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Aeropostale, Inc. (NYSE:ARO)

F1Q08 Earnings Call

May 22, 2008 4:15 pm ET

Executives

Ken Ohashi - Vice President of Investor and Media Relations.

Julian R. Geiger - Chairman and Chief Executive Officer

Mindy C. Meads - President and Chief Merchandising Officer

Thomas P. Johnson - Chief Operating Officer

Michael J. Cunningham - Chief Financial Officer

Analysts

Jeffrey Klinefelter - Piper Jaffray

Christine Chen - Needham & Co

Marni Shapiro - Retail Tracker

Roxanne Meyer - Oppenheimer

Kimberly Greenberger - Citigroup

Linda Tsai - MKM Partners

Michelle Tan - Goldman Sachs

Eric Beder - Brean Murray

Lorraine Maikis - Merrill Lynch

Robin Murchison - Suntrust Robinson Humphrey

Dana Telsey - Telsey Advisory Group

Howard Tubin - RBC Capital Markets

Operator

Thank you for joining us for the Aeropostale conference call to review first quarter fiscal 2008 financial results. (Operator Instructions) I would now like to introduce Ken Ohashi, the company’s Vice President of Investor and Media Relations.

Kenneth Ohashi

With me here today are Julian Geiger, our Chairman and Chief Executive Officer; Tom Johnson our Chief Operating Officer and Michael Cunningham our Chief Financial Officer. Mindy Meads our President and Chief Merchandising Officer is joining us telephonically. We issued a press release earlier this afternoon announcing our first quarter financial results. A copy of the release can be found on our corporate website.

Before we begin I would like to remind you that during this earnings conference call certain statements and responses to questions may contain forward-looking information such as forecasts of future financial performance. Forward-looking information and statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from our forecasted results.

Those risks are described in our annual report on Form 10-K and our quarterly reports on Form 10-Q, all of which have been filed with the SEC and are available on our website. We undertake no obligation to update or revise any forward-looking statements through reflect subsequent events or circumstances. Listeners of this call are referred to those filings.

Before I turn the call over to Julian I would like to ask everyone to limit themselves to one question during our Q-and-A session to allow everyone a chance to speak. Once we have gone through a round of questions we will go back and you may queue up again at that time.

I would now like to turn the call over to Julian.

Julian Geiger

I thank you for joining us today and I welcome you to our first quarter conference call. All of us at Aeropostale are thrilled with our first quarter results which represent a very strong start to the 2008 fiscal year. The last three months were another period of record sales, record operating margins and record earnings for Aeropostale. During the quarter we grew net sales by 22% to $336 million and achieved a same store sales increase of 10%.

Our merchandise margins improved by 110 basis points and our net earnings grew 44% to $0.26 per share from $0.18 per share last year. It is rewarding for our entire organization to deliver such strong financial results and especially rewarding to do so, on a consistent basis. It is equally gratifying for all of us to see how powerful and compelling the Aeropostale brand has become.

All indicators demonstrate that Aeropostale is currently at a level of recognition and respect never previously achieved in our 20-year history. The number of transactions in an average store continues to increase, even during a time when mall traffic is less than robust.

Our merchandise assortments are fresh and focused; our new store shopping environment is exciting and fun. Retail team surveys indicate that the Aeropostale brand has continued to advance and is now recognized as a top brand of choice for our target customer. We remain dedicated to and focused on the principal of listening to our customers and giving them what they want to wear at a price they can afford.

We believe that two of the primary factors that distinguish Aeropostale from our competitors are our nimble and flexible operating model and entrepreneurial but disciplined attitude. Our new and changing promotions create excitement in our stores and enable us to spur the demand for merchandise on an item and classification basis.

We believe that this unique positioning coupled with our great merchandise allows us to navigate successfully through the kaleidoscopic changes that characterize the dynamic retail landscape in which we live. During times such as these, our focus on inventory management is intense and is supported by making investments in people, process and systems.

Our focus and scrutiny have enabled us to maintain inventory levels consistently in line with perceived opportunity, while maximizing the sales and margin and contributions. Our west coast distribution centre has helped us to become a more efficient organization, improving our speed to market and supporting our future growth.

During the quarter, we opened 20 new stores on a net basis, keeping us on track to open the 85 new stores; we have previously indicated we would add this year. These stores will represent a double-digit square foot increase for the year. The successes of the brand and our strong and growing reputation have led us to capturing additional market share. As you know, we entered the Canadian market last year and our stores north of the border continue to generate results in excess of our expectations.

Our successful and seamless opening of stores in new markets highlights the strength, vitality and transportability of the Aeropostale brand. We remain excited about the potential for future expansion of the brand into more underserved or untapped markets. In order to share some of the merchandising highlights of the last quarter with you I will now turn the call over to Mindy.

Mindy Meads

We are very pleased with the execution of our merchandising strategies for the spring selling season. As you recall, this strategy included distorting key classifications, further balancing our assortment by adding more fashion, fashion basics within attention to detail, integrating more patterns and prints and also developing new classifications such as dresses.

The success of this strategy has translated into our women’s comp being up 7% and our men’s comp being up 20%. During the quarter we experienced particular strength in men’s and women’s graphics and denim and women’s short and bare knit top. We are encouraged by the strong underlying trends in these key classifications, as they will be an important part of both; our summer and early back-to-school seasons.

Our team has been focused on identifying key trending classifications and strategically investing in these businesses. Graphics, which has been the cornerstone of our business is one in which we have significant expertise and is emerging as of a classification with extraordinary opportunity. Our graphics business is significantly outperforming both our sales and margin plans. Our logo graphics with the Aeropostale name remain our top sellers further reflecting the strength in the brand.

We've continued to add newness to our graphics by refining texture treatments and appliqués and more importantly we’ve been able to drive sales trends in this business due to our very short lead time with key vendors. The entire product development team is very excited about our merchandising initiatives for the upcoming back-to-school selling season. We look forward to building on the successes for the spring and summer and offering the team customers the best combination of fashion and value.

In addition we have a new line-up of new marketing promotions, which we believe will drive both the teen and parent shopper into our stores. We look forward to further sharing these details with you with our back-to-school line preview on Thursday, June 19 in New York city.

Now I would like to turn the call over to Michael, who will share with you the financial.

Michael Cunningham

Total net sales for the quarter were up 26% versus last year driven by average square footage growth of about 1% and a 10% comp. For the quarter our comp transactions were up 7%, our units per transactions were up 3% and our average unit retail was essentially flat. During the quarter we opened 21 stores and closed one, ending the quarter with a total of 819 Aero stores in US, 15 stores in Canada and 14 Jimmy’Z stores.

Our gross profit increased 25% while our gross margins for the quarter were at 33.1% versus 32.2% last year. The 90 basis point increase was driven by higher merchandise margin and the leveraging of occupancy cost partially offset by higher distribution and transportation costs. SG&A for the quarter increased 20%, over 24.4% sales versus 24.7% last year. The 30 basis point improvement was primarily due to leveraging of store line operational expenses partially offset by stock-based compensation, higher incentive comp reflecting our bulk plan performance this quarter and RAE comp related fees due to the doubling of sales in that business.

As a result our operating income was up 42% and our operating margin reached a record 8.7% for the first quarter. Our tax rate for the quarter was 40.5%, which resulted in net income of $17.5 million or $0.26 per share. Cash and equivalents at the close of the quarter was $64.5 million versus $210.7 million together of cash and cash equivalents, together with short-term securities last year. The $146.2 million decrease of last year reflects to our increased stock repurchase activity during the second half of 2007.

As of May 3, 2008 we had approximately $134 million of remaining buyback availability under the current $600 million share repurchase program. Inventory at the close of the quarter was $135 million, now we are up 25% in total. On a per square foot basis inventories were up 13%. As we discussed on our last two conference calls we strategically shifted our spring and summer floor-set calendar to maximize the spring selling season. These proved to be the right strategy as demonstrated by our results. We’d also noted that this shift would continue till the May when timing receipts to the back-to-school selling season became comparable.

As such high comparable floor sets schedule, our inventory per square foot was up 4% to last year, and we do not anticipate any major flows that shifts in the future. We are comfortable with the level, age and composition of our inventory, as we headed into the second quarter and the early part to the back-to-school selling season. Our capital expenditures for the quarter were $20 million and depreciation and amortizations was $9.9 million. We expect second quarter earnings to be in a range of $0.22 to $0.24 per diluted share compared to $0.19 per share last year.

I will now turn the call over to Julian.

Julian Geiger

I would like to reiterate, how pleased I am with our accomplishments during the first quarter. I am so proud of the entire organizations commitment and achievement. I believe that we are well positioned to maintain a momentum headed into the second quarter and for the back-to-school selling season. While we are excited about the continued present opportunities for the Aeropostale brand we are also investing in our future growth. We have been working on refining our merchandising strategies of Jimmy'Z and we have been very encouraged by the recent trends in that concept.

We are also making solid progress in building the team and infrastructure for our third concept. We look forward to keeping you abreast of our progress on this concept throughout the remainder of this year. By any statistical measure, our business is never been stronger. We continue to generate same-store sales and margin increases even against the backdrop of a challenging economic environment.

Sales trends in all geographical regions are positive. We believe that the success of our business is predicated on our solid and consistent financial model, a proven operating formula and our unique and special corporate sprit. I believe that the Aeropostale organization is the most talented and dedicated group of professionals in our industry. I cannot thank them enough for the heroic efforts or the great accomplishments.

I also thank all of you for your support and interest. We look forward to answering any questions you all might have at this time. Operator at this point we are now ready to take those questions.

Question and Answer

Operator

(Operator Instructions) and we will take our first question from Jeff Klinefelter with Piper Jaffray.

Jeffrey Klinefelter - Piper Jaffray

Question on guidance first on the second quarter; could you just remind us again. I think you mentioned this on the last call, but in terms of trends, gross margin versus SG&A and what factors are at play in the second quarter, upside potential I would imagining exists if you outperform your comp expectations as you did in the first quarter, but if you could just kind of set the bar for us on what that guidance is based on and then also I think you provided initial outlook for the full-year of about 18% earnings guidance or EPS guidance; any updates on the full-year outlook?

Michael Cunningham

Sure, Jeff this is Mike. Now, at this point in time we have not got the full-year outlook. As you know the majority of the earnings really come in the back half of the year, so we feel it would be prudent to wait to see how the macro environment shapes out before we update the full-year. For next quarter basically our assumptions, I assume is a alight improvement in gross margin. We are going to see a slight increase in the SG&A rate as Julian mentioned; we are ramping up and heading the team for a younger concept and that will start to come on stream in the second quarter, so our guidance reflects that. Also there might -- obviously our momentum has been great in the first quarter. As we looking Q2 you all know for us the substantial majority of our earnings come in July and really that’s the beginning for us; mid July is the beginning of the back-to-school selling season, where both the volume and the floor set store goes back-to-school, regions start to set, so that’s really the majority of profits coming from July. So at this point in time given our guidance we feel it would be prudent to give the numbers we have out there and obviously as we get into July we’ll be in a position to update you further.

Jeffrey Klinefelter - Piper Jaffray

Okay. Michael what comp is implied in the second quarter guidance?

Michael Cunningham

Jeff, you know we don’t disclose that.

Jeffrey Klinefelter - Piper Jaffray

Okay, I thought you might want to this quarter?

Michael Cunningham

No.

Jeffrey Klinefelter - Piper Jaffray

Okay. In terms of -- one of the last questions; in terms of the second-half margins potentially you'd mentioned that you are one of the earlier retailers to start talking about inflation and cost of goods inflation. Any updated thoughts on that? Is that going to start to impact your margins to some extent in the second-half of the year?

Julian Geiger

We really don’t think that will be as a major factor at all in the second-half of the year Jeff. We are talking about prices now for 2009, when some increases will seem inevitable, but we have done a very good job and done tremendous support from our manufacturing base to basically hold prices for the second-half.

Operator

Thank you. We'll take our next question from Christine Chen, with Needham & Company.

Christine Chen - Needham & Co

Congratulations. I wanted to ask, as you have continued to improve your product mix, and it gets a little bit more sophisticated, have you seen any creep up in age of your customer and then for the back half of the year, what sort of opportunities do you feel like you have missed last year that you're improving upon this year? Thank you.

Julian Geiger

The -- it's very hard to tell, who the shoppers are. We think there maybe some creep up. We think the product is so dynamic and it looks so good and is being sold at such great prices that it is not only confined to a 14 to 17 year old customer and we do notice on an anecdotal basis, some are the kids in the stores, but we are very pleased by the sales clearly and by the growing reputation of the brand.

Christine Chen - Needham & Co

And then missed opportunities from last year?

Julian Geiger

The -- they were there -- while we try to convince ourselves we are perfect in everything we do and not in -- lots of clarifications that were not operating at an optimal level. Clearly, the reemergence of the graphics business, in women is a significant opportunity for us this year as the surgeance of the desire to wear something with the name Aero or Aeropostale is we are universal.

Christine Chen - Needham & Co

And then you mentioned that, you continue to take share and we certainly see that; who do you think you're taking share from?

Julian Geiger

Again, this is not something that we can measure directly, but you are -- attribute to the comp store sales of our competitors as we are -- so it’s logical to assume that those who are dropping the most are contributors to our business

Operator

Thank you. We will go next to Janet Kloppenburg with JJK Research.

Janet Kloppenburg - JJK Research

I was wondering if Mindy could comment on the success of the accessories program and how that category is positioned for the back-to-school the period and Julian I was wondering if you could talk about what’s going at Jimmy'Z and what progress you see there and I was also -- I don’t know if you said it, but I am wondering about inventory levels coming out in the second quarter and will you expect them to be on a like basis?

Julian Geiger

Mindy, you have the first of that?

Mindy Meads

Yes I got the first question. Janet, accessories was not our biggest strength this quarter. We continue to be very strong with the touts and we had a nice reaction to our swim but when it came to some of the flip-flops and shoes, it was very difficult as it has been for everyone else. So, we’re really keeping that inventory pretty tight and not planning that to be one of our biggest businesses as we go into the second half of the year.

Janet Kloppenburg - JJK Research

So you will divert that to what women’s products or men’s or where will those go now Mindy?

Mindy Meads

I was primarily talking about women’s as a much bigger part of our accessory business than men’s. Actually men’s had a pretty good quarter, but it was really the shoes and somewhere the sleepwear that was more difficult for us and I think that probably it was some seasonality issues on the product.

Julian Geiger

Janet, In terms of the question you asked about Jimmy'Z Janet, one of our goals has always been to start to run Jimmy'Z more in fashion like Aeropostale, which we are doing. It is a promotional specialty store for contemporary merchandise. What’s interesting to see is how the success of certain classifications mirrors those of Aeropostale and greatest strength of the business now is graphic t-shirts, mid shirts and denim. So we feel we have made a lot of progress not only in recalibrating the business to function like Aeropostale for a different target customer but to share some of the same successes in terms of our merchandise classifications.

Thomas Johnson

With regards to inventory at the end of the Q2, as you all know the only reason we had given guidance for the last two quarters was because of the floor set acceleration and the impact that would have on the inventory levels, there is no more floor set shifts so therefore at this point in time we don’t feel the need give the guidance on inventory levels.

Operator

We’ll go next for Marni Shapiro with Retail Tracker.

Marni Shapiro - Retail Tracker

So a couple on the marketing side, you have been fairly quite in my opinion for the last several weeks. You have done a lot of linkups in the past year with music and different kinds of promotions. I’m curious if this is a new cadence for the company or just time of the year and I should look forward to you ramping in up again in the back half.

Julian Geiger

I think the message right now is value; great merchandise, great prices. Unique promotion should be held in advance for times when peak traffic, so I think it’s more the time of the year than anything else Marni and as you know we tend not to disclose our promotional plans, but I’m sure you will see some interesting things as we get into back-to-school and beyond this year.

Operator

Thank you. We will go next to Roxanne Meyer with Oppenheimer.

Roxanne Meyer - Oppenheimer

I guess I just want to understand some of the line items in your gross margin, SG&A. Are you better quantify, how much the distribution and transportation costs, impacted the gross margin and what we can expect on a go forward basis especially in light of the only continuing, the continue of rise in energy prices?

Julian Geiger

Roxanne, the various components of distribution and transportation was the switch as you know we only go to West Coast to DC, so some of the products that’s not coming to West Coast to DC we are receiving lower prices trying to ship it because we are basically picking up that transportation costs ourselves before it can hit the DC. So, that is the bigger impact and we are not going to quantify it because it’s merely a shift in cost -- products costs in between logging an outline. The large piece of it is a fuel surcharge piece, which is the smallest piece of distribution transportation. It’s not material enough for as to disclose it and it’s something that, I’m sure everybody else is fighting and it's some cost of doing business that we will just continue to overcome as we continue to run the business.

Roxanne Meyer - Oppenheimer

So, some of the distribution pressures then are more confined to the first quarter?

Julian Geiger

I am sorry.

Roxanne Meyer - Oppenheimer

That the first component that you referenced does that more confine to the first quarter?

Julian Geiger

No, that will be ongoing.

Roxanne Meyer - Oppenheimer

That will be ongoing, okay and then quickly on the stock compensation expense, did you take that all in the first quarter for the whole year or…

Julian Geiger

No.

Roxanne Meyer - Oppenheimer

Assuming that you continue to beat expectations or make expectations about something that could continue as well?

Julian Geiger

That’s -- I think we talked about this one on one of the previous call. We straight-line and advertise throughout the year, so it’s a consistent dollar amount each quarter. However it has a bigger negative impact on the SG&A rate in the first two quarters of the year when our sales base is that much lower compared to the back half of the year. So, though we follow it in the back half of the year it has also been a negative impact on the SG&A rate.

Operator

Thank you. We will go next to Kimberly Greenberger with Citigroup.

Kimberly Greenberger - Citigroup

Thank you, good evening. I just had a follow up on Roxanne’s question; can you quantify for us the occupancy leverage here in the quarter and remind us when will you anniversary the higher distribution costs from there West Coast to DC, thanks?

Thomas Johnson

Yes at this point in time Kimberly, we don’t have the -- we are not going to be granule about the occupancy leverage in the first quarter.

Julian Geiger

And we started flowing goods to DC in August last year.

Operator

Thank you. Next we will go to Linda Tsai with MKM Partners.

Linda Tsai - MKM Partners

Hi, congratulations everyone. Can you give us a brief update on the younger concept?

Julian Geiger

As we said it was a concept catering to younger kids than our current 14 to 17 year old customer that we were going to use the core competencies that make Aeropostale great in the same operating approach and that we felt we had a particular opportunity in this niche, because we gained so much credibility and favorable demand which was an integral part of the shopping experience for a younger kid and as I said we are moving forward and will keep you abreast throughout the year as we make progress.

Linda Tsai - MKM Partners

And then a question for Mindy; Mindy are you seeing any new styles for back to school as it relates to denim?

Mindy Meads

Not really. I think really the success of the styling is to get really the right wash and the right fit. I think we have a very good balance. You will see some details, some of our fashion styles but -- and we are doing it in an expanded curvy fit. So we are really focusing on being in stock on all the key fits and washes. Not too much to silhouette change, but the slim jean will become a little bit bigger, but the bulk of our business comes from the skinny flair for her and then the boot cut for the guy

Linda Tsai - MKM Partners

So really no changes…

Mindy Meads

No, nothing significant.

Operator

Thank you. We will go next to Michelle Tan with Goldman Sachs.

Michelle Tan - Goldman Sachs

Great, thanks. Just curious about where the average price points are tracking. I think in women’s I noticed some of the dresses were priced like 39.99 which seemed pretty comparable to what some other guys out there were showing. So I was curious if you have seen creep up in the price points overall, has the assortments gotten a little more fashion focused?

Julian Geiger

We said that there was -- our average unit retail was fundamentally flat for the quarter, so there really is no significant change in pricing.

Michelle Tan - Goldman Sachs

Great and then just one quick follow-up, new store productivity?

Thomas Johnson

The new stores are performing on plan. So, we are pleased with the results so far. As we mentioned on a couple of the calls we have made some tweaks to the store format to increase the overall capacity. So, we still feel very good about them.

Operator

Thank you. Next we will take our question from Eric Beder with Brean Murray.

Eric Beder - Brean Murray

Could you talk a little bit -- I know you mentioned before about the Canadian stores how well that were doing. Could you provide an update and then could you talk about, what you think the potential is and how you look at the Puerto Rican market?

Julian Geiger

Sure, Eric. The Canadian stores continue to outperform the US stores on an average volume base and we are pleased with that. We see that total market approximately a 100 stores -- overall 80 to 100. In the Puerto Rico market as you know we opened up a couple weeks ago with a single store at this point, very pleased with the sales so far, but obviously very early in order to read that. The end of this year we will have three stores; we see that a 10 to 12 store market.

Eric Beder - Brean Murray

And if you could talk -- just a quicky on the shorts you sold this year, saw a lot of plaid -- what were the key -- was plaids really the big driver for shorts for spring and for summer. Where do you see it going forward? Mindy?

Julian Geiger

Mindy.

Mindy Meads

I will say the plaids were the strongest piece. Bermudas is stronger based on the whether then the shorty shorts, but we also had a really nice increase in knit shorts. That was really flat on the woven side and knit shorts too was very strong.

Operator

Thank you. Next we will go to Lorraine Maikis with Merrill Lynch.

Lorraine Maikis - Merrill Lynch

Thank you, good afternoon. Can you give us an idea of the cost pressures that you expect for the rest of the year between the new concept and also Jimmy'Z?

Julian Geiger

The Jimmy'Z was -- actually for the second quarter was about a penny less than -- the first quarter was a penny less than it was last year at this point in time, but as you know we did impair the Jimmy'Z outfit. So we are going to event based on depreciation. So Jimmy'Z will be a little bit less than what we had on a full year basis and as Julian said as we start to see progress on the merchandising front, we should get some -- a little more improved contribution and particularly towards the back half of the year and we are not going to detail out that the pressures again. We have a lot of cost pressures as every retail does these days in terms of taxation costs and various other, but we have a number of cost saving initiatives underway, that help to offset a anything off proportion of those increases.

Lorraine Maikis - Merrill Lynch

And on the cost that you’re cutting any color there on what line items you are looking at or what progress you have been able to make?

Julian Geiger

Yes, we may -- we manage -- obviously store line expenses are the biggest expense category on the P&L. We have stepped up the management of that on a very specific detailed basis, on a weekly basis to ensure that we keep in line with the sales. So, that’s the biggest impact we can have on a business and so from that every little line has been scrutinized in their activity that actual plans begins to get efficiency across the board whether it’s volume discounts, whether its smarter way to new business and it’s been an ongoing program we have at the groceries level throughout the company and we could go [Inaudible].

Operator

Thank you. Next we will go to Robin Murchison with Suntrust Robinson Humphrey.

Robin Murchison - Suntrust Robinson Humphrey

Thanks very much. Mindy this is for you; do you see any sign of taking a shift in plad bottoms or shift to where -- it seems like that trend has sort of been with us for several years now and I am just wondering -- I know you had success with it, but what do you think about it on an ongoing basis?

Mindy Meads

It’s still going to be important for us for the early part of back-to-schools shorts in the July and early August period is strong and we do not see it letting up from our customer standpoint.

Operator

Thank you. Next we will go to Dana Telsey with Telsey Advisory Group.

Dana Telsey - Telsey Advisory Group

Good afternoon everyone. Can you talk about what do you feel is the right mix of basic to fashion and veneer. Fashion and Veneer has great acceptance; were do you see that going to and also margin opportunities in each. Is there more IMU or product cost opportunities there; thank you.

Mindy Mead

Dana on the fashion we are pretty comfortable with taking -- in the past the core business was probably 50% of the business that’s going to about 35% and the fashion basics is still maybe 20% to 30% and that’s really been the change that’s happened this season with becoming a little more fashionable with some of the basics. We think its important to still layer on the fashion and also the veneer just really keeping the balance of all parts going.

Operator

Thank you and we have time for one final question. We will take that question from Howard Tubin with RBC Capital Markets.

Howard Tubin - RBC Capital Markets

Just one more question on gross margins; as we look out to the back half of the year and you come up against really two years of very, very solid gross margin improvement. How are you thinking about it -- or are there further opportunities for margin improvement in the back half of the year?

Julian Geiger

If you look it why we are doing well, it’s because of the initiatives that we started in 2005, that we've been implementing subsequent to that and we think we are just really in the beginning stages of seeing the benefits that conclude to us from those initiatives. As the brand gets stronger, as the recognition improves, as the merchandise in store continues it’s reach in progress and getting better and better, reducing this opportunity against even elevated levels of our performance from fourth quarter -- from last year. This is a brand that’s on the move, it’s a brand that’s being recognized and the tendency in the industry is for hot brands to get hotter and cold brands to get colder. So, we never can place it. We work very hard everyday, not focusing on our successes, but looking to those areas that we make better, so we are working hard to make each quarter better than the one that precede it.

Howard Tubin - RBC Capital Markets

Thanks very much.

Julian Geiger

Well at this point, with the first quarter is behind us and complete we are turning our attention to the second quarter and the upcoming back-to-school season. Our entire executive management team would like to thank all of our employees, customers, shareholders and you for your loyalty to us and we look forward to speaking to you in the future, about our performance in the second quarter.

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