Destination XL Group Inc (DXLG) 2003 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your fourth quarter and fiscal 2003 earnings results conference call. At this time all participants are in a listen-only mode. Later we will conduct a brief question-and-answer session and instructions will follow at that time. If anyone should require assistance during today's program, please press star then zero on your touch-tone telephone. I would now like to introduce your host for today's conference call, Mr. Jeff Unger. You may proceed, sir.

Good morning. I'd like to read our forward-looking statement. Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of the release, and as such are subject in the future to unforeseen uncertainties and risks. All statements regarding future performance, earnings projections, events or developments are forward-looking statements. It is possible that the Company's future performance and earnings projections may differ materially from current expectations depending upon economic conditions within both its industry and the country as a whole and its ability to achieve anticipated benefits, associated with announced cost reductions and strategic initiatives to improve operating margins.

Among the other factors which may affect future performance are, changes in business relationships with and purchases by or from major customers or suppliers, including delays or cancellations in shipments, uncertainties surrounding timing, successful completion of integration of acquisitions, threats associated with and efforts to combat terrorism, competitive market conditions and results, effects on sales and pricing, increases in raw material prices that cannot be recovered in product pricing and global economic factors including currency exchange rates, difficulties entering new markets and general, economic conditions such as interest rates. The Company makes these statements as of the date of this disclosure and undertakes no obligations to update them.

I'd like to now introduce, Dennis Hernreich, COO and CFO of Casual Male to read the release.

Thank you for that, Jeff, and good morning everybody. Thank you for joining us on this morning's conference call. I will briefly comment on the Company's fourth quarter results and provide insight into the operating earnings for Casual Male, indicate expected trends of gross margin and SG&A for 2004, and describe in more detail the special earnings charges taken during the quarter.

For the fourth quarter, the operating income of the Company was $9.4 million compared to an operating income level of $9.9 million during the quarter last year. Breaking this down further, the operating income of the Casual Male business was $8.8 million compared to $10.2 million last year, while the Company's other branded apparel business reflected operating income of $600,000 compared to an operating loss of $300,000 last year fourth quarter.

More on the other branded apparel business results in a moment, but first I will focus on the Casual Male business. Casual Male overall sales for the quarter at $94.5 million was virtually flat to the year-ago quarter in spite of the 2.4% comparable store sales increase due primarily to the discontinuance of the rep title in the Casual Male's catalog business, which resulted in a loss of sales of approximately $3 million during the quarter. In a moment David will provide you an update on the Casual Male sales trends going into the first quarter of the new year.

The average store count during the quarter, approximated 482 stores, as compared to approximately 472 stores during a quarter a year ago. A quick store count recap for the year. Casual Male began the year with 467 stores, opened 19 stores, closed five stores during the year, and, therefore, ended the year with 481 stores. Four other stores were relocated, while 13 others were remodeled during the year.

During the quarter, Casual Male's gross margin rate dropped by 80 basis points from year-ago levels to 42.3% primarily due to a slightly more promotional posture taken during the quarter. Casual Male's SG&A including depreciation increased slightly due to higher marketing costs during the quarter, compared to year-ago levels. For the year, the Casual Male business generated a 6% increase in operating income to $16.5 million, or 5.2% of sales on a comparable store sales decrease of 1.3% to $319.2 million.

In addition, Casual Male sales dropped 2% due to the discontinuance of the rep title during the year. The benefits of this strategic move will be enjoyed during 2004 with a much more profitable direct-to-consumer business. Gross margin rate declined for the year for Casual Male by 100 basis points primarily due to deleveraging effect of a decline in sales while merchandise margins were stable to the prior year.

Looking ahead into 2004 with respect to gross margins, we are expecting positive leverage on Casual Male's occupancy costs during the year and stable to slightly positive merchandise margins, such that gross margins overall should be enhanced during the year. Casual Male's SG&A for the year declined by another 6%, helping to offset the loss in sales to 34.2% of sales.

During 2004, we are expecting SG&A growth rates of approximately 7 to 9%. The increase is primarily earmarked to increase Casual Male's marketing programs to support the George Foreman marketing campaign during the year. Much of this incremental spend is expected to occur in the first half of the year during the initial launch. All other natural expense increases should be defrayed by cost reductions resulting primarily from the Company's systemic improvements expected at mid-year.

Overall, in spite of the increased marketing spend during 2004, we are anticipating another 100 to 150-basis-point drop in SG&A rates for the year. Also during 2004 we were planning to open 15 stores, close approximately 3 stores, and remodel another 150 to 175 stores, and, therefore, we should end the year with approximately 493 stores. Our capital expenditures should approximate between $18 to 20 million, assuming sales trends stay within expectations, such that we will maintain a cash flow positive posture. During 2003 the Company's capital expenditures approximated $13 million.

Turning our attention to the other branded apparel business. The operating income for the year improved by approximately $4 million from last year's generated operating loss. The cash flow from the other branded business was approximately break-even for the year. We anticipate that the other branded businesses will generate slightly positive cash flows in operating income during 2004.

The EcKo stores continue to perform profitably to plan, and the Levis/Dockers business is generating positive cash flow where sales have also stabilized, and gross margins have slightly strengthened. We ended the year with 58 Levis/Docker stores and intend to close between 25 to 30 stores during this year, such that we intend to end the year with between 28 and 33 stores. At the same time, we plan to open approximately ten EcKo outlet stores during the year and, therefore, intend to close the year with just over 30 stores.

After including write-offs associated with refinancing activities and restructuring charges related to the exit of the Levis/Dockers business, Casual Male Retail Group reported a net loss for the quarter of $8.8 million, or 25 cents per share, and $12.1 million loss for the year, or 34 cents per share, compared to last year's $23.8 million loss for the quarter and a $38.8 million loss for the year. During the fourth quarter CMRG recorded a charge of $13.7 million associated principally with the early retirement of high-cost debt after completing the $100 million 5% convertible debt offering completed in November of 2003.

As we previously discussed, the Company's interest charges next year are expected to drop by up to $4 million from 2003 while the Company's liquidity position is very strong with much of its $90 million revolving line of credit available to us. We ended the year with just under $4 million borrowings under that line. With a conversion price to equity of $10.65, we are well positioned for a debt-free balance sheet in the near future.

The charges recorded were related to writing off the unamortized value of the warrants issued with the two series of 12% subordinated notes for $24 million in principal which equated to approximately $11.3 million, premium paid on redemption of approximately $1.4 million, and the balance of the charge was associated with unamortized issuance costs. There remains approximately $7.8 million at 12% subordinated notes which we intend to redeem in July and at which time we will incur a final charge of approximately $2 million, much of which is associated with the unamortized value of the warrants issued with these notes. Other than this additional charge, we do not anticipate any other special charges, including any further restructuring charges associated with the Levis/Dockers business.

Lastly, CMRG's tax loss carry forwards are expected to approximate $90 million of which $60 million are unlimited as to usage, therefore we do not expect to be a cash taxpayer in the foreseeable future further enhancing the Company's cash flows.

That's my synopsis for the quarter and for the year, and let me turn the call over now to Mr. David Levin.

Thank you, Dennis. Well, it's been about two years since our Company's turnaround strategy, and now we really have positioned the business to significantly benefit from our new merchandising and marketing programs. We've continued to have comp improvement quarter to quarter from last year. We were at negative 5%. Second quarter we got it to the negative 3%. Third quarter negative 1%, and the most recently reported quarter at a positive 2.5%.

While we're not reporting first quarter sales until May, there's been a significant change from our trend, and we believe it's important to give a more current update to the financial community. And it's also important to note that there is no guarantee that the sales trend will continue for the rest of the quarter. However, currently, after seven weeks, our comps are now at 10% plus. And digging deeper into the numbers, there are some metrics that are even more encouraging.

We've now anniversaried the installation of our traffic counters in our stores, which also measure conversions. And conversions are based on the number of people who enter our store versus those that actually make a purchase. Our conversions are up by 10%. Our average unit retail is also up about 10%. And our maintained gross margins and our number of transactions are relatively flat to last year. However, the traffic to our stores continues to be down day in and day out, over 10%. And what that tells us, if we can get our traffic stabilized to last year, our comps will begin to exceed our current trend of 10%.

And on a very positive note, these metrics clearly validate that our merchandising initiatives are working, and it gives us additional upside once our marketing campaign brings in the new customers. And I'd like to review some of those merchandise initiatives that are impacting our sales for spring. I've talked about these in the past, and now we have some more quantifiable numbers to discuss.

First, our young men's business which includes the brands such as EcKo, Roca Wear, Sean John, this spring are up 142%, and it's moved this classification now to 6% of our Company sales versus 2.5% of our sales a year ago at this time.

Tall sizes. I've talked many times about how sizes were eliminated from our stores where we really became a big chain and neglected the tall customer. In key select programs this spring, we've increased our penetration, so today those tall sizes represent 12.6% of our sales versus 5.4% of our sales a year ago, clearly giving that customer a reason to come back.

Suit separates. Suits were only in 175 stores last year. They are now in the chain. We're running at 173% ahead of last year. Clearly, our strongest driving category for spring is suits, which also has a positive impact on our dress shirts and ties which are also up double-digit numbers. We've talked about our overassortments. We've reduced our SKUs this spring by 25% and it's clearly had an impact on our key item strategy. We're in better stock on bigger items.

Our lifestyle presentation is implemented now. Previously we merchandised our store by categories, jeans on one side, shirts on the other side. Now that we're into lifestyle presentation, again, positively received by our customer base. And we made a change to our geographic zones by store. We brought in a better, newer selection of product into our warm-weather stores earlier in the year, and, in fact, our Southern stores' comps are running at about 10% higher than the rest of the chain, and that's also good news for us because that products selling, and that's the same product that is hitting the stores in our Northern regions today.

I've talked about the movement from brands to private label. This spring we are now up to 55% of our assortments are branded versus 25% a year ago. Brands like Polo jeans, Perry Ellis, Jeffrey Bean, and we will be introducing IZOD for the fall, and I could quantifiably say, whenever we've changed the program from our Harbor Bay private label to a brand, we've seen significant improvement in our sell-throughs. And it's also important to note that our gross margins are the same as last year at about 55%.

And certainly last but not least, Casual Male's alliance with George Foreman as our spokesperson and the exclusive George Foreman apparel line for Big & Tall has been incredible. We've had fantastic initial response to the George Foreman product, and I've got some interesting numbers to review on that note. First of all, we planned our spring purchases at 535,000 units, and we've had to go back to reinforce that inventory, and we're now at 800,000 units for this spring, which is an increase of 50% over our original plan. And based on that, we have now moved our fall purchases to 30% of our on order for fall will be under the George Foreman label versus 15% that we originally planned for this spring.

And if I identify the three key items of the Comfort Zone selection, we've had tremendous success. The waist relaxer pants and shorts. We've increased the purchases for spring by 122% already over our original thought. The neck relaxer shirt by 70%. And the polo wicking shirt, the shirt that keeps big guys dry, we purchased 75,000 units of a non-dry shirt last year, and with George Foreman in the wicking process, we're now at 140,000 units of that shirt. An unbelievable number for a chain our size.

Finally, the Signature collection is doing extremely well. It's available on the Internet, it's available in the catalog and in 60 stores, and we've just done our final analysis and we will be raising that number to 143 stores for fall.

Talking about the media, again, an incredible story going on here. Just in the last few weeks, we've been in "USA Today", the "New York Times", George was on CBS Morning Show, CBS MarketWatch, CNBC Power Lunch, ESPN, and I could go on and on for quite some time on that subject. Just last week alone, we had over 19 million impressions through our PR campaign led by Weber Shandwick.

We also had a video news release about Casual Male that was picked up already in 29 cities so far with an additional reach of over 2 million. The media interest has been way beyond our expectations. Even George, a media giant, told me he's never experienced anything like this from a media blitz.

And in terms of getting back the loss of traffic Casual Male has experienced over the last few years, it leads us to a discussion of our marketing strategy. For the first time, we've launched a national advertising campaign on television. It began on March 15th and showcases five George's touting the new technology features of the George Foreman Comfort Zone. The commercial will be running for four weeks, and an additional three weeks prior to our all-important Father's Day period in June.

Prior to this national launch, we did test-market the commercial in Dallas and Houston in February. Our survey results from our customers showed 13% were first-time shoppers, and 59% of them said they saw the ad, 85% of the customers made a purchase, and over 50% of them bought something from the George Foreman line. And most interesting, we had 10% more women shoppers as a ratio of total shoppers, and that's very encouraging, and part of our strategic plan, since historically we have been underpenetrated compared to other men's apparel companies when it comes to the woman shopper.

Interesting, we also just tested a Father's Day promotion in this market which we offered a free George Foreman grill gift with purchase, and the George Foreman grill will have Casual Male embossed on it. We sold out in five days. These are not types of numbers that Casual Male has been able to talk about in the past. That's for sure.

And on another note, our call center. We have a call center that's called 1-800-think-big where customers have chance to call in either asking for a catalog or to find the nearest store from where they're located. Last year in the month of March, we received 583 phone calls. We are now trending this March at 7,000 phone calls. And while this is all encouraging, we are running an institutional ad campaign. This is going to take time to build awareness of Casual Male, and we believe it will take several months before we realize the full benefits of this marketing spend.

Next subject, our loyalty program. Clearly our next major strategic project. We have a database of over 2.5 million names, yet we have not had the tools to reach out and personalize the shopping experience with our customers. We're proud to announce we just signed the contract with STS for our software and IBM for a new POS register systems for all our stores. STS is the same firm that Chico's uses for their loyalty program and we're all too familiar with that success story. And this will be launched in the spring of '05.

On our remodel program we're projecting to get 150 to 175 stores done this year at an average cost of about $30,000 per store. I visited a few stores that were done. $30,000 makes these stores shine. We've completed 13, 17 are under the knife right now, and hopefully we'll have 80 done by Father's Day.

And finally, on our systems, E-3, one of the first components, is live and working, and our in-stock positions of basic replenishment product is starting to show significant signs of improvement. And in July we still are on schedule to launch all of our new systems and all the benefits we're going to get out of our warehouse, too.

So, in conclusion, we expect the benefits of these last two 20 months accomplishments focused in our four key areas, merchandising, technology, cost controls, and marketing, to provide our anticipated momentum during this year.

And on that note, we will open the lines to any questions.

Ladies and gentlemen, if you have a question or a comment, please press the one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from Rusty Hoss with Roth Capital.

Good morning.

Hi, Rusty.

Good morning.

Just wanted clarification. The SG&A that you gave, 100-basis-point improvement, that's for the Casual Male business, correct?

I was only speaking in that section to the Casual Male business.

Okay. So all the guidance really is to the Casual Male side?

Correct.

Okay. That's all I have. Thank you.

Thank you, Rusty.

Our next question comes from John Reilly from CJS Securities.

Good morning, it's Mike Roesler for John. Some of this came quick. Go over again that margin guidance?

Margin for the year, we're expecting to improve upon our occupancy leverage, John, as well as stable to slightly positive merchandise margins. On the strength of selling full-price George Foreman Comfort Zone merchandise and so on. So, therefore, our overall gross margins for the Casual Male business should be enhanced during the year.

And what sort of comps are you building into that thinking?

Positive comps, solidly positive comps.

And could you at least comment a little on the incremental margin, if say comps held or at better than the current levels?

I think if we saw comps at these levels you should expect occupancy costs, given our model, to improve as much as 100 basis points.

Great. Thanks.

Our next question comes from Kyle Stults of William Smith & Company.

Good morning. Can you break out EcKo sales for the quarter, Dennis?

EcKo sales for the quarter was approximately $7 million, Kyle.

Thanks. And can you discuss a little bit, other than the television advertising, where are your advertising dollars, where are those going?

For the year, a year ago we spent in the neighborhood of $20 million, and this year we're in the neighborhood of $26, $27 million. $10 million is coming into TV versus virtually nothing a year ago, and we're taking those dollars out of our direct mail piece. We're eliminating some of the weaker performances of previous years. We have, again, as I've said before, we've bombarded our customers with too many of these promotions that have lost their impact, so we're scaling back on those promotional events and trying to do more regular day-in and day-out business and spending that money to get the traffic back with the customers.

Okay. Is there any other sort of print media advertising you're doing?

Not other than our normal direct mail pieces at this time.

Okay. Great. Thanks a lot.

Our next question comes from Margaret Whitfield of Brean and Murray.

Good morning and congratulations. I know you mentioned the comps are running north of 10% so far and traffic is down over 10%, but I wonder if you could comment on what happened following the advertising launch just recently, whether in the last week or two if you've detected a change in traffic.

We've found -- there's a dramatic change in the traffic in our warmer-weather stores, much better than we've anticipated. The North last week, it was cold, it was difficult to measure. We do know that our shopper waits until the weather changes, and then the numbers really kick in. So we've seen more of an impact in our Southern stores than the Northern stores in the last week, but again, it's only been one week and it's too early for us to try and quantify it.

Okay. And could you comment on what the retail-only comps would have been for the quarter to date?

Yeah, our difference, Margaret, our difference between catalog -- or direct-to-consumer and stores continues to be about 2.5 points. So, therefore, the stores are just slightly, 2.5 points less than our 10% trend so far.

Okay. And when you said the Southern stores, I think you said were 10% above the chain, do you mean they were comping at 11% or what did you mean by that?

Well, again, the North really drives our business, because we have so much weight in the North.

Right.

But what I was saying was that, the blend has been about, again, that's 8% zone, the North has been significantly below the South. The South numbers are very strong, but they don't impact the total as dramatically.

Okay. All right. Thank you.

Thank you, Margaret.

Our next question comes from Scott Krasic of C.L. King.

Hi, it's actually Gary Giblen and Scott Krasic.

Hello.

Yes.

How are you?

Can you talk about the remodel lift now that you've completed a few of them? You seemed bullish, but what kind of sales lift are you getting?

Too premature to say. These completes don't even have a few weeks behind them. Going back to the ones that were done a year ago they have, overall, had a lift, but again we only had six to look at, so two are way up, two are slightly up, one was down. We don't have enough critical mass to make that judgment yet, Gary. Once we do we will share that information.

Sure. Okay. And then on the merchandise gross margin, not talking about occupancy now, but just the merchandise gross margin, you're indicating that you might have some improvement there, so that's a little bit more positive than kind of the stable gross margin discussions that have occurred before, so what's working out better?

Yeah, again, if our comps are above our projections that means we're getting to sell more at regular price and should have an impact later in the season when we go to clearance. It works in reverse when your comps are down. You have carry-over, and on the other hand we're getting very good sell-through, so we're anticipating that our clearance markdowns at the end of the season should be less than they have historically been.

Okay. Great. Just a couple more. Is there any trend, that you can talk about, in terms of concerning the rep catalog customers to the new Casual Male catalog which includes some rep-type pages?

Yeah. We are ahead of our projections on that. We are doing very well in getting that customer converted. We've offered them a lot of incentives over the last few months to come over, and, again, those of you that have seen the new catalog, we've got our best feedback from our store people who share that information with the customers. And we've heard from everybody it's the best catalog we've done, and, again, the catalog business has been very strong for us, now that we only have the one Casual Male versus the rep a year ago. So we're more than pleased with the conversion rates we've gotten out of getting that customer moved over.

Okay. Can you give us a ballpark of what the conversion rate is?

We're converting -- it's almost at this point now, 30 to 40%, Gary.

Okay. Yeah, that is good.

Just a footnote on our direct-to-consumer business, Gary, and that is, last year our dollars per catalog were at a very healthy, just over $4 a book. This year, with our catalog plan, mail plan, together with our expected sales, we think that number could grow to as high as $5 per catalog.

Yeah. Okay, great.

And looking forward to the long term, we continue to expect good growth in our direct-to-consumer business.

Okay. And finally, this is a question on the jeans business, but, Dennis, you had mentioned that it seemed to be improving somewhat, I guess, in sales and margins, and then I noticed that VF had very strong numbers yesterday. So is there some general significant strengthening in the jeans biz that would be a factor in your favor going forward?

I can only comment in terms of how we're operating our Levis/Dockers business. I think we're focused on a core product. We're in stock in our stores and our shelves, we have nice tops to match with it, which has all helped to stabilize the business. What's happening to the Levis brand and the denim business overall I can't really say. All I know is that we're very pleased with how we're winding down the Levis/Dockers business.

Okay. Good quarter. Thank you.

Thanks, Gary.

Our next question comes from Christina did he Marval from Sidoti.

Good morning, everybody.

Good morning.

Good morning.

Hi, there. Just several housekeeping questions for you guys. Sounds like the remodel is pretty early in the process, but wondering if you include the contribution in same-store sales or if you pulled those out for the year that they've been remodeled.

No, we keep them in the comps, Christina. These remodels, they really take just a few days to execute.

Again, it's paint and carpet, and we're just patching up these stores to make them look presentable. This is not a full rehaul remodel. Again, a new stores costs us $150,000, and this is, again, about $30,000 that we're spending.

Okay. I understand. And then with respect to the designs businesses, I'm wondering if you can separate out what the comp increase was -- or maybe not increase, but what the comps were at the EcKo business and then separately the Levis/Dockers business.

Well, we typically don't report and haven't reported comps on those businesses.

Okay.

But the Levis business was down comp but now is trending up in the first quarter so far, and EcKo is slightly positive.

In fourth quarter or now?

Both.

Both. Okay. And can you share with us how the EcKo margins are doing in the fourth quarter, relative to the overall?

The EcKo margins were healthy.

Okay.

Relatively close to plan.

Okay. And I'm wondering, if you could break down, Dennis, the $30.2 million restructuring charges last year? Yeah. Can you break that down? I have --.

Yeah. I think the piece that you might be missing, because it's somewhat hidden within the numbers.

Yeah.

Is the $7.2 million caught into the cost of goods sold.

Okay.

So, therefore, you have -- last year you had -- in addition to that you have $10.8 million shown under restructuring line.

Okay.

And you have a tax write-off there of $8 million.

So $7.2 million, cost of goods sold, and the restructuring line -- let me just add that together -- okay. That comes out to about $30.2 million. Okay. Actually, I'm still missing some. $7.2 million, $10.8 million for the restructuring line, $8 million for the tax, and then was there another five or so that was broken out? The five was broken out. That's on the restructuring line as well?

Yeah. So I was reading -- I'm sorry, I was probably reading you the -- $30.2 million is for the quarter.

Right.

$7.2 million margin, correct. $5 million in the restructuring line.

Uh-huh.

$8 million in tax.

Uh-huh.

And then there's another $10 million under loss from discontinued.

Discontinued. Okay.

I apologize for that.

Okay. That helps a lot. Okay. Oh, and one last thing, Dennis. Can you give us the square footage numbers, ending square footage, at the end of the fourth quarter by concept?

Yeah. At the end of the year, we closed with -- Casual Male's square feet, we had a million six-four. A million square feet.

Okay.

We had EcKo stores with 81.8 thousand square feet. The Levis stores, they were 552,000 square feet opened at the end of the quarter.

Great. Okay. Thanks a lot.

Thank you.

Once again, ladies and gentlemen, if you have a question or a comment at this time, please press the one key on your touch-tone telephone. Our next question comes from Kevin Foley from Construction Resources.

Hi, it's Kevin Foley, Constitution Research.

Hi, Kevin.

How are you?

Good.

Just want to understand, on the SG&A for the quarter, when I just look at the $37 million versus the $34 million a year ago, of that $4 million, how much of that is related to the -- or what is the difference, and how much is related to the ramp-up in the George campaign?

No, really, George campaign is not in the fourth quarter at all. That really started in the first quarter, Kevin.

Okay.

What that is primarily is, if you go to the segment reporting, within our press release, we break it down by businesses. As to where you see there's two components, really. There's a $1.6 million increase related to the other branded businesses, and although we did close Levis stores we at the same time opened up EcKo stores. So there's a swap in SG&A expenses associated with EcKo. And then we had an increase in SG&A in Casual Male business, which primarily is marketing related with respect to our promotional events in the fourth quarter, but also, too, last year we had some insurance recoveries which lowered our otherwise SG&A base in Casual Male a year-ago quarter.

What were the size of the insurance recoveries?

They were approximately $700,000, $800,000 in the fourth quarter of last year.

So that's part of it. Then you said, but you swapped out, so EcKo and Levis was a wash.

Well, EcKo and Levis was a $1.6 million increase.

Okay. That's it. $1.6 million increase.

Correct.

And that's just from the openings?

That's from having more EcKo stores.

All right. I got it.

Net of having less Levis stores.

Okay. I got it now.

Yeah.

All right. So that gets me $2.4 million on the way. What's the other remaining $1.6 million?

The increase in marketing spend was another $700,000 or $800,000, but I didn't put a number on it, but that was the increased marketing spend in the fourth quarter relative to a year ago, in the Casual Male business.

Okay. And there's one more piece, I guess?

That's gets you about $3 million. So $1.6 million net from EcKo.

I'm sorry, yeah, you're right. Yep. All right. That's clear. Appreciate that. That's it. Thank you.

Yeah, thank you.

Our next question comes from Laird Vegar of Baron Capital.

Good morning, everyone. How are you?

Good morning, Laird. How are you?

Good. David, I was wondering if you could talk a couple minutes about the retail strategy. You're going to open some stores this year. I think in the past you had spoken about maybe trying to looking into doing some type of new prototype. Can you talk a little bit about that? And then when you start thinking about how many stores you want to open in broad numbers, what are you thinking at this point?

I don't know where that came from, but we have no new concept, no new prototype at all.

Okay. So the stores that you're opening in '04 are going to look the same as the ones that you opened in '03?

Yes, our plan is, again, 15 new stores this year, a combination of outlet and full price. We've had a couple of different surveys, studies done, and it's interesting. Coming from different people's perspective, the store count keeps coming back at 700 to 800 dread [ph] stores for maturity for our company. After this year, because of the heavy remodel program, we're probably going to get accomplished in the neighborhood of 30 a year, which means we probably -- we have to have 75, 80, 90 deals in the hopper at any given time to actually get 30 executed. It's a long process for us.

Okay. Congratulations.

Thank you.

Our last question is the follow-up question from Scott Krasic from C.L. King.

Hi, guys. Actually, this is Scott this time. It seemed like you're talking about ten EcKo stores for '04, and I think when you had dialed back the store opening number and increased marketing costs you had talked about 15. So what's the switch from the 15 down to the 10?

Oh, no, I was referring to in one instance Casual Male we're planning to open up 15, Scott, and in EcKo I said we're planning to open up 10.

Right. But I thought from David or your press release from a month ago or six weeks ago, it had been dialed back to 15 EcKos, from 25 to 30, and now it's a sort of further dialing back now to 10.

I think that is right. I think that is the precise number that we're planning now for 2004.

Okay. So just sort of a question of what actually was going to get executed?

Yeah, now we have a good handle on what's in the queue to actually get opened this year. Again, there are a couple projects that, again, with new developments, these projects get pushed back, not through our own control, so some that we had slated for this year are now pushed into '05.

Okay. And then I guess since you guys have been so forthcoming already, do you want to break out, the foremen Texas experiment, were the results consistent with what you're seeing from the other Southern stores, or did the Texas stores that had the Foreman stuff for all of February even exceed what you saw in the other Southern stores?

I'd say that what we've learned is what I'm trying to convey to everybody. With an institutional ad that we're really just trying to get the name branded in George Foreman, it's a build process. It's interesting, now that the campaign is over, now they're even doing better compared to the rest of the chains. So this is going to take us several months of a lot of investment on our part on the expense side to get this thing done.

But the important thing to us is customer retention. When we get these new customers in the store, and, clearly, we are, we have the opportunity to own them for many years. Our customers have been very loyal to us. They've been with us five, ten years, and it's kind of an annuity. We spend money to get them in now, and hopefully we capture them for the years to come. But it's trying to quantify it at this point in time, it's just been difficult for us. But we're not holding back, and, again, it's been very positive. And I've had so many people talk to me that they've actually -- that have seen the commercial, we know we're getting our impressions out there right now.

Okay. Thanks. Good luck.

Thank you, Scott.

Once again, ladies and gentlemen, if you have a question or a comment at this time, please press the one key on your touch-tone telephone. There are no further questions at this time.

Okay. Again, thank you for joining us today, and hopefully we're going to keep this momentum rolling into bigger and better things as the next quarters progress. Thank you all again.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect.