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Executives

Nancy Benson - Director of Corporate Finance and IR

Alex Smith - President and CEO

Cary Turner - EVP and CFO

Analysts

Lauren Levitan - Cowen & Company

Adrianne Shapira - Goldman Sachs

Brian Nagel - UBS

Budd Bugatch - Raymond James

Mary Kovac - KeyBanc Capital Markets

Sara Senatore - Sanford Bernstein

Pier 1 Imports Inc. (PIR) F3Q08 (Qtr End 12/01/07) Earnings Call December 20, 2007 11:00 AM ET

Operator

This is Pier 1 Imports’ quarterly conference call. (Operator Instructions)

I would now like to introduce Ms. Nancy Benson, Director of Corporate Finance and Investor Relations for Pier 1 Imports. Ms. Benson, you may begin.

Nancy Benson

Good morning, everyone, and thank you for joining us this morning. Today, we will hear from our President and Chief Executive Officer, Alex Smith; and Executive Vice President and Chief Financial Officer, Cary Turner.

The agenda for today's call will be to hear opening remarks, followed by a brief discussion of the company's third quarter results, which were reported earlier today. We will also provide an update on our business and discuss opportunities for the balance of the year, followed by a question-and-answer period.

Before we begin, I would like to remind you that certain comments made during this call may contain forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934, and can be identified by the use of words such as may, will, expect, anticipate, believe, and other similar words and phrases. The company's actual results and future financial condition may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside the company's control. Please refer to the company's SEC filings, including its annual report filed on Form 10-K for a complete discussion of the major risks and uncertainties that may affect our business.

The forward-looking statements made today are as of the date of this call, and the company does not undertake any obligation to update its forward-looking statements. If you do not have a copy of this morning's press release, you may obtain one on the Investor Relations' page of our website, located at pier1.com.

Now, I would like to turn the call over to Alex.

Alex Smith

Thanks, Nancy. Good morning, everyone. I am pleased to be here today to share with you the results of our third quarter. As we outlined in today's press release, we are happy with the progress we are making in returning our company to profitability and beyond.

During the quarter, we efficiently closed the Pier 1 Kids business. And so, we are now completely focused on the 1,000 plus Pier 1 Imports stores and making them great again; we have nothing else to distract us.

During the quarter, we introduce thousands of new SKUs; many in new merchandise categories. We are extremely encouraged by the response of our customers and learning a lot to help us further develop our merchandise offering for next year. We are also very proud of our cost-cutting initiatives and the positive impact they are having on our bottomline.

Having said that, this is just the beginning. We know that our execution must be continually improved, and we will use this year's experience as opportunities for improvement next year. We are pleased with how far we have come in such a short time. We know there is still a lot of work left to do.

After Cary discusses our financial results for the quarter, I will provide some more color and detail on the third quarter, give you a sense of what we are seeing during the holiday selling season, and what this means for us for the rest of the fiscal year.

So now, I'll turn it over to Cary to give you the numbers.

Cary Turner

Thank you, Alex.

Earlier today, the company reported net sales from continuing operations for the third quarter of $374.2 million, a 7.1% decline from $402.7 million a year ago. The primary reason for the decline was the closure of 98 stores since the end of the third quarter last year.

Comparable store sales, which exclude Pier 1 Kids, clearance stores, and e-commerce, declined 1.7% for the third quarter. Comparable store sales declined 3.5% year-to-date for the first nine months. Pier 1 credit card sales in the third quarter were 25% of U.S. store sales, and were the same percentage as last year. Merchandise margins were 53% of sales in the third quarter, which historically yields the highest merchandise margins during the year.

During the third quarter, we completed the aggressive liquidation of our Pier 1 Kids merchandise, and the impact on reported margin was 130 basis points, indicating a margin of 54.3% in our Pier 1 stores. Store occupancy expense for the third quarter was $3 million less than the third quarter of last year as a result of the closed stores. Overall, gross profit margins improved to 33.6% of sales, up from 30.9% last year. And even with approximately 100 less stores, gross profit dollars increased $1.3 million over last year.

During the period, we continued our efforts to reduce costs, and after taking into account the effects of the special charges in both years outlined in today's press release, third quarter SG&A expenses were $37.4 million less than the same period last year. The primary contributors to the decrease in ongoing costs were savings of approximately $21.2 million in marketing expense, $10.8 million in payroll, and $5.4 million in other G&A costs, when compared to the same period last year.

For the nine months, savings adjusted for the special charges totaled $91 million, when compared to the first nine months of last year. For the third quarter, we reported an EBITDA, or earnings before interest, taxes, depreciation and amortization, of $2.9 million. And after adjusting for the $6.5 million in special charges, our adjusted EBITDA for the period was $9.4 million.

Our cost saving efforts will be ongoing. Currently, we now expect to realize at least $110 million in savings by the end of this fiscal year, and we now estimate that on an ongoing annualized basis, the savings will be at least $160 million.

We ended the quarter with inventories of $432.8 million, up 10% compared to last year. As we stated at the end of the second quarter, we expected inventory on a per square foot basis to increase to per square foot level similar to fiscal 2006. At the end of the quarter, inventory was $48 per square foot, compared to $41 per square foot in the year ago period, and $46 per square foot in 2006.

Inventories at the end of the fourth quarter will be higher than previously planned by about $20 million-$30 million. We have made a conscious decision to make an additional investment in the inventory above our original plan to meet our merchandise strategy needs, including our concerted effort to increase our store inventories. Given this, instead of being cash neutral for the year, we now expect to end the year with a lower cash balance in the beginning of the year by this investment in inventory.

During the quarter, capital expenditures were $2.9 million, bringing our year-to-date total to $5.6 million, of which $4.3 million was invested in our stores. For the year, capital expenditures are still expected to be approximately $10 million, and will continue to be primarily spent on existing stores.

During the quarter, we opened one new Pier 1 store, and closed 30, including 27 Pier 1 Kids stores. Year-to-date, we have closed 72 stores, including 36 Pier 1 Kids stores. We ended the quarter with 1,128 Pier 1 stores, with 1,045 stores in the US and 83 stores in Canada. For the full fiscal 2008 year, we still expect to close 90-100 total locations by year-end. Taking into account these planned closings, we plan to have approximately 1,025 Pier 1 Imports stores in the US and 83 Canadian stores at the end of the year.

Now, I'd like to turn it back over to Alex.

Alex Smith

Thanks, Cary. During our second quarter conference call, we told you that our focus is achieving sales with sustainable merchandise margins. It is clear in our results that our efforts are beginning to payoff in gross profit dollars.

Our comp store sales were, as you have seen, slightly negative for the quarter. We consider this a good result, given how promotional we were last year. We could very easily have achieved positive stores sales for the third quarter, had we elected to sacrifice margin dollars on both sales for the use of costly promotions. Our approach is working, in terms of generating gross profit dollars.

We held our prices, we increased conversion rates, we increased units per transaction, and we increased the average sale. Since the end of November, the trends have continued to improve. Our December sales are very solid--not spectacular, but very solid. And I do expect us to have a comparable sales increase for the month.

Traffic is still below last year, but the pattern is the same as we have seen in the recent past. I would, of course, like to see more traffic today, but our margins are firm, and over time, traffic will improve as satisfied and happy customers return to our stores with more frequency, and spread the news of our great new assortments.

Our strong merchandise margins for the quarter, which Cary talked about a few moments ago, are a result of more appealing merchandise, sharper price points, and a very strategic and closely monitored markdown strategy that I've referred to before. With every promotion on permanent markdown decision, our objective is to optimize the gross profit of every SKU.

One thing I would like to emphasize is, that POS promotions are not all bad. Our business model allows us to promote at reasonable cadence, clear out inventory we no longer want, and still generate sound merchandise margins.

We continue to strengthen our buying team. We are now up to 24 buyers, compared to 12 when I started here, in February. We have been able to attract talented buyers from a variety of backgrounds, and are building a team that, over time, will increasingly develop compelling merchandise assortments.

They've already made great progress. When I look at the store today and compare it to what I was seeing last December, before I joined the company, I give us a very high mark for strategic direction, but less high marks for consistent execution.

To repeat myself, we tried a lot of new things this year, with more SKUs, more categories, and more departments, and we're all moving in the same direction. But, it will take more time to be consistent across the board. We look forward, in fiscal '09, to buying with more precision and better execution.

Cary talked to you through the amounts of selling G&A cost that we've been able to remove from our cost structure. Our entire organization has been focused on this effort and has done an outstanding job. Along with stronger merchandise margin, the reduced SG&A costs have helped us to achieve a positive EBITDA for the first time in seven quarters.

Going forward, we have identified even more opportunities for expense savings, and we will continue to diligently monitor costs and seek out those additional opportunities to cut costs out of the business. This is an important piece of our return to profitability, but it's by no means the only one. We know that to be successful in the long-term, we have to drive sales. But, our reduced cost base puts us in a great position to better leverage gross profit and sales improvements.

Let me talk a little about marketing. We have saved $44 million since the start of this fiscal year by redirecting our marketing dollars into more cost effective advertising. Specifically, we have redirected dollars that were spent on catalogs and television into more frequent and targeted retail mailers and newspaper inserts, and we support these efforts with an e-mail marketing campaign.

The results of our extensive analysis tell us that we have seen an increasing response rate to our retail mailers as we move through the year, including strong improvements from previously inactive customer segments. In addition, we will continue to partner with Chase, the provider of our Pier 1 preferred credit card.

Our relationship with one of the largest consumer credit card banks allows us to reach out to new and former customers. This partnership also provides great insights into shopping patterns and new marketing opportunities, with their extensiveness to credit card holders. Our total marketing spend going forward will remain at approximately 4%-5% of sales.

Moving on to real estate, as Cary has told you, by the end of this year we expect to have about 1000 locations throughout the United States, which I believe is a very strong competitive advantage. Let me remind you that 70% of our targeted customers live within an easy drive of a Pier 1 store. We will, of course, continue to monitor the performance of all our stores, and we will make decisions concerning the closing and opening of locations strategically, with both long- and short-term goals in mind.

We are still in the process of reviewing all our options related to our home office facility. However, given the current real estate market and our lack of need for capital, we feel it is in the company's best interest to be judicious concerning any irreversible decisions concerning the headquarters; we can only sell the building once.

So, what about the balance of the year? From the 26th of December we will start the Pier 1 sale. This event will focus on clearing out seasonal merchandise, so that we can start shipping our new spring merchandise. Clearly, the markdown is needed to ensure we start the new fiscal year clean and fresh; it will reduce our fourth quarter margins below the third quarter. But the fourth quarter margins will still be significantly better than last year.

I know that the big concern for many of you is the overall economic environment that we are facing. I would prefer tailwinds to headwinds, but cannot control them. Our job is to focus on those things that we can control--providing great merchandise and a great shopping experience for our customers. If we execute our business model well, and are more compelling than we have been for the last several years, we will gain market share.

In closing, let me reiterate, again, how pleased we are with our third quarter results.

It is clear to me that our hard work is being rewarded. Our goal is returning the company to profitability and beyond. We know we still have a lot to do to get us where we want to be, but I'm confident we will get there.

Before we open it up for questions, I want to let you know that we will be issuing a press release discussing our December trading results on January the 10th. Thank you for allowing us to speak to you today. And now, I'd like to open up the call for questions.

Are you there, Janice? Hello?

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Lauren Levitan with Cowen & Company.

Alex Smith

Good morning, Lauren.

Lauren Levitan - Cowen & Company

Good morning. Thank you. Alex, could you tell us a bit more on the marketing front? Now that you've seen how you've been able to draw customers back in with these reduced marketing budget, can you give us some sense as to how much additional room you think there is in marketing? What we should be watching for going forward, and maybe give us some sense of which of the marketing devices have been generating the positive results that you have seen? Thank you.

Alex Smith

Thanks, Lauren. Well, firstly, I just want to just remind everyone that the spend--that we are going forward, with 4%-5% of sales--is the historical sweet spot for Pier 1 Imports. And what had happened in the last couple of years or so to our company, really, the whole marketing spend had really got out of whack.

So, how do we spend? We think 4%-5% is the right number, and most of the spend this year went on the retail mailers; that is why we do the books, which vary between sort of 24 and sort of 42 pages, which we mail to a combination of existing customers, both active and dormant, and some outside list that we buy in. We have supplemented that in the second half of the year, predominant in the fourth quarter, with newspaper inserts. And they have increased in frequency as we move into holiday.

We track the results of these books very carefully, and we are really very pleased with the response that we are getting from them. The surprise, I think, for us is that we have got better than expected results from the newspaper inserts. So, moving into next year, where we are starting to finalize the marketing approach for next year. I think you all going to see a continuation of mailers, and probably an increased frequency of newspapers inserts.

Lauren Levitan - Cowen & Company

So, is there some other area that has allowed you to identify additional annual cost savings, beyond marketing, that you could give us some insights in to this morning?

Alex Smith

Do you mean the extra $10 million --?

Lauren Levitan - Cowen & Company

Yes. Is there any particular area that's coming from, or is that just a continuation of all the initiatives across all of the --?

Alex Smith

That's in continuation. We look in every closet and clear out everything, and it's a surprise what you find in those dusty corners.

Lauren Levitan - Cowen & Company

Great. Thank you, and good luck for the rest of holiday.

Alex Smith

Thanks.

Operator

Your next question comes from the line of Adrianne Shapira with Goldman Sachs.

Alex Smith

Hi, Adrianne.

Adrianne Shapira - Goldman Sachs

Hi, Alex, how are you?

Alex Smith

I am great. Thanks.

Adrianne Shapira - Goldman Sachs

Great. A question on the inventory—just, if you can help, perhaps, provide some color, in terms of the decision to increase that by $20 million to $30 million, perhaps show us what is that, and why the decision? It clearly doesn't seem as if it's seasonal inventory. And just to clarify, Cary, would have been cash flow breakeven had you not opted to make that decision on inventory?

Cary Turner

Okay. Adrianne, thanks. Well, I think the first thing I want to say is, that we're absolutely sure that we need more inventory in the stores than we have had for the last couple of years. We have increased the store inventory quite substantially this fall. And that is one of the reasons that we're getting the sales goings that we are currently seeing.

Behind that, of course, is the DC inventory and the inventory that is on the water, because--don't forget, the way our business model works, once the merchandisers has left the port, it goes onto our books.

Now, when we're more efficient with our supply chain going forward, we will be out to reduce the amount of inventory that's on the water, and the amount of the inventory that's on the DCs. But frankly, we are not that efficient yet. And so, we have got what I would call, regal room bought in to that DC inventory. And that's the reason why you see that $30 million, or whatever it is that we've talked about.

So, it's absolutely necessary to increase the store inventories. And because we are not as slick as we should be, we have to back that out with more than we would have in a perfect world in the DCs and on the water.

Does that answer your question?

Adrianne Shapira - Goldman Sachs

Yes, that definitely helps. And I am just wondering if you perhaps show with us, should we expect continued build till the first half of '08 until you anniversary this and get this store-level inventory where you'd like it to be?

Alex Smith

No. I don't think so. I think we're kind of all thereabout.

Adrianne Shapira - Goldman Sachs

Okay. And just, Cary, if you could talk to…would you have been cash flow breakeven had you not opted for this inventory investment?

Cary Turner

Yes, we would have been. And just to clarify, we went back further than 2006, we went back to fiscal 2003 and 2004. And when we take a look, our range at the end of third quarter in terms of inventory per square foot was $48-$51. So, we feel very comfortable with this amount.

Adrianne Shapira - Goldman Sachs

Okay. That's very helpful. And then, Alex, you just referenced the opportunities on the supply chain. I know that was a source of opportunity. Could you just share with us progress there and perhaps even in the early days what you've identified in terms of opportunities?

Alex Smith

I mean it's a little bit anecdotal at this stage. Our head of supply chain actually has just this week got back from an extended trip to China, which he took also our head of IT. So we're looking, for example, at the way we consolidate goods in China.

Currently, we do a lot of consolidation in Hong Kong, which takes a lot of time and is very expensive. We think there is a good opportunity for us to move that process up into the Chinese ports. We're increasing the number of ports that we ship from, so that we minimize the cross-country costs within China. So that's the top end of the supply chain.

The other end of the supply chain, in terms of our distribution costs, the guys have really made very good progress this year in reducing the on-cost that we have to add to our landed/FOB cost--and that's in the margin. Part of the reason the margin has improved is because we have reduced our transportation and handling costs.

But I could go on and on all day about this. I mean, we have a lot of things we're looking at. And like all these things, its many, many dozens of relatively small initiatives add up to be a huge number of dollars.

Adrianne Shapira - Goldman Sachs

Alex, maybe any quantification in term of the huge amount of dollars?

Alex Smith

No.

Cary Turner

Not at this point.

Alex Smith

But as they come through, Adrianne, I'm certainly happy to talk to it going forward, in terms of the impact that it's having on the gross profit.

Adrianne Shapira - Goldman Sachs

Great. Best of luck.

Alex Smith

Okay. Thanks.

Operator

Your next question comes from the line of Brian Nagel with UBS.

Alex Smith

Morning, Brian. Okay. Do we have Brian?

Operator

Yes, sir. One moment, please. Mr. Nagel, your line is open. Mr. Nagel?

Alex Smith

Shall we move on to the next one?

Operator

Your next question comes from the line of Colin McGranahan with Sanford Bernstein.

Alex Smith

Hi, Colin.

Operator

One moment, sir, we are having technical difficulty.

Alex Smith

Yeah

Operator

One moment, sir. Okay. One moment, sir. Okay. Mr. Nagel, your line is open at this time, sir.

Brian Nagel - UBS

Okay, thanks. Can you guys hear me now?

Alex Smith

Yeah, we can.

Brian Nagel - UBS

Okay, great. First off, congratulations on a very nice quarter.

Alex Smith

Thank you.

Brian Nagel - UBS

A couple of questions. If we look at the sales line, particularly the comps, would there be a way to look at comps, say, "X" furniture, realizing that the furniture is probably more hurt in this economic environment, and try to isolate some of the performance of your newer categories with the lower ticket, like impulse purchases, that you've introduced in the stores?

Alex Smith

Yeah. I mean, clearly, we do that everyday. Well, I think what I'd say about that is, we've talked a lot about the way we're going to drive sales is not by getting rid of furniture, but by deemphasizing it. And the way we're going to deemphasize it is to grow the assortments of the impulse on pickup items. And that's what we did, and that absolutely is what's driving the sales.

So I don't whether that helps. I mean, furniture as a percentage of our total sales for the third quarter was certainly lower a percent than it was the previous year. And in December, that is true to an even greater degree.

Brian Nagel - UBS

Going forward, should we think about furniture becoming less and less as a share of your total sales?

Alex Smith

You can think of furniture being less as a share of our sales, but don't think about furniture as being less important to us, in the sense that we're not throwing things out, it's all about layering on top, rather than discontinuing.

Brian Nagel - UBS

That's helpful. The second question, I know it's early on, but as you look at the data you get from your credit card, have you seen any trend, yet, in customers that may have not shopped at your stores for a while coming back to the stores, or any trend in how consumers look at your promotions?

Alex Smith

Well, where we have seen it, and I alluded to it when I was talking about marketing, because we track the results of our retail mailers very carefully, and we segment the list who we send the books to, very carefully. And we are really very pleased that we're getting a good response from customers who we consider technically dormant. So, yeah, we are seeing an uptick, and old Pier 1 customers, customers who shopped historically are returning to the store.

Brian Nagel - UBS

Very good. Congratulations and good luck for the balance of the year.

Alex Smith

Thanks.

Operator

Your next question comes from the line of Budd Bugatch.

Alex Smith

Are you there Budd?

Budd Bugatch - Raymond James

Can you hear me?

Alex Smith

Yeah, loud and clear.

Budd Bugatch - Raymond James

Alright, very good. Can you give us any color on conversion rate and average ticket--I know you said they are up, and can you give us any numerical help on that?

Alex Smith

Not really, Budd. No. Except just to say all those key performance indicators are nicely in the positive.

Budd Bugatch - Raymond James

Cary, you had said in the past, I think, that 100 basis points of conversion rate increase equated to a 400 basis points of comps. Is that still the range we're in?

Cary Turner

It's still the range.

Budd Bugatch - Raymond James

Okay. Alex, you said in your remarks that you expect gross margin and the fourth quarter merchandise margin to be down from the third quarter, beginning the Pier 1 sale on the 26th. Do I take it as that half of the 54.3% number should be an adjusted number, excluding Pier 1 Kids clearance, or is it half of the 53%.

Alex Smith

Half of both of those.

Budd Bugatch - Raymond James

Yes. But, we're going to see the 54% on the statement; which one will you be able to talk about? I'm not sure, I understand your answer.

Alex Smith

I'm not sure, I understand the question. But I mean, what we're seeing is, we go in to last week of December and into Jan, then clearly will be putting the seasonal merchandise on the sale and clearing out the old inventory, and that's going to drag the merchandise margin for the fourth quarter below the merchandise for the third quarter. I mean, it really doesn't matter which of those two third quarter numbers you take; it will be less than both of those.

Budd Bugatch - Raymond James

Okay. That's helpful. The lease termination cost in the third quarter--will there be any additional ones in the fourth? Or any additional called out items in the fourth quarter?

Cary Turner

They won't be significant, at least at this point, but…

Budd Bugatch - Raymond James

Okay. Payroll savings, can you share anything about what Sharon's program might be, and will there be any impact on the fourth quarter in store payroll or overall payroll?

Cary Turner

I think the trends that you've seen in the first nine months will continue.

Budd Bugatch - Raymond James

Okay. Alright, thank you very much. Congratulations.

Nancy Benson

Thanks.

Operator

Your next question comes from line of [Mary Kovac] with KeyBanc Capital Markets.

Mary Kovac - KeyBanc Capital Markets

Hi guys, great job on the quarter.

Alex Smith

Thanks, Mary.

Mary Kovac - KeyBanc Capital Markets

Couple of questions for you, I know during the quarter you guys made a decision to increase the seasonal product--I think it was about 10%. I'm just curious, I know the stores are mostly seasonal right now, but how those products are doing and maybe an insight into spring, as to what kind of learnings you're taking from this season into next season, and then when we could start seeing that new merchandise show up in the stores?

Alex Smith

Thanks, Mary. Well, actually the amount that we increased our holiday and seasonal merchandise in the stores this year was very much greater than 10%. I'm not quite sure where that number came from.

Mary Kovac - KeyBanc Capital Markets

Okay.

Alex Smith

And that's one of the reasons why we are having a reasonably good time at the moment. So, we're happy with that. In terms of new merchandise, we'll start to flow those goods into store, I guess, at the backend of January, and early February.

During that sort of clearance month, we want the stores focused on the sale and clearing out the old merchandise. So, I think if you went into stores mid-February, you'd start to see a good representation of new spring.

Mary Kovac - KeyBanc Capital Markets

Okay. And then, just quickly, I'm curious how some of the new lines that you guys are starting to rollout, you know--like the new spa line you guys have done, and bringing in the a couple of more toys--how that's going, and if we can expect those to continue?

Alex Smith

You can certainly expect both toys and spa to be part of our assortments going forward, yes.

Mary Kovac - KeyBanc Capital Markets

Okay, Excellent. Thank you very much.

Alex Smith

You're welcome. Okay. I think this is the last question, Janice, please?

Operator

Your last question comes from the line of Colin McGranahan with Sanford Bernstein.

Alex Smith

Hi, Colin.

Sara Senatore - Sanford Bernstein

Hi. This is Sara Senatore on behalf of Colin. How are you?

Alex Smith

Fine.

Sara Senatore - Sanford Bernstein

Good. My congratulations on the quarter. Most of my questions have been asked, but I wanted to see if you could maybe comment, generally, on some industry trends we're seeing; some store closings, bankruptcies?

Does that benefit you? Does it service the drag, maybe even some of the liquidation is initially happening, and then help to support comps--or are you sort of too small a piece of the general industry to see a material impact?

Alex Smith

Well, I think as we have said a few times, Sara, our share of the home market is really relatively small. And we can do all we need to do in terms of growing our business and returning to profitability by just taking market share from thousands and thousands of other different retailers.

We really don't see the impact of anyone individual retailer on us. It just doesn't come on right our screen frankly.

Sara Senatore - Sanford Bernstein

Okay. Thank you. And then just one company-specific question. You mentioned that you executed less than perfectly, as I think could be expected in initial stages. But is there anything in particularly your point--that you could address going forward, besides merchandising or store operations, anything that you could give a little color where there might be opportunity?

Alex Smith

Well, I think we have opportunity everywhere. And we have a long laundry list of things that we want to address. And when we all get back fresh and rested after the holidays, we will be sitting down and having our strategy meetings for next fiscal year, and we'll bake all our learnings and thinking into next year's plans.

Sara Senatore - Sanford Bernstein

Okay. Thank you.

Alex Smith

Okay. All right. I think that's it. Thank you very much everybody. And I'd just like to thank all our associates who've worked very hard this year to help to return our company to profitability. Thanks very much.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

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