Abercrombie & Fitch Co (ANF) 2003 Q3 法說會逐字稿

Good afternoon.

My name is Derek, and I will be your conference facilitator today.

At this time I would like to welcome everyone to the ANF third quarter 2003 earnings conference call.

All lines have been 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, followed by the number 1 on your telephone keypad.

If you would like to withdraw your question, press the pound key.

Thank you.

At this time I would like to turn the call over to Mr. Tom Lennox.

Please go ahead, sir.

Good afternoon and welcome to our third quarter conference call.

After the market closed we e-mailed to your offices the third quarter sales and earnings release, balance sheet, income statement, and an updated financial history.

If you have not received these materials please call Courtney Depenhart [ph] at 614-283-6751, and she will forward them to you.

This call is being taped and can be replayed by dialing 1-800-642-1687.

You will need to reference conference ID number 6756018 to access the replay.

You may also access the replay through the Internet at www.abercrombie.com.

With me today are Mike Jeffries, our Chairman and CEO, and Seth Johnson, Executive Vice President and COO.

After Seth reviews our financial results, Mike will discuss the business from a merchandising perspective then we will answer your questions.

Before we begin, I remind you that any forward-looking statements we may make today are subject to the Safe Harbor statement found in our SEC filings.

Now to Seth.

Good afternoon.

Total sales for the third quarter were $445 million, up 6% over last year's third quarter sales of $419.3 million.

Comparable store sales decreased 9% for the quarter.

By business, comps were as follows: In the adult business, Abercrombie & Fitch, comps declined in the low double digits.

In our Kids business, Abercrombie comps were negative mid-single digits, and in Hollister, comps increased in high-single digits.

Women's and girls comps were significantly stronger than men's and boys in each concept for the third quarter.

Comps were strongest on the West Coast, in Florida and in the New York metropolitan area.

Comps were weakest in the Midwest region.

The gross income rate for the quarter was 41.3%, 150 basis points higher than last year's rate of 39.8%.

The increase versus last year largely resulted from higher initial mark-up.

Mark-down to costs were also improved versus last year.

Partially offsetting these improvements was an increase in buy-in and occupancy costs.

During the third quarter we continued to make progress in sourcing which resulted in IMU improvement in all three of our businesses.

The increase was most dramatic in Hollister and the Kid's business where initial mark-up improved by over 300 basis points.

The increase in buying and occupancy costs as a percent of sales reflects the inability to leverage fixed costs such as rent, depreciation, and CAM charges with a comp store decrease.

We ended the third quarter with inventories down 2% per gross square foot versus last year at cost.

This is consistent with the guidance we provided on our second quarter conference call.

We will remain conservative in our inventory commitments until we see a change in our sales trends.

At this point we expect to end the fourth quarter flat to up slightly per square foot in inventory versus last year.

The third quarter SG&A rate was 23.0%, 150 basis points higher than last year's 21.5% rate.

Although we achieved savings versus our budget and payroll and travel in both home office and stores, increase in rate versus last year resulted from an inability to get sufficient leverage to offset the comp store decrease.

Our distribution center continues to make a major contribution to our success in expense control.

During the third quarter D.C. productivity as measured in units processed per labor hour was 45% higher than last year.

This was on top of a 41% improvement in the prior year.

For the quarter, we processed more units with 8% fewer labor hours.

We continue to make great progress in reducing our cost per order for the direct business.

Compared with last year our expense per order dropped by 37% in the third quarter.

Operating income increased for the quarter from $76.4 million to $81.5 million.

Despite the tough sales environment we're pleased that we were able to maintain and slightly improve our operating margin as a percent of sales for the third quarter.

We are also slightly ahead of last year's rate for the year to date period.

Net income for the quarter increased from $47.7 million to $50.5 million, an increase of 6%.

Third quarter earnings per share on a fully diluted basis were 51 cents versus 48 cents last year, an increase of 6%.

During the quarter, we repurchased 635,000 shares in the open market as part of our previously authorized share repurchase program.

There were approximately 2.5 million shares remaining to be purchased as part of our 5 million share repurchase authorization.

The timing of share purchases will depend upon market conditions.

We opened five Abercrombie & Fitch stores, three Abercrombie stores, and 17 Hollister stores during the quarter.

One Abercrombie & Fitch store was closed for remodel at quarter end but has since reopened.

We ended the quarter with a total of 352 Abercrombie & Fitch stores, 170 Abercrombie stores, and 129 Hollister stores, for a total of 651 stores.

For the fourth quarter we plan to open five Abercrombie & Fitch stores, three Abercrombie stores, and 43 Hollister stores for a total of 51 new stores.

For the year we'll open a total of 107 stores, ending the year with 358 Abercrombie & Fitch stores, 173 Abercrombie stores, and 172 Hollister stores for a total of 703 stores.

Total square footage for the year will grow 16% versus 2002.

For 2004 we are targeting at least 110 new stores with total square footage growth around 15%.

We continue to be pleased with the sales productivity generated by our new stores.

During the quarter the new stores in Abercrombie & Fitch, Abercrombie, and Hollister opened during the past 12 months averaged 100% of the sales per square foot of the existing store base.

For fiscal 2003 our planned capital expenditures will be between $115 and $120 million.

This is slightly below our previous guidance primarily due to savings in our home office expansion project which was recently completed on time and under budget.

During the third quarter we also completed the rollout of our new point of sale system.

At this point we expect total capital expenditures in 2004 to be at around the 2003 level.

Now I would like to discuss the profit outlook for the fourth quarter.

The sales environment remains tough and is difficult to predict when our sales trend will improve.

As has been the case throughout the year we will continue to manage the business very conservatively, focusing on protecting the bottom line.

Assuming a continuation of the third quarter comp trend we would expect fourth quarter EPS roughly flat to last year.

Now Mike will talk about our results in more detail.

Good afternoon.

Our business obviously remains tough, given the sales environment I'm very pleased we were able to continue to increase our net income in the third quarter.

October was clearly very weather affected which makes it very difficult to project a running rate into Christmas.

We recently completed our initial Christmas floor set and I believe we are very targeted at what is working.

I'm pleased with the assortment but given the third quarter trend we must be cautious.

We expect to promotional environment and as always we will run the business to protect both the aspirational nature of our brands and the bottom line.

Now I'd like to talk about the business by brand.

I'll start with Abercrombie & Fitch.

The men's business remains very tough and I don't see any evidence of an immediate turnaround.

There's some very strong areas of the business such as woven shirts, polos, and loungewear but they have not been able to offset weakness in other classifications.

For Christmas, I believe our opportunity is in driving the women's business.

The women's knit business has been consistently good and I see it getting stronger for Christmas as we get better assorted in pretty feminine styles.

The women's fleece business has been very good.

Sweaters have been much stronger than expected and we will be in a better sweater inventory position as we get closer to Christmas.

The women's jean business has also been better than expected and we will also after skirt business for Christmas this year.

Sleepwear and underwear look like they will be very strong businesses in the fourth quarter.

Outerwear has been very disappointing and we will need to cover this business elsewhere.

This month we are launching a new women's fragrance called "Now" based on the huge success of Fierce in men's, I'm excited about the potential incremental business that this fragrance can provide.

Many of you have favorably commented on our use of the moose logo for Christmas.

This is a great branding vehicle and has added some novelty and fun to the assortment.

More importantly, the customer reaction has been extremely positive both in men's and women's.

We are turning items with the moose logo very fast and as we get into a stronger inventory position in these items there is further volume potential.

In our Kids business Abercrombie, girls had a solid positive comp for the quarter.

This business is very good in both tops and bottoms and I see strong potential for continued growth in girl's productivity.

The boys' business has been very difficult but remains overdeveloped in share compared with our other businesses.

Hollister continues to perform very well.

As Seth mentioned, Hollister's comp increased in the high-single digits for the third quarter.

As in ANF, girls is driving the Hollister business and represents 70% of the overall business.

Despite a challenging October I'm extremely pleased with Hollister's progress.

Sales per square foot in the Hollister stores were 122% of the Abercrombie & Fitch adult stores in the same malls for the third quarter.

Hollister is working in a wide range of malls and geographic areas and its operating margin is now at the level we're achieving in ANF.

The Hollister business has been very strong in both tops and bottoms.

As in ANF we are chasing sweaters for Christmas.

Fleece is very strong and I see the knit business improving as we get into a better inventory position in feminine embellished tees.

Our Internet business continues to grow at a rapid rate.

For the third quarter the Abercrombie & Fitch business grew 29% versus last year and the Abercrombie business was up 59%.

Our new Hollister e-commerce business continues to grow.

Our international e-commerce business and Abercrombie and Fitch has grown dramatically, more than doubling this year and now accounts for around 20% of the ANF e-commerce business.

The magnitude of this business indicates that the ANF brand continues to get stronger worldwide.

In closing, I am pleased with our financial performance for the third quarter.

Our business remains solidly profitable and I'm confident that we are well positioned for Christmas.

However with the environment still challenging, we will remain disciplined in our approach to managing the business.

Now we are able to take your questions.

Please limit yourself to one question so that we can speak with as many callers as possible.

After everyone has had a chance we will be happy to take follow-up questions.

At this time I would like to remind everyone in order to ask a question please press star, followed by the number 1 on your telephone keypad.

We'll pause for just a moment to compile the Q&A roster.

Your first question comes from Janet Kloppenberg with JJK Research.

Hi, Mike.

Hi, Seth.

Hi, Tom.

How are you?

Good.

Mike, I wondered if could you talk about opportunities for future IMU growth in the fourth quarter and in '04.

And, Seth, if the rates of D.C. productivity improvement can continue to help the expense side of the picture as well.

Thank you.

Thanks, Janet.

IMU improvement will continue in the fourth quarter.

We're working very hard for it to improve next year.

We're not counting on it next year as we're looking at our bottom line but we're working very hard to have it improve.

It's clearly been an important element in us being able to maintain profit growth this year.

Seth, would you like to address her?

In terms of D.C. productivity we were up, I think, 45% in the third quarter.

At this point, I don't expect that level of improvement in the fourth quarter.

We continue to get up against tougher and tougher numbers.

I think a more realistic fourth quarter number is probably 15 to 20% improvement versus last year.

It's tough to quantify these things because that team continues to surprise us on the up side every quarter, but we would expect some improvement next year but obviously at a much slower rate.

Okay.

Thank you.

And Mike, that Hollister's operating margin, does it go above ANF's as we go forward here?

I would expect it to.

I don't know when we're projecting that to happen, but I think it will.

Clearly at ANF's rate right now it will exceed the margin in the future.

Thanks very much.

Thank you.

Your next question comes from Lauren Levitan with SG Cowen.

Thanks.

Good afternoon.

Last quarter, Seth, you gave us a sense of the drivers of comp growth in the different divisions between transactions and average retail.

I'm wondering if you could comment on that again, please.

Okay.

For the third quarter, transactions per store in ANF were down about 15%, and transaction value was up 3%.

The Kids business, transaction value, was about flat, and transactions per store were down about 4%.

And in Hollister, transaction value was up 9%, and transactions per store were roughly flat to last year.

And I know you commented earlier during your comments, Mike, about the productivity at Hollister in those centers where you also have an Abercrombie.

Right.

Could you talk about just in total how you think the Hollister concept is attracting -- if you think it's attracting a different customer?

I'm surprised that the transaction per store in Hollister wouldn't have been up given the brand is still so young.

Could you maybe give us a sense as to who you think the customer is there relative to the ANF customer?

Thanks.

I think the Hollister customer is clearly younger, it is targeted younger and it is younger than the ANF brand.

It is targeted at a 14 to 18 year old.

Clearly 16 is the focus in the middle.

AN F is 18 to 22, 20 is the focus.

I think our customers do cluster around those age groups.

There is some trade-off, and overlap, but I think the customers do cluster around those ages, just as in the younger business we clearly cluster around 12.

Okay.

And one last follow-up.

In terms of that 70% at Hollister being driven by women's can you give us the comparable percent on the ANF side, please?

Sure.

It's about 66%.

Seth is making me honest, but I think it is 66%.

Yeah, women's and ANF was 66% for the quarter and girls and the Kids business was 63%.

Great.

Thanks very much.

Thank you.

Your next question comes from Jeff Klinefelter with U.S. Bancorp.

Yes.

Mike, a question on your inventory commitments within the ANF adult.

Are you now aligned with the current sales trends at roughly 34%?

Is that where where your inventory commitments would be, and how are you positioned to take advantage of the uptrending women's categories during the balance of the year?

Actually, we're more conservative in men's than the business trend would even indicate.

I think the women's percentage is obviously going to continue to grow, and that's where our inventory commitments are.

So I would, without being very specific in the figure, would say that our women's business could grow to the Hollister level with our current commitments.

And that's where I think they'll end up, by the way.

Do you think the pricing environment in men's has just changed so dramatically that it's going to be difficult to get back to that sort of aspirational price point for the guy in that 18 to 22-year-old range, or do you think this is a cycle that's just taking longer than you had anticipated?

I think it's the men's business is a very tough business, and we haven't really responded by lowering our price points in men's.

I'm happy with where we are.

I think we run a good quality business, and I'm very confident that when the trend changes we're going to capture the customer.

We haven't compromised in quality.

Our standards are high.

We're not running a promotional or cheap business, and I think when this men's cycle changes we're going to take advantage of it.

I'm very proud of how we've held the course in that business, truthfully, Jeff.

Okay.

Thank you.

Thanks.

Your next question comes from Barbara Wyckoff with Buckingham Company.

Hi, everybody.

Hi.

Couple questions, Mike.

Can you talk about what's happening in women's pants?

I remember that they had gone from sort of loose to sort of narrower, how you're interpreting besides this new femininity in pants, then I have another question.

Okay.

Sure.

I think we went through a cycle early last spring where a fuller silhouette worked.

The fuller silhouette worked with a very tight top.

As we got into fall, the silhouette changed to a very tight silhouette, so the women's bottoms business is all about really slim and tight, slim through the leg but clearly a flare or boot bottom, but a very tight fit, and that's where our inventory is.

That's how I anticipate it going forward in the near future, too, but we're well positioned in that silhouette at this point.

In contrast do you find that the men's silhouette is getting a little looser or is there really no change in men's silhouettes?

There's been very little change in the men's silhouette.

I wish there had been.

I'm dying for some change.

Okay.

I've noticed recently that you've taken some deep mark-downs on a portion of the holiday receipts, some deep mark-downs on some of the things, what percentage does that inventory comprise of the total?

We've taken very few mark-downs on Christmas.

As a matter of fact, I think practically none.

Yeah, Barbara, I think what you're seeing are probably some second mark-downs on third quarter goods, and we've also recently started a 50-off red-line promotion, but that's not on new.

That's only to clear the bits and pieces of third quarter.

Our Christmas mark-downs are nonexistent at this point.

The mark-downs you've seen recently were all very consistent with how we planned the business all along this fall.

Go ahead.

No, we're pleased with initial Christmas selling.

I can't tell where it will go, but there's no mark-downs to speak of.

Okay.

And then just one last question.

The new feminine things that you've talked about, embellishment, when are they going to be coming in?

Around Thanksgiving, is that when we should be expecting them?

Well, they're already there, we are selling these well and there will be more delivered weekly right into Christmas.

Okay.

As a matter of fact, in all three of the brands, Hollister, needed more in October.

We had a weakness in women's tops in Hollister in October because we did not have enough of that inventory, but it's clearly flowing at this point.

Great.

Thank you.

Sure.

Your next question comes from Stacy Pak with Prudential.

Hi, thanks.

Hi, Stacy.

Hi.

Hey, Seth, you guys have done just an incredible job on the expenses thus far in the face of some tough sales numbers, and I'm wondering, on your Q4 guidance, what does that assume in terms of SG&A dollars?

It seems to me you have got to be running out there at some point, and does that flat fourth quarter give you any credit for recouping last year's port charges?

And then, Mike, for you, just sort of bigger picture, why do you think, other than weather, Hollister comped negatively in October?

It seemed odd to me, given it's still so young.

And how do you look at the weak transactions in the core business?

What do you think is going on, and do you see any opportunity to turn them?

Okay.

There are a bunch of questions there.

Seth, want to go first?

In terms of the fourth quarter I think the way to think about the scenario we described, the comp trend continues, I think it would be a fairly similar level of SG&A growth versus LY to what we saw in the third quarter, and not the level of margin improvement that we achieved in the third quarter.

I think at this point we'll have initial mark-up improvement but at a minus nine comp, we'd likely have higher mark-down percentage than last year.

What about the port on that?

Yeah, those costs are part of initial mark-up, and those would be part of the reason for improvement in the fourth quarter.

So that's already incorporated?

Yes.

Okay.

And also '04, Seth, are there any opportunities on expenses in '04?

Well, we're just starting to budget 2004 at this point.

We would, obviously, be very conservative in our expectations there, but I don't think there's any dramatic break-through to be achieved.

We'll continue to try to be as tight as we can in every area.

Okay.

Okay, let me go after.

Hollister weakness in October, Hollister's weakness, deterioration in comps in October matched the ANF's, which I think were largely weather-related, with the addition of one other weakness, and that was, as I mentioned, Stacy, women's tops.

We had a poor assortment in women's knit tops in October and really suffered from it.

That's a very highly developed business for us and that hick up did hurt us in October.

I'm comfortable that we're going to be on track again but that really was the weakness in the business relative to the trend in ANF.

And you expect to be on track there for December?

Fourth quarter, yeah.

Then the transactions in the core business, I think when you look at ANF, we've chosen to run regular price, nonpromotional business, and we've chosen to run a high-margin business.

When you look at the gross margin, dollars per store, that decrease was nowhere near what the comp decrease was, because we've held the course with the business.

I think that's an important consideration about the whole ANF business, and I think you've got to look at the bottom line.

A lot of that bottom line was contributed through higher merchandise margin.

So that's one factor in looking at that business.

And I'm going to maintain that as a strategy on going.

We're going to be the aspirational brand.

In addition to that, our men's percentage in the ANF business is still overdeveloped relative to either the rest of the world or Hollister. 66% women's, Hollister is 70%, we're still being penalized by that high percentage of men's business, although it's getting in line very quickly, so that ratio does hurt us, and did hurt us during the third quarter.

That percentage will be in line, and I think we're positioned, I think our women's business is running well, is positioned well, is a high-margin, high-profit business, and our men's business is the same.

We're turning that business very well, and I think when there is a change in the men's trend, we're going to be well positioned in the business.

Okay.

Thank you.

Thanks, Stacy.

Your next question comes from Brian Tunick with J.P. Morgan.

Hi, yes, good afternoon.

I guess my question really is for Seth.

I guess over the past seven years, since you guys have been a public company, you've always talked about aiming for double digit earnings growth, and, Mike, you've talked about not promoting the business and remaining an aspirational brand.

But now that we're talking about mid-single digit earnings growth what are other levers, what are other opportunities for, you know, large share repurchase programs, additional growth vehicles, or potentially promoting the business to enable investors to see double digit earnings growth again?

Well, I think we still, on a long-term basis, are very targeted at those levels of earnings growth.

We're obviously in a very difficult sales environment for our business and a lot of businesses right now, and I think to continue to show earnings growth of any sort is a very strong achievement in this environment.

I think there is a reality that if the sales line is difficult, you can't lay on double digit increases.

Mike talked about what he thinks we need to do with the Abercrombie & Fitch brand.

It's not as simple as just running a bunch of promotions.

You have to maintain the image of the brand, and because that's what assures your continued earnings in the future.

So I think we've sustained growth by developing the Hollister business that's a huge success so far.

It's allowed us to continue to never have a down quarter, and we've talked previously about having another concept in the works.

So I think we're doing all the things that a prudent management team would do to sustain growth in the future.

And I think, Brian, the fact that we're not going to promote the business, I've got to restate that, that we are committed to this quality business is going to sustain the earnings growth in the future.

And when business conditions get better I think we're well positioned to be back into the double digit earnings growth range.

And when you talk about business conditions getting better, on comp day when other companies are reporting double digit comps and other companies are reporting 20 and 30% earnings growth, what are they doing differently do you think in their businesses?

Brian, I think you've got to look at what they reported last year when you look at the difference and I think you got to look at how our earnings growth has continued.

We just announced the 45th consecutive quarter of earnings growth.

It's an amazing number.

Okay.

But that's what we're about.

Okay.

Well, good luck.

Thank you.

Your next question comes from Dorothy Lakner with CIBC World Markets.

Thanks.

Good afternoon, everyone.

Mike, I wonder if you could talk a little bit more about your ability to move faster to get inventory in.

You've obviously kept inventories under very tight control in a very difficult sales environment but you've indicated your ability to get the goods in if you need them, particularly on the women's side of the business, and I just wondered what you've done to enable the company to be able to do that, which clearly should help you if the women's business comes through for you.

I think that's very much part of our culture, Dorothy.

We move very quickly, and we have strengths in classifications in women's knits that enable us to do that.

That's a very significant part of our business, and it's a very significant part of our strategy that we can react very quickly, and we are reacting very quickly.

I think the shortfall in women's knits in Hollister and ANF in October we remedied very quickly.

So a key part of our strategy now ongoing, and beyond being chasing the business, our strategy to just flow more newness has been significant in that business, and significant in volume and profit.

Also, just speaking to the strength that you're seeing in the sweater business, just remind us what that business was like last year.

And then one other question which was the Kids business, which has seen a couple of quarters now I think of better performance relative to the adult Abercrombie business.

I wonder if you could just flush that out a little, what's made the difference.

In sweaters, we've add very tough third quarter in sweaters.

We weren't anticipating a very good business, and it wasn't, but we have found there's strength in that business that we have, in fact, chased, so we're projecting, in fact, an increase in the sweater business in December in all three women's brands against big comp store decreases in third quarter.

In the Kids business, the business has really been driven by the girls business, and that's a function of we're really getting on track in that business, but that business is relatively underdeveloped to the other women's businesses.

It's 63% of the total.

So there we're kind of plagued with an overdeveloped boys business, which as is the men's business, is very tough, but the girls business is comping positively and growing dramatically as a percentage of continues.

We're not really running that business different from the Abercrombie & Fitch or the Hollister female business, it's just that we're on track at this point.

Great.

Good luck.

Thank you.

Thank you.

Your next question comes from John Morris with Harris Nesbitt.

Thanks.

Couple quick questions.

One is in terms of the openings you've got slated for Hollister in the fourth quarter, was there any slippage?

Looks like there's a lot of them coming in Q4, and I'm wondering when you will have the bulk of those opened by?

Then I think you also mentioned 110 openings for next year.

Can you give us breakdown by division and just remind us of any marketing promotions outside of the sale period that you would have done last year in December and January?

Thanks.

In terms of Hollister openings, I don't think there's been a lot of slippage.

We really had back-ended those openings from the start of the year.

I think we're on target to have almost every store opened before Thanksgiving, which is always our target.

So I think, to be honest, the team's done a great job getting these stores opened on time.

As we go forward to next year, out of 110 stores, I think our idea would be to have at least 85 Hollister's, probably 15 ANF adult stores and around 10 kids' stores.

Okay.

And remind us of the marketing promos.

Last year we did some direct-mail promotions that affected business after Thanksgiving, and we also had a bounce-back promotion where you could get the coupon during November and redeem it in mid-December.

So that's what we did last year.

Okay.

Great.

And I assume you're not planning to repeat those this year.

At this point we don't really want to talk about marketing strategies for Christmas.

It's a competitive issue.

Okay.

Thanks for the clarification.

Thank you.

Your next question comes from Margaret Major with Goldman Sachs & Company.

Hi, it's Margaret Mager with Goldman Sachs. 45 consecutive up quarters is nothing to sneeze at, so good job there.

I do have a question about how do you think about the mix between Abercrombie and Hollister for your total company?

At what point do you think that Hollister can sort of drive the ship on the top line?

Then part and parcel that, or related to that, how do you think about the productivity of new store space?

Because with your square footage up 16% and your sales up 8%, total in the quarter, maybe you're not thinking about sales productivity of new space and thinking about it more from a profit perspective, so if you could educate me on that.

Lastly, with regard to the Abercrombie division in particular, I guess a similar question was already asked, but what can you do to change the traffic trends in that business?

Just to increase the number of people who are aspiring to buy Abercrombie.

Thanks.

I'll address the productivity of the space.

I think the difference between our square footage growth and the sales productivity isn't new store related.

That really reflects the drop in comp store sales in the business.

The productivity of the new stores is, as I said in my remarks, is at the level of the existing store base.

Okay.

Let me address the existing store business.

I think very simply it is to run the business better, to be more targeted in terms of fashion, to be more fashion-right, particularly in the women's business.

That's our opportunity to get greater growth out of the women's business during this time when the business trend is so much stronger than men's.

And it's really what we're devoting ourselves to, in terms of resources, systems, people.

We are really working to drive that business very hard, but driving it from a fashion-right point of view, not a promotional point of view.

The worse thing for this business to do would be to turn it promotional.

And I'm very comfortable that we can make progress there.

The question about just Hollister and the mix of the two businesses, do you think at some point we'll -- and how close are we, if you will, to Hollister, driving the total company comp?

Well, I mean, Hollister store base is obviously much bigger than it was a year ago, I think for this fourth quarter we'll have probably 93 or 94 stores in the comp base for the company that are Hollister, and ending this year with 172 stores.

We'll have that number of stores in the comp base a year from now in the fourth quarter, so obviously Hollister is going to be a bigger and bigger contributor to the comps of the business.

To date, the major impact of Hollister is really seen in the profitability of the total business, in that most of the stores haven't been comp stores but they're very much contributing profit improvement because the operating margin is now at the same level as ANF.

The only difficulty about the hypothesis of Hollister driving the comps is that Hollister stores open at a very high rate of productivity.

So we can clearly improve that, but it's not as if they're opening at a low rate.

Okay.

You reminded me one more quick one.

You said if comps are down 9% in fourth quarter your mark-down percentages or rates would go up in the fourth quarter.

Is that because inventory per square foot is down 2%?

It's not as simple as that.

There's obviously an inventory content issue that you always have to consider.

I think our content is very good entering fourth quarter, but there's still a lot of flow to happen.

I think the simple explanation for a little higher mark-down rate is we didn't -- I think a minus 9 comp is a more severe sales scenario than we expected to be talking about earlier in the year.

So I think we've reacted as fast as possible, but at the same time, we want to give ourselves upside in the business, too.

So I think there's a balance between downside protection and giving yourself the opportunity for much greater success in terms of sales and profit.

We really do not want the fourth quarter to be minus 9.

Right.

And that isn't our expectation today, but that's our downside.

Okay.

Thanks for answering my question.

Sure.

Good luck in the fourth quarter.

Thank you.

Your next question comes from David Berman with Berman Capital.

Hi.

It's Steve [Inaudible] here.

How you doing, guys?

Hi.

One question on the merchandise issue, then, Seth, a follow-up question.

On the merchandising, in terms of the men's volume, how have you kind of evaluated or studied, I mean most of your merchandise is very tight-fitting, you've got to have a washboard stomach.

Have you done any research in saying maybe we should make it a more generous fit and broaden the population or does that not fit with the imagine we're trying to cater to?

It's a combination of those two things.

One, our target customer is a 20 year old, and most of those 20 years old's don't have figure problems yet, but two, we look at our size selling and see if it's SKU'd in a certain direction and we react that way to it.

Because if it's SKU'd in an extra -- if we're, as your hypothesis, we are too tight, we would be selling a greater proportion of extra large than how we're buying it.

That isn't the case.

But we continue to look at that carefully.

Okay.

And when you mention in your preliminary remarks that outerwear is suffering, could you give us a sense of what percentage of your fourth quarter business is outerwear, or was outerwear last year?

Sure.

Hold on.

I don't have that number offhand.

I think we'll have to get back to you.

Okay.

And just to clarify your comments, you're saying that your fourth quarter you could do flat earnings if your comps are down 9%, even though we're facing easy comps, you're looking upon that as a floor kind of thing, where you feel that you could do better or you hope you could do better?

I think our view is that with what happened with the weather in October, the fact that we just set our Christmas set, it's very difficult to project a running rate or trend in the business, and since that's very difficult to do, we wanted to give investors a sense of what kind of profit would result if the third quarter trend continues.

We obviously hope to do much better than that.

And we're working ourselves to death to make sure or to try to make sure it doesn't happen, but we're very conservative operators, and we always talk about the downside.

Right.

Could you give us any kind of sensitivity on the upside if you have down 5 comps or flat comps?

No, I don't think that's productive.

Just pray with us.

Okay.

Thanks a lot.

Good luck.

Thank you.

Your next question comes from Joseph Teklits with Wachovia Securities.

Hi, thanks, guys.

Just one question.

Mike, you mentioned the moose was selling very well.

Right.

Moving very fast.

Is that just for girls or are guys buying the moose, too?

It's in all four of the Abercrombie brands.

It's in men's, women's, boys, girls, and performing very well everywhere.

As a matter of fact, there's an icon in Hollister that's performing very well, that's the seagull for that brand, guys and girls.

Yep.

Seen it.

If you're chasing merchandise for both the moose and sweaters, when do you expect to have your floor set with that merchandise that we can really judge you on it?

It's an ongoing process but we're going to be in very good shape for Thanksgiving week.

So November not really, but December you should be ready to go with how you want your stores to look?

I think we're getting there now, Joe, I think every week it's getting better.

This week we're well positioned in moose, the women's sweaters are delivering weekly, but by November week 4, I think we're in good shape.

November week 3 we're pretty happy with where we're going to be.

Do you know what percentage of the merchandise has the moose and what it will get to?

About 20% of the top selling in all three brands in women's is iconic, and it's about 20% in tops across the board brand by brand.

Okay, thanks.

Good luck.

Thanks.

Your next question comes from Dawn Stoner with Pacific Growth Equities.

Thank you.

Good afternoon.

I just wanted to try to reconcile some of the comments from earlier.

Obviously, you've presented as a worst case scenario a negative 9 comp, giving you flat EPS, with some comment about the SG&A outlook.

I'm just trying to reconcile your gross margin outlook.

You're looking for improvement in IMU continuing, perhaps an increase in the mark-down rate, I would assume continuing buying in occupancy de-leveraging.

I'm just wondering how that nets out?

Does that imply a flat reported gross margin?

First of all, Dawn, we did not describe the minus 9 as a worst case scenario.

I don't know how to define a worse case in terms of comps.

Minus 9 is what we did in the third quarter.

We said if that continues in the fourth we could be flat.

We think we can do better, but I don't think anybody on this call can say what a worst case for volume is in any business.

In terms of margin, I think with a minus 9 scenario we'd be roughly flattish to last year in margin.

That would be improved initial mark-up offset by deleveraging and buying and occupancy and some increase in mark-downs.

And that's what it is.

It's a scenario of a continuation of third quarter.

It's not a projection, it's not a down worst case, it's not a best case, it's continuation of trend, and we're hoping to do much better.

Got it.

Okay.

One follow-up.

Would you be willing to comment on the gross margin differential between men's and women's, boys and girls?

It's higher in the female side of the business.

I can't tell you the magnitude but it's higher in the female side of the business.

Okay.

Great.

So I guess as a follow-up to that, as the women's and girls continue to gain momentum, wouldn't that imply some positive impact to merchandise margins?

It does on a continuing basis, but that's factored into our projections.

Great.

And then just a housekeeping question, what was gross square footage at the end of the third quarter?

Hang on a second.

It's 4.709 million.

And the diluted share count?

99.102 million.

Great.

Thanks very much and good luck.

Thank you.

Your next question comes from Kim Greenberger with Lehman Brothers.

Great, thank you.

Good afternoon.

Hi, Kimberly.

Mike, I'm looking back at some comments you guys made at the end of the second quarter regarding your women's business and the outlook for the third quarter, and you indicated that with some tweaking on your inventory content and obviously excluding the negative impact from the reduced promotional level this year, that you guys thought the women's business could trend closer to the double digit range for fall.

I don't know what that would be post the promotions, but I'm just wondering if you can give us a perspective on how the women's business performed relative to your expectations and where you felt like you have further opportunity in that business.

I think in third quarter the weakness that occurred that I didn't project in that business had to do with women's bottoms, and it was alluded to, it was talked about earlier in the call.

The women's bottoms business has become a business that's very tight in terms of silhouette, and that's it.

It's a tight flare bell-bottom business, and we had some inventory that we had projected would still be in a fuller bottom that did not happen.

So I think the biggest short-fall to my expectations in third quarter women's business was in the pant business, and there was a short-fall in the outerwear business which just didn't happen third quarter as we had projected it would happen.

It's ongoing weakness in the women's outerwear business, we're up against a huge amount of business last year in the Sherpa business, the corduroy Sherpa jacket that isn't happening this year, the military business, and the paecoat business isn't taking that business, so we have to find those dollars elsewhere fourth quarter.

However, the pant business has been put into our inventory where that business is, which is tight, and I'm anticipating that business being fine for the fourth quarter.

Okay, great.

And then, Seth, if you could just give us an update on your CFO search that would be great.

We're in the middle of the search.

It's obviously one of those things where it's a successful search when you've filled the job.

So the position isn't filled but we're very pleased with the level of candidates that are being surfaced for the job.

Okay.

Great.

Thanks.

Your next question comes from Robin Murchison with Jefferies & Company.

Hi.

Most of it's been asked, but two housekeeping.

One, how much did you spend on the third quarter share repurchase?

And two, regarding concepts for last quarter you talked about it essentially being ready, unless I misunderstood.

Can you update us on that?

First of all, on share repurchase, we said we bought 635,000 shares during the third quarter.

That was an investment amount of about $17.5 million.

In terms of concept four, what we have announced previously is that we are working on it, we have a small staff that's been assembled that is putting it together.

We have not yet announced when the first stores will open.

We said there won't be any stores opening in 2003.

But at this point that's all we really want to say about it.

Derek, help me.

Your next question comes from Dana Telsey with Bear Stearns.

Good afternoon.

Hi, Dana.

Can you talk about, if the product is where you want it or trending in the direction you want, Mike, does the store look, just presentation or product, fixturing or anything like that, do you see that needing any adjustments and any changes coming forward in 2004?

Club Cali on the Hollister side, how is that doing and how is that membership growing?

And Magalog, any changes in the future to that?

And how is that being responded to?

And, Seth, can you give us CAPEX in D&A for the third quarter?

Okay, let me write these down.

First is, do I see fixture changes in the stores being necessary for next year?

No, I really don't.

I think we're in good shape in all the concepts.

We've been updating the Abercrombie & Fitch stores very steadily, and I think that there's been very subtle change in those stores in terms of atmosphere but I think it's working and I think we've spent the money that we should be spending there and I think we're in good shape.

Club Cali, let's give you the numbers on the membership, 2 million at this moment.

We're very pleased with Club Cali and what we've been able to do with that as a marketing vehicle for Hollister.

The Magalog is something that is evolving.

You'll see pretty major change in the Magalog for spring.

I'm not going to reveal what that is, but it will look pretty different to you, I believe.

And the fourth thing is CAPEX.

And also gift cards.

Do you plan any changes in gift card patterns this year versus last year?

Well, I mean, we sell a lot of gift cards, obviously, at Christmas.

We don't have anything specific that we're doing differently to promote them right now, but we expect it to continue to be a big business for us.

Okay.

You want CAPEX for the fourth quarter?

For the third quarter and D&A.

Third quarter CAPEX, $34.3 million, and depreciation, $16.4 million.

Thank you very much.

Thanks, Dana.

Your next question comes from Michael Dolihare [ph] with Jefferies & Company.

Good afternoon.

Mike, I understand the strategy on not promoting the goods and fully agree that 15 off the store is not the answer.

I'd like a little color if you would though on, there are lots of other aspirational brands who have learned how to whisper loudly to drive traffic and to convert that traffic into regular price selling.

Could you comment on that for me?

I thank that we continue to experiment with that, truthfully, we're not blind to what goes on in the world, and we're constantly looking to how to increase foot traffic in a manner that's consistent with an aspirational brand.

Trust me, we're doing all kinds of work on that, and will continue to do so.

When the rest of the retail executives are huddled around their '04-'05 calendars trying to find ways to drive the traffic, we can be sure that the management team at Abercrombie is also of that mind?

We are obsessed with it.

Well, when would it be reasonable that we would see some effort -- some manifestation of that obsession?

I can only say that we work on it on a weekly basis and we'll do what's right for the brand on a weekly basis.

In hindsight in third quarter, do you wish there would have been some, kind of whisper loudly bold price traffic-driving events?

I don't think I would have played third quarter differently, truthfully.

I think we came out with good bottom line and clearly protected our brand.

Agreed, and agree that 15 off is not the answer.

We think you're right about that.

Good luck.

Thank you.

Your next question comes from Richard Baum with CSFB.

Ready to give up on you guys.

Here we are.

Hi, Richard.

Hanging in.

I've just got a couple of quick questions.

The first is, Mike, you talked about the Kids business being very much tilted, or I think you said boys way too overdeveloped.

Right, compared with girls.

I think the number was 63%.

Where would you be more comfortable?

I think it's going to end up at 70%, Richard.

I think every one of our businesses are going to be about 60%, between 66% and 70%.

And you've known me a long time.

I've always said that there's twice as much women's business as men's business, and that comes to about 66%.

Yeah.

I agree.

On the potential number of stores for kids, I know that's a number that's moved around a lot over the last several years.

Where are you currently in terms of the potential for kids?

In terms of your belief.

Well, that's a difficult question to answer.

We still believe that ultimately there could be 400 Kids stores, but we look at the growth of that business on a deal by deal basis and approve new real estate only when we think the economics for that particular store would work.

The productivity in the Kids business hasn't been at the level of our other two businesses, and that's one factor that's caused us to hold back on the expansion.

I think we all believe that the productivity can improve significantly in Kids over time, then we can add more stores.

I feel better, Richard, about the Kids business than I have in a long time, given the momentum that that girls business is developing, and I think it's just a productivity issue.

Our return is so much greater in the Hollister and ANF business.

Do you think there's anything to the argument that the that the productivity is lower, just could be a function of the fact that there are fewer customers available to buy kids product than there is to buy adult product?

Yeah, and I think we're hindered a bit at the price levels, which we need to be for that brand versus the ANF brand, but I still think we can get higher productivity.

Having said that, I don't think we're ever going to get to the productivity level of ANF or Hollister, but I think we can do better and the better would justify more stores.

I'm not sure it's 400, but it is more stores.

Lastly, just a balance sheet question for Seth.

Accounts payable were up 59% in the quarter versus sales up 6%, inventory up 12%.

Oftentimes this is a case with timing but could you comment specifically as to why payables are up so much relative to those other metrics?

Richard, are you comparing -- which period are you comparing it to?

Quarter over quarter.

So third quarter this year versus third quarter last year, on all three.

Okay.

Yeah, it's an 18% increase, and I think it really relates just to a timing difference in the deliveries.

We've done nothing of any significance in terms of how we run the business that would change the fundamental payables to inventory ratios.

You said payables, I'm showing on the balance sheet it was $106 million this year, right?

Versus -- well, showing $67 million.

Maybe that's a bad number.

I think what you're seeing is we did a reclassification for some bank overdraft numbers that used to appear in cash, and now they're shown in payables.

So we changed the way we're doing it this year and then we reclassed some for last year as well to have an apples to apples comparison.

Okay.

I got it.

That clears it up.

Thank you.

Thanks, Richard.

Your next question comes from Rob Wilson with Tiburon Research.

Hey, Mike, are sweater price points lower this year than last year?

They're about exactly the same in masculine-feminine -- in all our businesses, the AUR is practically identical.

And, Seth, you talked about payroll productivity in previous quarterly calls, and I don't know if that was mentioned this time.

Have you sort of maxed that out?

You mean average store hours?

Right.

Yeah, I think we've pretty much maxed that out.

To talk about the third quarter, we were roughly flat to down very slightly in hours per store in an Abercrombie & Fitch average store, the Kids business was up very slightly, and Hollister was up more dramatically, but that really related to just the higher productivity in Hollister.

So I think the days of having big reductions in average hours per store, in Abercrombie & Fitch and Kids are pretty much over.

One last question.

Conceptually, how do you measure customer satisfaction, vis-a-vis payroll hours?

That's a very difficult question, and we're in the process of really looking at the stores' organization and how we're operating the business, how we're managing the floors, and it has to do with upper management spending time in the stores, how do the stores look, how do they feel, how are they running.

There's no objective measure.

It is pretty subjective, but we're spending a lot of time on that subject I have to tell you.

Thank you.

Thank you.

Your next question comes from Richard Jaffe with UBS.

Thanks very much.

Most of my questions have been answered.

I guess just a follow-on thought, I guess we're all looking for greater visibility for the Abercrombie & Fitch brand without tainting the brand or in any way eroding the margins or the viability of the brand.

I'm wondering if there's any indication of things up your sleeve or events or anything we can look for in the next 90 days that might help draw interest to the stores.

We're working on them, Richard, but for competitive reasons, we really don't want to talk about them at this point.

So we should look for surprises, not on the price line, but on the interest line?

I don't think we said that.

I think we said we just can't talk about what we're doing for competitive reasons.

Right.

So we should hope for interesting events rather than plan.

Yes, you might see some interesting events, Richard.

I will keep my fingers crossed.

Thanks very much.

Your next question comes from Susan Anderson with AK Capital.

Thanks very much.

I apologize if this question has been answered earlier during the call, but could you address why Hollister has shown negative comps during October months?

And also, in going back and looking at your sales call, it sounded as though the slowing of sales at Hollister perhaps may have begun even in September and in the earlier months, so if you wouldn't mind touching upon that, I'd appreciate it.

We already answered that question, but I will be very happy to do so again.

The Hollister business weakened in October at kind of the same rate as ANF, which I believe was a weather factor, with the addition of weakness in women's tops, which was a weakness in the women's knit top assortment.

I believe going into fourth quarter that we will be doing better in that regard.

But that was the function of the slowing of the comps in Hollister.

So are you saying that Hollister has seen a rebound to double digits?

I'm not saying that, but I can't comment on where we are right now, but Hollister did experience that, and we're working very hard to get the inventories in line with where they should be in women's tops.

Thank you.

Your next question comes from Marie Driscoll with S&P.

Hi.

Could you talk a little bit about the international opportunities that you see?

Hello?

Yes.

I think the question is can we talk about international opportunities that we see.

We think that there are many opportunities for our brands overseas.

There's nothing that has been planned at this point.

We are just working on making our U.S. business as strong as we possibly can.

We have a lot of continued opportunity here in new stores and strengthening the existing business, and that is our thrust right now, but we do know that the potential is very strong in the future.

Okay.

Can you hear me?

Yes.

Thank you.

Okay.

Can I ask you another question?

I'm just wondering if you could -- I know you've described the average Abercrombie customer as an 18 to 22-year-old.

I'm just wondering if when you go in the store that customer has perhaps changed over the course of the last seven or eight years and if so how?

Well, the customers change dramatically. 11 years ago the customer was somewhere between 90 and death, and we reconceived the business for an 18 to 22-year-old.

I think over the last seven years the customer has aged.

I think that seven years ago our customer population was clearly clustered in high school, and it has aged, as we've wanted it to age over the last seven years.

I could say that seven years ago we were clustered around probably about 15.

I'm comfortable that we're clustering around 20 at this point.

Okay.

Thank you.

Thank you.

Your next question comes from Josh Schwartz with Flatbush Watermill.

Hey, guys.

Hey, Josh.

Can you hear me?

Yes.

One question and one comment.

Mike, I just want to be sure.

I've been listening to you for awhile, I think I understand, but I don't want to assume anything.

In your view, is it that the one thing that you think is gone on that you are unwilling to change with ANF is the price level?

Is that accurate?

Other than that you feel like you're doing most things reasonably well, or even with the price you're doing that, given the long run where you want to be?

Yeah, I think we're positioned exactly where we want to be.

We're right at ANF, which puts us in the right space for Hollister.

I'm very comfortable with where we are with the price value relationship for ANF.

Okay.

So let me just make this comment.

I don't get a chance to speak to you often, so I wanted to do it here.

Sure.

To me, it's so obvious, you guys run, I mean, just a wonderful business.

You have $700 million in invested assets, you're going to have about $500 million in cash at year end, you're going to do about $200 million in net income.

It's an astounding job that you've done.

Everyone there has created tremendous value.

I think I understand the reason you want to maintain margin is because you want to maximize your long-term earnings, not just today.

I want to max for the margin, but also for the health of the brands.

Right, so that we can maximize how much money we make over the course of forever.

Exactly.

That's our mission here.

So what I would urge you to do, and I know I've gotten on these calls, and maybe I've been a little bit too confrontational, because I get a little bit upset.

That's okay.

But I wish you would look at the price of your stock, which if you back out the cash, is about 11 times earnings, or a 9% yield, that's if we don't grow ever, ever, which is just unreasonable given how well you guys run your business.

We should start looking at this, and, I mean, we should have done it awhile ago, I feel, obviously, but it should be looked at as an opportunity, and I don't want to be confrontational, so I want you to know I'm not saying this for that reason.

Okay, Josh.

There's no reason that you, or anyone at that company that has worked so hard, should be taken advantage of by Mr. Market and have to sell stock at prices that are ultimately way too low.

We can take advantage of this, and that's my comment.

I would like -- I think that that psychology should start to be looked at just as much as you look at how well you run the store, because it's another opportunity for us to maximize how much money we make in our interest.

Josh, we will do so.

Continue to look.

Thank you.

Sound advice.

Thank you, Josh.

Your next question comes from Don Whitiker with DCW Incorporated.

Good afternoon, gentlemen.

How are you?

Good.

How are you?

I wanted to start out and say I hope Q4, may the moose be with you.

Thank you.

Part of my question has already been answered.

Concept four, without divulging any kind of competitive information information, can you give us the demographics or when we would anticipate to hear greater detail of concept four?

I really can't reveal anything.

Nothing.

At this moment, other than what Seth said.

It is in the works, we're pleased with where it's going, and we will announce something at the appropriate time.

But know that it's a key thrust for our business.

Yeah, because Hollister's basically has legs of its own right now, so I think you guys are probably getting restless.

You're right.

Well, thank you so much, and may the moose be with you.

Thank you.

Your next question comes from David Cothdahl [ph] with Zurchin Management.

That's okay, I'm tired.

Thank you.

Bye.

Your next question comes from Dennis Van Zelfden with SunTrust Robinson.

Good afternoon, everyone.

Did the adult Abercrombie & Fitch stores located in malls with a Hollister perform better or worse than those adult stores not in the same mall as a Hollister?

I think in terms of the comp store change, those stores on average performed a little worse than average for Abercrombie & Fitch.

You're saying the stores in the same malls as a Hollister performed worse?

Yes, what we see is there's a small impact on the ANF stores on average.

It's not all the stores, but if you average it, there's a small impact during the first year, and once the Hollister has comped, we see very little impact.

So small in the first year, then negligible year two.

It's hard to judge the impact of this, because we still have a fairly significant number of the centers where we don't see any impact or it goes the other way, but if you average them all out, there is some cannibalization during the first year.

But not significant, and we really to have stress that.

Okay.

Thanks.

Thank you.

You have a follow-up question at this time from Margaret Mager with Goldman Sachs.

Hi.

I just wanted to clarify something about Hollister.

I think you said that Hollister's operating margins are now equal to Abercrombie's?

Right.

Okay.

Would that be an okay working assumption for the full year?

Well, I think that really refers to the third quarter.

It probably wasn't yet at ANF's level at the first and second.

It continues to gain.

The fourth quarter obviously remains to be seen.

It will relate to what kind of comps we generate at Abercrombie & Fitch.

Right.

Okay.

And on the productivity side, did you say that Hollister was above Abercrombie?

Yes.

Okay.

I'm just wondering, do you think that that's the right operating model for Hollister is something more profitable than Abercrombie?

Do you think that it should and will be a more profitable business?

That's a good question.

I don't think we really need to decide that one way or the other.

I think a lot of this relates to what the productivity difference ultimately rests for ANF versus Hollister.

There are a few elements of the Hollister expense structure that I think will probably always be a little higher than ANF's, meaning store payroll, because of the lower price points, a lot more transactions to process, a lot more task hours related to the same volume level.

At the same time the Hollister store size is smaller than Abercrombie & Fitch, with everything else equal should give it a little higher sales per square foot.

Which it has, yes.

Which it has right now.

We don't see any reason that the gross margin of the two businesses should really be any different.

And the exciting thing about that is that they are relatively the same for the first time.

Huge improvement in IMU to take it close to the Abercrombie & Fitch level.

Right.

I guess I was focusing on the idea of Hollister sort of crossing over and driving the top line, but I'm wondering if I should be worrying about if Hollister is kind of at its potential for profitability in terms of margin percentages anyway, if the down trend continues at Abercrombie if Hollister, if you end up with more of a negative mix shift, if you follow what I'm saying.

That sort of Abercrombie -- Hollister is to the point where it's so profitable that if Abercrombie continues down it overwhelms the gains at Hollister.

I don't think we at all feel that we've maxed out Hollister in profitability.

I don't think we've maxed it out in productivity per square foot.

We're not anywhere close to the peak we achieved in Abercrombie & Fitch.

I don't think we've seen the top in terms of initial markups.

We continue to make progress in building stores more efficiently, so I think there are elements of this business that we're still just getting going on, and we see a lot of potential there.

I couldn't agree more.

Huge up-side profit potential for Hollister.

Okay, well, that helps.

Thank you.

Yeah.

Thank you very much.

You have a follow-up question at this time from Joseph Teklits with Wachovia Securities.

Hi, quick one.

Did Hollister men's comp up or down in the quarter?

Let us look.

I think it was down very slightly.

Okay.

Got it.

Thanks.

Slightly is the answer, right.

At this time there are no further questions.

I would now like to turn the call back over to management for any closing remarks.

Thank you.

Good night.

This concludes today's ANF third quarter 2003 earnings conference call.

You may now disconnect.