Citi Trends Inc (CTRN) 2012 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Citi Trends third quarter 2012 conference call. During the presentation all participants will be in listen only mode. Afterwards we will conduct a question-and-answer session.

(Operator Instructions)

As a reminder this conference is being recorded today, Tuesday, November 20, 2012. I would now like to turn the conference over to Tripp Sullivan of Corporate Comm. Please go ahead, sir.

Thank you. Our earnings release was sent out at 6.45 AM Eastern Time this morning. If you have not received a copy of the release it is available on the Company's website under the Investor Relations section at www.cititrends.com. You should be aware that the prepared remarks made during the call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Management may make additional forward-looking statements in response to your question. These statements do not guarantee future performance, therefore undue reliance should not be placed on them. We refer you to the Company's most recent report on Form 10-K filed with the Securities and Exchange Commission for a more detailed discussion of the factors that could cause the actual results to differ materially from those described in the forward-looking statements. I would now like to turn the call over to Bruce Smith, Chief Financial Officer. Bruce, please go ahead.

Thanks, Tripp. Good morning, everybody, and thank you for joining us today. Also on the call are Ed Anderson, Chairman and CEO, and Jason Mazzola, Executive Vice President and Chief Merchandising Officer. First, I will provide with you details related to the third quarter and year-to-date results and then Ed will discuss further the results and our business outlook, after which we will address any questions you may have.

Total sales in the third quarter increased 4% to $149 million, including 0.005% increase in comparable store sales. The higher comp store sales were reflected in a 4% increase in customer transactions, partially offset by lower average ticket. The decrease in the average ticket was comprised of an average unit retail that was 8% lower, partially offset by an increase in the average number of items per transaction.

By merchandise category, sales in the third quarter in comparable stores were as follows. Accessories were up 12% on top of a 1% increase in 2011's third quarter. The Home division was up 4% in this year's third quarter and up 3% last year. Men's sales were up for the second straight quarter, increasing 1% after decreasing 13% in the third quarter of last year. Children's sales were down 4% this year and down 8% last year and the Ladies division was down 12% this year after being down 11% in last year's third quarter. Sales of nationally recognized urban brands represented 42% of total sales in the quarter compared with 44% last year. Comparable store sales by month in the third quarter were up 3% in August, down 4% in September, and up 2% in October. For the nine-month year-to-date period total sales are up 3.6% and comparable store sales are down 3.1%.

Gross margin in the quarter was up 70 basis points from last year's third quarter to 34.4%. For the year to date gross margin is 35.5% compared with 36% in 2011's first three quarters. SG&A expenses were well controlled in the quarter with expenses as a percent of sales declining 280 basis points to 34.3% from 37.1% in the third quarter last year. Last year's third quarter included $1.2 million of severance costs incurred in connection with a reduction in force that eliminated 40 positions.

These severance costs account for 80 basis points of the improvement in the expense ratio. The other 200 basis points of improvement resulted from savings in numerous areas, including, among other things, lower ongoing payroll costs associated with a reduction in force, favorable insurance results, less pre opening costs related to opening fewer new stores this year, and the implementation of expense reduction initiatives in several other areas.

Year-to-date SG&A expenses as a percent of sales have declined 120 basis points to 32.3%, even with a de-leveraging effect on expenses as a percent of sales that typically accompanies a comp store sales decline of 3%. The third quarter net loss narrowed to $3.7 million or $0.25 per share this year compared with a loss of $6.8 million or $0.46 per share last year. Year-to-date the Company has a net loss of $1.5 million or $0.10 per share compared with a loss of $4.7 million or $0.32 per share in last year's first three quarters. Our balance sheet position remains strong as we enter the high cash flow fourth quarter. Cash, together with short-term and long-term investment securities, totaled $56 million at the end of the quarter, up from $53 million at the same time last year and we continue to have no debt.

Inventory was up 15% over last year's third quarter, with about 50% of the increase due to a change in our inventory flow this year to bring in a higher percentage of cold weather purchases before November 1. The other 50% of the increase is due primarily to an increase in next season buys as part of our previously mentioned shift back toward higher levels of opportunistic buying. Next season buys are bought at heavy discounts at the end of a season and held in our distribution centers until the beginning of that same season the following year.

In looking toward the fourth quarter it is important to remember that we have an extra week this year, the week ending February 2, 2013. Because this week includes the first of the month and will likely include some benefit from income tax refunds being received by our customers, we expected sales to be somewhat higher than our weekly average. However, we would also expect it to be virtually breakeven from a profitability standpoint, because in addition to having operating expenses during the extra week, consistent with last year it will include a significant amount of markdowns early in the week in order to have them in place before the first of the month. Now I will turn the call over to Ed.

Thank you, Bruce. We are making good progress in our turnaround efforts. There were several positives in the third quarter results. First, we're very happy to report a comparable store sales increase. This is the first comp sales increase in 10 quarters. The last quarterly comp increase was the first quarter of 2010. Also, we controlled expenses well and improved our cash position.

Sales of the Accessories, Home, and Men's divisions all increased for the quarter. Footwear is the biggest driver in Accessories. As reported previously, we've expanded the space dedicated to Footwear and have had very good results. Additionally in Accessories we expanded our offerings in Men's and Children's Accessories and have delivered increased sales. The Home division bounced back and we believe our Home business is on track. An expansion of our Big Men's offering drove the increase in Men's and we believe we have more up side there. The Children's division was down again.

The Girl's business is the most difficult and it has been affected by the decrease in brands in much the same way as Ladies. Our Ladies business, however, continues to be our biggest challenge. The Brand business continues to decrease, as previously popular Urban Brands just are not selling as well as in the past. While we continue to test new brands and work with suppliers to revive some of the brands, we're putting more of our efforts into the non-branded part of the business. And we have seen some nice successes in the non-branded Ladies business.

We have brought some new buyers into this area and we're hopeful that we can see real improvements here in the not too distant future. Gross margin for the third quarter was higher than last year at 34.4%, but was negatively impacted by higher than expected markdowns and higher freight costs. Higher markdowns were partly due to marking down some of the mistakes inherent in the significant merchandising changes we have made. Freight costs for merchandise shipped to our stores was higher due to higher volumes shipped this year versus last year. That being said, we still expect, when we are further in our turnaround to see a normalized annual gross margin in the 37% to 38% range.

We planned higher inventories at the end of the third quarter. This was done to ensure that we finalize receipts of Fall/Winter product earlier. This gives us a longer selling season for Fall/Winter merchandise and sets up a smoother transition into Spring product. We are excited about opportunities for sales in the fourth quarter and are much better prepared from an inventory quality and content perspective. However, we do have some concerns. Last year's fourth quarter was highly promotional for us, as we cleared out a lot of excess Branded inventory. The extra markdowns we took to reprice and rebalance the inventory drove the gross margin down to about 30%. This presents a challenging top line comparison.

Next, I want to talk about layaways. Layaways historically account for about 10% of our sales, but they have a larger impact on the fourth quarter, especially December when large amounts of layaways are paid out. Layaways are not recorded as sales until the entire balance is paid and the merchandise is picked up. So in every quarter total sales include non-layaway sales plus layaways picked up. Our layaway sales are down this year because of a lower AUR on items laid away. So we expect the amount of layaways converted to sales in the fourth quarter to be less this year than last year.

We expect the drag on fourth quarter comp sales from fewer layaways to be about 2%. We don't know exactly how this will play out for overall comp sales. Non layaway sales have been up the last couple of months and could offset the expected layaway conversions drag, but we won't know whether this happens until Christmas. Sales for the first three weeks of November are flat with last year. Note that during this three-week period, non layaway sales were up, but layaway conversions were down. Although we still have much work to do, we feel very positive about the progress we're making and continue to be very optimistic about our future. Okay, operator, we'll now take questions.

(Operator Instructions)

Evren Kopelman with Wells Fargo.

Congratulations on the positive comp in the quarter.

Thank you, Evren.

I wanted to ask about the average unit retail as you're lapping the strategic price reductions from last year. When can we expect that average unit retail to begin to flatten out?

As you know the average unit retail has been down -- Bruce, correct me if I misspeak here -- around 10% most of the year. And we -- the first time we anniversary a big drop in AUR last year -- last year's AUR was down slightly as we came through the second and third quarter into the fourth. But the first time we saw a big drop in AUR last year was in the month of December. And December we saw about a 10% drop and the same thing in January. So, we are going to be anniversarying a big drop as we get into December. On the one hand, that's a positive, because we'll be anniversarying the AUR. And we don't know what the prospects are for this year's AUR versus last year's AUR. I guess we're being sort of cautious at this point. Does that make sense?

Yes, that makes sense. The other question is about that extra week and the timing of tax refunds. I remember last year, January, I think, until the last two days of the month and the quarter you were running a certain comp and those two days were down a lot because of later tax refunds. Do you have any idea this year, if there is any conversation you've heard about timing, how that will impact your Q4 into Q1 that we should think about when modeling?

Evren, we haven't heard anything this year and if you remember last year, the news that came happened like a week before the end of January. We had a certain date that we expected the government to start sending the wire transfers out and they decided to push it back a couple weeks for what they called security concerns about -- from the recipients of the wire transfers. So, it did push everything back, but even last year, although those two days, Friday and Saturday, were down from the previous year, they were still higher than what a normal Friday and Saturday would be because some of the checks had already started to go out.

Okay. Then lastly, obvious the cash balances growing on the balance sheet. Any thoughts about a special dividend or something like that before potential tax rate changes? Thank you.

Thanks, Evren. We want to emphasize that we're still in a turnaround here. And while we're very happy to continue to report improved results, we are not turned around yet. So, we're still being very conservative as it relates to all of our parts of our business, including cash. We need to be a lot further down the path of our turnaround before we think about doing things with cash. So, for now the answer to that question is no.

(Operator Instructions)

Thomas Filandro with Susquehanna International Group.

Congratulations, as well, getting into positive comp territory. Two quick ones. Can you guys just give us some insight on your thoughts around Black Friday? I think last year it took a more aggressive initiative to be in the game. Can you talk about your merchandising and or marketing strategies around the Black Friday weekend and how it compares to last year?

Then the second question is related to -- I believe you guys talked about introducing or each buyer had to introduce like 25 new resources. I don't know what period of time that was over. Can you just talk about that strategy and whether or not it is sort of yielding any successes?

And then I have a longer term question related to these urban brands and I will just ask it now. What do you do if, in fact, the urban brands never do rebound? Is there another way for you guys to sort of reinvigorate the business in a different direction if these brands don't come back to the levels they've come back to in the past? I know that's a lot, but thank you.

Tom, thanks for the questions. I did hear your three separate sort of questions about Black Friday plans and marketing. About the -- what's the report card on the new brands and new vendors we've brought into the Company. And two, what happens if the urban brands really don't rebound to the extent they did in the past. That's a lot of questions, but our chief merchandising and marketing guy, Jason Mazzola, here, is going to take them on.

Starting with black Friday and sort of our holiday messaging and what we're doing in the stores. We're definitely participating in black Friday this year. I think our offering is going to be more powerful than last year's. Specifically, we're going to have ten items that are really catered to our customer at exceptional values that are going to be placed strategically throughout the store. In addition to that, as a Company, we're focusing more on gift giving as a whole. So at the same time as the black Friday is going on and throughout the entire holiday season, we have a new table program at Citi Trends to really emphasize gift giving and highlight some of those areas.

There are six tables this year. Gifts for him, which includes fragrance, jewelry, and accessories. Gifts for everyone, which includes clocks, bar wear, candleholders, picture frames and throws. Gifts for kids, which includes pajamas, box sets and slippers. Toys, which includes predominately dolls, games, and vehicles. Gifts for her, which is predominantly robes and slippers. And then, the last table, men's and ladies fashion watches. This is different than what we did last year. We sort of had business as usual at Citi Trends. And this year we are really moving forward with a very aggressive gift giving strategy catered specific to our customer. So, we're cautiously optimistic about the holiday season, as Ed said, but we think we have positioned ourself for success. So, that tackles the first question.

Second question was about new resources. The buyers have made outstanding progress in opening new resources. We have actually been pleasantly surprised with some of their reaction to a lot of those new resources, both in the branded and non-branded areas. So, overall, I'd give the buyers and the merchants a check plus. Some things have not worked out as we would have liked. And as Ed mentioned, we've taken the mark down and moved on from there. But we're broadening our vendor assortment and broadening our fashion assortment. That actually dove tails very nicely into your third question about urban brands.

As far as we look at urban brands, let me just give you my quick overview in terms of how we view men's and ladies. Overall, we continue to see mens urban brands in a relatively healthy spot. The current brands resonate well with our customer and there is ample supply of the product in the market. Further, there are emerging brands that have relevancy to our customers. Ladies brands are not in a healthy spot. Over the last three years they have lost their relevance due to poor fashion and quality offerings. Some of this can be reversed with better fashion and quality offerings, but it is unlikely to ever return to its peak. So, both men's and ladies have a trickle effect down to our kids business. Boys brands are going to be in a healthy spot, while girls brands are going to be suffering from the same degree that ladies really is.

You've asked the question about if they never come back to their peak. What we're doing is we're positioning our fashion businesses to be exceptional fashion for our customers at a price. So, we do believe that if these urban brands don't ever come back to their peak, as they were in previous years, that we can offset that with the fashion offering and then secondly, we are moving some of those apparel dollars into high-growth areas. For example, shoes, men's accessories, kids accessories, and home. So that has proven to be a very strong lift for us right now, as you saw the results in our comp store sales. We believe we have just got start -- we're just getting started in expanding some of those area and there's a lot of growth and opportunity left there.

Thank you for the very comprehensive answer, Jason. Can I just ask a follow-up to the 10 items? Can you give us a sense are those purchased items to a similar margin structure that you usually have and how is that going to be marketed to customers? Is it just in-store marketing?

We're doing some local radio advertising. We definitely have window signs that went up about a week and a half ago. We have bag stuffers. And actually we think it's a clever concept. We're actually promoting or not promoting, we're saying it's $7.99, all of these items are $7.99 and they are not on the same margin structure. We expect very high sell-throughs on these items because they're limited in each of the stores. We want to create that see it, love it, buy it, a real sense of urgency. We're trying to create what we call a cell phone moment, where you see something in the Citi Trends that is so exciting that you actually pick up the cell phone and you're calling a friend or a relative to get them down to Citi Trends to actually purchase that item. So we are very excited about this year's offering and actually we're kind of keeping it a secret saying, come to Citi Trends on black Friday, it's really worth the wait.

That's fantastic. The best of luck to you and happy Thanksgiving to all.

Thank you, Tom

(Operator Instructions)

Patrick McKeever with MKM Partners.

Question on the Citi Lights stores. I'm just wondering out of the entire store base as this juncture. I know you have slowed the renovation program, but out of the entire store base how many stores are Citi Lights prototypes and how many are not? And is there a significant difference in performance between the different prototypes?

Thanks, Patrick. Of the 513 stores we have opened today, just over 100 of them are Citi Lights. We did, I think, about 25 conversions last year plus some relocations, 15 remodels or so. Then we opened 55 last year and the stores we've done this year are the four new this year and expansions are Citi Lights. So, it is just over 100. The performance of the Citi lights stores are about at the same place as the performance of our other Citi Trend stores. We've got a nice bump, sales bump from the conversions when we did them, but I think with the benefit of hindsight that bump really is a remodeled bump. In other words, a bright, shiny new store versus a tired old store and we got a nice sales bump there. We don't see, as I said before, we don't see any real significant difference in the performance of the Citi lights stores versus the other stores, but having said that we like the Citi lights look and that is our new look. As we go forward with additional remodels and new stores that will be the look.

How about from a regional standpoint in the quarter as we look across the different markets that you operate in? Were there any notable differences and how are your new California stores performing? That was a bit of a stretch to push all the way out to California. Just wondering how those stores are performing at this juncture.

Regionally, Patrick, our performance is pretty close to each other across the north and the south and the east and the west. So there's not a big regional call-out. California stores for us, we have nine stores in California and I would say the net result at this point are those stores are underperformers as a whole. We have two or three of the stores out there that approach average, but most of the rest of them are below average. Does that answer your question?

It does. So, why do you think those stores are underperforming?

We look -- any time we look at underperforming stores, you just have to look at the basics. Are your demographics right? Is the shopping center a strong shopping center? Do you have the right store in the right physical place? Is it the right size, et cetera? In California, I think we have some good real estate locations and some other locations that maybe aren't quit as good. And apparently there's -- the customer taste for urban fashions in particular maybe a little bit different in California then they are in some of the other places, but we really don't have all the answers to California. We have not given up on California. We're operating our stores out there. Actually this year, while the stores still under perform the Company, the stores as a group are actually up this year. So we're seeing some progress.

And then just last question, on the fourth quarter. I know you're not giving any sales or earnings guidance, but, I mean, you did say that November month to date comps tracking flat and you gave a little color around the fifty-third week and what the impact might be. I mean, it is such an important quarter. You lost, at least on an adjusted basis, $0.18 last year. You comped down [6.2]. The year before you made $0.52 in the fourth quarter. So, a huge swing. So, I guess, can you give us any help on the fourth quarter in terms of how the margins might look? It's just tough to get any -- there's no trend, I guess. The benchmarks are not there. And it is such an important quarter. You've lost money for the past couple quarters, but typically you make a decent amount of money in the fourth quarter. What should we think about this year?

First of all, Patrick, you're right, we haven't given anybody any guidance on Q4. But there are some things that we could point you to get a fix on how we see the fourth quarter. If you look at this year, as we come through this year, we look at what we've done each quarter as we come through last year's fourth quarter to the first, the second, the third, sort of incremental progress. We've been making incremental progress. It's not been leaps and bounds, but all the progress has been in the right direction, both operating results wise, margin wise and sales wise. If I look -- if you're looking at the fourth quarter from an expense perspective, you should probably expect us to see expenses in the same neighborhood of what you've seen for the last two or three quarters. The same kind of expectations from an expense perspective.

Gross margin wise, last year's fourth quarter was 30% gross margins, as I called out earlier. You've seen what's happened to gross margin the last couple of quarters and so we would expect to see an improved gross margin in the fourth quarter. It's not going to be normalized, as I attempted to call out in the phone call, because we still are in a turnaround and we're doing a lot of things right. We're still making some mistakes and we're correcting them as we go along. So, we're not going to get back to a normal gross margin, but it's going better than last year, I can tell you that.

So, the real issue for the fourth quarter is what are sales going to be. That's the real driver for the quarter. It's a big volume quarter. What are the sales going to be? As Evren asked earlier, we are going to be anniversarying a lower AUR through part of the quarter and that's a potential positive. I called out that last year's sales environment, there was very promotional as we took a huge number of mark downs in the quarter and that tended to make for a promotional environment last year. We have a bit of a layaway bogey coming into the quarter, but then again our cash sales are up. Our non-layaway sales are up and have been up. So that's a positive. The things going in all directions, expenses and gross margin should be in pretty good shape for the quarter and the quarter is going to all depend on how the comp store sales are. Does that help you?

Okay. Well, good luck. Thanks, Ed.

Thank you, Patrick.

James Fronda with Sidoti & Company.

I was just curious to know if you were seeing any inflationary pressure going into fiscal 2014.

James, are you talking about inflation on merchandising purchases, or just general things?

Correct.

In merchandising -- I'm looking at Jason, he's shaking his head. We really haven't seen any consequential upward pressures on prices of merchandise that we buy at this point.

I guess for the expenses for fiscal '14, do you think this quarter is a good run rate to use going forward, going into fiscal '14?

Yes, I think some of the anomalies that have been in there this year have played out, such as the reduction in force that we did back in the third quarter of last year. We have now completely cycled through that. So, yes, I think so.

All right, that works. Thanks, guys.

Thank you.

Evren Kopelman with Wells Fargo.

I just had a few follow-ups. On the layaways. Why do you think the layaways are down? Did you change the terms or anything like that this year versus last?

No, we are actually running a layaway promotion where we don't charge the fee and we charge a lower percent down, but it's exactly the same promotion for exactly the same time frame as last year. So, everything is apples for apples from that perspective. The reason our layaway business is down is that the AUR on layaways, laid away items, is down and I think our overall AUR down, Bruce, is down around 10% or so. But the AUR on layaway items is down about 20%.

I believe the reason for this is most of the items that are laid away, particularly this time of year, are higher ticket items like coats, outerwear, and in particular our branded product. Our AURs on our higher ticket items, particularly branded product in general and coats specifically, is down a lot more than our average AUR. And these items are typically laid away and so that's why layaways are down. Actually the number of layaway transactions, the number of layaways that have been done, the number of units on layaway, are all more than last year.

The other question is, when you gave the monthly [K] in September, was it down four, I think you said. Why do you think September was weaker than the other months?

We have no idea. We didn't see a first of the month inside the quarter that would have made a big difference in September. We don't know.

Okay. That's fair.

Sorry. Sometimes that is the answer.

Also from when you reported, it sounds like August really picked up also after you reported. Is that right? I forget the exact statement.

Yes, that is correct. Definitely. Bruce was just saying, August picked up as we got more into the back-to-school season.

Then I promise last question, when you talk about normalized gross margins 37%, 38%, do you think you can get there next year?

I think it's possible next year. I don't want to get too far ahead of ourselves. I'm trying to hold everything back on this turnaround. We are not turned around. And will we complete our turnaround next year? I think that's possible, but I don't want to say it's likely at this point.

Thank you so much and have a happy Thanksgiving. Great. Thank you, Evren.

Thomas Filandro with Susquehanna International.

Bruce, can you just tell -- I just want to go back to this inventory number again of 15%. I think you said like half of it was related to cold weather assortments and then the other half season buys or next season buys. Can you help us reconcile that number? I don't know if you told us what inventories should look like at the end of the fourth quarter and as you've changed your philosophy in terms of buying, what should we -- how should we think about the flow of inventory, maybe on a quarterly basis next year? Can you give us any direction? That would be helpful, thank you.

Tom, let's have Jason talk about inventories first. Talk about why we flowed the inventory the way we did and what he expects it to look like as we go through the fourth quarter and end the year. And then we'll come back and talk about next year's expectations.

First, as we had said, our store inventory was up due to peaking our fall receipts EOM October. Last year we shipped fall product late and that resulted in excess fall mark downs. By peaking in October we hope to avoid fall mark down liabilities and position ourselves to drive fourth quarter sales very well. Second, we took a much bigger position on NSBs to really set up this spring season. A larger NSB position will allow us to transition from fall to spring with stronger off-price values versus last year. So, we're happy about that. Also, we believe in the fourth quarter store inventory will be relatively flat to up slightly versus last year, while NSB inventory will be up over last year. We continue to view NSB as a key strategy to delivering value to our customers and ultimately profitable comp store sales.

Tom, let me just add on to what Jason said. The inventories were up at the end of Q3 about 15%. About half of that number, about 7% or so, was in stores and that was what Jason was talking to you about there and teeing up the beginning of the fourth quarter with particularly fall weather merchandise to increase its selling season. The other half of the increase are these, what we call next season buys or pack and holds. We're making large off-price buys. Last year, for some reason, we had pulled back on those buys, probably too much, and the build back that is reflected in this year's -- half of this year's quarterly inventory increase is just a normal add-back, teeing up things that Jason spoke about earlier.

As for as plans for inventory as we go through next year, Bruce, do you want to talk about that? Do you have any comments about that?

Tom, with our inventory on a quarterly basis, the key thing to keep in mind there is that we want to be as low as possible at the end of the first quarter, because we're headed into several months that are very low-volume months. Even May in particularly when you get into the summer months, all the way to back to school. So, that is always going to be by far the lowest month. And where we want to be heaviest in inventory is obviously not only headed into the fourth quarter, but maybe different from some other retailers, headed into the first quarter because of the tax refund business that we do. If you remember, February is our second Christmas. Our weekly average sales in the month of February are as much as they are in the month of December, which is very unusual for retailers. So, we want to have a lot of inventory going into Q4 and into Q1, light coming out of Q1.

Just a general planning perspective, as far as the dollar amounts of inventory, we expect the store inventories to be essential flat as we will go through next year. Builds in inventory would be perhaps buying more NSBs or closeout buys. But we are expecting to deliver some positive comps, especially next year and to improve our turns as well.

Can I ask a follow-up to that maybe to Jason on the NSBs? Change in the philosophy. How far along are you, do you believe, in that penetration of NSB or closeouts? Do you have several percentage points to go in terms of the overall mix or will you, by the end of this year, be at the level that would you like it to be or any kind of comments around that would be helpful.

No, we've definitely made nice progress there. I am happy right now with our spring NSB plan. This is really the first season that I've been in place where we took our first step to getting it right for the spring season. So, what we're going do is really assess that and determine, hey, we've got the right number, does it need to be higher or lower, and were we doing it the right way? So, I'm happy where we are. It's definitely several percentage points above where it was last year and I see that for the fall as well. But we're going to transition slowly into that, watch every step, access, and then move forward. Does that make sense?

That makes perfect sense. Thank you again for the comprehensive update and best of luck.

Thank you.

Mr. Anderson, there are no further questions at this time. I will now turn the call back to you. Please continue with your presentation or closing remarks.

Thank you, everyone, for joining the phone call today and happy Thanksgiving and happy holidays. Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.