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Operator
Good morning, my name is Constance and I will be your conference facilitator today.
At this time, I would like to welcome everyone to the American Eagle second quarter earnings results conference call.
All lines are placed on mute to prevent any background noise.
After the speakers remarks there will be a question and answer period.
If you would like to ask a question during this time, simply press star and then the number one on the telephone keypad.
If you would like to withdraw your question, press the pound key.
Thank you.
Mr. James O'Donnell Co-Chief Executive Officer, you may begin your conference.
James O'Donnell - Co-Chief Executive Officer
Thank you, Constance.
Good morning everyone, this is Jim O'Donnell.
Other participants today include Roger Markfield and Laura Weil.
Hopefully, everyone has the copy of the press release of the second quarter results that was e-mailed out this morning and available at ae.com.
If everyone needs a copy please call Cindy Jones at 724-779-5251.
Before we begin, I need to remind everyone that during this conference call, members of management will make certain forward-looking statements based upon current information based upon the company's current expectations or believes.
We caution investors that the results actually realized may differ materially from those expectations or believes.
Based on the risk factors described in our quarterly and annual reports filed with the SEC.
Needless to say the second quarter was challenging, while Laura will review our results in a few minutes, I'll add that our financial performance was well below the internal goals.
We're working quickly to make adjustments to the Fall line, which Roger will discuss shortly.
On the expense side, we'll continue to run the business conservatively and delay non essential projects until our sales performance improves.
Turning now to our real estate plan.
Year to date, we've opened 20 locations and remodeled 34American Eagle stores in the U.S.
Growing our total square footage by 12 1/2% from the second quarter of last year.
These openings, eight stores are in A-malls, 12 in B, and by region, 12 stores were added in the west, four in the Midwest and two locations added in the southeast and mid-Atlantic region.
We closed one store, ending the period with 716 total U.S. locations.
We are on track to complete the opening of 50 stores planned for this year, which includes 21 openings in the third quarter and 9 in the fourth quarter.
Our new high profile centers including 575 Broadway in Soho, New York and Third Street Promenade in Santa Monica, California continue to exceed expectations and we're very excited about a newly remodeled store in the King of Prussia Mall, which incorporates new elements of our next generation store design.
Store remodels remake a focus during the second half of 2003.
We're on track to complete 65 to approximately 70 remodels by year-end.
However, it is important to note that store size will be market-driven and our footprint will expand only when it makes sense, considering performance of the mall, store location, and per capita and demographic mix of the market.
We continue to be pleased with our performance at our American Eagle Canadian stores it remains high and margins continue to improve.
We opened four [INAUDIBLE] Canada this date ending the period with 60 stores and we're on track to open ten stores this year, which includes five openings in the third quarter and one in the fourth quarter.
Now, Bluenotes.
Although it's still early we're encouraged by the recent performance of the back to school floor sale that arrived in stores on July 23.
A special note, tops in both guys and girls are performing very well and the denim business has turned positive as well.
In recent sales trends -- if recent sales trends continue we'll hope to see an improvement in the financial performance of Bluenote during the back half of this year.
Now here's Roger.
Roger Markfield - President, Co-CEO
Thanks Jim.
Good morning.
Our Spring season clearly was below expectations but rather than focus on the past today I want to jump into the back to school and Fall programs.
From a merchandising standpoint we're looking strategically at our business and have identified key areas for improvement which I'll address in a moment.
I want to lead with our biggest strength, the American Eagle brand which remains solid and powerful.
American Eagle stores are still a designation for our customer.
We know this through third-party research including TRU and MPD, which consistently lists American Eagle near the top of the brands most shopped by the target customers.
What's more, ae.com continues to perform very well.
The second quarter sales up over 30%, user sessions up over 20%, and the conversion rate up once again.
Our ever-improving Internet business would not exhibit 15 straight quarters of growth if not for the power of our brand pulling it forward.
Although the back to school started out slowly we do have many strong-selling items.
At least 70% of the floor is working and selling through.
Of course we must hit 100%.
Unit sales to date in August are up, but the average unit retailer negatively impacting the comp and comps are down 8% through the first ten days of August.
For the number of categories where we done our homework well are comping positively, most importantly, including women's denim.
Women's graphic T-shirts, pants, outerwear, underwear, personal care.
Men's woven shirts, underwear and parts of accessories.
Comps in men's denim are down in the high single digits due to average retail offset but it increases.
We're having success with the basic five pocket denim in men's, which is lower priced while the higher fashioned denim is much more difficult in both men and women's.
Although we have a number of strong selling items, overall back to school is below plan.
We're not converting traffic inter-transactions at the pace that we must.
Now, I'm accountable for our performance and after that, I hold everyone on my team accountable.
When the early numbers on back to school came in soft we immediately began to review and analyze our problems and certainly to start to correct them.
I'll lay it our for you the missteps and action taken to correct them.
Many of you listening saw our back to school floor set and many of you indicated that you liked it, as well as we did.
We certainly were caught in the line both to give it the American Eagle stamp and make sure it stood out from all of our competition.
But because we were so focused on setting ourselves apart, we overemphasized certain categories like women's sweaters and made the too fashion-focussed for the back to school customer.
But we should have been more active oriented.
I could put it best this way.
We should have had a whole lot more hoodies and things like that.
We also made a calculated decision to de-emphasize our logo on several key items and even eliminated altogether from certain programs.
We had data, we had feedback and we had a lot of collective instinct going into that decision but for all of that, it was the wrong move.
The American Eagle brand has been pain stakingly established over time and it's a mass brand and the customer expects to make that branded connection with our product.
And overall our assortment was too serious for back to school.
We needed more active fun looks.
We're working hard to correct course now and I'm confident the right changes are implemented for holiday and forward.
We've identified our most challenging categories and addressed them.
Our women's and men's knit top business are big, powerful categories that performed below plan.
We'll turn these businesses around, they are the the most, must-win categories and as I said, we're adjusting the Fall assortments on the run and the lead performance will improve in the fourth quarter.
Importantly, we're addressing the underlying strength of the business units to make them more productive over the long term.
Strategically the assortment needs to be with the AE brand and we must make ourselves distinct in the marketplace but not leave some of that marketplace behind.
We mostly focus on key items, these items win with and we must address our 20-year-old target customer in such a way that we still pull in customers on both sides of the demographic, reaching down into the teens and up into the 20s.
To learn now about our customers and how they're involving, we're conducting a major customer research effort at American Eagle stores all across the country.
We're gathering data because we want to understand our buying customers better.
And just as much, we want to understand those store visitors who are not buying.
I've just come out of the show-and-tell meetings for the Fall product and I can assure you that our designers and merchants have gotten this message clearly we're focussed on the clarity of our presentation, our customers must see a big, powerful key items without too much clutter and we must have compelling value items.
Our whole brand is based on value pricing, that's what our customer comes to us for.
Value price messages will be clearly stated, then reinforced, through all of our marketing and through our stores.
One last note, we will continue to tightly manage inventories during the back half of the year.
We ended the fall season clean and we will continue to operate that way.
The American Eagle brand is enduring, we're not a nitch player we're one of the biggest players in this category and as we move forward, we are making all of the necessary adjustments to our business.
Both tactically and strategically for continued growth and profitability.
Now, here's Laura Weil.
Laura Weil - CFO
Thank you, Roger.
Good morning everybody.
As Jim and Roger noted we were very disappointed with the second quarter performance and we're committed to improving the future profitability.
Total consolidated sales for the second quarter rose 5.6% reaching a record $337.1 million compared to $319.2 million last year.
Our second quarter sales included $19.3 million from the Bluenotes chain, compared to $18.8 million last year.
Second quarter comparable store sales for the AE brand declined 0.3% compared to a comp decline of 4.8% in the second quarter last year.
The negative comp was driven primarily by a high, single digit decline in the average unit retail price.
Transactions per store decreased in the low single digits while the number of units sold per store increased in the mid single digits.
Units per transaction rose in the high single digits.
Consolidated same store sales, which include American Eagle and Bluenote stores declined 5.5% and comp for the Bluenotes decreased 8.3% compared to a comp store decrease of 13.9% in the second quarter last year.
I'd like to note, that Bluenotes comps were positive in the last week of July, when we sent back to school and continue positive month-to-date.
Our consolidated gross margin deleveraged by 140 basis points from 34.4% to 33% in the second quarter last year, due primarily to the deleveraging of buying occupancy and warehousing cost.
We're then buying occupancy and warehousing cost we do leverage rent expense due to the negative comment and lower-than-planned sales performance in the U.S.
Merchandise margins were flat for the period as an improvement in IMU was offset by higher markdowns.
By division, AE U.S. and Bluenotes contributed to the decline in growth margins while AE Canada had a positive impact.
Despite the negative comp, selling general and administrative expense as a percent of sales declined by 20 bases points to 25.2% from 25.4% last year.
SG&A dollars grew just 4 1/2% on a 12% increase in square footage.
The decline in SG&A is a percent to sales, was driven primarily by our expense control initiatives and included leveraging and advertising supplies, services purchased, travel, and communications expense.
Depreciation and amortization expense is a percent to sales increased to 4.1% from 3.9% last year.
Other income in the second quarter was $514,000 compared to $196,000 last year.
The increase in other income was due to lower interest expense, and the strengthening of the Canadian dollar.
Net income for the quarter was $8.1million compared to $10.1 million last year and diluted earnings per share were 11 cents compared to 14 cents diluted share last year.
The Bluenotes lost 4 cents per share in the quarter compared to a two-cent loss last year.
Our balance sheet continues to remain strong.
We ended the period with $209 million in cash and short term investments an increase of $32 million from the second quarter 2002.
Total consolidated merchandise inventories increased 6.9% to $159 million from $148.8 million at the end of the second quarter last year while our gross square footage increased 12%.
U.S. inventory per square foot decline 2.6% compared to last year.
As Roger mentioned, we'll continue to manage our inventory conservatively through the remainder of the year.
We currently expect inventory per foot to be down at the end of the third quarter, compared to last year.
Capital expenditures for the quarter totalled $20.5 million and year-to-date totalled $34.1 million dollars primarily related to our new and remodeled U.S. stores.
For the year, our CapEx plan is expected to be approximately $80 to $90 million.
Now, turning to the outlook.
As Roger discussed, we're working very hard to quickly adjust our assortment for the holiday season.
We have tweaked the Fall assortment and have a new floor set arriving on September 5, which includes additional active wear, however, given our negative 8% comp performance month to date we currently expect August comps to be down in the high single digits while we're hopeful that September and October sales performance improves we're not comfortable giving specific guidance at this time.
Thank you and now we'll open the call for questions.
Operator
At this time I would like to remind everyone if, you wish to ask a question please press star and the number one on your telephone keypad.
We'll pause for just a moment to compile the Q-and-A roster.
Your first question from Lee Giordano of Merrill Lynch.
Lee Giordano
Good morning everybody.
Couple of quick questions here, I'm wondering, could you talk with a little bit more about the back to school assortment and what the specific changes are.
I know you're bringing in active wear, how much have you been really able to really adjust to hopefully see a pick-up in September.
And, then, also, over the last week, the little step up in promotional activity, have you seen any ramp up in sales because of the promotions and how is it impacting?
Thanks.
Roger Markfield - President, Co-CEO
On the active part of the business, we've obviously missed the hoody business in terms of trying to tweak the customer for us to be a bit older.
We've now moved up the holiday hoodies, which we had into the Fall assortment, and we've re-bought into the holiday hoodies with a whole new selection.
And we will be in a very strong position for holiday in that category.
We put back on all products, starting to flow into the stores next week, our logo.
All of the products that should have had the logo on the product will have it.
The sales-through, where we have the logos were terrific and we are we took our logo off they were much slower.
By holiday, everything will be in place.
Lee Giordano
And how were the promotions started?
Are they helping at all in the beginning here?
Roger Markfield - President, Co-CEO
We're not seeing very much difference in the promotional approach, driving anymore business.
We're selling more units but obviously we're selling at a lower average unit retail and that's why the units are still up for the month to date but the average unit retail is down.
Lee Giordano
Thanks.
Operator
Your next question comes from Dana Cohen of Banc of America Securities.
Dana Cohen
Hi guys, couple questions, just following up on that.
It sounds like the AUR pressure is price not mix, is that correct?
It's promotions?
Unidentified
That's correct.
Dana Cohen
Second, could you talk a little bit about what you're going to do on those inventories and expenses from here.
I mean, you're already planning inventories down and comps clearly are worse than you thought, so what incremental steps are you taking on inventory and expenses to protect the P&L?
Roger Markfield - President, Co-CEO
Inventory, obviously, Dana, in our system is light.
But in terms of making all of the adjustments and putting the inventory where we want to have it.
We had that open to buy available.
So, we still will run the business very tight on inventories but we're putting our money into the fourth quarter exactly where we think it should be so we're reaching down to the younger customer that we think we were losing.
Dana Cohen
So inventories will be down, what, low single digits for the balance of the year?
Roger Markfield - President, Co-CEO
I would say low sing the digits.
Dana Cohen
And what about on expenses?
Laura Weil - CFO
Dan on expense, I just want to remind you, on third quarter last year we leverage 40 basis points on 7% negative comp so we will be closely, closely watching expense.
We're freezing head count.
We're looking at other expense measures and we'll continue to very tightly reign in our expense level.
Dana Cohen
What about marketing?
Laura Weil - CFO
Marketing is a really important part of our brand.
We'll continue to use our tactical marketing and where we can pull back on any expense that makes sense for the business we will.
Dana Cohen
Okay.
Then, lastly, Roger.
Roger Markfield - President, Co-CEO
Yes.
Dana Cohen
Historically you've talked about testing as a key measure, you know, to try -- to having the right product and your ability to chase things, you know, very close to season because, you know, you were testing, you know, a short period ahead.
I remember a quarter or two ago you talked about how somehow you had stopped doing that and you had to get back to it.
It sounds like from what you're saying that you made, somehow, organizationally, you made a decisioning to go more trendy.
Am I wrong?
It doesn't sounds like you got back to the testing as you sort of had talked about, maybe, six months ago.
Roger Markfield - President, Co-CEO
The testing is in place, now, Dana.
That I can assure you and everyone listening.
The testing for 80%, I would say, of our product is tested at this point in time and when you see the holiday selection, most of that is through the testing process.
And I feel comfortable about what we had.
But what we didn't have, was the active inspired looks which we've taken care of.
When we put that together with the other key items, and obviously the business that drives the fourth quarter is the sweater business on the women's side, they're 90% of the sweaters tested and we think once again, as we did last year, we're going to have a pretty successful season there.
Dana Cohen
What happened to back to school?
Roger Markfield - President, Co-CEO
Back to school, we decided to be more sports wear oriented, to be certain in the focus of the demographic that we were going after, that we were going to be a bit more mature.
Now, in hindsight, for back to school, we should have reaching for the younger customer, we should have stayed with the logo looks and we been in the active sports wear look of the hoodie, stronger graphic T-shirt and certainly our grand is so powerful, for us to have taken off, shame, shame on us.
For us to be a little bit more, you know, thinking that the customer didn't want our logo when we built the $1.5 billion brand.
It's silly.
It's nonsense.
That desire of not having our brand is over.
Dana Cohen
Okay.
Thank you.
Operator
Your next question comes from Nealy Sominga of Piper Jaffray.
Nealy Sominga
Great thanks.
Roger, as you talk about the refocus on the value pricing strategy and making that more evident in your assortment, is this kind of adding a whole other level of complexity for the second half in terms of the margin plan or is this just kind of broadcasting out what's already been in place?
Roger Markfield - President, Co-CEO
It's both of the one, it's not more complicated.
Actually, it's simpler and it's the basics of the business.
And for us to have gotten off of this and to not make the impact by item at a strong-value price in the store and to confuse it with two or three items on a table to make a more of a sportswear story, is foolish of the the customer comes in and they connect or they don't connect.
They got to look at a strong item em and respond to it and they respond to it by price.
I tell you that, we're not changing the quality of our product.
We're not changing the desire to be fashion-right.
We're still, absolutely after the singular focus, a 16 to 25-year-old customer.
None of that has changed, but how we deliver it and present it, how we price it, and how we don't confuse the presentation in the store is what we're going after.
And I do believe, and as I said before, 70% of the merchandise we have in the store is selling on a four to five to six week supply.
You know you can look at the inventory on the balance sheet and see how fast we still turn.
But for us to do the product activity we need to do as a company, where we're 400 buck plus amount we got to be strong, and strong on items and strong on price point.
For holiday you'll see it, we're back there.
Nealy Sominga
With respect to holiday where do you see the specific timing?
Is that the October floor set?
Roger Markfield - President, Co-CEO
No, November floor set.
Nealy Sominga
Delivering early November, mid or late.
Roger Markfield - President, Co-CEO
Early November.
First week or early November.
Nealy Sominga
Thank you.
Operator
Your next question is from Stacy Pak of Prudential.
Stacy Pak
Hi, few different things.
First, can you tell us what the women's comp is in the first ten days of August?
Laura Weil - CFO
Yeah.
Roger Markfield - President, Co-CEO
We'll give you exactly the number.
Women's is down about five, six points.
Stacy Pak
So it's still down, even though all of the things are working?
Roger Markfield - President, Co-CEO
Well, you have -- 100% has to work for our product activity.
Fundamentally we have 70% working and when we did the sweaters for women's we should have had hoodies.
Stacy Pak
Uh-huh.
Roger Markfield - President, Co-CEO
And it's a simple business you carry X amount of items and if you don't have one or two of the big power items we're capable of selling 35,000 40,000 units a week on you're missing two of the items you're missing $3 million of business.
Stacy Pak
On the military or cargo bottoms, versus denim, can you comment on the performance there and could you tell us, within denim, you know, what percent is fashion and is denim up and as a percent of the mix this year, versus last?
Roger Markfield - President, Co-CEO
Sure.
Denim, as a total number in both men's and women's is relatively flat to last year and that's what we planned on.
The difference is, is that, on the women's side, denim is comping.
It's doing well in both units, and in average unit retail.
The problem in the women's denim is that the fashion denim, which is a much smaller part of the total women's denim business, the five-pocket being three-quarters of it, the fashion business is not selling at all.
And that volume is coming out of the cargo, military bottoms on the women's twill side of the business.
And that business for us is very strong, that's on a four, five week supply but, the fashion denim business isn't working in women's and if we had that working then we'd be that much stronger.
On the men's side of the business, the 5-pocket denim business is of the basic core business is up very nicely.
And it's the higher-priced, the more expensive washing of the fashion denim in men's that higher prices is not -- the customers are not responding to that.
But anything from $39.50 and down on the 5-pocket denim men's business is very strong.
Stacy Pak
Then, on the knits, Roger, is that -- why does it take you so long to fix those?
Usually, knits are a very fast turn.
Is it a silhouette, is it logo, what is it?
Roger Markfield - President, Co-CEO
It's a combination of things.
We're moving fast.
Back to school started for us in the third week in July and by the first week in August, we were responding.
It took us two weeks to read, to have our meetings, to, you know, research it, and dissect it, and everything that we could catch we caught.
You'll see at end of this week, you'll see new graphics coming in on both the men's side of the business being set next Monday or December day, it will be in our DC this week.
And then you'll see the women's in the following week.
We respond and within the month we're bringing in the graphics with the logo on the long-sleeved shirts.
The sweatshirts, we moved the holiday sweat shirts up into Fall and we brought in with holiday with sweatshirts with the American Eagle name into fourth quarter.
We're nimble and we have tremendous open to buy because we left this open.
It's the nature of the business.
But the bottom line is, that we didn't have this, in these particular weeks, which are big weeks for the customer.
Stacy Pak
Right.
And, then, on the inventory, you have not reduced your inventory investments since the comp slow-down in July, you're just chasing what you think, you're trying to get into the right products?
Roger Markfield - President, Co-CEO
That's correct.
We did have things on hold that we didn't make in the fourth quarter, those we cut off, we didn't need to make.
What we made, fourth quarter decisions as late as this week and we were able to make those adjustments.
Stacy Pak
One more question for you and I have a couple for Laura.
Roger, does American Eagle need to change the way the business approaches defines trends, ie, logo and hoodies.
Is the organization approaching it the correct way?
Or is it just that, you know, we went to old, and we should have been younger?
I mean--
Roger Markfield - President, Co-CEO
I think that's a good question.
You know, we -- sometimes you think that you want -- that the customer wants to be cooler and doesn't want to have a logo.
And I made mention to that before.
The reality is, is that in this niche I do believe we're the strongest player and when you think about the world out there and you think about the, you know, Wal-Marts and the Targets and et cetera, et cetera, American Eagle is a really upscale niche.
And though our prices are value price when you walk a typical mall.
We have to have our logo on the product.
American Eagle is a very powerful brand and they'd rather wear our brand than most any other brand.
It was nonsense for us to think it would have been cooler to take our brand off the product.
Our brand will be on the product where it makes sense from two weeks ago on.
Stacy Pak
But, you're not changing the way you're defining trends going forward, or approaching tends?
Roger Markfield - President, Co-CEO
Absolutely not.
I still think in terms of interpreting fashion trends for the mass audience we're very good at.
What we did is shot ourselves in the foot.
The reason I believe the brand is strong, on 70% of the content, where we're right and didn't screw around with it, it's selling four, five, six weeks of supply and in the denim business which is the real tell tail sign of the strength of the business, we did our homework well, we did it right and the fact that fashion denim is working on the women's sides and high price on the men's side wouldn't hurt us all.
Our customers in the store, we shot ourselves in the foot and they're not buying what we offered to them, what they wanted.
Stacy Pak
Laura, advertising dollars spent, Q3, Q4 this year versus last year, SG&A dollars, Q3, Q4, this year versus last year.
Laura Weil - CFO
On SG&A, I want to remind everyone, again, that, you know, we had a lot of leveraging last year, 40 basis points on a negative 7 comp.
This year, our current plan--
Stacy Pak
Are you saying with that, ie, we did it so great, or watch out, we didn't have a lot left?
Laura Weil - CFO
We have lots left, Stacy.
The way we're looking at it today and clearly continue to reduce, right now, we think the SG&A dollars will increase roughly 10 to 15% and some of that depends on whether or not, you know, we were able to meet our earnings performance and accrue for any type of incentive bonus.
Nonetheless we do see the dollars increasing in be probably a 10% range minimally for the third quarter.
Stacy Pak
Even if you weren't accruing for bonus?
Laura Weil - CFO
Yes.
Stacy Pak
Uh-huh.
Okay.
Laura Weil - CFO
On add dollars, right now we think the dollars in advertising should be flat for the third quarter.
Stacy Pak
And can you comment on the fourth quarter?
Laura Weil - CFO
I'd rather not at this point.
Stacy Pak
All right.
Thank you.
Laura Weil - CFO
Okay.
Operator
Your next question comes from Lauren Levitan of SG Cowen.
Lauren Levitan
Good morning.
Roger, could you talk a little bit more about the market research that you mentioned earlier, do you anticipate or have you learned anything from it, already, and in addition, on your comment about value-pricing, should we expect that you'll be more promotional even when the more active, consistent product comes in, later in the season.
And since we're talking so much about who hoodies, I'm wondering if you could comment on what percent of the business it was that last.
And I have a question for Laura.
Roger Markfield - President, Co-CEO
Sure.
Michael, why don't you tell them about the rear search we're doing.
Michael Leedy - Chief Marketing Officer
Laura, hi, it's Michael Leedy, starting Friday, we'll start mall [INAUDIBLE] in every region of the country.
This isn't just a few customers but thousands of customers.
We hope we'll get a tight handle on what's happening with our business through those intercepts.
Additionally we're working with an outside to clean close look and the market share in key part of our business.
Businesses like graphic T's, cargos, hoodies that Roger mentioned, jeans, et cetera.
Laura Weil - CFO
Lauren, why don't you go ahead and ask me a question, it's Laura and we'll get you an answer on the hoodies.
Lauren Levitan
Okay.
I was wondering if you could comment on the activity on the sherry purchase side and any remainder on the year and comment on the performance, year to date, of the remodel and expanded stores and the new stores relative to the rest of the chain.
Thanks.
Laura Weil - CFO
Sure.
On the buy-back, you know, we still have 700,000 shares remaining on our buy-back program and we very much believe in it and we'll continue to repurchase on an opportunistic basis.
And, just want to note, that our stock repurchases to date are in line with our peer group.
I'm going to let Jim O'Donnell address the new and expanded stores and they're performance to date.
James O'Donnell - Co-Chief Executive Officer
What would you like to know?
Lauren Levitan
Maybe you could talk about where you are relative to your plan, how your modeling does in terms of both pick-up and product activity and/or return on capital.
James O'Donnell - Co-Chief Executive Officer
Sure.
First of all, in product activity, I think it's pretty easy to note that with our declining sales productivity is not where we want it to be, especially in the expanded remodeled stores and deleveraging in rents.
But in our new stores, our 2003 new stores, we're actually beating pro forma which all of the financials are built on as far as taking the location.
We are running up, approximately, about one or two percent and all of the stores of 2003, right now, are rolling to [INAUDIBLE] operating profit.
As far as the productivity issue, we'll continue, as I stated, in my earlier presentation, to monitor size as it relates to market and demographic within that market market.
Lauren Levitan
Can you give us any expectations for what we should look for for next year in terms of what your return hurdles would be on expanded and new stores and maybe what preliminary plans for square footage would be?
Laura Weil - CFO
I could tell you that our hurdle rate is minimum of 30% ROI.
And, you know, we're continuing to see a good first year return on cash.
So, in terms of square footage, I think, it would -- we're going to look at that.
James O'Donnell - Co-Chief Executive Officer
I would say that we will look seriously at size of store store.
We currently are running our new stores at approximately just under 6,000 square feet and that will will probably be adjusted somewhat more and a downward side than an upward side.
I would like for, somewhere around 5500 square feet on average.
Lauren Levitan
Okay.
James O'Donnell - Co-Chief Executive Officer
For a new store.
Roger Markfield - President, Co-CEO
Stacy, we lost about 3% of the business but not having the hoodies the way we should have had it.
Lauren Levitan
Okay.
So comps still would have been negative and maybe it's associated with the other issues like the AUR declines and graphic t-shirt deficiencies.
Roger Markfield - President, Co-CEO
That's right and not having the logo on the product and also having too many sweaters.
And in the back to school frame when we shive more active-oriented.
Lauren Levitan
And the comment on the value pricing, Roger, what should we expect in terms of activities even when the more consistent products come in.
Do you plan to be more aggressive?
Roger Markfield - President, Co-CEO
It depends, obviously, upon the marketplace and how right we are.
The plan is to be consistent with last year.
The holiday assortment looks pretty much right on with the adjustments that we made.
You know, we'll be in strong inventories and key items in terms of sweaters, and hoodies, and graphics, so we'll have to see what happens in the marketplace.
Lauren Levitan
So on a stronger comp on those products in the back part of this year, you would be modeling and merchandise margin flat to up?
Roger Markfield - President, Co-CEO
That's correct for the fourth quarter.
Lauren Levitan
Thank you.
Operator
Your next question from Janet Clogenberg of JJK Research.
Janet Clogenberg
Hi, Roger.
Roger Markfield - President, Co-CEO
Hi, Janet.
Janet Clogenberg
Hi, Laura, hi Jim.
Laura Weil - CFO
Hi, Janet.
Janet Clogenberg
Roger, I have a couple of questions, first on the denim.
It sounds like either the fashion is wrong, the kid doesn't want fashion, or the prices are too high.
Can you address that?
Can you also talk about your success and relative to your investment in the corduroy business, and, then, I have a question on product but I'll come back to that.
Roger Markfield - President, Co-CEO
On denim, once again, Janet, the 5-pocket denim business, in women's is terrific.
And the fashion denim business is, quite frankly, non existent they don't want it.
Janet Clogenberg
They don't want it, it's not a price situation.
Roger Markfield - President, Co-CEO
It's not a price situation.
They want the fashion in the military bottoms which we have for them and they want the 5-pocket denim which we have for them.
Janet Clogenberg
And Roger, is your 5-pocket denim retail higher this year than last year.
Roger Markfield - President, Co-CEO
Same structure.
Janet Clogenberg
Same price.
Okay.
Roger?
Roger Markfield - President, Co-CEO
Yes.
Janet Clogenberg
Okay, what about the corduroy business?
Roger Markfield - President, Co-CEO
Corduroy business is comping over last year and we will have two programs for holiday.
Janet Clogenberg
Do you wish you had more right now?
Roger Markfield - President, Co-CEO
Probably so.
Janet Clogenberg
Probably so.
Okay.
My next question is on the timing, you're bringing in more logo and more active wear for the Fall -- for the holiday season.
My concern there is, Roger, could the customer change again?
Maybe he or she may want more fashion at that time of year.
Right now, maybe they're stocking up on basics, can you address that issue?
Roger Markfield - President, Co-CEO
Our history says that sweat shirts and graphic T's are the two biggest at holiday as well as back to school.
We'll be in it for holiday.
Janet Clogenberg
You don't think that the reversal here could be too extreme?
Roger Markfield - President, Co-CEO
Nope.
Janet Clogenberg
Okay, and also, Laura are you still planning on running the TV ad you talked about earlier in the Spring?
Laura Weil - CFO
We have a TV ad returning currently and we're planning one for the holiday.
Janet Clogenberg
You are going to continue to do that?
Laura Weil - CFO
We'll look at the results and continue to evaluate, it's a long-term strategy to build the brand.
Janet Clogenberg
And if you could talk about the assortment at AE Canada and Bluenotes relative to the American assortments and what's [INAUDIBLE] there rather than America?
James O'Donnell - Co-Chief Executive Officer
As far as Bluenotes is concerned, the assortments the biggest difference we are re-emphasizing the denim of the main driver of the business.
But, also, we have a very strong commitment to knit tops for both boys and girls and our accessory business has been extremely positive and we've taken a negative situation in denim, comp-wise, and turned that into flat for men's and slightly positive for women's and we hope that that trend will continue.
As far as the assortment goes, it is pretty much what we think the teenager, the 17-year-old, in Canada, boys and girls, would be looking for.
Janet Clogenberg
So is it more active?
Active-inspired?
James O'Donnell - Co-Chief Executive Officer
Not necessarily so.
I would say it's more value-inspired.
Janet Clogenberg
Okay.
James O'Donnell - Co-Chief Executive Officer
Throughout the entire assortment.
Janet Clogenberg
Thank you.
James O'Donnell - Co-Chief Executive Officer
You're welcome.
Roger Markfield - President, Co-CEO
Janet, AE Canada and assortment of merchandise is pretty consistent with the U.S. and the business is a bit better.
Janet Clogenberg
So what does that say, Roger?
Roger Markfield - President, Co-CEO
Well, I mean, obviously, you have less competition up in Canada, as well.
Obviously you have less competition up in Canada as well, you know, you would expect that to be the case.
We -- American Eagle up in Canada, from all of the information we've gathered, has quickly become the biggest brand in this space.
Janet Clogenberg
Right.
Okay.
Good luck.
Roger Markfield - President, Co-CEO
Thank you, Janet.
Thank you.
Operator
Your next question comes from Dawn Stoner of Pacific Growth Equites.
Dawn Stoner
Thank you.
I wanted to revisit the brand positioning questions earlier.
Just thinking about your comments last quarter, when you said you went too young and you should have been older.
And, now, this quarter, saying you went too old, and you should have been younger.
I'm trying to understand where this settles down and if you could remind us, Roger, maybe in as much detail as you're comfortable giving what the profile is of your target customer and how you move forward to the goal.
Roger Markfield - President, Co-CEO
It's a good question for everybody and something we continue to look at our brand strategy and make sure we're consistent with it and then we tweak it to the left, and tweak it to the right, and you keep running into these issues.
We are college or college-age and we are, as you know, fashion-right merchandising.
We're affordable, fun, casual and whole some, in terms of the words that describe the life style that's not changed and it's consistent and our target customer changed.
The focus is a 20-year-old, the range is 16 to 25-year-old and we want to be focussed on the college.
We're not focussed on the high school.
There's a lot of high school competitors out there and we know that all of those customers do aspire to shop in our particular store.
Obviously, for back to school, we needed to tweak it a bit younger and that we did not do.
It's still within the same lifestyle that we are, it's the same demographics and the same strategy.
We're not changing that, we spent a lot of time getting this thing where we think it's right.
We have screwed up in the terms of the tweaking we made.
Obviously for back to school you do need to be a bit younger and holiday, when it's a gift-giving and we are the gift-giving store, while you need to have hoodies, it's a key item em, and you need to have logo graphics, a key item, I think when you see the sweater selection that we have and the bottoms that go with it, it's exactly in this profile.
Dawn Stoner
Okay.
So, if I'm understanding that correctly, what you're saying is, you're customer base basis skewed a bit younger during the back to school period and therefore you need to cater to taste a little bit more?
Roger Markfield - President, Co-CEO
Exactly.
Dawn Stoner
Okay.
Second question for Laura, on Bluenotes.
It sounds like trends are starting to show some pick-up there, and I'm just curious if you think you can get an earnings contribution from that concept in the back half.
And if you still see expansion potential for this brand down the road?
Laura Weil - CFO
Dawn, I think that what we're really looking for is mitigation of losses from last year in a flat earnings performance for the third quarter and fourth quarter.
We'd be very please to wipe out the losses that we surfed in Q3 and Q4 of last year.
And we're looking for a modest comp in that business for the back half and it's up against a very weak comp for last year and we do think it's achievable and we're very pleased with the efforts of the team up in Canada to really turn the business around.
We've gotten much better IMU's in the business, it's something that we worked on for some time.
Or marketing has been cleaned up and changed.
We have a terrific leader, and Fred Grover, who worked at American Eagle for a number of years and has really brought a lot of discipline and process to the Bluenotes business.
So, all of that being said, we really have to watch it.
We know that when you, you know, reposition a brand, you mean, we've suffered hopefully the worst of it and now we're seeing the benefits of all of the hard work in the team up there, and here in Pittsburgh.
But, if we do see light at the end of the tunnel, well's love to, you know, perhaps test it in the long-term, test the store in the U.S.
But, clearly, we've got to get over the hurdle of it's performance in Canada.
And we have to see a strong, strong turn around from it's it's from the previous performance.
Dawn Stoner
And we wouldn't look for anything new in terms of testing elsewhere, for, perhaps, at least another year if things remain on track.
Laura Weil - CFO
At least not until 2004, absolutely.
Dawn Stoner
Great, thanks very much.
Operator
Your next question comes from Liz Pierce of Sanders Morris Harris.
Liz Pierce
Good morning.
In terms of, Roger, could you talk about on the logo, is it going to be as pronounced as it has been or are you still downplaying the size of the logo.
Roger Markfield - President, Co-CEO
The size of the logo will be appropriate to the garment and it will be on the garments and the question of the size, the scale, and the placement, it will be appropriate.
Liz Pierce
Okay.
How many different products left field the logo and how does that compare versus last year?
Roger Markfield - President, Co-CEO
It will be equal to last year.
We will have all of our sweatshirts, which for back to school, on the men's side, we did not have the logo.
Will have the logo.
And all of our sweatshirts in women's left field the logo and all graphic T-shirts that are appropriate left field the logo somewhere.
Liz Pierce
Okay.
Roger Markfield - President, Co-CEO
Caps, caps and trucker caps left field the logos as well, and knit caps.
Liz Pierce
Okay.
Great.
And I think, I guess, perhaps, Jim would answer this on the remodels.
Did he say, do I understand correctly, the '03 models did not perform up to plan?
James O'Donnell - Co-Chief Executive Officer
Product activity.
It actually is comping positive, mid-single digits, but the productivity on the increased square footage has not met our hurdle rate.
Liz Pierce
And do you have any reason why that might be?
I mean, is this the store different differ than the '03, new '03 stores?
James O'Donnell - Co-Chief Executive Officer
No, it's pretty much, any of the stores from the '02 and '03 have a similar performance, all based on the merchandise assortment.
I don't think that it's the size of the store or the locations that we're selected.
All of the locations for remodel and expansion are all, and I emphasize, all, very prolific stores that run anywhere from $450 to $500 per square foot and they slipped in productivity to point they're in the $390, $400 square foot.
Liz Pierce
It's the incremental square footage you're not seeing the lift in.
James O'Donnell - Co-Chief Executive Officer
That's absolutely correct.
Liz Pierce
Okay, great.
How many models are planned for next year?
James O'Donnell - Co-Chief Executive Officer
We planned for 70, but if I don't see business turning around to where we all want to see it, that number will be adjusted, and adjusted downward.
Liz Pierce
And, then, you talked about the size of the store coming down, perhaps, 500 square feet.
What gets taken out?
James O'Donnell - Co-Chief Executive Officer
Basically, probably, you know, I don't know if this means anything to you, but we actually build stores at 55 to 65 right now.
And when we are building a few stores over 6500 is where, I think, we might be in excess.
I think our assortment lays out pretty well on 5500 and 6500 and Susan Miller our Chief Merchant as well as Roger and the rest of the team feel comfortable with that.
I don't think we move anything we become a little more productive, that's all.
Liz Pierce
Okay.
And back to Roger.
Just, if you could remind us what the lead times are on some of the various categories?
Roger Markfield - President, Co-CEO
Well, knit wear is about 35 day lead time.
And woven are about a 60 day lead time, Lynn.
Liz Pierce
And denim would be?
Roger Markfield - President, Co-CEO
Denim would be -- we could move denim within 35 days.
Liz Pierce
And will there be, in terms of the outerwear, you talk about sweaters, will there be other times of outerwear we should see with the November floor set?
Roger Markfield - President, Co-CEO
Yes.
You will see, actual links on October 4 or October 5 you'll see an outerwear set in all of our store.
Liz Pierce
Great.
Thanks, guys.
Laura Weil - CFO
Thank you.
Roger Markfield - President, Co-CEO
Thanks.
Operator
Your next question is from Lee Backus of Buckingham Research Group.
Lee Backus
Yeah Roger, you keep talking about the 20-year old customer, you also talked about the strength of the brand and the research you've done.
Where is the strength in the brand?
At what age is it younger or is it at that 20-year-old customer?
Roger Markfield - President, Co-CEO
It's at both, Lee.
That's the issue.
That the 16, the 15, they're in our stores and in fact, if you go to our stores, if you stood in our stores you'd see as many 15 and 16-years-olds as you see 19 and 20-years-olds and depending on the time of the day and the day of the week, you'd see more.
But we think it's very important how we position ourselves.
And strategically we're consistent in what we're trying to do and we do need to tweak it, again, I repeat, a bit younger at certain times of the year, in terms of the mix of merchandise but not the overall statement.
Lee Backus
So you think you have that 20-year-old customer?
Roger Markfield - President, Co-CEO
Absolutely.
Lee Backus
Okay.
Also, I know some of the stores you do have traffic counters, has it been an issue of traffic?
How much during this back to school season or is it just the merchandise?
James O'Donnell - Co-Chief Executive Officer
No.
The -- not traffic.
We're running, right now, and you're right we do have traffic counters in approximately 220 stores right now, which I monitor daily, and we average, you know, averages are not all that telling we average anywhere on a week day to 600 to 800 customers on on a weekend between 800 customers and 1500 customers.
My feeling is, if you can't do business on that number of the people coming into the store, there's something wrong that you need to adjust and identify and take appropriate action and I believe that Roger and the team are doing that.
Roger Markfield - President, Co-CEO
Yeah.
The customer hasn't let us down we let the customer down, lee.
They're there.
Lee Backus
So those traffic numbers are similar to last year?
James O'Donnell - Co-Chief Executive Officer
Yes.
Roger Markfield - President, Co-CEO
Yeah.
And you can see it in certain categories where we're doing very nicely we don't have the right offerings and we're not doing it.
Lee Backus
Thank you.
Roger Markfield - President, Co-CEO
You're welcome.
Operator
Your next question comes from Kimberly Greenberger of Lehman Brothers.
Kimberly Greenberger
Great.
Thank you good morning.
Roger, I'm wondering if you could talk about fashion denim as a percentage of the overall denim assortment.
I thought made a comment on men's I didn't hear in terms of the overall, is your conclusion also given that fashion denim in the women's side is not selling but the fashion twill bottoms are selling.
Is that customer rotating to the next slice of newness of fashion and how quickly do you think you'll be back in stock in the more fashionable twill bottoms she seems to be gravitating to?
Roger Markfield - President, Co-CEO
The mix of the merchandise on the fashion denim is about 15% of the business and the 5-pocket about 85% of the business.
And yes, the customer is definitely buying the more fashion bottoms on the military sides of the business.
And, in twills.
Kimberly Greenberger
Okay.
And, then, if you had to sort of characterize, overall, you know, if there was one thing you could have done different, in terms of your back to school presentation, this year, would it have been, you know, a better balance to the assortment, and not sort of ignoring some of the categories that worked well in the past?
Or, you know, where -- if you could sort of, you know -- from -- back up from the details and tell us, you know, from a high-level, what is the one thing that you guys wish you had done differently?
Roger Markfield - President, Co-CEO
The balance of the mix.
Yes.
Yes.
Yes.
Having more active oriented merchandise.
Having hoodies with our logo, having graphics to a greater degree with our logo.
Active-inspired looks and knit wear having nor active inspired looks.
Kimberly Greenberger
In terms of fixing the balance, you expect by the holiday assortment, that will be fixed.
Cow tell us when that would set?
Roger Markfield - President, Co-CEO
First week in November.
Kimberly Greenberger
Okay.
Great, thanks.
Operator
Your next question from Richard Baum of CSFB.
Tracy Cogan
It's Tracy Cogan filling in for Richard Baum.
Most of my questions have been asked.
I think on the last call you said you were adding branded merchandise to Bluenotes and I'm curious how that's doing and if you intend to add more brands?
James O'Donnell - Co-Chief Executive Officer
Yes.
We did, at -- actually, three customer choices in the branded category.
But, doing well.
And, as far as the adding for the future, we are looking at a number of brands, actually.
Who we deciding to with remains to be seen and that will be for Spring of '04.
For holiday, we'll probably have 5 cc's of branded product.
I think it adds a flavor to the store.
It is not going to be one of the key drivers that was stated earlier, the key drivers will be in the denim and flit and knit programs.
It does add a nice touch I think it gives another reason for the young cuss mother to come into the store.
Tracy Cogan
Thank you.
Operator
Your question question is from Dorothy Lakner of CIBC World Markets.
Dorothy Lakner
Thanks.
Good morning, everybody.
Could you, Roger, Laura, either one, give us the mix of between men's and women's in the second quarter?
And, also, a question for Roger.
Are there adjustment that is you're making to denim for the fall, and then into the holiday season, as a result of what you've seen here?
You may have answered this.
I'm sorry if you did.
Roger Markfield - President, Co-CEO
No--
Dorothy Lakner
One more question.
On the outerwear, I think that outerwear is one of the categories you've been doing prettify well with thus far and outerwear has always been a big category for you in the fall season, you know, your promotion in October and so forth and I just wondered if you're making any changes to that assortment as you go into October?
Thanks.
Roger Markfield - President, Co-CEO
All right.
The mix, Dorothy, is about 36% men's, and 64% women's.
For the first quarter?
Dorothy Lakner
Uh-huh.
Roger Markfield - President, Co-CEO
And for the third quarter, it's pretty similar.
In terms of denim, the fashion denim business has been kilt for the fourth quarter, as I said before, we're on a 35 day cycle so we didn't buy any denim up until the second week of the week we're in now, is when we made our commitments for holiday.
And, obviously, we didn't buy any fashion denim at all.
It's all in the 5-pocket denim business.
Dorothy Lakner
And has some of that been taken up by the military, the cargo?
By the business?
Roger Markfield - President, Co-CEO
There's a whole new look taking place in the pants business that we have in our stores right now.
I don't want to talk specifically about it.
We see it as a new trend and that's where the money is being put.
Dorothy Lakner
Okay.
Roger Markfield - President, Co-CEO
And, yes, the outerwear business, on the women's side is doing well.
It's basically, a blazer business at this point in time.
But the outerwear will set strongly for the -- in the first week of October.
And men's outerwear first comes in towards the end of September.
Dorothy Lakner
There is some heavier outerwear in the stores right now, on the women's side of the business.
Do we see a continuation of the trends?
Roger Markfield - President, Co-CEO
That's only one coat you have in there right now and I think you'll like the women's outerwear when if comes in.
Dorothy Lakner
Thank you.
Operator
Your next question is from Joe Teklits of Wachovia Securities.
Joe Teklits
Thanks, everybody.
Roger Markfield - President, Co-CEO
Hi, Joe.
Joe Teklits
Roger, help me with the math on week of supply terms.
You're saying 70% of the inventory is turning at at 4 or 5 or 6 weeks of supply.
How do you get to positive comp, what percentage do you need if you're turning it 6 weeks?
Roger Markfield - President, Co-CEO
Weeks of supplies in store basically on a 5 and 6 week supply right now.
On 70% of the merchandise.
And, then, about 30% of the merchandise is much slower than that.
Joe Teklits
Okay.
Roger Markfield - President, Co-CEO
So, when you put it alone the in-store we're on a 7-week supply and you need to be a week faster than that in order to get the comp that you want to get to, that we want to get to.
You really need 100% of the merchandise working for you.
Joe Teklits
Can you speed those turns?
Have you ever had a two-week supply turn of key items?
Roger Markfield - President, Co-CEO
Oh, sure.
Some of the merchandise is on 10, learn weeks and some merchandise is on a one or two weeks supply.
Joe Teklits
You're saying net 6 week average.
Roger Markfield - President, Co-CEO
That's correct.
Joe Teklits
Something else for you, Roger.
Trying to work through something you're saying about units and traffic, I guess, so far for August, you're comping down 8 or whatever the numbers is.
You're units are up.
Roger Markfield - President, Co-CEO
Units are up just a touch.
Just a touch.
Joe Teklits
And you said your traffic was, I think, up, or fairly good, but you weren't converting.
Roger Markfield - President, Co-CEO
That's correct.
Because we don't have the right mix of merchandise.
Joe Teklits
So units and conversions are not could related to you?
Doesn't converting meaning -- doesn't units being up slightly meaning that you are converting the traffic?
Roger Markfield - President, Co-CEO
We're not converting the transactions, we're doing it in units for the same customer and units in transactions are up.
Joe Teklits
They are.
Okay.
That helps.
And one question for Laura then.
When you give a Bluenotes comp, Laura, is that in constant dollars or does that move with--
Laura Weil - CFO
No, we take on the the effect of currency.
Joe Teklits
You do.
Cool.
Thanks.
Operator
Your next question comes from Todd Slater of Lazard.
Shane Fontana
Hi, this is Shane Fontana for Todd Slater.
To talk about the mark downs, how many basis would you estimate?
You said 70% were working, were there mark downs in 30% of back to school, would you say?
Roger Markfield - President, Co-CEO
That's correct.
Yes.
Shane Fontana
Would you tell us what the average mark downs were for the items?
Roger Markfield - President, Co-CEO
Not at this point.
Shane Fontana
All right.
And, in terms of -- I just wanted to ask a quick question on the SG&A.
You said the SG&A reductions came mostly in travel, communication, supply?
Unidentified
Advertising.
Laura Weil - CFO
Advertising.
Shane Fontana
So you reduced advertising costs?
Laura Weil - CFO
Well, for the -- yes.
Shane Fontana
Okay.
And, going forward, you said you were going to do additional, additional cuts.
Now, is that -- where do you see most of that coming from?
Head count?
Laura Weil - CFO
Well, it's really less in cutting head count and more in keeping new hires to a minimum.
And making sure that we might not fill positions that we feel are needed.
It's take ago sharp look at that and we're looking at cutting expenses in New York and we've been successful in doing haven't so, it's across the chain, and as I said, we're going to keep a close, a close watch on expense and cut wherever necessary.
Shane Fontana
Okay.
And, then, in terms of -- I'm sorry, there was just a lot of new merchandise coming in and a lot of different dates.
You're saying in a couple of weeks you're expecting the new graphic T's
Roger Markfield - President, Co-CEO
Next -- week the graphic on the men's side and following week on the women's.
Shane Fontana
And remainder is coming in on the first week of November?
Roger Markfield - President, Co-CEO
November will be constant flow.
Shane Fontana
Constant flow, and where are you going to get the new hoodies in, do you think?
Roger Markfield - President, Co-CEO
The first shot of the hoodies will come in.
Laura Weil - CFO
September 5.
Roger Markfield - President, Co-CEO
September 4th.
Shane Fontana
Fourth and that's both men's and women's?
Roger Markfield - President, Co-CEO
Yes.
Shane Fontana
Okay, great.
Those were my questions.
Unidentified
Pretty fast.
Laura Weil - CFO
Operator, I think we have time for one more question.
Operator
Your final question comes from Rob Schwartz of JL Advisors.
Rob Schwartz
Hi, guys.
I had a quick question on the cash flow and the balance sheet.
I think as of last quarter you said 700,000 shares remaining on the buy-back, is that correct?
Laura Weil - CFO
Approximately, yes.
Rob Schwartz
So there's no repurchase activity in this current quarter.
Laura Weil - CFO
No, there was not.
Rob Schwartz
Okay.
Would the strategy going forward, what is your strategy with that and there's no cash flow statement on the release, can you update us on the cash flow, year-to-date?
Laura Weil - CFO
Well, the strategy going forward:you know, I certainly hope that we will be in the market, repurchasing shares.
We think it's an important part of our ball -- managing our balance street sheet so I would expected we'd it and continue our buy-back efforts.
On the cash flow, we did not include -- what?
It will be in our quarterly release.
Rob Schwartz
Okay.
I mean, the stock was during the quarter, traded as low as $13 $14, 10 or 11 times next year's earnings.
Given the initiative, the improvement in Bluenotes it strikes me as awkward there was no repurchase activity in the quarter.
Laura Weil - CFO
Rob, we'll seek to correct this on the go-forward.
Rob Schwartz
Okay.
Good luck.
Roger Markfield - President, Co-CEO
Thank you.
Laura Weil - CFO
Thank you appreciate it.
Thank you everyone.
We appreciate your interest in our company.
Operator
This concludes today's American Eagle second quarter earnings results conference you may now disconnect.