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GameStop Corp. (NYSE:GME)

F3Q07 Earnings Call

November 20, 2007 11:00 am ET

Executives

R. Richard Fontaine - Chairman of the Board, Chief ExecutiveOfficer

David W. Carlson - Chief Financial Officer, Executive VicePresident

Daniel A. DeMatteo - Vice Chairman of the Board, ChiefOperating Officer

Steven R. Morgan - President

Analysts

David Magee - Suntrust Robinson Humphrey

Benjamin Schachter - UBS

Bill Armstrong - C.L. King & Associates

Colin Sebastian - Lazard Capital Markets

Edward Williams - BMO Capital Markets

Arvind Bhatia - Sterne, Agee & Leach

Operator

Good morning. Welcome to GameStop Corporation’s thirdquarter results conference call. (Operator Instructions)

I would like to remind you that the call is covered by theSafe Harbor disclosure contained in GameStop's public documents and is theproperty of GameStop. It is not for rebroadcast or use by any other partieswithout the prior written consent of GameStop.

At this time, I would like to turn the call over to DickFontaine, Chairman and Chief Executive Officer of GameStop Corporation. Pleasego ahead, sir.

R. Richard Fontaine

Thank you and welcome to GameStop's third quarter conferencecall. I am Dick Fontaine, the Chairman and CEO. With me today are Dan DeMatteo,our Vice Chairman and COO; Steve Morgan, our President; and David Carlson,GameStop's Executive VP and Chief Financial Officer.

I am going to make some preliminary comments and turn itover to David, who will take us through the numbers in some detail, and Danwill be commenting more on the titles, give you some insights into the productsof the fourth quarter and touch on our marketing plans.

This morning we announced another very strong quarter whichcontinued to build on the exceptional results of the first half of the year.Our third quarter was not only outstanding in total but what was particularlypleasing was that all of our divisions turned in solid performance and perhapsas important, laid the groundwork for an excellent fourth quarter and holidayseason.

While the highlight of the quarter was probably thephenomenal sales of Halo 3 from Microsoft, it was far from a one-trick titlequarter. In fact, the diversity of platform sales and supporting titlescontinues to be amazing. Total hardware sales by units and as a percentage ofsale have never been higher in the third quarter, and while that put pressure,as expected, on our gross margin, the margin decline was more than offset byour operating efficiencies and a 5.8% improvement in our SG&A expenses. Inshort, a great deal of our incremental performance slid through to the bottomline.

Every segment of our business exceeded expectations, led byour domestic sales, earnings growth, and comp store numbers, but followedclosely by similar strong performances in Australia, Canada, and Europe.

Furthermore, GameStop.com turned in its best third quarterever in both sales and unique visitors and completely redesigned the site, whileGame Informer surpassed 3 million audited subscribers to increase its dominancein the game magazine field.

In short, we have a top flight, high-tech broadcast channeland a top flight, traditional broadcast channel pushing videogames and the successof the categories.

Once again, our U.S. market share, according to NPD,increased and while I don’t at this time have specifics from each of thecountries, I believe our strong performance and the addition of many new storesis resulting in GameStop growing share in all countries where we do business.

During the quarter, we held the biggest private videogametraining conference and vendor show in the world in Las Vegas, with 4,418 storeand field managers and 88 vendors coming together to discuss upcoming titlesand sales techniques for the holiday season and to exchange ideas for growingthe business.

Beyond the sheer size, the conference was notable this yearfor two seminal events; one, it marked the official launching of the GameStopbrand under power to the players, and we now have over 95% of our U.S. storesrebranded, which will allow us for the first time to roll out national mediamarketing, PR, and advertising campaigns.

I truly believe that with the continued spreading of theGameStop brand, we stand more to gain than normal retail brand extensions inthat our model, combining the dominant selection of new product and theconsumer value of being able to recycle their used videogames, is unique andperhaps not as clear as a traditional straight retail model. Therefore, themore people that begin to understand what the GameStop brand stands for, thebrighter our future and we’re just beginning to push the brand.

Secondly, the conference focused our store managers on theneed to better serve the more broad-based demographic being attracted tovideogames. We are seeing more first-time gamers in our stores, more girls andwomen, more gift-givers, and more product being developed to build on thistrend. And we’ll be merchandising our stores accordingly in the fourth quarter.

Our real estate teams around the world continue to do anoutstanding job. In the third quarter, we opened 181 stores; 101 in the U.S.and 80 internationally, bringing our store count year-to-date to 417, and weare on course to at a minimum reach the high-end of our forecast for 2007openings, which was between 500 and 550 stores.

It’s clear that GameStop is rapidly growing into a growingworldwide market for video game product and we continue to see many moreopportunities to expand. And our strong balance sheet puts us in a position tocontinue to stay aggressive and to underline this point, I do want to point outthat during the quarter, Standard & Poor’s raised GameStop's corporatecredit and senior unsecured debt rating to double B from double B minus.

In summary, I can say with confidence that the managementteam at GameStop is as broad and deep as the business itself. We have a greatgroup of people throughout the company and we are accomplishing outstanding results.Needless to say, we are positive about our business, excited about the fourthquarter, and very sure of our future.

And now I would like to turn it over to David.

David W. Carlson

Thanks, Dick. Good morning. Before the market opened today,we released our sales and earnings results for the third quarter of 2007.GameStop sales for the third quarter increased 59% to $1.61 billion, ascompared to $1.01 billion in the prior year quarter. Comparable store sales forthe third quarter increased 46.3%, far more than originally anticipated due tostrong industry fundamentals in all geographic regions.

Videogame hardware grew an eye-popping 149% during thequarter, helping to build a strong foundation for software sales in the comingyears, while videogame software grew at an astonishingly strong rate of nearly60%.

Halo 3, Madden NFL 2008, and Guitar Hero III topped the listof best-selling games for the quarter.

Net earnings for the quarter grew 283% to $52 million,including debt retirement costs of $2.4 million, far exceeding last year’sthird quarter net income of $13.6 million.

Diluted earnings per share for the quarter were $0.31,including $0.02 per share of debt retirement costs. These results were $0.12per share higher than the high end of our guidance issued in mid-August.

Gross margins declined year over year in the quarter, asexpected, due primarily to a higher mix of lower margin hardware related to thestrong sell-through of next generation systems, and due to lower co-opadvertising funds related to the prior year incremental co-op funds we receivedfor the launch of the new hardware systems.

SG&A leverage improved from the prior year quarter by580 basis points. This leverage came primarily from the strong comp sales andcontinued efficiencies from refining our business model. As such, we were ableto grow operating margins by 160 basis points during the quarter.

Our balance sheet remains very strong, with nearly $280million in cash at the end of the quarter. Inventories grew 38% from the prioryear, significantly lower than the sales growth experienced during the quarter.

In addition, we finished the call of our senior floatingnotes in early October, calling $120 million of debt and bringing our totaldebt to a very manageable $580 million at the end of the quarter.

We also issued updated guidance for the fourth quarter offiscal 2007 and the full year. Fourth quarter comparable store sales areexpected to grow a strong 7% to 9%, when compared to our 26.5% comps in the year-agoquarter, when the PlayStation 3 and Nintendo Wii were first launched. Note thatthis is an increase from our prior implied guidance of 4% to 5% comps for thefourth quarter.

Diluted earnings per share for the fourth quarter areexpected to range from $0.95 to $0.97, as compared to $0.81 per share in theprior year quarter, an increase of $0.03 per share from our prior guidance.

Also please note that the prior year fourth quarter includedan additional 14th week, which added approximately $0.05 per share to EPS.

Based on the strong results experienced in the third quarterand our improved fourth quarter outlook, we are raising our full year 2007 EPSguidance by $0.15 to range from $1.61 to $1.63 per diluted share, with salesincreasing between 28% and 29% and comparable store sales increasing between20% and 21% for the full year.

With that, I’ll turn it over to Dan.

Daniel A. DeMatteo

Thanks, Dave. Both Dick and Dave have given a great accountof our best third quarter ever, so I will discuss what we see driving ourfourth quarter.

First, we have never been in better shape to cater to thegift-giver, the casual gamer, as well as the avid gamer. We have just completedstore remerchandising that will help the gift-giver by creating sections forkids entertainment, music entertainment, and the young female gamers. With theaverage gamer at 33 years old, we have something for those from six to 60.

Our holiday advertising will be focused on the gifters andthe newly emerging casual gamer, with media buys in print, online, TV, andradio. Our store associates have been trained to help those customers who needmore service and we have analyzed and refined our scheduling to ensure bettercoverage during peak sales periods. We will have the best sales support in thecategory.

We expect our in-stock position of games will be better thanever through continued refinement in our systems and distribution capabilities.As a matter of fact, no one does this better than GameStop, so from anexecution perspective, we feel confident that we are in the best position everto capitalize on the growth in this fastest growing entertainment category.

Now we will discuss the products that will be driving thesales line. Hardware unit sales are expected to reach an all-time high with themomentum of next generation consoles and handheld systems. The Nintendo Wiicontinues to be a sellout and the price reductions on the PS3 and X-Box 360have increased sales dramatically. On the handheld side, the new PSP Sony bundlesare a sellout and the Nintendo DS continues to sell well.

So record sales of hardware in the fourth quarter will be astrong set up for 2008 for growth in software.

Never before have we had such a great lineup of games acrossall platforms and genres. As a matter of fact, the new titles that havereleased this month have all either met or beat our expectations.

The relatively new music genre, led by Guitar Hero III fromActivision and Rock Band from EA will be sellouts, so if you want one youbetter start following the UPS truck to your local GameStop.

On the avid gamer’s gift list will be newly released Call ofDuty 4 from Activision, Assassin’s Creed from Ubisoft, and Mass Effect fromMicrosoft.

Sports enthusiasts will be asking for WWE Smackdown fromTHQ, Need for Speed from EA, and NBA 2K8 from Take Two, and the Wii gamer willbe buying Super Mario Galaxy and Mario and Sonic Olympic Games from Nintendo.

Also, we are pleased that the $59 price point for the new360 and PS3 games has continued to hold as the consumer understands the valuein these outstanding games.

In closing, our stores are full of games. As a matter offact, our distribution centers have shipped over 11 million units in the lasttwo weeks in preparation for Thanksgiving weekend. Our refurbishment center hasbeen working seven days a week, so our used games are available for the budgetconsumer.

Our store associates are ready to help the new customerswith gaming information and our marketing is set to drive them to GameStop.

Remember, at GameStop, games are our business, our onlybusiness.

With that, I will turn it over to the moderator for thequestion-and-answer period.

Question-and-AnswerSession

Operator

(Operator Instructions) We will go first to David Magee with SuntrustRobinson Humphrey.

David Magee -Suntrust Robinson Humphrey

Good morning. Good quarter. I may have missed this, did youcomment about used inventory going into the fourth quarter, how you thoughtabout that?

Daniel A. DeMatteo

Our used inventory has grown in the third quarter. Oursales, as a matter of fact, have accelerated to 22% growth in Q3 from mid-teensin Q1 and Q2, so we are expecting good growth in used videogames, a continuedacceleration in Q4. So inventories are in good shape and we expect acceleratingsales.

David Magee -Suntrust Robinson Humphrey

And how much insight do you have now in terms of titlereleases in the first part of next year? Have you seen -- besides the obviousone that was delayed, have you seen much information on the other titles?

Steven R. Morgan

We have a list. Now obviously sometimes these titles don’talways come out when we anticipate but in the first half of the year, it lookslike there is a pretty good lineup of titles, including Super Smash Brothersfor the Wii, which should be a very big hit; obviously Grand Theft Auto isscheduled currently I believe to come out some time in April. We have Army ofTwo which slipped out of the fourth quarter into the first or second quarter,and Metal Gear Solid is projected for either the first or the second quarter.

So we have a really good lineup of games and I probablymissed some. Those are just the ones off the top of my head, but those are somereally big titles coming in the first quarter.

Daniel A. DeMatteo

Also, I would expect that the number one thing that willdrive hardware sales in Q1 will be the continued growth in the installed basethat we saw in Q3 and Q4 from this year, so we are growing the ever-growinginstalled base again, as Dick mentioned, Q3 hardware sales reached a record asa percentage of our business and we expect hardware sales will reach a recordin units as a percentage of our business in Q4 -- not in dollars, because we’vehad price declines on the X-Box 360, the PS3, and the PSP, but certainly inunits we will have a record fourth quarter.

R. Richard Fontaine

Also to add to that, continuing with comments that we’vemade earlier, the diversification of hardware platforms continues to be verystrong. We have never had as many platforms represented, so it’s verybroad-based, something for everyone, from the handhelds to the super powerfulbut totally unique in the Wii, great diversification in the hardware.

David Magee -Suntrust Robinson Humphrey

Thanks a lot and good luck for the holidays.

Operator

We’ll go next to Ben Schachter with UBS Securities.

Benjamin Schachter -UBS

Congratulations on another excellent quarter. A fewquestions for you; you talked about Rock Band and Guitar Hero. Could you walkthrough what SKUs exactly you think are going to be sellouts? And what otheritems do you think there will be supply issues with in the quarter?

And then also, on the PlayStation 3, after the price cutwe’ve seen some positive momentum. How do you feel about that product goinginto ’08? And then I have one follow-up. Thanks.

Daniel A. DeMatteo

As usual, there are always product shortages in thiscategory so this year is no different than any other year. Rock Band justreleased -- as a matter of fact, its first day of sales are today. We areexpecting that to be a sellout. Guitar Hero for the 360 and the PS3 especiallyhave been sellouts, and we are expecting to be resupplied, or we’ve gottenresupplied and we are expecting to get resupplied again right after Thanksgiving.

And the Wiis continue to sell as quickly as we can get theminto our stores. You really do have to follow the UPS truck to get one ofthose, so -- let’s see. I think I hit all of them. And the PS3, we saw a littlebetter than a doubling in sales after the price cut. Of course, now we haveseasonality but we are still very pleased with the sale now of the PS3.

Benjamin Schachter -UBS

Okay, and then Dave, a quick question for you; when youthink about the debt level by the end of ’08, how should we think aboutmodeling that? And any color you can give on modeling actually the net interestincome line?

David W. Carlson

You’re talking about next year?

Benjamin Schachter -UBS

Yes.

David W. Carlson

Well, obviously we’ll be giving guidance on that in March,but we obviously have cash flows coming and we will have to discuss with theboard exactly what we want to do with those cash flows. But one of the optionsis to pay off some more debt, so we’ll probably be discussing that afterChristmas with our board.

Benjamin Schachter -UBS

Okay. Thanks.

Operator

(Operator Instructions) We’ll go next to Bill Armstrong withC.L. King & Associates.

Bill Armstrong - C.L.King & Associates

Good morning. I’ll add my congratulations on a fantasticquarter. Dan, you just mentioned PS3 run-rate a little better than double sincethe price cut, was that enough -- it occurred very late in the third quarter.Was that enough to move the needle much in Q3 or is that going to be more of aQ4 event in terms of significance to your top line?

Daniel A. DeMatteo

Well, I think it’s more a Q4 event in our top line and it’sjust one of many, many things though that are significant events in our topline for the fourth quarter. I would add that equally important was the pricecut on the PSP and the new bundles that have come out on the PSP. Equallyimportant was the new SKU on the 360, the arcade pack that has come out onthat, and equally important are the expected sales of the Nintendo DS, which isthe other handheld that is doing extremely well.

So I think altogether, there’s just many factors that we areputting together that we expect record hardware sales in units in the Q4 thisyear over any other year.

R. Richard Fontaine

I would also point out that it’s definitely, in my opinion,much more of a fourth quarter event. It not only was late but if you’ve beenwatching any television of late, you’ll see that Sony has really put on almosta saturation advertising campaign around the software titles for the PS3 and withthe PS3 having a price point now that’s more accessible, a combination of boththe marketing and the price point should see it really being driven through thefourth quarter.

Bill Armstrong - C.L.King & Associates

Okay, and could you elaborate on the availability of Wiihardware and the outlook for the fourth quarter there?

Daniel A. DeMatteo

Well, Wii hardware will be in short supply. We will have itin our stores the day after Thanksgiving. We have it in our Thanksgiving ad, soyou again better get there early. But each store will have a supply of Wii andthen I expect it to be gone, and then we’re getting resupplied in December acouple of times and we are expecting a resupply also in January.

So it’s going to be -- we think we have our forecastaccurate with what the anticipated flow of the Wiis are going to be, but theWii will be short throughout the quarter.

Bill Armstrong - C.L.King & Associates

Okay, and finally on the gross margin side, within the newhardware, new software categories, gross margin is down year over year. Couldyou elaborate on that, please?

David W. Carlson

Sure. As I said in the earlier comments on new videogamesoftware, we received some additional co-op last year for the launches of thenew systems, the PS3 and the Wii. The preorder programs we had in place and alot of marketing that was going on in the third quarter for the launches, sothat is the reason for the decrease in the -- the slight decrease in the newvideo game software margin.

The same reason for the new video game hardware but inaddition, we have a mix issue there. The Wii and the PS3 were not in sales lastyear during the third quarter, so that has brought the margin down some, soit’s a mix issue in addition to the co-op funds that we received for thelaunches.

But if you look at the numbers, they are very consistentwith the first and second quarter. In fact, I think they are up a little bitfrom the first and second quarter gross margin numbers on both of those lines.

Bill Armstrong - C.L.King & Associates

Should we see that co-op dollar impact flattening out in’08?

David W. Carlson

That was a one -- the ’06 third quarter co-op number was aone-time incremental item so you shouldn’t -- you should see similar grossmargins going forward that we are experiencing now.

Bill Armstrong - C.L.King & Associates

Got it. Okay, thanks a lot.

Operator

We’ll go next to Colin Sebastian with Lazard CapitalMarkets.

Colin Sebastian -Lazard Capital Markets

Good morning. Just following up first on the hardware unitlift and looking at the 7% to 9% comp store sales growth for Q4, I wonder ifyou can drill down a little bit in terms of the mix between hardware andsoftware. And related to that, have you made any changes to your industry or platformgrowth assumptions for this year?

David W. Carlson

The platform growth assumptions haven’t changedsignificantly since we talked about them in the third quarter.

On the mix issue --

Daniel A. DeMatteo

As I said, we expect positive units growth in hardware andvery slight, if any, dollar growth. So you can compute that, so we expect muchstronger growth therefore in software and accessories than we do in hardwarebecause hardware will be more like flat -- not in units but because of thedollar declines on the PS3, the PSP, and the 360.

R. Richard Fontaine

So for the sales mix variance, to Dan’s point, you will notsee the same proportionate impact in all likelihood that you saw in the thirdquarter.

Colin Sebastian -Lazard Capital Markets

Right, okay. Thank you. And then you also talked about arecord quarter for the online sales and I was just curious how material that isfor the business at this point.

R. Richard Fontaine

Well, at this point, from a pure financial standpoint,honestly it’s not tremendously material to our earnings but it’s extremelyimportant to, as I said, our high-tech broad promotion of the business and thecategory. Perhaps what is more important to us at this point in time is theamount of unique visitors, which I’ve said established an all-time record.

But truthfully, from the standpoint of its earningscontribution, given how fast the company has grown and our total size, it’srelatively immaterial but important.

Daniel A. DeMatteo

Just to add to that, we believe that our e-commerce sitewith all the information it provides about games, what’s coming, et cetera, isa big driver of customers also to our stores. It’s hard to quantify that but asDick calls it, a very great broadcast channel, the best broadcast channel inthe industry about videogames.

Colin Sebastian -Lazard Capital Markets

Okay, and did you mention the number of stores you closedduring the quarter?

R. Richard Fontaine

No, I didn’t but the total number was 12 during the quarter.Yes, that’s right, 12 stores, so we had a net of -- what was it, 169 stores netthat we opened during the quarter.

Colin Sebastian -Lazard Capital Markets

Great. Thanks and congratulations.

Operator

We’ll go next to Edward Williams with BMO Capital Markets.

Edward Williams - BMOCapital Markets

Good morning. A couple of quick questions for you; first ofall, with regard to the supply of Wii games, have you experienced any issueswith software being in tight supply going into the holiday season? And thensecondly, I have some questions on the international store base.

Daniel A. DeMatteo

Actually, no, not on the Wii software. We have notexperienced any shortages. That doesn’t mean -- I mean, any is a strong wordbut we don’t anticipate shortages in that. As a matter of fact, I was lookingthis morning at our best-selling Wii games going into Thanksgiving weekend, allof our stores are in stock.

Edward Williams - BMOCapital Markets

And then looking at the international business, can you justgive us an idea as to how the businesses in Canada and Europe performedrelative to what the company average was in the third quarter? If the top linegrowth or comp store sales were stronger or materially different? And then,what the operating margins looked like?

David W. Carlson

For the third quarter, the comps in Australia and in Europewere just slightly less than the U.S. but they -- I believe it was the Haloeffect there. They didn’t have quite as impactful Halo sales. Canada wasslightly better than the U.S. but they are all very significant comps, so to behonest with you, there is not a huge difference between any of the geographicalregions in comps.

Edward Williams - BMOCapital Markets

Okay, and what about the profitability?

David W. Carlson

We’ll be releasing that with our 10-Q in about a week.

Edward Williams - BMOCapital Markets

Okay. All right. Thank you very much. Congratulations on thequarter.

Operator

At this time, we do have time for one more question. We’llgo next to Arvind Bhatia with Sterne Agee.

Arvind Bhatia -Sterne, Agee & Leach

Thank you. I would like to add my congratulations as well. Ihave a couple of questions. The first one is it looks like you opened about 180new stores during the quarter, a little bit faster than we had expected. I waswondering if you could update us on where you are on your store opening planfor the year. I know you had stated 500 to 550 this year. If you could alsoperhaps give us the mix at this point of new store openings that you wouldexpect.

And I wanted to follow up on Ben’s question on the debt andcash at the end of the year, as opposed to next year. If you could just touchon that.

And last question is on Game Informer, you haven’t talkedabout that in a while. I’m wondering if we can get some color on where you areon the impact of that on the bottom line, if any, and the number ofsubscribers, et cetera. Thank you.

R. Richard Fontaine

Let me take the first; as I indicated in my openingcomments, we are in a position now where at the very least, I think we aregoing to hit the high end of our range for new store openings for the year.That would be in the 550 store range. The amount of stores that we have in thequeue, that is deals that are signed for the fourth quarter, we’ll almostcertainly achieve that. It is not unusual as we get into particularly theDecember time period that certain things will drag, so it’s conceivable thatcould go into January but still within the quarter.

And if all of the stores that we currently have signed andanticipated do open, it is likely that we will in fact exceed the high-end ofour range slightly. And more importantly, I’ll use this as a forum, moreimportant than the store number, which is I think you would say veryimpressive, to say the least, are two factors.

Number one, we continue and our real estate and operationspeople continue to do a great job identifying unserved markets and unservedareas where we can continue to put new stores.

Secondly, more important than the store count is how wellthese stores perform. And as a group, the 2007 stores to date are performingbetter than any previous group since we have been public, so not only are weopening many stores but those stores continue to be extremely productive.

David W. Carlson

On the debt and cash levels, we believe that we will havethe $580 million of fixed rate debt as of the end of this year, and then in thebeginning of next year, we’ll discuss what we are going to be doing with ourcash flow.

Total cash at the end of the year is projected to be verysimilar to the end of last year, somewhere in the I believe $550 million to$600 million range.

Daniel A. DeMatteo

And I’ll answer on the Game Informer, we don’t break out theprofitability of Game Informer but it is indeed profitable. At 3 millionsubscribers, as Dick mentioned, this is another broadcast channel to our bestcustomers about videogames, so I look at it as every month, we get to talk toour best people about the best games that are going to come out. So it’s a veryimportant broadcast channel and lastly, it’s the cornerstone of our loyaltyprogram.

With Game Informer, you get a discount card good on selecteddiscounts in the stores. We recently did a survey of our customers to find outwhat they thought about our loyalty program and found that it’s verywell-received and very well-respected, so again it’s the cornerstone of ourloyalty program also. So it’s a very important piece of the total GameStopcommunication channel.

R. Richard Fontaine

I would also point out that Game Informer is just anotherindication of how all-in we are in this category and to Dan’s point, it isdisproportionately important. It runs as a stand-alone separate division. It’sbased in Minneapolis. It has got a unique group of editors who are veryindependent. They say it the way it is. It gives us a tremendous amount ofinsight and information in terms of how they evaluate the games that are comingforward.

As a matter of fact, it’s notable that in 2007, 11 of the 12issues really featured world exclusive cover stories. That is to say, theeditors up there got insights into some of the products that are coming in thefuture and had a chance to get a first look.

I would point out that we have scrupulously kept this as aseparate, stand-alone entity with its own culture specifically so that theeditors up there are not affected by GameStop per se. But nevertheless, it isbuilding a reputation in this business for knowledgeable and informed reviews ofproducts at second to none. We are very proud of the job they’ve done.

And I’m sorry. I thought there was going to be anotherquestion but we thank you for joining us today. I certainly hope that you cansee how enthused we are about this business, how positive we are about thefourth quarter. I know that the comp and the earnings numbers that we have beenturning in are almost unique to retail. We feel we have a very strong businessoperating in many degrees as a very unique growth story. We intend to continuethis. We think the industry is heading our way. Clearly we are operating into agrowth market. You can be assured that we are going to go after everyopportunity that is out there and try to achieve every sale that is available.

Thanks for your support. We really appreciate you being onthe call.

Operator

Once again, that does conclude today’s call. We doappreciate your participation. You may disconnect at this time.

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