Q2 assortment featuring maxi dresses, rompers, and more casual dresses will resonate more than our Q1 assortment.
While the year got up to a slower start driven by a significant change in traffic trends at the end of March and a slow reception to seasonal basics including dresses, we are working hard to adjust our game plans for Q2 and the balance of the year by focusing on the following. One, continued investment in eCommerce and digital marketing to support a strong growth that we are seeing. The launch of our mobile app in Q3 will also support this growth.
Two, stronger marketing support for our successful celebrity collaborations including the launch of Jennifer Hudson jean in late July, early August as well as the continued success of the Eva Mendes collaboration. As I mentioned earlier, we will enter our fourth year of this successful collaboration in September.
Three, continue to increase our level of chase and fast response and our go-to-market process and we will leave more money opened as we enter Q3 and Q4 to successfully chase categories that are doing well. In the current retail environment we are seeing fashion perform stronger than seasonal key items.
Four, we are also working with new partners beginning in Q1 that will enable us to grow overall sales and traffic. This includes Zulily, where we had a strong cast in Q1 piloting shopkick in 140 stores beginning in June and both Criteo and Bluecore on the digital side. And five, we will see larger financial benefits from Project Excellence as we go forward from Q1.
Now let me take a moment to update you on the five strategic initiatives that we continue to focus on to drive our business forward in 2016. First, we are growing our sub brands as we evolve into a broader lifestyle brand.
As I mentioned, we are focused on expanding our Soho Jeans business with the upcoming launch of the Jennifer Hudson collection. We are also working to further grow the Eva Mendes category by expanding these new product categories including a broader accessories assortment during the year.
We also continue to test our Eva Mendes side-by-side and shop-and-shop within our stores to good success. We currently have 16 side-by-side, 25 shop-and-shops and two standalone locations.
Finally we are maintaining our dominant position in the 7th Avenue Design Studio collection. This sub brand was difficult in Q1 driven by weakness in our bottom categories. We are repositioning pants in Q3 based on a more modern silhouette. We have also added design talent to this important sub brand in Q1 and we’ll see the impact of this by Q4.
We have seen strength in our fashion and more lifestyle driven product offerings, including Trending Now and Quintessential. Trending Now is a lifestyle driven assortment that has developed closer in and can be developed and delivered within 24 weeks. We have also seen the introduction of Quintessential driven by the Audrey pant as a new place to grow our versatile assortment as we move beyond Q1.
Second, we will continue to work on creating a deeper emotional connection with our customers and increasing brand awareness among our target consumers. In Q1 we did not plan large marketing efforts around our celebrity collaboration and beginning in July, we will again leverage the star power both Eva and Jennifer to drop consumers into the brand, while ensuring that we're connecting with them in ways that are authentic.
Our celebrity partnerships are key part of our strategy and we’ll continue to focus on fostering these relationships to ensure that New York & Company remain the go-to-destination for exclusive collaboration from some of our customers favorite celebrities.
We will also continue to grow our consumer database, increase our email database and expand our credit loyalty program. We are leveraging this expanded database to create additional touch points with our consumer and invite advisor to shop with us more throughout the year.
Our third initiative is focus on increasing sales and productivity and profitability across all three channels of our business. We remain focused on ensuring that each channel has a unique yet complementary identity that fits within the overall New York & Company brand in order to drive sales and profitability going forward.
While we were pleased with the growth that we continue to see in our eCommerce business both from the traffic and sales side, however both our outlet and core retail stores are softer traffic than trend during the quarter which significantly impacted our sales results. We are working diligently to improve our traffic trends to brick-and-mortar, but both traditional and nontraditional marketing efforts.
We also did not see the results from our 50 conversion stores that we plan to see in the quarter. Unlike the 9 that we tested last year, traffic declines impacted these stores. John will speak further on the results of the conversion stores and how we're looking at them go forward.
Fourth, we are focused on becoming a best-in-class omni-channel retailer. This will enable us to better serve our customer in a matter where, when or how she refers to shop New York & Company. We believe that this will also enable us to drive improved performance across the business as we leverage our three distinct channels to provide a seamless customer shopping experience. We look forward to launching shopkick in June, our new mobile app in Q3 and will be testing kiosk and select stores starting next fall.
Fifth, we did make progress on our speed to market initiatives in the quarter delivering product faster to our stores from concept to floor. We work with our agent partners and improving our speed of design and production by working in new ways. We also made significant progress on the expense side by actualizing savings from Project Excellence in the quarter which we’ll continue to grow as we move throughout the year.
In summary, the first quarter was challenging and we're working hard to improve our traffic trends to our stores, as well as adjusting our game plan to support the categories that are performing well. We continue to believe in our overall direction of unique and differentiated product driven by celebrity collaborations and sub brand, and believe in the direction of our omni-channel initiatives. These strategies along with the financial support of Project Excellence position us well for future growth.
Now, let me turn the call over to John for an operational update.
While we came in short on our Q1 expectations, we continue to be encouraged that we’re seeing positive comps in four of the last five quarters. We believe that the progress we made and continue to make on our short and long term strategic initiatives will produce improved results.
I'll begin my remarks with a review of our credit loyalty program and omni-channel initiatives. I’ll then provide an update on our store expansion, outlet conversions, and end with Project Excellence our productivity initiative.
Our credit loyalty market share increased to 39% of sales up from 37% in Q1 of 2015, which is an all time high. We continue to expect growth in our credit card file as well as in our email database to drive long term loyalty and incremental sales. This is obviously very important because we can more effectively target these loyal customers with specific offers and we know that these customers spend two to three times more annually and shop more frequently.
Now let me turn to our omni-channel business. We continue to experience strong growth in eCommerce in the first quarter benefiting from the enhancements we've made and continue to make to our web platform. During the quarter we continue to see strength in our shift from store omni initiative with positive comps over last year.
We believe we are leading in technology within the specialty store channel and expect our extended capabilities with Ask Us, ship from store, and buy online pick up in store to further differentiate New York & Company from others, as we give customers the flexibility to have the product in the size and color they want and enable them to shop when, where, and how they want. We'll continue to implement technology enhancements in store and online.
To help us better serve customers across all channels, we’re currently rolling out a company-wide POS upgrade. We will provide mobility and introduction of tablets in all of our stores. This rollout will improve productivity and increase security levels of our operating systems.
The new POS system will also help support further omni growth initiatives. The new POS upgrade will be complete at the end of Q2 this year. To further expand our omni capability and our desire to be best-in-class, we will be testing a New York & Company kiosk in select stores this fall. This new kiosk will allow her to have an endless aisle of all available sizes, colors and assortment.
In the quarter, we continue to see strong growth in mobile. We’ve made enhancements to our mobile experience, as we see the customer using mobile as an omni enabler to shop anywhere, anytime.
Now let me spend a minute on our store expansion and outlet conversion. During the quarter, we converted 50 New York & Company stores to outlet and closed 2 New York & Company stores ending the first quarter with 488 stores including 132 outlet stores and 2.5 million square feet in operation.
As Greg mentioned, we also opened 2 Eva Mendes freestanding stores. These two test stores are located in the Fort Lauderdale, Florida area and San Francisco.
As it relates to our Q1 performance in the 50 outlet conversion stores, we saw similar issues with traffic that we experienced in Q1 brick-and-mortar generally. These 50 stores fell short of our original plan and we are taking immediate steps to improve traffic in these conversion stores with aggressive marketing and promotions.
Turning to Project Excellence, which as you know is our ongoing initiative to improve overall operational efficiency and productivity. As we moved into 2016, we continue to see the benefits of our initiative which we began implementing last year. Our most significant improvement for the coming year are centered on improving our speed to market and realigning and increasing our collaboration with our key agent partners along with simultaneously driving reductions in our product cost and developing expense controls across all areas of the business.
From a speed to market perspective, we have improved our product development calendar and shortened our supply chain timelines. These changes along with the implementation of the formalized fast track process have enabled us to more effectively leverage runway and trend intelligence and more rapidly deliver product from concept launch to in store.
Our agent realignment efforts are off to a successful start and we continue to increase the collaboration between our internal teams. This change has led to an increase in presence and collaboration of our partners and design and sourcing teams in New York and greater interaction with their foreign offices, as we continue to focus on driving margin and improving execution throughout all areas of the product development process.
We continue to be pleased with the success of Project Excellence to date. And while we are excited that these savings begin flowing through directly to our bottom-line in 2016, we still remain very focused on identifying new opportunities to reduce costs, increase our speed to market, increase efficiency and improve profitability.
So in closing, we are encouraged that our strategic efforts in our credit loyalty program, our omni-channel and Project Excellence are taking shape and starting to produce short and long-term results.
With that, I would like to turn the call over to Sheamus to review our first quarter results and provide 2016 outlook in more detail.
Thank you, John. Good afternoon, everyone.
Net sales for the first quarter were $216 million, as compared to $223.4 million for the first quarter of last year. Comparable store sales decreased 2.3% compared to an increase of 1.8% in the same period last year.
In the comparable store sales base, average dollar sales per transaction decreased by 3.4% and the number of transactions per average store increased by 0.8% reflecting increases in our growing eCommerce business offset by decreases in our brick-and-mortar stores.
Gross profit as a percentage of net sales decreased by 110 basis points to 27.7% of sales versus last year's first quarter gross profit rate of 28.8% of sales. This reduction reflects the combination of one, a 40 basis points decrease in product margins primarily due to increased markdowns partly offset by lower product costs resulting from our Project Excellence initiatives.
Two, a 60 basis point increase in other cost of goods sold related largely to shipping costs associated with the significant growth of the Company's eCommerce business. And three, a 10 basis point decline in the leverage of buying an occupancy costs due to the lower sales.
Selling, general and administrative expenses were $65.3 million as compared to $68.5 million in the prior year. Excluding the non-operating charges of $2.9 million from last year, selling, general and administrative expenses were $65.6 million in the prior year.
The decrease in selling, general and administrative expenses excluding non-operating charges reflects significant increases in variable expenses associated with the growth in eCommerce sales combined with increases in severance expense. These increases were offset by decreases in marketing expenses and reductions in performance based compensation expense.
GAAP operating loss was $5.4 million as compared to the prior year’s first quarter GAAP operating loss of $4.2 million. Excluding $2.9 million of non-operating charges, the non-GAAP adjusted operating loss in the prior year was $1.4 million.
GAAP net loss for the first quarter of fiscal year 2016 was $5.7 million or a loss of $0.09 per diluted share. This compares to the prior year's GAAP net loss of $4.7 million or a loss of $0.07 per diluted share. Excluding $2.9 million of non-operating charges the prior year's first quarter non-GAAP adjusted net loss was $1.8 million or a loss of $0.03 per diluted share.
Total quarter end inventory increased 2.1% which was in line with our prior expectations reflecting higher inventory on hand with lower levels of the inventory in transit due to the company changing shipping terms on certain shipments to take title later in the supply chain. Inventory per average store increased 5.4% as we positioned inventory for the Mother's Day and early summer selling period.
Capital spending for the first quarter was $1.9 million as compared to $6.7 million in last year's first quarter reflecting a shift in real estate spending and a shift in IT infrastructure spending to later in the fiscal year.
During the quarter we converted 50 New York & Company stores outlet and closed two stores ending the quarter with 488 stores including 132 outlet stores and $2.5 million selling square feet in operation. As previously mentioned, the company ended the quarter with $47.6 million of cash on hand and no outstanding borrowings under it's credit facility.
Now turning to our outlook for the second quarter of fiscal year 2016. Net sales and comparable store sales are expected to be flat to slightly negative. Gross margin is expected to be flat to up 50 basis points from the prior year's gross margin rate reflecting reductions in product cost and agent expenses resulting from Project Excellence combined with reductions in buying payroll and improved leverage of our occupancy expenses. Partially offset by increased shipping costs associated with the growing omni-channel business.
Selling, general and administrative expenses are expected to be approximately flat as compared to the prior year period. Operating results on a GAAP basis for the second quarter of fiscal year 2016 are expected to be in the range of approximately breakeven to $1 million of operating income as compared to operating income of $400,000 in the prior year, reflecting anticipated diluted earnings per share in the range of breakeven to $0.01 per share.
The Company expects total inventory to increase in the mid-single digit range reflecting higher levels of in-store inventory as we position ourselves for the fall selling period. Capital expenditures for the second quarter are projected to be between $9 million and $10 million as compared to $7.3 million of capital expenditures in the second quarter of last year.
Depreciation expense for the second quarter is estimated at $6 million. During the second quarter, the Company expects to open one New York & Company store remodel two existing locations and closed two stores ending the quarter with 487 stores including a 132 outlet stores and 2.5 million selling square feet in operation.
With that, I'd like to turn the call over to the operator to begin the question-and-answer portion of the call.
[Operator Instructions] And our first question will come from Pam Quintiliano with SunTrust Robinson Humphrey.
Hi, this is actually Nick Hyatt on for Pam thanks for taking our call. I just have a couple questions for you. First, I'm just wondering if you can talk a little more about traffic. I know you mentioned it, but can you just tell us how - maybe how you compare to broader mall traffic both in your full price stores as well as in outlets?
Sure, so what we're seeing as we've been talking about probably over the last four quarters, our traffic and our brick-and-mortar stores had typically outperformed the mall average and we saw that as well really through the first 7 weeks of the quarter. What we did see for the full quarter as we continue to perform better than the typical mall average in traffic.
However, we did experience really in week 4, a change in our momentum where we typically really outperformed the mall average, we only slightly outperformed the mall average and we did see a deceleration in our traffic in our brick-and-mortar stores that we were not expecting nor the trend would have showed us that.
At the same time which was interesting, our online traffic remains strong and robust and it actually exceeded our expectations in the quarter.
Got you, thank you. My next question is, I am just wondering if you can let us know if you think there was anything going on outside of weather in the quarter in terms of fashion or anything else that you addressed?
Yes. We always look to our self internally to understand what we could have done better. I will say that from a marketing perspective as I talked about, we did spend about $2 million less than the prior year quarter. Part of that was we did do a TV test with Eva Mendes in our D.C. market which we did not anniversary which was a large part of that expense.
The same time really - we did not really have our celebrity outreach in the quarter that we've had in almost every other quarter, Jennifer Hudson was not a part of Q1 and Eva Mendes while the collection was very strong, Eva Mendes herself was not out as she was Q1 in the prior year from a PR perspective.
So as I said, I think one of the things we're going to do as we move to Q2 and beyond is make sure that we're projecting our celebrities in a robust way again. We'll do that in July with the launch of Jennifer Hudson and then in fall we have Jennifer and Eva and I think we need to make sure that we project that because that I think was part of our winning strategy that allowed us to have traffic really above the mall average.
I would also say that, what was interesting in the quarter with fashion performed significantly better than seasonal basics. And when I say seasonal basics crops, shorts, tees both in outlet and in our core stores significantly underperformed and that really started with that week for Easter period and so you can say that there is a weather piece of that where we saw for instance over the last couple weeks both in the West Coast and in Florida those categories are performing significantly better than they are in the Northeast and the Mid Atlantic.
And what's unusual and we're really trying to understand this is these categories continue to perform well online and are not missing. So it's questionable about what the weather influences there. Obviously, we look at the broader consumer what's going on in the consumer the industries look good, we see from a broader retail market obviously there were some challenges, what I always look to is our product and say what can we lean into harder, and I think that is our celebrity collaborations, our sub brands and fashion which we continue to win on.
Perfect, thank you. Last question is, you mentioned your consumers. I am just wondering if you can talk about some of the macro trends out there and if any of those are working in her favor.
Well, I mean, I would say they should be working in her favor in terms of the job, what's going on employment, what's going on with GAAP, they should be working in her favor. I will say that it's very hard for us to speculate what would say, which would cause this change in traffic, which really happened in March - at the end of March. And I would say that happened across that looks like many of the retail sector for - where our consumer would shop.
So we're continuing to dive into the broader macro environment to understand if there was something that happened during that time period that influenced her from a psychological perspective in terms of her shopping behavior.
So, I will say that what we're seeing on the macro level, what you’re hearing on the macro level you would not say that she should be affected from a shopping patterns but as we've seen unknown to us obviously, but what we saw really when a lot of people announced last week, everyone kind of experienced the same thing, a lot of people experienced similar things from a traffic perspective the same time that we did.
Sure, perfect. Well thank you very much and good luck on the quarter.
Our next question will come from Eric Beder with Wunderlich Securities.
Yes, good afternoon. This is [Brian Tronia] [ph] on for Eric. The first question we had was, if you could maybe do a bit of a deeper dive into your inventory level exiting the quarter obviously you spoke about it being up mid-single digits on a store basis in order to prepare for the summer selling season.
But moving forward could you maybe give some insight in terms of where you see your inventories level being moving forward? Is there some level of inventory that was earmarked more for the warmer selling season than maybe it's been stuck in the channel a little bit, and I guess in summation is it something that - is something that you'd be looking to normalize and if so what sort of timeline would you say in terms of you seeing that happen?
So I’m going to pick up the first piece of that and then let Sheamus really talk on the financial piece of it. I will say that yes, this is - we invest into summer products towards crop, tees dresses at this time of year. I will say that while we did miss early - really missed in the month of April in those product categories, our goal will be that we really be clean as we enter into Labor Day. I will say that what we've seen really in the last two or three years is that this summer cycle can live through the month of August all the way to Labor Day which is very different than where it used to live.
And I will say that it gives a little more runway on this product. We as a company have always prided ourselves on being very clean as we enter the new quarters and we will continue to do that and I believe that implicit in our guidance into Q2.
I think it's important that we're clean, I will say however I will sell shorts and tees and dresses through the month of August and be very clean as we exit the Labor Day holiday. And Sheamus you just want to pick up on financial -
Yes, so from a financial perspective obviously as we started the quarter we gave guidance in terms of where we expected inventories to end at the end of the first quarter, and we are right in line with that guidance. So we initially gave guidance of expecting inventories to be up in the low single digit percentage and as we ended Q1 we were in fact up about 2.1%, so very much in line with where we expected it on a overall basis.
I think our team in the organization have been very responsive and disciplined in pulling back on certain receipts where possible, so that has helped in terms of the future outlook of inventory and as we guided in our release today and in my comments, we do expect to end the second quarter with inventories up in the mid-single digit percentages, but as Greg commented we are always very disciplined in terms of ending inventory clean for a season of any seasonal product categories and we'd expect to do something similar for this time period.
So in terms of expectations I think we're relatively in line with where we initially planned.
And I think what I would say is because of really our speed to market initiatives both what we launched for Project Excellence which effects both our ability in terms of say trending now to deliver collections in 24 weeks from concept but really leaving a lot more money open from chase.
We will take an even more aggressive approach on this as we go to Q3 and Q4 and be a lot leaner in our investments so that we can really chase what's selling. And I think because what the work we've done with our agents, the closeness we are getting with our factories and the ability that we are working more directly with our partners overseas allows us to be a little more or a lot more I guess confident in our ability to hold back and chase in and really go after what selling as we move into Q3, Q4 period.
Fair enough. I appreciate the clarity both from the financial and operational side. The second line of questioning I had is, I guess more to take a step back in terms of the overall operational initiatives and how you're looking to develop the product offering and your relationship with the customer, I guess both in the near term and over the longer term.
So I guess the most important one is in terms of the celebrity lines could you maybe give any level of insight or sort of expectations moving forward in terms of expanding from the lines you have now whether that's expanding - you had briefly referenced the expansion to product offerings with the Eva Mendes line are doing the same thing with Jennifer Hudson in addition to what's rolling out in the summer, as well as even potentially looking at additional collaborations with additional public figures.
And I guess as an extension of that in terms of the reference to your success in the fashion driven product. You had referenced at times in the past a desire to raise pricing and initial markups, given the performance of this quarter has your outlook in that regard changed or are you still looking to take pricing either in more finesse manner or across the entirety of your collection?
No, celebrity collaboration huge pillar of our key success it's been a bright spot of our assortment probably for a good two years now with Eva Mendes we just came off of our best quarter ever even without Eva really doing a lot of PR in the quarter, which was unusual and really doing a lot of broad outreach, we had our best ever what we're seeing with the Eva Mendes collection is it just keeps getting stronger. It keeps growing in category. Our customers - we had a dress for instance that we had over 100 positive reviews, 4.8 stars just off the charts and with customers and what this collection is resonating huge.
So with that, as we move into the fall and really as we move into spring, we've introduced kind of a mini collection for June week three - we're anniversary in June week five, and as we move into fall we're anniversarying our fourth year with her in September. We're growing her accessory assortment, we have a great handbag assortment with her for fall. Additional shoes, the sweater assortments great, great design team, great collaboration with Eva.
We think there's so many possibilities where this business can go and I think we're probably like in bottom of the fourth right now with her, and I think that we really have an opportunity to really grow that.
Then with Jennifer Hudson, we're launching a real jeans collection with her in July, July week three. Last year we launched Jennifer Hudson with no branded product, we just shot Jennifer in an amazing environment, we have over 7 jean styles, plus additional assortments and we believe we can continue to grow this though different than Eva which is its own collection, Jennifer is and as really inspired by her as amused and we developed it across the Soho Jeans line.
And lastly we are really diligently looking for a third celebrity. My goal initially probably was to launch that in Q4 of 2016. Right now we're looking for Q1 of 2017 which can be I think just a real powerful additional celebrity collection.
So overall celebrity, still very happy about it. What I can tell that Eva Mendes selling AURs were higher than they've ever been. The costumers paying for fashion right now, she is not looking at price for fashion. We're still going to continue to keep our retails where they are 20% to 30% higher than the main line there. And what we're really seeing is from a pricing standpoint, seasonal basics that have been really big building blocks of assortments that are not necessarily super fashion driven, that's really what we're seeing price compression this season, more so than we've seen in the past.
So as we balance Q3 and Q4 we're going to watch for that.
Okay, fair enough, I appreciate the color on that. That is all I have and good luck moving forward.
[Operator Instructions] Our next question will come from David Kanen with Aegis Capital.
Good evening, guys. First question for John, you converted 50 stores to the outlet format. My question is the preexisting stores let's say it's around little over 80, but did they perform similarly or was there discrepancy between the new ones and the existing?
Greg and I both commented on the actual script that brick-and-mortar in general both outlet and retail were challenging and traffic was tough in both of those channels. As it relates to the conversion the 50 that we converted, we obviously had tremendous success with the 9 that we converted last year around the same time, we came back and converted the other three in August of 2015 and those results were also very strong.
So I think that the traffic was definitely a drag on those stores like it was in all of our brick-and-mortar locations. There was one thing that we did different, we really wanted to go into these 50 conversion openings or transition them as pure as we possibly could without let exclusive, so last year we had carryover of NYCO product, New York & Company product that we were able to liquidate in the first quarter in those original nine stores, and it was a strategic decision to try to get rid of their merchandise and have as clean as possible for outlets.
So as we look back there was obviously a lot of sales that there were sales that were related to NYCO carryover, and so hopefully as we get more aggressive with promotion, as we get more aggressive with the overall traffic drivers as Greg mentioned we're going to do some conventional and non-conventional things to get them into all of our stores both New York & Company and outlet, but especially as it relates to conversion, we think we've got some strong price points and some strong items that will draw them into those locations.
And at this time this does conclude our question-and-answer session. I'd like to turn the conference back over to Greg Scott for any additional or closing remarks.
Thank you again for joining that. The entire organization is working hard to improve our overall results. We look forward to speaking with you when we report our second quarter results in August. Thank you.
That does conclude our conference for today. Thank you for your participation.
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