Destination XL Group, Inc. (formerly Casual Male Retail Group, Inc.) together with our subsidiaries (the “Company”) is the largest specialty retailer of big & tall men’s apparel with retail operations in the United States and London, England and direct businesses throughout the United States, Canada and Europe. We operate under the trade names of Casual Male XL, Casual Male XL Outlets, Rochester Clothing, B & T Factory Direct, Shoes XL and Living XL. We operate 401 Casual Male XL retail stores, 66 Casual Male XL outlet stores and 27 Rochester Clothing stores. Our direct business includes several catalogs and e-commerce sites which support our brands and product extensions. Unless the context indicates otherwise, all references to “we,” “our,” “ours,” “us” and “the Company” refer to Casual Male Retail Group, Inc. and our consolidated subsidiaries. We refer to our fiscal years ended January 31, 2009, February 2, 2008 and February 3, 2007 as “fiscal 2008,” “fiscal 2007” and “fiscal 2006,” respectively.
Our Company was incorporated in the State of Delaware in 1976 under the name Designs, Inc. Until fiscal 1995, we operated exclusively Levi Strauss & Co. branded apparel mall and outlet stores. In May 2002, we acquired the Casual Male business from Casual Male Corp. at a bankruptcy court-ordered auction. At the time of the acquisition, Casual Male was the largest retailer of men’s clothing in the big & tall market in the United States. As a result of the acquisition and the significance of it to the growth and future identity of our Company, on August 8, 2002, we changed our name to “Casual Male Retail Group, Inc.”
Since the acquisition in 2002, we have invested approximately $75.0 million, of the total $105.0 million spent in capital over the past six years, toward rebuilding our infrastructure, including:
modernizing our information technology, benefiting every aspect of our operations from distribution, global sourcing, store operations and merchandise planning to overall inventory management and profitability;
updating and restructuring our distribution center with an enhanced warehousing application that significantly streamlined our distribution processes, enhanced our in-transit times and significantly reduced our costs;
refreshing our real estate portfolio through our remodeling and relocation initiatives. Since 2002, we have remodeled approximately 262 of our Casual Male retail and outlet stores and have relocated another 50 to improved locations; acquiring Rochester Clothing in fiscal 2004, with its then 24 retail stores; and,
re-branding all of our Casual Male stores, including all signage, from Casual Male Big & Tall to Casual Male XL. This name change helped to remove the stigma associated with the words “big & tall” and was positively received throughout the chain.
The men’s big & tall apparel market, which includes pants with a waist size of 42” and greater, as well as tops sized 1X and greater, generates approximately $5.5 billion to $6.0 billion in sales annually and represents approximately 13% of the overall men’s apparel business. Growth in this segment has been driven by rapidly changing market demographics. In fiscal 2005, 61% of U.S. adults were overweight or obese, up more than 50% in ten years. Additionally, in 2005, all 50 states classified 15% or more of their total adult population as obese, versus four states in 1991. According to the Center for Disease Control, the rate of obesity for the under-30 age group is growing faster than any other segment of the population. These statistics suggest that there is a significant gap between the market share of the big & tall apparel market and the overall percentage of the population classified as overweight.
The men’s big & tall apparel market is currently served by a variety of retailers, including department stores, mass merchandisers and specialty stores. These stores typically offer a limited assortment of sizes and styles. We estimate that our current market share is approximately 7.7% and believe that we have the potential to reach 12% and beyond. We believe that we can ultimately achieve this goal by catering to the broader target market, attracting customers from various incomes, age and lifestyle segments and offering the widest selection of sizes and styles. A substantial opportunity continues to exist for market share growth from the lower-size range of our market: men in the 42”-46” waist size. These sizes are usually at the high end of the size range for most retailers and, as a result, the selection is usually limited at such retailers.
The big & tall industry is highly fragmented with a large volume of target customers who, we believe, are essentially underserved. While our long-term goals continue to be market share growth and overall improved profitability, our immediate focus has shifted as a result of the declining economy. With the uncertainty that exists regarding the volatility of the economy and its continued impact on consumer spending, during fiscal 2008, we increased our focus on maintaining a solid liquidity position, generating free cash flow on an expected decreasing sales base and managing our balance sheet, specifically inventory. Based on the current economic outlook for the next 12-18 months, our posture will remain the same.
We operate as a multi-channel retailer with two primary retail brands: Casual Male XL and Rochester Clothing. The Casual Male XL customer is a consumer of primarily moderately priced branded and private label casual sportswear and dresswear. The Rochester Clothing customer is a luxury-oriented consumer of fine quality, designer and branded menswear. In addition, we started B&T Factory Direct in 2007 for the value-oriented component of our target market. With shoes being an integral part of any wardrobe, in 2007 we started our direct business, Shoes XL, to improve our penetration in the shoe product line. Lastly, to cater to the household needs of our target market, we acquired a small business, Living XL, specializing in high-quality household products which help larger people maintain a more comfortable lifestyle.
Our objective is to appeal to all of our customers by providing multiple and convenient ways to shop. Our customer is often a destination shopper when it comes to purchasing apparel for himself. Our direct businesses are a natural extension of our store operations and extend the reach of our brands by offering an easy way for our customers to shop. An NPD Group study completed in 2005 found that the big & tall customer often crosses channels to find the clothing they need and want. The study found that approximately 33% of big & tall customers shop online for their clothing, as compared to 21% of regular sized men. Likewise, the big & tall customer’s rate of catalog shopping is nearly double that for men who do not require special sizes.
This multi-channel approach has enabled us to grow our business by offering a shopping alternative to the full spectrum of our potential target group. Through acquisitions, new business formats and new product development, we believe we cater to all income demographics from the value-oriented customer to the high-end luxury-oriented customer. We offer our customers merchandise in all lifestyles from casual to business, young to mature, in all sizes XL and up.
In spite of the state of the economy, we will continue to pursue any new opportunities that would strengthen our multi-channel experience for our customers. At the same time, through continual improvement in customer service as well as merchandise offerings that meet the struggling financial needs of some of our customers, we hope to mitigate the drop in consumer retail traffic by further improving upon our conversion metrics, the percentage of shoppers who actually make a purchase on their visit as well as the average units sold per transaction.
Our Casual Male business offers an extensive selection of quality sportswear, dress clothing and footwear for the big & tall customer at moderate prices. Our full-price Casual Male merchandise is sold through our 401 Casual Male XL retail stores, Casual Male XL catalogs and e-commerce site www.casualmaleXL.com.
The majority of the Casual Male merchandise is basic or fashion-neutral items, such as jeans, casual slacks, tee-shirts, polo shirts, dress shirts and suit separates. The Casual Male customer is primarily interested in comfort and fit, at a reasonable price. As such, Casual Male’s clothing has features specifically designed for our customer, such as waist-relaxer pants, stretch belts, zipper ties, wide band socks, neck-relaxer shirts and clothing with comfort-stretch technology and reinforced stress points.
We carry several private label lines in our Casual Male XL retail stores and direct businesses which perform very strongly and represent more than 70% of our sales:
-Harbor Bay was our first proprietary brand and it continues to represent a significant portion of our business, specifically our core basic merchandise. Harbor Bay is a traditional line of clothing which competes with the Dockers®, Izod® and Cutter & Buck® branded products.
-626 Blue-Vintage Surplus (“626 Blue”) is targeted toward a younger customer. 626 Blue introduces a younger lifestyle look that caters to a broader market, which is influenced by Abercrombie & Fitch and American Eagle. Our 626 Blue merchandise is comprised of premium washed denim, casual wovens and tee-shirts. This private label line has grown significantly over the past three years.
-Synrgy targets the customer looking for a contemporary look. The merchandise is inspired by Perry Ellis Portfolio and Calvin Klein’s sportswear line.
-Comfort Zone™ apparel is all about comfort, fit and technology. The merchandise has exclusive features such as our patented Neck-Relaxer shirt, Waist-Relaxer pants, Jacket-Relaxer suit separates and Dry-Action wicking polo that provide comfort and performance combined with uncompromising style so that big & tall men can find casualwear and dresswear that fit their lifestyle.
-Oak Hill is a premier line catering to those customers looking for slightly more style and quality than our Harbor Bay but still in a traditional lifestyle.
In addition to our many private label lines, we carry several well-known brands of merchandise including: Polo Ralph Lauren, Nautica, Nautica Jeans Co., EcKo, Levi’s®, Dockers®, Calvin Klein, Reebok® and others.
Our private label brands, together with the traditional well-known brands, enable us to better cater to the various market segments of our overall target market. Our research has shown that we need to appeal to a variety of customers within the big & tall market in our efforts to become the preferred choice among big & tall men.
Our stores are merchandised to showcase entire outfits by lifestyle, including traditional, functional active, young men’s, dresswear and contemporary. This format allows us to merchandise key items and seasonal goods in prominent displays and makes coordinating outfits easier for the customer while encouraging multi-item purchases. This lifestyle layout also allows us to better manage store space in each market to target local demographics. Stores are clustered to meet the demographic needs of customers by climate and ethnicity. The key item strategy is also fully integrated by lifestyle, allowing us to focus on merchandise presentation and offer our customers a compelling value proposition.
Casual Male XL retail stores.
At January 31, 2009, we operated 401 Casual Male XL full-price retail stores, located primarily in strip centers, power centers or stand-alone locations. These stores offer a broad selection of basic sportswear, other casual apparel, dress wear and accessories, as well as a full complement of our private label collections. The average Casual Male XL store is approximately 3,521 square feet and has approximately $185 in sales per square foot annually.
Casual Male XL outlet stores.
At January 31, 2009, we operated 66 Casual Male XL outlet stores designed to offer a wide range of casual clothing for the big & tall customer at prices that are generally 20-25% lower than those offered at our full-price retail stores. Much of the merchandise in the outlet stores is offered with the purchasing interests of the value-oriented customer in mind. The merchandise assortments and brands carried in the outlet stores are consistent with the merchandise strategies carried in our direct business, B&T Factory Direct, which is discussed below. The average Casual Male XL outlet store is approximately 3,185 square feet and has approximately $188 in sales per square foot annually.
Casual Male XL Direct Businesses
Our direct businesses are a vital part of our multi-channel business. Due to the capacity limitations of any retail store, our stores cannot always stock every size or assortment. Our direct businesses bridge that gap for us. We encourage and expect our store associates to use our catalog and websites to help fulfill our customers clothing needs. If an item is not available in our store, then our store associates can order the item for our customer through one of our direct channels and have it shipped to the store or directly to the customer. Approximately 5% of our retail stores’ sales are sales derived from in-store orders placed through our direct channels.
Our Casual Male XL website, www.casualmaleXL.com, and our “Casual Male XL” catalogs offer an assortment of merchandise similar to what is available in the stores, but also offers a broader selection of brands, styles and sizes. During fiscal 2008, we issued 18 editions of our Casual Male XL catalogs and circulated a total of 8.8 million catalogs. We also own the domain name www.bigandtall.com. This site integrates our Casual Male XL, Rochester Clothing, B&T Factory Direct, Living XL and Shoes XL websites in an effort to generate additional traffic.
Through our business relationship with Sears U.S. and Sears Canada, we offer selected Casual Male merchandise on www.Sears.com and www.Sears.ca, Sears’ Canadian website. In cooperation with Sears U.S., we produce a co-branded Casual Male XL and Sears catalog. During fiscal 2008, we mailed 5 editions of the catalog with a circulation of 500,000. In addition, we also have a co-branded section in the Sears Canada catalog. During fiscal 2008, we appeared in 4 editions with a circulation of 500,000 catalogs depending on the edition.
B&T Factory Direct
Under the B&T Factory Direct name, we operate a B&T Factory Direct catalog business as well as an e-commerce site, www.btdirect.com. This direct business enhances our existing Casual Male XL outlet stores, enabling us to provide a multi-channel shopping experience for the value-oriented customer. The merchandise offered in our “B&T Factory Direct” catalogs and on our website is an expanded selection but similar to the merchandise that can be found in our Casual Male XL outlet stores.
We offer a private label program, specifically for our Casual Male XL outlet stores and our B&T Factory Direct businesses, which is similar to our lifestyle private label lines found in our full-price retail stores but made at lower costs and sold at lower price points for our value-oriented customers. We currently carry Canyon Ridge, which is similar in style to our Harbor Bay product line, and Flex Zone, which is similar to our Comfort Zone™. We also carry 555 Turnpike, which is targeted toward our younger customers similar to 626 Blue, and Fuse, a contemporary line similar in style to our Synrgy product line.
During fiscal 2008, we mailed 9 editions of B&T Factory Direct with a circulation of 2.3 million.
Our Rochester Clothing stores carry a broad selection of quality apparel, at higher price points, from well-known branded manufacturers such as Polo Ralph Lauren, Robert Graham, Joseph Abboud, Michael Kors, Ermenegildo Zegna, Cutter and Buck, Tommy Bahama, and Paul & Shark. The Rochester customer is able to find a wide range of apparel from traditional and modern sportswear to suits and accessories. These stores cater to our customer, offering a personal shopper-type experience, with experienced staff that has a strong knowledge of the merchandise and services, such as custom made-to-measure suiting and on-site tailoring.
In fiscal 2006, we introduced two private label brands made specifically for our Rochester customers. Rochester 1906™ is targeted as a classic traditional line offering sportswear, loungewear and dress shirts, while Castagne™ is positioned as a more contemporary sportswear line. In fall of 2008, Rochester introduced Society of One, a jeans wear brand catering to the needs of the fashion denim customer. All proprietary private brands feature the highest quality fabrications, details and construction. These brands represent approximately 8% of Rochester sales for fiscal 2008. Although these lines have found a market with our customers, we do not expect private label product to be as big of a contributor as it is in our Casual Male business because of our Rochester customer’s preference for branded high-end fashion merchandise.
Due to the high-end price points of our Rochester business, the decline in the economy during fiscal 2008 has affected our Rochester business the most. In response, we are looking at ways to improve and strengthen the overall profitability of our Rochester business. We strongly believe that the Rochester brand is an integral part of our overall objective of providing a shopping alternative to the full spectrum of our target customers, from the value-oriented customer to the high-end Rochester customer. However, because of the economy and its direct impact on our higher-end customers, we are considering reducing our store count for Rochester. During fiscal 2009, we will begin testing a new hybrid store format in six of our existing Rochester stores. The hybrid store format, which by design will be a 6,000-7,000 square foot store, is a combination Rochester Clothing and Casual Male XL store, allowing the customer an opportunity to see the lifestyle sportswear offered by Casual Male XL while still offering the lifestyle of the higher-end fashion apparel of Rochester Clothing. Our Casual Male customer will also have an opportunity to see an extended offering of higher-end sportswear that currently is not offered in our Casual Male XL stores. We are anticipating that the merchandise will be a combination of 75% Casual Male and 25% Rochester product, including an expanded assortment of suits, sportcoats and dress shirts with on-site tailoring services currently not available in our Casual Male XL stores.
In addition to our hybrid format, we may also consider converting select stores to an outlet format. The outlet format would carry a basic core-line of Rochester clothing and clearance merchandise from our full price retail stores. We are also adding a selection of more moderately priced basics to our Rochester Clothing stores during 2009, primarily from the well-known branded apparel lines that our Rochester customers expect.
Rochester Clothing stores
At January 31, 2009, we operated 27 Rochester Clothing stores, located in major cities throughout the United States and one store in London, England. The Rochester Clothing stores provide the customer with high-end merchandise from well-recognized brands. The average Rochester Clothing store is approximately 8,192 square feet and has approximately $256 in sales per square foot annually.
Rochester Clothing direct businesses
Because we currently have only 27 Rochester Clothing retail locations, which may not be accessible for many of our Rochester customers, our direct businesses are a significant portion of our overall Rochester business. Our “Rochester Big & Tall” catalog and www.rochesterclothing.com website offer an assortment of clothing that is similar to what can be found in our retail stores, with a broader selection in most cases. During fiscal 2008, we issued 20 editions of the Rochester Big & Tall catalog with a circulation of 3.7 million.
Our Other Direct Businesses
Our website www.shoesXL.com carries a complete line of men’s footwear in extended sizes. This website offers our customers a full range of footwear in hard-to-find sizes. Our plan is to significantly increase our sales penetration in the shoe product category to levels which are more in line with men’s apparel spending for shoes. The assortment on Shoes XL is a reflection of our apparel, with a broad assortment from moderate to luxury and from casual to formal. Shoes XL currently has a selection of more than 400 shoes, ranging in sizes from 12M to 17M and widths up to 5E. We carry a number of designer brands including Cole Haan, Allen Edmonds, Timberland, Calvin Klein, Lacoste and Bruno Magli. Shoes XL is also supported with a catalog. In fiscal 2008, we mailed 4 editions with a circulation of 1.6 million.
In addition, we have added the expanded shoe assortments within our existing Casual Male XL and Rochester Clothing catalogs, including on our websites, www.casualmaleXL.com, www.btdirect.com and www.rochesterclothing.com, as well as featuring the entire shoe product assortments on www.shoesXL.com.
Our Living XL business, which includes our website www.livingxl.com and our Living XL catalogs, specializes in the selling of select unique, high-quality products which help larger people maintain a more comfortable lifestyle. The types of products sold on our website and in our catalogs benefit both men and women and include sports and outdoor accessories, patio furniture, travel accessories, medical products and other household items. During fiscal 2008, we mailed 7 editions of our Living XL catalog with a circulation of 4.6 million.
International Web Stores
During the third quarter of fiscal 2008, we launched our online stores for both our Casual Male XL and Rochester Clothing brands in six European countries: U.K., Germany, France, Italy, Spain and the Netherlands. We engaged GSI Commerce, Inc. (“GSI”), a leading provider of e-commerce solutions, for the design, development and operations of the 12 online stores. GSI provides the Web store design, order processing, fulfillment and customer call center services for each of the Web stores. Each online store is tailored to the specific European country in which it operates and includes country-specific components, such as online payment processing, content translation and customer services.
MERCHANDISE PLANNING AND ALLOCATION
Our merchandise planning and allocation area is critical to the effective management of our inventory, store assortments, product sizes and overall gross margin profitability. The merchandise planning and allocation team has an array of planning and replenishment tools available designed to assist in not only maintaining an appropriate level of inventory and in-stock positions at the store and direct levels, but also tools for pre-season planning for product assortments for each store and the direct channels. Additionally, in-season reporting identifies opportunities and challenges in inventory performance. Over the past several years, we have made important investments in implementing best practice tools and processes.
Our core merchandise makes up over 40% of our Casual Male assortments and over 25% of our Rochester assortments. Our planning and allocation team estimates quantity and demand several months in advance to optimize gross margin and minimize end-of-season merchandise for all seasonal merchandise. We have implemented an all-channel assortment planning methodology that customizes each store’s assortment to accentuate lifestyle preferences for each store.
In 2008, we implemented a merchandising data warehouse intended to provide the merchandising team with standardized reporting for monitoring assortment performance by product category and by store, identifying in-stock positions by size and generally monitoring overall inventory levels relative to selling. At season end, we analyze the overall performance of product category, overall assortments and specific styles by store to focus on the opportunities and challenges for the next season’s pre-season planning cycle.
During 2008, we have been building a set of specific universal reporting tools which is intended to be used to fulfill the daily, weekly and monthly roles and responsibilities of the merchandise planning and allocation team. These reporting tools provide focused and actionable views of the business to optimize the overall assortment by category and by store. We believe that by having all members of the merchandise planning and allocation team follow a standardize set of processes with the use of standardize reporting tools, our inventory performance will be optimized.
We believe that our store associates are the key to creating the highest quality visit for our customers. In fiscal 2008, we began a three-year program to essentially change the culture of our stores from an operationally-driven organization to a sales-driven, customer relationship organization. Our overall goal is to help our associates become less task oriented and more focused on the customer. We want our associates to help our customers buy their apparel needs by building their wardrobes, not just selling our customers an item. In order to do this, we have invested in educating our associates. Our training approach not only provides product knowledge but also behavioral training; we are teaching our associates how to interact with each customer and strengthen and build upon their relationships with their customers.
We are also able to gauge the effectiveness of this training by measuring sales productivity at each level of the field organization, including individual sales associates. We believe that these education programs, together with monitoring sales metrics to help identify opportunities for further training, will add to our brand loyalty with our customers, while also improving sales productivity.
Our field organization is overseen by our Senior Vice President of Store Sales and Operations and is comprised of the following:
Casual Male XL store operations
In order to provide management development and guidance to individual store managers, we employ approximately 37 District Managers. The District Managers are divided among four geographical regions, each region consisting of 8 to 11 District Managers depending on the number of stores and the distance between them. Each District Manager is responsible for hiring and developing store managers at the stores assigned to that District Manager’s area and for the overall operations and profitability of those stores. District Managers report to one of our four Regional Directors, each of whom reports directly to our Senior Vice President of Store Sales and Operations. The Regional Directors and Senior Vice President of Store Sales and Operations coordinate all sales and operations initiatives and activities.
Each store is staffed with a store manager, assistants and associates. Each store manager is responsible for achieving certain sales and operational targets and is entitled to receive bonuses based on achieving those targets.
Rochester Clothing store operations
The Rochester Clothing store operations are divided among three geographical regions which are managed by three Regional Managers reporting to the Vice President of Rochester Sales. Each Regional Manager is directly responsible for hiring and developing store managers at the 6 to 10 stores assigned to that Regional Manager’s area and for the overall operations and profitability of those stores. The Vice President of Rochester Sales reports directly to the Senior Vice President of Store Sales and Operations.
Each Rochester Clothing store is staffed with a salaried and incentive-based store manager and hourly-paid and commissioned assistant managers and sales associates.
Our field organization is supported by our Vice President of Operations whose staff supports the communication, training and development of our field personnel.
MARKETING AND ADVERTISING
Our marketing department creates and implements a wide variety of national, regional and local advertising, direct marketing and sales promotion programs. These direct mail and e-mail programs are designed to increase sales and customer awareness of all of our business channels, which include Casual Male XL, Rochester Clothing, B&T Factory Direct, Living XL and Shoes XL. The primary component to our marketing budget is our direct mail campaigns to our customer databases. With the majority of sales captured in our customer database, we maintain the largest customer database of purchasers of big & tall clothing. Our direct mail and e-mail programs allow continuous communication with our customers both for promotional events as well as relationship programs such as the birthday club and new customer loyalty programs. In addition, local store marketing activities occur on a regular basis and include store opening events and in-store promotion programs.
Advertising and marketing costs for all channels of our businesses represent approximately 7.7% of our total revenue for fiscal 2008, or approximately $34.1 million. This includes creating and distributing catalogs, retail direct mail pieces and in-store signage for our Casual Male XL business, Rochester business, as well as our supporting e-commerce businesses, including B&T Factory Direct, Living XL and Shoes XL.
In addition, we have a very active e-mail campaign updating all of our customers about the latest fashions, wardrobe ideas, promotional discounts and clearance specials. Over the past 12 months, we have sent over 200 e-mails to our customer base for all divisions.
We manage a customer loyalty program for our Casual Male XL customers. At of the end of fiscal 2008, approximately 81% of our Casual Male retail customers were enrolled in this program and 71% of all of our Casual Male customers, both direct and retail, were enrolled. Under the program, customers accumulate points based on purchase activity and earn rewards by reaching certain point thresholds. Through fiscal 2008, rewards earned were valid through the stated expiration date, which was approximately five months from the mailing date and could be redeemed for a discount on a future purchase of merchandise from us. Rewards not redeemed during the five-month redemption period were forfeited. For fiscal 2009, we are modifying and expanding on our current loyalty program. Under the revised program, we are increasing the point threshold under which rewards are earned but the value of the earned award as a percentage of points will be greater. In addition, points will accumulate on a calendar year and will reset with the beginning of a new year. We are also reducing the redemption period on the reward from five months to three months.
In March 2009, we rolled out a new level of our loyalty program, Prestige XL. Prestige XL is a rewards program for our top highest spending customers. This group of individuals spends on average over $1,000 per year. The objective of this program is to recognize these customers and continue to build brand loyalty with them, which closely aligns with our overall store operation objective of building strong customer service. Our store associates will be able to identify our Prestige XL customer and cater to his shopping needs. The customer will receive specialized benefits including double points, preferred sales, special e-commerce offers and catalog shout-outs. Only a select few will be invited to join the Prestige XL program and enrollment will only be for one year. Each year we will award our past year’s highest spending customers a Prestige XL loyalty card.
We believe that these changes and enhancements to our loyalty programs will continue to improve our sales productivity and encourage a loyal customer base while reducing the overall cost of the programs.
We utilize a customer relationship management (“CRM”) system which allows us to expand our level of communication to our customers, and makes available pertinent customer information at the store level, with the goal of servicing the customer better. With the customer database maintained at the corporate office, our business has daily results on its direct marketing efforts and has the ability to respond to business immediately. Our sales associates now have an array of information available about their customers. Through the CRM real-time database, our sales associates are able to access valuable information on each customer’s buying patterns, preferences and sizes.
For fiscal 2009, we have reduced our marketing budget by approximately $7.9 million to approximately $26.6 million with a strong focus on improving marketing productivity. Our focus and marketing objectives will be aimed toward our existing loyal customer base, where we will focus on our direct mail and e-mail programs. We are planning to minimize mass-media advertising and prospecting of new customers, instead improving overall marketing effectiveness with a smaller budget. Our remaining cost savings will be from the reduction in catalog circulation, some of which started to occur in fiscal 2008. We have begun further tailoring our circulation towards our more active customers and reducing the number of circulations to our less productive customers. By focusing on this more active group of customers, we can improve our productivity while minimizing our costs.