Build-A-Bear Workshop Inc (BBW) 2014 Q4 法說會逐字稿

Greetings and welcome to the Build-A-Bear Workshop fourth-quarter 2014 results conference call. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Allison Malkin of ICR. Thank you. Ms. Malkin, you may now begin.

Good morning. Thank you for joining us. With me today are Sharon Price John, CEO, and Voin Todorovic, CFO. For today's call, Sharon will begin with a discussion of the fourth-quarter results and outlook for 2015. Voin will review the financials and then we will take your questions. We ask that you limit your questions to one question and one follow-up. This way we can get to everyone's questions during this one hour call. Feel free to requeue if you have further questions.

Members of the media who may be on our call today should contact us after this conference call with your questions.

Please note the call is being recorded and broadcast live via the Internet. The earnings release is available on the investor relations portion of our corporate website and a replay of our call and webcast will be available later today on the IR site.

Before I turn the call over to management, I will remind everyone that forward-looking statements are inherently subject to risks and uncertainties. Our actual results could differ materially from those currently anticipated due to a number of factors including those set forth in the risk factors section and the annual report on Form 10-K. We undertake no obligation to revise any forward-looking statements.

And now I would like to turn the call over to Sharon John, CEO.

Thanks, Allison. Good morning, everyone. Thank you for joining us today. We were pleased to deliver solid results in 2014 and believe that our strong fourth quarter represented the convergence of the key strategies that we have been driving throughout the year.

For the fourth quarter, we achieved a 9.9% increase in consolidated comparable-store sales, expanded retail gross margin by 730 basis points, and delivered net income of $13 million versus adjusted net income of $7 million in the fourth quarter of 2013 and an increase of $6 million.

In total for the 2014 fiscal year, we achieved an increase of 1.6% in a consolidated comparable store sales on top of a 5.1% increase in fiscal 2013; expanded retail gross margin by 450 basis points following a 220 basis point expansion in fiscal 2013; and delivered adjusted net income of $16.5 million versus adjusted net income of $3 million in fiscal 2013, an increase of $13.5 million. The continued disciplined execution of our stated strategies is the primary contributor to our improved results for the quarter and for the year.

As we stated, our plan for 2014 focused on four key strategies, optimizing our real estate, refining our consumer value equation, rationalizing our expense structure, and establishing the groundwork to further leverage our core competencies and brand equity. Throughout the year, we believe we have successfully and consistently delivered against these strategies.

First, we have continued to execute the real estate optimization plan that was initiated in late 2012. At that time, 22% of our North American retail stores were unprofitable. In contrast, we ended 2014 with 98% of our stores generating a positive four-wall contribution margin. Specifically, we generated a margin of over 19% in our North American stores which is almost double the margin we achieved in 2012. These results show significant progress toward reaching our stated goal of a 20% to 22% four-wall profit margin.

Simultaneously with the closing of underperforming stores, we have selectively opened stores in new formats to take advantage of high traffic tourist locations. An example of our ongoing opportunistic approach to nontraditional real estate is the fourth-quarter opening of five temporary shop in shops within key Macy's locations including the Herald Square in New York City flagship store. This initiative not only added sales in the quarter but also increased our brand exposure to the hundreds of thousands of tourists and local consumers that visit Macy's as a part of their holiday tradition.

Second, we have continued to successfully refine our consumer value equation. We balance the tactics of reducing discounts and taking selected price increases with an integrated brand building marketing effort designed to drive more profitable sales and elevate product stories.

During the fourth quarter our Merry Mission Christmas campaign was a great example of how this new brand building marketing approach can generate both sales and margin for our Company. We positioned our proprietary Merry Mission reindeer product as intellectual property and buoyed it with exclusive advertising and a mobile app. This approach elevated the perceived value of the line enabling parity retail pricing with our licensed offerings for the first time. By doing this, we increased average transaction value and added margin.

The app which extended our brand interaction by creating play beyond the plush had over 1.5 million game sessions. This along with the strength of our other proprietary and licensed properties, namely Disney's Frozen and Nickelodeon's Teenage Mutant Ninja Turtles, fueled our 9.9% comparable store sales increase in the fourth quarter.

The combination of real estate optimization and refinement of the consumer value equation was instrumental to our North American sales per square foot improvement of $409, up from $381 in 2013 moving us closer to our stated sales per square foot goal of $450 to $500.

Third, we have continued to manage our expenses and successfully expand our margin. The fourth quarter marked the first period where we were able to comprehensively value engineer our product offering from the planning stage versus cost reducing the line midway through the development process. This effort, combined with the strategic price increases helped to drive a 730 basis point expansion in retail gross margin for the quarter and a 450 basis point expansion in retail gross margin for the year.

Fourth, we started to lay the groundwork for the expansion and creation of new revenue streams. In 2014, we expanded into new international markets for the first time in over three years with the opening of two stores by our franchise partner in Turkey. We also elevated and expanded our franchise agreement in Germany adding two additional countries for future development, Switzerland and Austria. In addition, we started to make key investments to upgrade our IT infrastructure and supply chain with the goal of continuing to improve productivity and efficiency.

During the coming year, we will begin to evolve our 2014 strategies and stated goal of sustained profitability to sustained profitable growth. Through a combination of continuous improvement of current initiatives and strategic expansion into additive opportunities, we will focus on the following four key strategies for 2014.

One, expand into more places. During the year, we expect to open stores in high potential destinations such as tourist locations, outlet malls and shop in shops given that these types of locations tend to overindex on key metrics versus our traditional mall stores.

In the back half of the year, we will also start to update our aging store fleet and systematically roll out a new store design that has been developed to improve productivity while refreshing our brand look to be more relevant to the millennial consumer.

We will update stores with our new design primarily in conjunction with natural lease events including new store openings, relocations and lease required remodels. We will also continue to leverage the current momentum of our owned and operated retail business to enter new global markets with both a restructured franchise model and organic corporate expansion.

To this end, we are pleased to share that we recently restructured the Nordic franchise arrangement which included converting the store in Tivoli Gardens, one of Denmark's most popular tourist destinations into an owned and operated enterprise.

Two, target more people. We will continue to drive our core consumer business with an evolved segmentation, product development and marketing strategy. We will focus on initiatives that increase trial and repeat visits from the 3- to 12-year-old core consumer who currently represents over 60% of our sales.

We will also strategically expand our effort to the over 12-year-old consumer base with a focus on less price sensitive categories including giftable, affinity and collectible products. This consumer currently represents approximately 20% of our sales and has a tendency to overindex for online purchases. Therefore we expect to leverage our e-commerce business to efficiently target this segment.

Three, develop more products. We will continue to develop more high-impact proprietary product stories coupled with elevated marketing programs that tend to garner higher price points, drive add-on purchase and create play beyond the plush. We also intend to strategically expand our brand presence and generate new sales and profit streams by launching an outbound licensing program. Licensing will enable us to extend our brand reach with new offerings in relevant categories and will provide consumers with products beyond the plush.

Four, drive more profitability. We will continue to improve the value engineering of products to further optimize margins while implementing new systems that facilitate sales growth and increase efficiency.

We have also prioritized the incremental growth initiatives that I have just discussed to strategically expand our profitability. These initiatives are comparatively margin accretive because they leverage existing infrastructure, can demand higher price points or are primarily royalty-based.

To date, our first-quarter 2015 comparable store sales are positive. Key contributors are the impact of the redemption of holiday gift cards and the implementation of our strategies including the launch of fresh new offerings of proprietary and seasonal products and the continuing performance of key licensed properties that we accurately anticipated would remain relevant after the holiday sales period, such as Frozen.

Of note, this past Valentine's Day was the third largest single sales day in our history and represented the highest average daily store sales since 2006. Buoyed by the holiday falling on a Saturday, we further fueled this opportunity by leveraging our interactive personalized store experience to create an integrated marketing effort designed to appeal to kids, parents, grandparents and teens who wanted to create a furry friend for someone special in their lives.

Our campaign called Share Your Heart paid homage to our iconic and holiday appropriate heart ceremony and emphasized adding a personalized message to your furry friend with our record a sound accessory.

We also partnered with the Make a Wish Foundation for the second year in a row to enable our guests to share their hearts and their support for children with life-threatening illnesses.

To drive our boy's business during the Valentine period, we built on our historically successful superhero product lines with the launch of a new Hulk Bear in advance of the May 1 release of Marvel's Avengers, Age of Ultron movie. This super cute bucked up Hulk was also a natural giftable for our over 12-year-old guest who wanted to send a message of strong affection for someone special.

To drive sales for the remainder of the first quarter we will take advantage of the Easter shift back to the first quarter with the introduction of an innovative brand building TV advertising campaign timed with the Easter season and the arrival of our proprietary spring collection.

We will launch a new Build-A-Bear product line called Promise Pets, a more realistic breed based plush primarily targeted to the older girl and boy segments. Promise Pets is supported with an age appropriate free mobile app that allows the child to bring the product to life and virtually care for their new furry friend further building on our goal of extending brand interaction and creating play beyond the plush.

We will introduce the first of a series of limited-edition collectible Disney Princess bears created to appeal to both the younger girl and the over 12 collector segments. The initial offering will be the Cinderella bear, which we expect to benefit from heightened character awareness due to Disney's March 13 release of the live action Cinderella film. And we will continue to drive our boy's business by systematically launching new Avengers characters building up to the film's release.

Overall our outlook for the quarter remains positive and we continue to expect to leverage the momentum from 2014.

Now I would like to turn the call over to Voin to review our 2014 financials in more detail.

Thanks, Sharon, and good morning to everyone. We are pleased to report our eighth consecutive quarter of improved operating results including positive comparable store sales, expanded retail gross margin and increased net income for both the fourth quarter and fiscal year 2014 demonstrating the disciplined execution of our strategies.

Before I continue as a reminder, fiscal 2014 was comprised of 53 weeks compared to 52 weeks in fiscal 2013. The 53rd week is included in our 2014 fourth-quarter results.

For the fourth quarter, net retail sales were $130 million compared to $106 million in the prior year, an increase of 23% excluding the impact of foreign exchange. Consolidated comparable store sales rose 9.9% driven by a 12% increase in transaction value with gains in both average unit retail and units per transaction, partially offset by a decrease in transactions as we experience lower conversion on foot traffic.

By geography, comparable store sales increased 8.5% in North America and 14% in Europe. Comparable store sales are compared to the 14-week period ended January 4, 2014. Our e-commerce business increased by 9% excluding the impact of foreign exchange with continued improvement in profitability.

The fourth quarter also benefited from an adjustment to deferred revenue related to our loyalty program which was approximately 1% of net retail sales for the quarter.

Retail gross margin expanded 730 basis points to 52.2%. This was a result of a 420 basis point increase in merchandise margin and improved efficiencies in the supply chain. The remaining 310 basis points of expansion was attributable to leverage in fixed occupancy expenses driven by improved sales performance including the impact of the 53rd week and the deferred revenue adjustment.

SG&A was $56 million or 42.9% of total revenues including $1 million in management transition, asset impairment and store closing expenses. This compares to $44 million or 40.9% of total revenues last year which included $1.5 million in management transition, store closing and asset impairment expenses. Excluding these costs, SG&A was 42.1% of total revenues in the fourth quarter this year, an increase of 260 basis points. The additional expenses were related to increased performance-based compensation and higher investment in elevated brand marketing to drive store traffic.

Adjusted net income per diluted share improved to $0.73 from $0.40 last year. For the fiscal year, net retail sales were $388 million compared to $373 million last year, an increase of 3.4% excluding the impact of foreign exchange. Our consolidated comparable store sales rose 1.6% primarily driven by a 7.3% increase in transaction value that included gains in both average unit retail and units per transaction partially offset by a decrease in transactions.

By geography, comparable store sales grew 1.4% in North America and 2.3% in Europe.

E-commerce sales increased 3.5% excluding the impact of foreign exchange with significant improvement in profitability. Retail gross margin for the year increased 450 basis points to 45.6% driven by 370 points of expansion in merchandise margin and improved efficiencies in the supply chain. The remaining 80 points of expansion came from leverage and fixed occupancy expenses driven by improved sales performance including the impact of the 53rd week and the deferred revenue adjustment.

SG&A was $164 million or 41.9% of revenues including $2 million of management transition, asset impairment and store closing expenses. This compares to $161 million or 42.4% last year which included $5 million of management transition, store closing and asset impairment expenses. Excluding these costs, SG&A was 41.3%, a 30 basis point increase.

Pretax income improved to $16 million from a pretax loss of $2 million in fiscal 2013, an $18 million increase year-over-year.

Income tax expense was $1.7 million for an effective tax rate of 10.4%. The 2014 tax expense and effective tax rate reflect the full release of the valuation allowances in foreign jurisdictions as well as a portion of the US valuation allowance. We currently expect to see a reversal of the remaining US valuation allowance in fiscal 2015 which would result in an overall tax benefit for the year.

Net income improved to $14 million or $0.81 per diluted share compared to net loss of $2 million or $0.13 per share last year. Adjusted net income improved to $16.5 million or $0.93 per diluted share compared to last year's adjusted net income of $3 million or $0.17 per diluted share.

Turning to the balance sheet, at year end consolidated cash was $65 million, up $21 million from last year. The increase in cash is attributable to our improved operating performance and reduced capital spend. The majority of our cash at year-end was domiciled outside the US. In addition, during the year, we had no borrowings on our credit facility.

During 2014, we repurchased 327,000 shares of our common stock for $3.4 million leaving approximately $3.8 million of availability under the current stock repurchase program.

For the 2014 fiscal year, capital expenditures totaled $11 million primarily related to the refresh and opening of stores and IT infrastructure. This compares to $19 million in the prior-year.

Depreciation and amortization was $18 million in fiscal 2014. For fiscal 2015, we expect capital expenditures to be in the range of $20 million to $25 million. As Sharon mentioned, we will begin to update our aging store fleet and systematically roll out the new store design that has been developed to improve our productivity while refreshing our brand look. The majority of the store spend is expected to occur in the back half of 2015.

Separately, we will continue to invest in IT infrastructure throughout the year. Depreciation and amortization is expected to be $16 million to $18 million.

Consolidated inventories at quarter end totaled $52 million compared to $50 million last year, an increase of 3.4%. This change was driven by an approximate 10% increase in units partially offset by a decrease in average unit cost as we realized benefits from our ongoing value engineering initiatives. The increase also partially reflects the proactive adjustment of our manufacturing lead times in order to mitigate anticipated first-quarter disruption of shipments at West Coast ports which positioned us well for the start of 2015.

Finally, as you model 2015, the full year should reflect an adjustment for the 2014 53rd week. For modeling purposes, this adjustment should represent an average week of sales with a higher flow through. Also note due to the timing of Easter falling on April 5 this year, the majority of the sales for this holiday will occur in this year's first quarter versus the second quarter last year.

Now I would like to turn the call over to the operator to begin the question-and-answer portion of the call.

(Operator Instructions). Stephanie Wissink, Piper Jaffray.

Thank you. Good morning, everyone. Voin, I will start with my follow-up first and then Sharon, a question for you. On the product margins that you mentioned I think up 400 basis points particularly from the value engineering, can you talk a little bit more about what the balance of the year might look like in terms of opportunities on the raw product costs?

And then, Sharon, my question for you just coming off of multiple days at Toy Fair this weekend, there is a lot of talk around the entertainment slate for 2015. Could you help us look beyond the first quarter, beyond Avengers and talk a little bit about what you see coming through the balance of the year? Thank you.

Okay, from the gross margin perspective, we are very pleased with the performance that we have seen in Q4. We expect to continue to see some of the pricing benefits that we are seeing in margin expansion in the first half of the year. As you can realize from the [staff] reported over the last few quarters, our margin has expanded significantly more in the second half of the year since we are starting to annualize those things in 2015 there is going to be the wrap- around impact of that margin expansion and pricing activities that we took last year.

So for the entertainment slate, yes, clearly having great partners is a key part of our strategy and we have done a great job at building those relationships over time. This particular year is a very powerful year for us. I mentioned that we have the Cinderella collectible doll, collectible bear that will be out for the live-action film. That is an important, new approach for us in that it will be an $80 product and a limited edition. So we really are pushing into the strategy that we discussed earlier about the collectible business, the affinity business, the over 12- opportunity. And the product is all-inclusive so it will come in its own unique package with an exclusive dress, wigs, shoes, etc. So we are really excited about that.

And then we do follow on with Avengers. We also have Minions for the summer. We are very excited about that. We have a lot of good, early buzz on that. We have new product for Frozen which we expect to continue to be powerful and then in the fourth quarter, we have Star Wars.

Thank you. Best of luck you guys.

Gerrick Johnson, BMO Capital Markets.

Good morning. I was wondering if we could talk about the increase in value of transaction. Is that driven by more add-ons like clothes and shoes or is that from selling more higher-priced bears?

It is a combination of both things, Gerrick. As we mentioned, we have taken selective price increases basically in two different strategies I think we have talked about before one being selective price increases as it relates to licensed product and some of our key proprietary product taking it to a higher price point. And then the price banding where we took our entry-level price point from $10 to $12. But we also have with the marketing of comprehensive stories, we are seeing add-on purchases increase as well.

So it is not just a dollars per transaction, it is also the unit dollars and it is the units per transaction.

Okay, great. So what is the percent of your bear sales now that are licensed versus proprietary and how does that compare to say last year, maybe even a couple of years before that?

So I think that we have mentioned in the past that we have a range that we look at from 30% to 40%. This year with the powerful license roster that we had, it was on the higher end of the range and certainly hit the top edges in the fourth quarter when you have the combination of a Frozen which is one of the biggest licenses to ever hit in a single year and Turtles. But for the year, we are just on the higher end of the range.

In the past it has been in that same range, down to 30, up to 40 depending on the power of the film or the property itself.

Okay, thank you, Sharon.

Alex Fuhrman, Craig-Hallum.

Thanks and congratulations on a great year. I was hoping to get a little bit more clarity on what comps could look like in the first quarter. It sounds like they are positive so far and then obviously you are going to get that benefit from the calendar shift of Easter. What does that kind of end up looking like then for Q1 and then how should we think about Q2 with the calendar shift as well?

Yes, so we are positive year to date. We did have a great Valentines and we actually had a good January given the increase in the gift card sales coming out of the fourth quarter of last year. We feel very good about the quarter. We don't give exact guidance on quarter to quarter comps but the shift should be beneficial to us.

I will just caution that like a lot of retailers we have experienced some hit and miss with some of the weather. We have managed to fight through it thus far and although I think we have planned very robustly to manage through some of the port issues, if they remain chronic or become more acute, we are not completely immune. But we have done quite well on mitigating it.

Okay, that is very helpful. Thanks. As a follow-up, I was very interested to hear what you mentioned about Denmark. Was there something kind of unique about that franchisee that made that an interesting opportunity to bring that in-house or is that perhaps maybe the international strategy as you think about new organic stores, are you also potentially going to be bringing more comprehensive markets in-house?

I think that it is really an extension of our current North American strategy in that when you think about what Build-A-Bear can really mean to people, it is about marking moment in time, creating memories and that same sort of over index on key metrics in tourist locations applies also to doors like a Tivoli Gardens, where for those of you that aren't familiar is a huge tourist attraction in Northern Europe in Denmark and some northern German and Belgians.

It was an extremely successful door for us some years ago up in the $5 million, $6 million range. They had not been performing at those levels and we had an opportunity to rearrange, to renegotiate some of that deal with our Nordic partner and take that to an owned and operated enterprise which we felt would be an excellent opportunity for us and it is basically just an extension of the strategy because the same key metrics hold in place.

We are pretty excited about that and we are looking at restructuring as we mentioned some of those franchise deals in key countries and if it makes sense for us financially and strategically, we will continue to do that. It also leverages our UK operations so it wasn't really outside the scope of what we would be able to do in the normal course of business. We are managing it with our general manager of the UK.

Okay, great. That is very helpful. Thank you very much.

Alex, sorry. I'm just going to add on you had a second part of that question on the second quarter. Second quarter has historically been whether Easter is in it or Easter is not, our smallest quarter. It is hard to cover on second quarter particularly with an Easter shift.

Understood, thank you.

Greg McKinley, Dougherty & Company.

Thank you. So, Sharon, you talked a little bit about your promotional strategy and your product offerings here for Q1. Can you tell us a little bit about what this TV marketing effort is going to be, how that compares and contrasts with what you have done in the past?

And then just want to make sure I understand what are these products, these Promise Pets and how many additional limited edition Disney collectibles are out there? Is this a staged product line that we will see unfold over months or quarters?

Yes, okay, so the TV strategy, one of the things that we were careful to do as we restructured the value equation for the consumer was not just pull out the discounts and increase pricing without balancing that with increased marketing, brand building, marketing. Because you have to give and take a little bit there. You have to balance it in a way that ultimately you increase your margins as well by not spending so much that you made up the difference or lost the difference. But you need to go back in and speak with the consumer again in a different way.

So that brand building over-arching marketing story -- and you will see a really great example of that as we go into the Easter timeframe -- is resetting who we are and introducing ourselves to the millennial in a fresh, new way. Very important but that is just one arm of our marketing strategy.

The second arm is to build these stories, not just sell SKUs, we are not just churning out stuffed bears. This is a story building opportunity for us. It gives you a hook with the marketing, it helps you drive add-on purchases, it creates efficiencies in your marketing and we have seen that that is working. It worked very well with the reindeer story.

We believed in the reindeer story and planned into something that had a broader opportunity in both scope and scale. So Promise Pets can be a perennial for us. It is not seasonal, it appeals to both boys and girls and it is a little bit of a different approach than the type of animal that we have had on our shelves in the past. It is not as cartoonish, it is pretty realistic but really cute.

You will be able to get your free app and download it and that particular animal whatever breed that you purchase comes to life on this app and the kid gets to interact and pet and feed and care for the pet in a virtual, way, but it also has this tactile little friend that they can play with, carry with them, sleep with which is an important part of childhood and kids still like to have that tactile interaction. It is not all virtual. So we believe that we can bring together the best of both worlds.

We expect that we will be able to continue to update Promise Pets throughout the year and in the coming years with new breeds, just churning through new breeds.

On your third question, which was the Princess question, collectible question, the answer is yes. We do expect to have a continuous cadence of collectible dolls and right now, we are doing it in a limited-edition way which is 30,000 collectible dolls of each one of the different princesses that we're planning. We are working hard in conjunction with Disney to plan these introductions in conjunction with some other entertainment opportunity that they may have slated or marketing that they may have slated around the princesses. But you will see a start to bring these out as a series.

And when you say as a series, is it a Princess series or we could see a series of these with other types of Disney properties?

Right now it is a Princess series but clearly if this works for us and it is successful, we would continue it in fresh new ways.

Thank you.

James Fronda, Sidoti & Company.

Just on lower overall oil prices, do you think that had a significant impact for the fourth quarter and do you think it will have a big impact for you guys in 2015?

So we got a little bit of a benefit but it is really not significant and we really don't expect it to be significant in 2015.

Okay. On either the top or bottom line, correct?

Correct.

Okay, thank you.

(Operator Instructions). Gerrick Johnson, BMO.

Good morning again. A question on Easter. It falls on the 5th and New York City schools I know are off the week after. Isn't that when you usually get the nice lift is when the kids are off from school so I'm kind of wondering how it is more of a first-quarter event as opposed to second quarter?

Okay. Good point. But the first-quarter sales of the pre-Easter products, when kids wake up and have something in a basket, that is going to happen in the first quarter and we do quite a few bunny sales. So all of those sales will come before. The spring breaks should buoy us in the second quarter assuming kids don't stay in school like they did last year because of the weather. They lost so many school days last year that we actually lost a lot of our spring breaks particularly in the polar vortex affected areas which did affect our sales in a negative way in the second quarter. So there might be an opposite effect for us this year assuming that kids stay out of school for the spring breaks.

Okay, that makes a lot of sense. And then on the new remodeled stores that will be appealing to millennial moms, what about these new stores that will make them appealing to those moms?

We have done a complete brand refresh which from the logo through the color palette that brings us in sort of up to date. If you look at where we have been in the past from color palette to logo to typeface, it looks as if it was created in the 1990s and it was and we haven't really touched the brand since the beginning and most great brands do continuously update and tweak their brand and brand look.

We also relooked at the entire process and flow to make sure that people get through the process in a way that they feel like that each stop is beneficial and exciting and that we are driving either affinity in some way or an add-on purchases and to make it more efficient for us. And we also interestingly and I mentioned this at the ICR presentation, we are taking what is probably our most iconic, most eye-catching element of the store which is our stuffer, certainly the most unique elements of our store, pulling it up toward the front of the store and making it a lot more prominent to make sure that people know that something is fresh and new inside.

So I think when you get into one of these stores and when we start to remodel we will be sure and tell you where they are located. I think you will see how the gestalt of it really feels different and fresh without losing the core essence of who we are.

Sounds good. Thanks a lot.

(Operator Instructions). Greg McKinley, Dougherty.

Thank you. Sharon, we talked about launching outbound licensing. Can you give us some examples of how that may show up, what should we be looking for and when?

You should be looking for things more in the fourth quarter of this year and clearly our priorities would be categories where we have been successful in the past. We have had out-licensing in the past and categories that are close into our brand equity. So some of the things that we have done well in the past with our certain segments of apparel, arts and crafts, snack foods and candies, and we are all in the process with great partners. We have identified partners. It just takes a while to develop these products and get them out on the shelf.

Okay, thank you. It seems like your seasonal stores were I am guessing highly successful, not just in terms of generating revenues but exposing the brand. Can you or will you help us understand the degree to which those impacted your Q4 revenues?

It was only five shop in shops. So it was comparatively not that material in a purist revenue form but we fully believe that it was material in an impact way. Now we also believe that we have exposed the brand to a lot of new consumers, we are still working with Macy's, they are wonderful partners of ours. And it is another one of those ways where we can integrate and elevate relationships.

You probably know we for years have had the Macy's float in the Thanksgiving Day Parade and it helps us to pull that whole story together and helps us to have presence in areas that would otherwise be very difficult in some of these downtown core big cities if it weren't for a shop in shop deal on 8% rent basis.

Okay, thank you.

There are no additional questions at this time. I will turn the floor back to Sharon John for additional comments.

Thanks, guys. Really appreciate everyone joining us today and we look forward to updating you on our progress in the first quarter 2015 when we have our next call. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time and we thank you for your participation.