Destination XL Group Inc (DXLG) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Casual Male Retail Group 2008 earnings call.

(OPERATOR INSTRUCTIONS).

I would now like to introduce your host for today's conference, Jeff Unger.

Hi, good morning everyone, thank you for joining us today. On our call today is David Levin, our President and Chief Executive Officer, as well as Dennis Hernreich, Executive Vice President, Chief Operating Officer and Chief Financial Officer. After I read the forward-looking statements, both David and Dennis will read prepared statements, and then open up for question and answer. Today's discussion will contain certain forward-looking statements concerning the Company's operations, performance, and financial conditions, including sales, expenses, gross margin, CapEx, earnings per share, store openings and closings and other matters. Such forward-looking statements are subject to various risks and uncertainties that could cause an actual result to differ materially from those assumptions mentioned today, due to a variety of factors that affect the Company.

Information regarding risks and uncertainties are detailed in the Company's filings with the Securities & Exchange Commission. Our complete safe harbor statement is available at www.casualmaleXL.com. David, the call is open to you.

Thanks Jeff. Today we announced third quarter comp sales decreased 5.3% from last year, with comp sales being down 2% in the previous year. The most recent quarter showed about 5% drop in sales trends from Q2. Consistent with other retailers, there was a significant falloff in traffic during the month of October. Also consistent with the market, the more problematic areas of the country were in the Southeast and Southwest. On a positive note, conversion rates and the average transaction continues to improve over last year, so we have been able to offset some of the loss in traffic, by improving our sales metrics.

We're confident that the loss in comp sales is not a result of losing market share. What we are seeing is the effect of macro-economic conditions that have caused erosion and customer confidence in spending. It's interesting to note that CMRG has two Big & Tall chains, that cater to two different demographics. We are seeing that Rochester Clothing, our higher end luxury concept, has felt the impact of the current economic situation to a much greater degree than Casual Male. This seems to be consistent with the results reported last week by think higher-end department stores such as Neiman Marcus, Nordstrom's and Saks.

As the retail world has been turned upside down in the last 60 days, we have been quick and diligent to take appropriate actions where we can. Managing our inventory has become the central focus of our activities, as we try to adjust to the slowdown in retail. Even with the shortfall in sales to our forecast, today our inventory is 7% less than a year ago in total, and 10% less on a store-average basis, and we believe by the end of our fiscal year, total inventory will be 5% to 10% less than year-ago levels.

Our other priority is to improve the liquidity of the Company during a difficult time for all retailers. Dennis will address this all-important issue with you shortly. In the last month, we successfully converted the eight Dahle's stores we acquired in the second quarter to Casual Male stores. We now have a presence in Utah, Montana, and Idaho, and have added market share in Las Vegas, Seattle, and Phoenix. I would like to thank the Dahle's family for the smooth transition, and we are pleased with the early results. We have now 500 stores in 47 states, with the next largest specialty store competitor having five.

We also launched our European e-commerce initiative in the last month. We now have Casual Male, XL and Rochester Clothing sites up and running in the UK, Spain, Italy, France, Germany, and the Netherlands. We have been pleased with the initial traffic to the sites however, our conversion rates have not been up to our expectations at this point, and we're working on improving that over time.

Our direct businesses with Casual Male, XL, and Rochester Clothing in the US have experienced similar results as our brick and mortar, in terms of a fall-off in traffic and demand. The same is true of Living XL, and Shoes XL. We continue to adjust the circulation plans with the continued goal of trying to break even in each of these concepts.

Our priorities have shifted as we are experiencing the most difficult retail environment of our generation. We will not drive top-line sales at the expense of gross margin and carrying excess inventory. And we are not motivated to drive down our gross margins when we are not losing market share, and we are not motivated in this current environment to spend a lot of capital to grow our business.

We will continue to grow market share by utilizing the improvements we have made in our inventory management systems, and our strong planning and allocation teams. We will continue on our path to increase our market share in the smaller sizes that we have to offer. And we're motivated in keeping a healthy balance sheet, and we are motivated increasing our cash flow, and reducing our debt. When we see the business turning in our favor again, we will be ready to get back on track on the growth potential we have always believed in with CMRG. And now Dennis will review the financials of the Company.

Thank you, David, and good morning, and thank you all for joining us on this morning's call to discuss Casual Male Retail Group earnings and performance for the third quarter of 2008. Many of my comments may reiterate some of the points David has made, but I think it important to emphasize the attention and focus, the business has in managing through a difficult business climate.

For the third quarter of 2008, we had a net loss of $3.2 million, or $0.08 per diluted share as compared to a net loss of $3.8 million, or $0.09 per diluted share for the third quarter of last year. For the nine months ended November 1st, we had a net loss of $1.2 million or $0.03 a share, as compared to a net loss of $200,000 or $0.01 a share last year. What is the most significant part about the third quarter is the impact of the macro-economic trends had on the businesses, on the Company's business, which was not entirely apparent early in the year.

During the third quarter, the Company experienced a significant downturn in the sales trends. Comparable sales during the first quarter and second quarters were minus 2.7%, and plus 0.3%, with August performing similar to the year-to-date trend. However, in the third quarter, comparable sales decreased by 5.3%, due to significant drops in September and October, which are continuing in November.

As David stated, sales trends deteriorated as traffic decreased, not only in our retail channel, but also the direct channel as well.

Being uncertain as to the depth and duration of this economic down cycle, we have reprioritized the Company's many initiatives to focus on free cash flow, inventory management, and strengthening the Company's strong liquidity position under its revolving line of credit. At the end of the third quarter, the Company's debt balances have been reduced by 15% from a year ago to $71 million. Capital expenditures have been reduced by 40% to $9.4 million compared to a year ago. And comparable store inventory levels have dropped by 10%, and overall inventory levels are down by almost 7%.

As a result, the Company's liquidity, or unused excess availability under its revolving credit facility has grown by 20% to $47 million from year-ago levels. Furthermore, even in this uncertain and difficult environment, the Company expects to generate positive free-cash flow for 2008 and 2009 years, reduce its debt levels, and further strengthen its' already solid liquidity position under its credit facility, which does not expire until October 2011.

Needless to say we feel very confident that the Company can continue its effort to increase market share. Market to the smaller-sized component of our target market, and take advantage of the infrastructure improvements that we have made over the previous four years in managing its inventory levels, and maintaining strong in-stock positions by size, while providing meaningful lifestyle assortments to each of our stores and the direct channels, without interruption from this difficult economic cycle.

We will continue our focus on enhancing the Company's market share, but with reduced inventory levels and minimal capital expenditures, which for next year are planned at approximately $5 million, and almost 80% reduction from 2007 levels. Don't be alarmed, all that needs to be done will be done, and as you know in the past, our new stores openings have been very modest anyway. Market share growth is to come from improved productivity.

Also, as a result of the current volatile economic and business conditions, we find it difficult to predict our customer traffic in our retail and direct channels, not only quarter-to-quarter, but also week-to-week. Therefore, we are not able to provide any earnings guidance for the balance of the year, and consequently for 2008. At the time of our next earnings call, scheduled for March 2009, we will, again, review business and economic conditions, and make a determination as to our ability to provide meaningful earnings guidance for 2009.

Just a few observations regarding the third quarter performance. Total sales decreased by 5.7% to $100 million as compared to sales of $106.1 million at a year ago, comparable sales, as I said for the third quarter decreased 5.3%. This decrease consisted of 6.1% decrease in sales from our direct businesses, and a 5.2% decrease in sales from our retail business.

Our core business which includes just Casual Male and Rochester businesses, had a comparable sales decrease of 5.5% for the third quarter. For the first nine months of this year, total sales decreased by 2.8%. The sales shortfall of $9.2 million was primarily driven by decrease in our comparable sales of 2.2%, which includes the comparable sales decrease of 4% from our core businesses.

Our direct businesses increased by 5.6% for the first nine months, however, this increase was offset by a decrease of 3.7% from our retail businesses. Customer traffic in the retail channel decreased by approximately 10% during the third quarter. Such decrease accelerated from traffic trends we experienced during the first six months of this year.

Our non-core businesses which include Living XL, Shoes XL, and B&T Factory Direct generated sales of $3.5 and $11.6 million for the third quarter and first nine months of this year, compared to sales of $3.1 million and $5.0 million for the last-year periods. During the third quarter, our gross margin rate inclusive of occupancy costs, was 42.2%, as compared to a gross margin rate of 43.9% a year ago.

The decrease in margin rate was a result of 30 basis point decrease in merchandise margins, and 140 basis point increase in occupancy costs as a percentage of sales. The 140 basis point increase is the result of relatively fixed occupancy costs over a decreased sales base. Our occupancy costs in dollars increased only 4% over the prior quarter.

The decrease in merchandise margin during the third quarter is negatively affected by an increase in costs associated with our loyalty program, increased postage cost from our direct businesses, and increased markdowns in our Rochester merchandise, and a slight deterioration in our initial margins due to a shift in sales mix, from our higher margin core businesses to our lower margin non-core businesses. For the first nine months our margin rate was 44.2%, compared to 45.4%.

The decrease in margin rate was the result of 30 basis point decrease in merchandise margin, and a 90 basis point increase in occupancy costs, all the reasons previously stated. SG&A expenses for the third quarter were 42.7% of sales, as compared to 41.5% for a year ago. On a dollar basis, SG&A expenses decreased by $1.3 million or 2.9% for the third quarter, as compared to a year ago, with a decrease of 3% from our core businesses. For the first nine months, SG&A expenses were 40.3% of sales, as compared to 39.4% a year ago.

The SG&A costs for our non-core businesses increased by $3 million over the same period in the prior year, while expenses for our core businesses decreased by 2.9%, resulting in a total decrease of approximately $700,000 on a year-to-date basis. With the weakness in sales continuing this quarter, strong expense control has been a significant priority for us, and will be for the remainder of this year and next year.

We will closely manage our SG&A levels, while continuing to invest in our marketing campaigns and growing our direct businesses. We expect SG&A levels to approximate between flat to minus 2% during quarter 4 of 2008, and into 2009, even after including added SG&A for our new Dahle's stores and the EU direct channel growth. Javonne, that completes my comments. Please open the call to our question and answer session.

Thank you.

(OPERATOR INSTRUCTIONS).

And our first question comes from Scott Krasik from CL King.

Yes, Hi guys.

Good morning.

David I know you don't typically do this, but can you give us sort of a monthly progression during the quarter of the same-store sales, and then give us some indication of where they have gone in November?

No, we don't comment on current quarter. As Dennis said, we're seeing a continued shortfall in traffic, continue -- the same type of improvements we're seeing in conversion, as we have in the second quarter. But I think it's consistent, that things have not improved at all, starting into the fourth quarter for us, and what we have heard out there from everybody else. We seem to be fairly consistent with what other retailers are reporting.

I mean some people are putting out minus 20s. Is that consistent?

No, but we -- remember, they were coming from minus 15s or 12s. I mean -- I think our performance of minus 5 for Q3, was probably one of the better numbers out there.

Right. Okay. So now, I mean, obviously the traffic is weaker than you expected, when you had originally planned inventory and what not. Since you haven't been successful in the past -- and I don't think most retailers will be -- promoting to get traffic -- how do you -- the inventories are probably still going to be too high at the end of the year, or ?

No, I think I said that -- that inventories should be down 5% to 10% less than year-ago levels at the end of the year.

Right.

We have been very aggressive and early to respond to the shortfalls in traffic, and our merchandising teams have been very diligent in moving inventory. Again, one of the advantages we have at Casual Male is 50% of our inventory is core, which is programmable. And that's very manageable for us to maneuver that inventory forwards and backwards. Our inventories look very good at this point in time, all things considered

Dennis, without giving specific guidance, can you give us sort of a range of where you potentially see the cash flow coming in for the year, and what sort of rage we could apply to the debt?

I think I said it's -- the only range I can give you, Scott, is that it is positive.

You are going to pay some level of debt then?

Yeah.

Okay. Thank you.

Our next question comes from the line of Gary Giblen from Goldsmith & Harris.

Good morning, David, Dennis, and Jeff.

Good morning.

I'm wondering what percent of your merchandise is sort of career wear, because maybe that's tied in to one reason Rochester was a little bit weaker. Suits obviously tend to career work -- work oriented, but if you go across categories, what percent it would come to approximately in both chains?

Well, Casual Male is about 15%, and Rochester is -- what did we say -- 12?

25.

25%. Surprisingly, our clothing business, suit business, and Casual Male, has been on the healthier side of our total sales.

Okay. I mean, would you expect it to be related to broad changes in unemployment?

No, I think our assortments in Casual Male have gotten -- have gotten stronger, and -- Rochester, shortfall in sales is pretty well across the board. It's directly related to traffic.

Uh-huh. Okay.

Not unlike what you see in the higher-end department stores, Gary. It's very similar impact on the business.

The -- the higher price points, the more challenging it's becoming, and we're making adjustments for that for next year, for Rochester having a higher percent of our inventory at more moderate prices than our highest-end product.

Okay. Understand. And within Rochester, are you seeing more pronounced weakness in financial center cities like San Francisco, or of course, the 6th avenue stores, New York?

Well, New York has held up pretty well, we remodeled that store. It looks great. And there has been good responses, but, yes, we think the major markets certainly having an impact, and we're seeing that in our London store too.

-- incremental weakness there - okay. I know gift cards isn't a big part of your business, but there has been a lot of talk about big decline in gift card usage this -- or purchases this time around, so what do you see happening?

Hard for us to speculate. We don't have -- the gift card program really doesn't kick in until Thanksgiving weekend.

Okay. And just finally, the -- is your procurement, your buying power, so to speak, your -- the prices you can negotiate affected by softer volumes, or it is maybe improved because you are doing somewhat better than other retailers, so you are that much more important to the vendors or to the --

Well, starting in spring '09 where our next receipts are going to be coming in, we have gross margin improvement planned mostly through our global sourcing division, where we've been very aggressive, and able to get better prices than we have in the past. So we don't see any margin impairment, the only -- as I said, I think, on the last call, the only area where we are looking at price increases would be in branded footwear, which is coming out of China. And it seems like every manufacturer has raised their prices across the board. But again that's less than 5% of our total sales.

I see. Okay. Well, good luck navigating the environment. Thank you.

Thanks.

Our next call comes from Thomas Filandro from SIG.

Hey, guys, I actually have to say congratulations with traffic being down 10%, the results are actually quite good, relative to what we are seeing out there from others so, job well done in a tough, tough market. Dennis first questions to you. Could you just speak speak a little more about SG&A. You talked about marketing investment. I think you said flat to negative 2, on a dollar basis for the fourth quarter. Did you also say that is the type of number we should see for '09?

Yes.

Okay so, in terms of the marketing piece, are we seeing marketing up year-over-year?

Well, marketing has been up year-over-year in 2008, and what -- the point I intended to make was, we're going to maintain that posture, not increase the dollars in '09, but certainly maintain our campaigns in to '09 from '08.

Can you be more specific about how circulation plays in to that, and just remind us too, TV, whether we're doing TV this year?

Yes, as you know we're doing TV this year in the fall as -- as -- in the same posture as the spring, and we intend on at this point, to continue that in to next fall -- next spring and next fall. Our circulation in our cataloging, as it relates to our current customer base, our active files, if you will, we're maintaining the same posture, same [circ] as we have been doing in '07 and '08. Of course mailing to our new customers that have joined us et cetera. But we have shifted many of the prospecting dollars that the catalog circ that was being used, and instead focusing on TV and mass media, as the medium by which we'll prospect for new customers.

Is overall circulation -- what was the overall circulation in the third quarter, up down?

Overall circ is down because of the shift out of prospecting, and in to TV.

Can you be more specific? How much it was down?

It -- top of my head, Tom, I want to say like 15% down.

Okay. That will be a similar trend in the fourth quarter?

That will be a similar trend in the fourth quarter.

As well as at least the first half of '09.

Yes, but don't forget that productivity of that part of our circ has always been very poor.

So core -- non prospecting circulation, I'm assuming is down but to a much lesser degree.

Actually, it's slightly up.

Slighty up, okay. You have answered my question on that, thank you. Can you tell us are there any covenants on the credit facility, and if they are, what they are, and whether you are in compliance in your views go forward?

There's really no financial covenants at this level. The only covenant that does exist is, in the event that our liquidity, our unused excess availability drops below $20 million and EBITDA covenant does kick in, but we don't anticipate getting close to that at all.

You made an IMU comment, I sort of missed it. You said something about lower IMUs, which impacted the MMU --

Oh, I was talking core versus non-core businesses --

Oh businesses, okay. Not products. You are talking like the Shoes XL and --

Yeah, our shoe margins are slightly less than our apparel margins, and as shoes become slightly more -- higher penetration of our business, it tends to drop the average slightly.

Okay. So with David's comments, your comments on the IMU front, should we continue to view MMUs coming under a little bit of pressure in the fourth quarter. and then rebounding in '09? How should we view --

Yeah, difficult to -- to -- to -- well, the factors that are at play here Tom, depending upon traffic and sales trends, and our position to stay liquid on inventory, we may or may not have to discount, and at what depth of discount will we have to maintain to continue to stay liquid with our current traffic.

Okay. But I just want to confirm what I'm hearing here. You had a 30 basis point decline in the MMU, none of the negative factors you highlighted were related to markdowns, they were all related to loyalty program.

Yeah, so far -- that's -- through nine months that is exactly right.

Okay so at this stage of the game, unless the environment continues to get more challenging, your inventories are in good position, and David as you alluded to, you don't want to put pressure on gross margins just to drive sales. The likelihood is. it would not be a huge fallout in MMU, unless of course the environment changes dramatically. Is that a fair assessment?

That's a fair assessment, although our fashion part of our inventory, we will be aggressive, if necessary to liquidate that inventory to stay current, Tom.

Okay.

We're not going to take our basic core product, promote it deep to try to generate traffic or sales. We will concentrate on anything that's perishable, seasonable, to get rid of it in this quarter, so we come out clean for next year, and that's a moving target weekly as we make those price adjustments.

Okay. Just a couple more things, David, the Rochester comment about coming in with some lower -- more moderate-priced products. That's a change, clearly a reaction to what is going on in the environment.

Let me clarify that. It's not bringing in new assortments by brand. It's balancing the mix a little better.

Okay.

Because we're not bringing in any lower-priced brands. It's just the percentage of sales we are going to get out of our opening price points that we currently have, will increase, and some of the very high price points will have to come down. That's what we're saying. We're not going to change the strategy, really.

Okay. That was my question. And any thoughts on why you had strong traffic on the European operations, but you didn't see as strong on the -- as conversion as anticipated? Any thoughts as to why that has occurred?

Well we are learning about that. I mean, we're glad we're getting a lot of exposure, and we're learning about through surveys and other means, understanding what our potential customers are seeing, and why they are not converting quite at the rates that we see here domestically.

Okay. And is the -- Dennis or David, how are you guys getting the message out, is it just like search engines or how do people know --

So, search engines, banners. We also circulate a catalog to our customer base, that has been accumulated out of our London store for the last several years.

Okay. Thank you very much and, you know, best of luck in this environment, guys.

Thank you.

Thanks, Tom.

Our next question comes from Terry Gray from RBC Capital Markets.

Thanks, good morning.

Good morning.

Quick question on the debt balance. If you could just talk a little bit behind your thought processes behind continuing to pay down the debt, versus holding on to the cash?

We would rather -- we would rather reduce our debt -- the interest savings, I think, is more than the interest to be earned on cash. To us, it's almost no difference, quite frankly, and as debt is reduced, it expands our credit availability and liquidity to the business.

Okay. Thanks, that's all I had.

Our next question comes from Margaret Whitfield from Sterne Agee.

Morning, most of my questions have been answered. But I was curious you had a lot going on with the EU, the Dahle's, acquisition and the three new businesses that were opened in the last two years, and I wondered if you could quantify the bottom-line impact to your quarter from these new ventures, or recent ventures?

Margaret, all told, it's probably a loss of -- on a pretax basis, Margaret of some $400,000 for the quarter.

And would a loss be expected in Q4 as well?

Probably of that kind of magnitude, yes.

Okay. So there's -- you had TV in November -- I guess you had TV starting at then of October. Normally your consumer response -- I take it you did not see any pickup, or maybe it made it less negative than it would have been otherwise. Any comments on TV? And how long does it go on for?

I think you said that, I think maybe it been less negative -- it would have been more negative if we weren't on TV. That's always hard for us to measure. But again, all I can is I compare ourselves to the other retailers out there, and it seems we're doing considerably better in holding our comp sales to what -- what else is out there. That's -- that's about all we could quantify at this point in time. We do get considerable phone calls in to our call centers when we're on television. We get a lot of requests for catalogs, but as far as driving traffic to the stores, that's very difficult for us to measure.

And when does the TV spot end, this month?

We go through week one of December, I believe.

Yes.

Any holiday plans that are new and different this year, in terms of hard lines, more of them in the stores, more giftables?

We're pretty consistent with where we were a year ago. Our Thanksgiving promotion is the most aggressive we have ever been, but we planned this six months ago, but we have -- we think we have a very compelling offers out there for Thanksgiving, and other than that, it's pretty much the same promotional schedule that we had a year ago.

Given where the stock is, I think there are concerns about liquidity here, if you could be a little more specific on, where the debt might be at year-end. That would be very helpful I think. Is there any way you can give us a range, Dennis? On where you think you might end.

We expect our revolver balance to end somewhere between $30 million and $35 million, and liquidity close to $50 million Margaret.

Okay. Good. And best of luck for the holidays.

Thank you.

Our next question comes from Betty Chen from Wedbush Morgan.

Good morning.

Good morning.

I was wondering if you can give us a sense of the sales mix or profitability contribution of the Rochester division, given some of the struggles you highlighted for the third quarter?

The Rochester business represented to us in the quarter, about -- about 20 -- just under 20%, Betty.

Okay. And is that usually the kind of profitability mix we would expect from them, or it is higher given the --

It's -- the profitability mix is slightly to Casual Male's advantage.

Okay.

So it's slightly less, therefore, as a penetration for Rochester.

Okay. And then in terms of Europe, just to follow-up on the earlier questions, could you remind us, is the product offering the same in all of those countries, relative to the US merchandise? Or what adjustments have you made to indicator to the local preferences?

Well, we're learning about the local preferences, the assortments are pulled from our US assortments, so they are very much alike. Not 100% everything is available in Europe, but almost everything. As we go forward, we'll learn more about those local preferences, and they are the same -- the assortments are the same in all countries right now. And not only will we learn about the lifestyle preferences, we'll also learn about the sizing as well. And that might be having an impact on our conversion as we learn more about that, we'll make the appropriate adjustments.

Are we seeing better traction in the UK, given the established base with the Rochester store there relative to the other countries?

We're seeing good traffic in to UK, but we're pleased with the traffic in all of the countries, quite frankly.

Okay. Now I know you mentioned the expected investment for Q4 in Europe, how should we think about that for 2009?

We're -- we're -- with our relationship we have with GSI Commerce, who is helping us with the infrastructure part of this business, we expect to operate Europe at slight loss to, perhaps, even a break even in to 2009. We'll have a slight loss in the fourth quarter of this year.

And then in terms of the non-core business here, I know your management circulation. Should we still anticipate break-even this year? And then sort of what are the targets from here?

We'll probably have -- non-core businesses -- we'll probably have a loss for the year of about $1 million. But we're making the appropriate adjustments, and expect that to be break even or perhaps slightly positive for 2009.

That's terrific. And is the slowdown the same across the board, or is the -- the shoe doing better than Living XL and B&T?

I would say shoes are doing the best of all -- of the new concepts right now. It's very consistent, growing at a good pace and again for -- for Living XL, you know, we're -- we're still working on a longer-term plan on that. We need to increase our base. We need to prospect more in to the women's side, where we're getting some good activity. Continuing to mail catalogs to our existing customers, it slowly works its way down in revenue, because a lot of this product is not replaceable on a seasonable basis.

So, David, when we think about that for next year, are we going to plan for circulation to be up a little bit, to try to target that female customer base?

We're working on that right now. I can't give you any guidance on that. I will -- I should be able to have more color on that at the next call.

Okay. And then just lastly then, you mentioned that CapEx will be approximately $5 million next year. How should we think about the allocation of that, and I'm sorry if I missed this early, did you say there will not be any store openings next year?

I think we have like one store opening next year, Betty.

Okay.

So the $5 million -- that -- basically that is a maintenance-level-type capital expenditure amount.

Uh-huh.

Real estate probably takes up over half of that. We have on the board -- part of that real estate, much of that is for relocations that makes sense even in this environment.

Okay.

And then we have some maintenance level type expenditures necessary on our IT side, and in our warehouse center.

Okay. Okay. Well that's terrific. And best of luck managing this environment. I think you guys are doing a great job. Keep it up.

Well thank you, Betty.

Our next question comes from the line of [Klaus von Setterham] from Deutsche Bank.

Hi, I have two questions. You have got liquidity, and you are buying in debt. Would it be more accretive to buy stock?

It would be accretive to buy stock. I think that the Company's posture is to be more defensive at this point in terms of its liquidity position, and make sure that the working capital needs are being supported for the business. And we'll continue to evaluate that as we go through this.

Right, now that makes sense obviously. But given the price of the stock, a little bit of a buyback could make a big difference, it would seem to me. So that was one question. The second one is, I can't remember, do you guys have a poison pill?

No.

Is that something that might be a good idea?

I think that our posture has always been to increase the shareholder value, and not put up artificial measures necessarily.

Okay. Thanks. That's all for me.

Our next question is a followup from Thomas Filandro from SIG.

Hey, David, just a quick question on -- are you seeing any variance between the total business and the smaller size arena, are you seeing, maybe better penetration there?

We're doing a lot of analysis on that, and we're making a commitment to bring in more -- smaller sizes. Our information is telling us, we're not keeping enough inventory levels in those small sizes to maximize the business, and we are going to commit to expanding the in-store -- on those sizes.

Okay.

But we continue to -- you know, that's a key priority for us. We continue to work on that, and we get improvements, but we see it has got so much upside, we should be doing even better than we are.

Any comments and I know in this environment its probably tough to get anything off the ground, but Bold XL?

Bold XL, it's one of those things. It's a website that really has no overhead to it, and because of expense tightening, we're kind of putting it on ice. There is traffic in, we're generating sales, but we're not going to put a lot of capital -- or SG&A in to that at this point in time. We'll let it -- we'll let it stay where it is and then attack it when we -- we feel more comfortable about the environment out there.

Thanks very much.

(OPERATOR INSTRUCTIONS).

Okay.

I'm showing no further questions.

All right. Well thank you all for joining us on the call, and we'll get back to you next quarter. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. In concludes the program, and you may all disconnect. Everyone have a great day.