Destination XL Group Inc (DXLG) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Casual Male Retail Group fiscal 2009 earnings conference call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. (Operator Instructions) As a reminder this conference is being recorded. I would now like to turn the conference over to your host today, Jeff Unger. Please begin.

Thank you, Sean. Good morning and thank you for joining us today for Casual Male Retail Groups fourth quarter and fiscal 2009 earnings. On our call is Dennis Hernreich, our Executive Vice President, Chief Operating Officer and Chief Financial Officer and David Levin, our President and CEO. I'd like to read our forward-looking statement and then introduce David.

During today's call we will discuss some non-GAAP metrics to provide investors with useful information about our financial performance. Please refer to our earnings release which was filed this morning and is available on our website at www.casualmalexl.com for an explanation and reconciliation of such measures. Today's discussion also contains certain forward-looking statements concerning the Company's operations, performance, and financial conditions including sales, expenses, gross margin, capital expenditures, earnings per share, store opening and closing and other matters. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results 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 and Exchange Commission. David, the call is now yours.

Thank you, Jeff. Today we announced our fourth quarter and fiscal 2009 financial results. Considering the difficult economic environment in 2009 we're very pleased with the way we navigated through the year. When we spoke to you during our first quarter 2009 earnings call on May 21, we began laying the ground work for the transformation of Casual Male. The first step was to improve the overall profitability and cash flow through better managing inventory and expenses and I'm pleased to report that we met all the metrics discussed on the call. Even with the decline of $49 million in sales volume, we still generated significant cash flow and earnings improvement over the previous year. Our focus on a tight management of our inventory coupled with seasonally appropriate product assortments enabled the Company to improve our merchandise margin in the fourth quarter by 890 basis points.

Strategically in the past 18 months, we have been focused on driving gross profit dollars as opposed to driving top line sales. When we acquired Casual Male in 2002, we ran over 20 store promotions a year. In 2009, we ran just seven promotional events and delivered our highest margin performance ever. The reduction in store events coupled with continued improvements in size management, planning and allocation, have all contributed to the increase versus the last several years. This combined with the gradual recovery in consumer spending and traffic levels should lead to continued improvement in our comp sales over time.

It's important to reiterate what I said on the last earnings call in regard to the loss of top line sales over the last 18 months. We do not believe we have lost any market share during this downturn. Our surveys showed that 90% of our customers who had not made a purchase at CM recently said they plan to shop with us again and we're starting to see signs of that in our performance. Since November, each subsequent month has seen an improvement in traffic and comps over the previous month. And quarter to date for fiscal 2010, we're seeing sales flatten out for the first time in two years. With the relatively flat sales plan for 2010, seeing greater improvement in the back half of the year, we should be able to deliver higher earnings based on a combination of continued improvement in our gross margins and the reduced expense structure.

From a product standpoint, Spring 2010 is off to a promising start. Our inventories are in excellent shape with minimal season carryover from last year. Our in stock position on our core products is also in great shape. The strongest categories in the first quarter so far have been denim, screen T-shirts, woven tops and active wear. And from a division point of view, our value oriented catalog concept, B&T Factory Direct, is experiencing significant sales increases this Spring, but we're also seeing improving trends in our other areas as well including our Casual Male XL stores.

During the last few calls our attention has been focused on the upcoming openings of our Destination XL concept. In mid 2009, we opened what we referred to as hybrid stores. Basically, we took five underperforming Rochester stores and remerchandised them with an assortment of Casual Male and Rochester products. The hybrid stores averaged about 8,000 square feet. All five stores met or exceeded our expectations and they are currently producing four wall contribution close to the Company average, which is an improvement over the combined four wall of the existing stores that were impacted.

Destination XL is taking this concept to a higher level. DXL will offer a full assortment of our products under one roof by combining a full assortment of Casual Male product with selected product from our Rochester concept, our B&T Factory outlet stores and even our Shoes XL and Living XL direct marketing businesses. The initial prototype DXL stores will be about 11,000 square feet and carry an assortment three times that of the Casual Male store. These stores will also address many of our customers greatest concerns. Among them, the need for wider aisles, bigger dressing rooms, better lighting and an on site tailor.

The results from our focus groups and national surveys concluded that our customer who is clearly a Destination shopper is willing to drive up to an hour to shop at Destination XL location and is very enthusiastic about this concept. As we open a DXL in existing market, at the same time, we will be closing two to three stores in the same market. As a result, we expect the opening of DXL stores to be somewhat neutral to our overall sales, inventory, and square footage. However, four wall profits from one DXL store are expected to be 30% higher than the combined four wall profitability of the one to three closed Casual Male stores. The ROI on the DXL stores will obviously depend ultimately on the size, cost to build and productivity of the stores. However, we initially are targeting a four wall contribution margin of 30% and a three year ROI of 50%. The current state of the real estate market is in our favor as we go out and negotiate the terms.

In 2010, we'll test this concept by opening five DXL stores in different types of markets. The first three stores are targeted to open mid to late Summer in Schaumburg, Illinois, Houston, Texas and Memphis, Tennessee. The Schaumburg store is a newly constructed store from the ground up. The Houston store is the conversion of an existing Rochester store in which we are adding 4500 square feet and the Memphis store is the conversion of an existing Casual Male store.

Some time in the third quarter, we're also looking to open stores in Las Vegas, Nevada and Glendale, California. The continued expansion of these stores will depend on their performance and the timing of store lease expirations. Assuming our test is successful, going forward as we look to expand the XL locations, we'll be timing new stores to the lease termination of the stores that we intend on closing. Given the larger size and nature of these stores, we will be initially targeting highly populated areas in major metropolitan cities and suburbs.

So we're excited about the future. We have dramatically improved the overall profitability and cash flow of the business and have a new concept that we believe is capable of delivering even higher level store returns and capturing increased market share over the long term. Without putting a timeline on it, we believe the $49 million in lost sales in fiscal 2009 will eventually come back to our top line. With a fairly fixed expense structure and strong merchandise margins of over 60%, the flow through on the incremental sales dollars will be quite strong and we'll continue to tightly control our inventory and SG&A which would benefit our operating margin. Combined with the strategy of the DXL concept, we believe we're well positioned to drive sustainable earnings growth over the foreseeable future.

Over the long term, we believe the DXL stores have the capability to capture higher penetrated sales in the big and tall sector by attracting a wider customer base and a higher percentage of each customers wallet. Dennis will now review the quarterly and annual results for the year.

Thank you, David, and good morning, everyone. Thanks for joining us as we review our fourth quarter and 2009 results. While the overall weakness in the economy during the past 18 months directly impacted our business, particularly our sales volumes, fiscal 2009 was a very pivotal year for us. Beginning in 2008 we started to take the steps that we felt were necessary to be profitable and cash flow positive given the potential for double digit decreases in sales for fiscal 2009. We are pleased to report that in spite of the drop in sales, net income for the fourth quarter of 2009 was $3.6 million or $0.08 per share as compared to an adjusted non-GAAP net loss of $6.1 million or $0.14 per share for the fourth quarter of 2008. The prior year adjusted non-GAAP net loss excludes the impact of the non-reoccurring charges that we incurred last year, primarily related to impairments.

Instead of trying to maintain our top line during a weakened economy, we shifted our focus towards improving our operating income and optimizing our free cash flow. We focused on strengthening our liquidity and efficiently managing our inventory levels to improve our gross margins. The result of these initiatives was an improvement in operating income of $11.7 million, $2.1 million for 2009 as compared to an adjusted operating loss of $3.6 million in 2008 before non-cash charges and severance costs of $73 million. This improvement in operating income despite a sales decrease of $49 million was the result of improved merchandise margins and about $27 million decrease in SG&A expenses for 2009. As a result our net income for 2009 was $6.1 million or $0.14 a share, as compared to a net loss, total net loss of $109 million or $2.64 per share in 2008, and as compared to an adjusted net loss of $7 million or so, or $0.18 per share in 2008.

Of equal significance was the continued improvement in our financial position during fiscal 2009. We have reduced our total indebtedness to $11.1 million at January 30, 2010, which represents a decrease of $40 million or 78% as compared to the prior year. In addition, we have further reduced our inventory levels at the end of the year by $8.7 million or 9% as compared to 2008. Over a two year period, we have reduced our inventories by approximately 24%. This aggressive approach to managing our inventory has been a key component to optimizing our merchandising margins through avoiding excessive promotional and clearance activity. Our resulting free cash flow for 2009 improved by almost $19 million, was approximately $26.2 million compared to a free cash flow number of $7.6 million for 2008. Accordingly, the amount of borrowing availability under our credit facility approximates $60 million at the end of 2009 as compared to only $30 million at the end of last year. We believe that with this restructured operating model, our existing business can remain stable and cash flow positive even in difficult conditions.

Given our leaner operating structure, we believe there is significant opportunity to expand our operating margins as our top line begins to recover the $70 million loss in volume over the prior two years. This can be accomplished by focusing on servicing our loyal customers with lifestyle and product assortments, often in their unique sizes, elaborate store assortment planning to optimize each market, aligning sales forecasts with inventory planning, helpful customer service provided by-product knowledgeable associates assisting our customers in their wardrobing needs, and careful expense management. All of the ingredients that produced 2009 results.

All during this recovery period, the Company expects to generate healthy free cash flows and further strengthen its virtually debt free balance sheet enabling it to easily fund its growth initiatives. However, we do not believe that new store growth in our current formats will produce the level of market share growth we hope to achievement. Given that, during 2009, we started to pursue new strategies to grow our business and increase our market share within the big and tall market. We believe that in order to be successful and become a growth business, we need to develop more compelling and convenient ways for our customers to shop while attracting a largely untapped segment of the big and tall market, the smaller waist customer with sizes of 42 to 46 inches. Our market share of this component of the big and tall market is significant opportunity for substantial growth. The positive results in our hybrid stores confirm the additional opportunity for us which lead to the creation of Destination XL as David spoke about earlier.

In conjunction with our new Destination XL store concept that David described, we will also be launching a cross-channel website combining all of our existing e-commerce sites into one enhanced website with state-of-the-art features and best practices. This will enable our customers to easily shop across all of our brands and product extensions with ease and will bring all of our customers under one centralized website. Their classification as a Rochester customer or a Casual Male customer will no longer limit their ability to access our full product assortment. The Company's infrastructure investments made over the past several years, its expansion of product assortments that has evolved, the planning and allocation methodologies that have been developed, customer service emphasis within its stores, and its emphasis upon its multi-channel approach to servicing our customers has prepared us for the challenges of implementing the successful DXL concept.

Let's take a look at fiscal 2010. Our revised position on guidance is to give annual earnings guidance with quarterly updates. At each quarterly earnings release, besides sharing actual results, we will also update the annual earnings guidance and give specific details as to the reasons for any adjustments to the previous annual guidance. While we are not providing quarterly guidance, we will provide some commentary to help you better understand the quarterly flow of our business.

We have seen a steady gradual improvement in traffic and sales since December, as David alluded to last year, but continue to believe the rebound in the big and tall market could take an extended period of time. We are currently planning our sales volumes to be relatively flat in 2010 between $385 million and $395 million with comparable sales to approximate between a minus 1% and a plus 1%. Based on these sales projections for 2010, we expect to make continued improvements in gross margins of between 40 and 100 basis points to between 44.6% to 45.2% and SG&A costs to decline approximately 2% from 2009 levels. We therefore expect our earnings for fiscal 2010 to be between $0.23 and $0.26 per share. The first quarter should continue to benefit from reductions in SG&A and gross margin improvement and we are comfortable with the first quarter consensus earnings estimate of $0.05 per share. In the second quarter we will anniversary our cost reduction initiatives from last year and face challenging gross margin comparisons and therefore this can keep earnings relatively flat in this quarter.

From a liquidity perspective, we expect to generate free cash flow of approximately $20 million, which represents cash flow from operations of $30 million less a planned capital expenditure level of approximately $10 million. Our capital expenditure projects for 2010 are primarily related to our Destination XL store concept and the corresponding enhancement and launching of our multi-business e-commerce website. Free cash flow will likely be used to fully reduce our existing bank debt and expect to be debt free and cash positive at the end of 2010. We further expect that the availability under our revolver, which does not expire until October 2011, will be over $60 million by the end of the year.

I'll now highlight the primary components of our fourth quarter and fiscal year 2009 results. Our comparable sales for the fourth quarter and 2009 decreased by 8.2% and 10.8% respectively with our retail channel down 5.8% and 10% respectively and our direct channel down 17.5% and 14.1% respectively. Throughout the year, similar to our luxury retailers, our Rochester business was impacted the most by the economy with a comp decrease of 14.2% and 22% respectively for the fourth quarter and fiscal 2009. Comp sales for our Casual Male business were down 7.3% and 8.5% respectively. In our retail channel as a whole, much of the drop in sales is related to a corresponding decline in traffic. Otherwise, we had a conversion increase of 3.5%, but partially offset by a drop in dollars per transaction during 2009.

For the year, our direct channel generated approximately 22% of the Company's total sales. This penetration has steadily increased over the past several years as we have emphasized customer convenience and multi-channel operations. However in 2009, our direct channel sales declined at a higher rate than our retail channel unlike other multi-channel retailers, but primarily due to the growth we have experienced up until 2009 and due to a 35% cut in catalog circulation. At the same time, catalog productivity improved by 30%, partially contributing to the Company's profitable performance in 2009. In 2010, we are planning to cut catalog circulation by another 8%, but also planning to raise productivity by another 15% by further reducing unproductive catalog circulation.

Gross margin. In the fourth quarter our gross profit margin increased 760 basis points to 46.4%. This was the result of an 890 basis point improvement in merchandise margin offset by 130 basis point deleveraging of fixed occupancy costs. Our prior year merchandise margin was negatively impacted by the markdowns to clear end of season merchandise or reduce aggressively inventory levels. This year through our efforts we have been able to significantly reduce the need for excess of clearance markdowns and inventory levels were managed at planned levels.

For the year, gross margin increased by 150 basis points to 44.2%. The increase was primarily driven by a 340 basis point improvement in merchandise margins, again partially offset by 190 basis point deleveraging in fixed occupancy costs. As I mentioned our aggressive inventory and our reduced need for markdown activities were the primary factors were a significant improvement of merchandise margin in both the fourth quarter and 2009. Throughout the year we stayed focus on inventory, aligning our inventory receipts with revised sales forecast such that inventory levels were maintained at desired levels which helped us minimize clearance markdowns.

Our occupancy costs, which are relatively fixed, were flattish on a dollar basis in 2009, but increased as a percentage of sales on a lower sales base. We were very active throughout the year in renegotiating our lease terms with many of our landlords, which was very successful and should enable us to reduce future occupancy costs by approximately $9 million over a five year period of time. As a result, we expect to modestly leverage occupancy cost in 2010.

In 2009, SG&A expenses were 38.2% of sales as compared to 40.1% in 2008. On a dollar basis, SG&A expenses is decreased about $27 million or 15% to $151 million. Lower marketing costs related to a reduction in certain promotional events, elimination of media advertising, and a 35% drop in catalog circulation accounted for approximately $15 million of the SG&A savings, which brought marketing costs to approximately $19 million. As a percentage of sales, marketing spend for 2009 dropped by approximately 280 basis points. The remainder of the savings resulting from reductions in payroll of about $8 million, improvements in distribution productivity of around $2 million, reduction in stock comp of around $2 million, and another $6 million or so in savings and corporate overhead and improvements in field productivity. These savings are partially offset by management bonuses, which were not earned or made in 2008.

During fiscal 2009, we substantially reduced our capital expenditures to approximately $4.6 million from $12.6 million in the prior year and $21.4 million in 2007. Our capital projects for 2009 were limited those that we believed would provide a significant financial that we believed would provide a significant financial benefit. We spent approximately $2.2 million on system enhancements, $1.5 million on store capital, including the conversion of five of our Casual Male stores to hybrid stores. With the remainder of general capital projects for our corporate offices and distribution center.

During 2009 we opened one new Casual Male store, closed eight others including one Casual Male outlet. We also closed eight of our Rochester stores bringing our total store count at year-end to 479 stores. In 2010, we expect to close approximately 15 to 20 stores and end the year with around 460 to 465 stores. This concludes my comments on our results for 2009 and our expectations for 2010 and now David and I will be happy to answer any questions you may have.

Thank you. (Operator Instructions) Our first question comes from Tom Filandro with SIG.

Thanks, thanks very much for the details and congrats on working through a difficult year. A couple of questions. Can you tell us on that four wall contribution target for DXL, I think you said 30% David. What assumptions are you making for the top line in terms of what sales you will gain from the stores that are being closed, or I should say retained? And could you tell us too what the average four wall contribution is of a CMXL store? And then my final comment on that is, I think what I hear is you believe the biggest share opportunity is with these DXL stores to capture that smaller waist shopper, let me know if that's true, and if that is true where do you think that shopper is currently filling his apparel needs? A lot of questions there. Thank you.

Let me see if I got them all. Currently our Casual Male four wall is about 20%. Where we see it coming from if we use Schaumburg as an example, where we have three stores closing and one opening, the opening store is within proximity of the existing store. So we anticipate getting 100% of that store sales and through historical closing over time, we anticipate the two closing stores, which are approximately 11 miles from the store, that will capture about 50% of each of those stores and then on top of that we have the layering coming in of the Rochester business which will be incremental to that store. So when you put it all together, it may not be -- it's not a story about combined incremental sales as much as it's about the incremental earnings power. The square footage will stay about the same too because we're closing 12,000 and turning it into 12,000, but it's really talking about the productivity of those existing stores.

As far as the 42 to 46-inch, that's going to be gravy to us. Anything that we could capture is over and above our projections. Where we think that guy currently is shopping, he's all over the board. He is buying a lot online because, as you know, the stores selection of 42 to 46 is very limited and it's just very fragmented out there where he's shopping, but he doesn't have a one stop place to shop. And again, we had the focus groups were with the 42 to 46-inch guy and he was very excited about the possibility of shopping in a DXL environment.

Fantastic, thank you. Best of luck.

Thanks.

Our next question comes from Richard Jaffe with Stifel Nicolaus.

Good morning, thanks a lot. A question on the direct business, and where you see that going, obviously one is a very timely and appropriate move, but wondering about the international initiative and the timing of the implementation of the single platform for all of the divisions and once it's implemented, how you'll support it in terms of catalog distribution and where you see it growing as a percent to total sales.

Let's stay in the US first, Richard. With respect the DXL website obviously we're trying to time it accordingly with the openings of our DXL stores, that's our target, that's our objective and we'll give you updates next quarter as to how we're progressing with respect to that. There's a lot of work to be done to accomplish that, but that's our objective.

But no sense of would that be calendar year 2011?

It would be this year and we're timing it right now to be approximately quarter three.

Implemented in quarter three?

Yes. With respect to the international expansion, that continues. It's going a little bit slower than we had hoped for and anticipated. We still are committed to the market. Our customer base does exist in Europe, and we'll keep at it. It's not terribly significant to our top line as yet and as well, it's not terribly significant to our bottom line either. So we hope to make much more progress with market penetration this year and hope to turn this thing around in 2011.

And the catalog circulation plan for the next year?

Catalog circulation plan, again for our existing businesses, I said we're planning it down eight, productivity up 15. We will see the development of the DXL website and how it is absorbed and introduced to our customers and we'll develop a circulation catalog plan for that business for DXL into 2011.

Could you provide a little bit more detail on the inventory quality that is the conversion, less clearances than last year? Can you put a number on that or give us a better sense of how it is good or it's better or how et cetera, et cetera?

The actual quantity of our clearance inventory is less by a similar amount, our total inventories are down, plus the intensity of the clearance that we do have is significantly less. So it's taking less markdowns to clear less clearance inventory and therefore, our markdown rates are much better than they have been in the prior years.

Got it. Thank you very much.

(Operator Instructions) Our next question comes from Liz Pierce with Roth Capital.

Good morning. Thank you and congratulations. Nice job. Dennis? Can you hear me?

Yes, I can.

Wanted to make sure I was off of mute, sorry. On the SG&A guidance, I just want to verify, are you talking percent in terms of dollars or is that 200 basis points?

No, two points on dollars.

2% on dollars.

Yes.

Okay, just wanted to make sure, and then just to back up on the 42 to 46 size, what percent of the market is that and I think you only offer a few skews in that. I just wanted to frame that.

Yes, 42 and 44 alone are about -- over 60% of the market yet it only represents 10% of our sales. We've always known that's the big opportunity. That's the Holy Grail for us to try and capture more of that market and we haven't been all that successful at it. Again, we think rebranding under the DXL name is going to attract a lot of new customers that don't carry the baggage of the Casual Male or the Rochester name specifically to being big and tall. So by having that in place, we've also populated the DXL stores with a much higher percentage of 42 and 44-inch inventory. So we're prepared for it. We anticipate it happening and I think it's a big opportunity for us, but again, it will all be plus whatever we could capture in that market.

And I'm curious, so the 10%, was that -- would that also equate to like 10% of the skews?

Well, the inventory makes up about 12% of the size range, Liz.

Okay.

But we offer, what you said before is not quite right. We do offer these sizes in all of our styles.

Okay, right. But it's not -- the assortment hasn't been distorted in favor of that and it sounds like it will be for DXL?

That's correct.

Okay, that's what I want to know, and depreciation and amortization estimate for this year?

Yes. Around $13 million range, Liz. In fact it's down from this year reflecting our drop in capital expenditures.

Right, and then the tax rate for fiscal 10?

Not too dissimilar from this year, perhaps lower at 15%.

Okay. And I think everything else has been asked that I had or you gave it in the detail that you provided which is very helpful. Oh, wait one more. Inventory per square foot or just inventory how we should be thinking about it for the end of a year from now?

I would think of our inventories at around flattish to this years -- might be down a tad, but generally flattish to this years levels.

Okay. Great. Best of luck, thank you.

Yes. Thank you, Liz.

Our next question is a follow-up from Tom Filandro.

Hi. Can you hear me okay on this line?

Yes, we hear you.

Here is the question. I think you said quarter to date sales are flattening out. So if that's what you did say, can you give us some color on the metrics of the performance? Are you seeing a change in AUR, the average transaction, conversion up? And also in your view that you provided for the full year which is hurdling sort of flat comp, how should we think about CMXL and Rochester comp performance by each brand, please?

Well, as sales are flattening, Tom, it's the traffic that is bringing that along. The metrics are generally the same. We're getting better conversion, we're getting slightly better dollars per transaction still, but our traffic now is flattening and helping to produce those trends.

So still negative, but starting to close in on flat kind of level?

Well we showed fourth quarter -- we showed comps of 8.2% and obviously we closed the gap on that. That's the trend so far in the first quarter.

Okay, and then the view on the comp by brand for full year?

Well, we're certainly -- Casual Male is the flagship generates 85% of our volume and so that's a big part of what we're seeing, but also too the Rochester is performing much better than the slide has discontinued and is performing much better and even starting to see signs of recovery for the Rochester business.

Great, and if I can, the cross-channel site? When will that be up and running?

Well I mentioned, we're working hard towards quarter three, Tom.

Okay, one more, please. The initial DXL locations, if you do see very strong performance, which it sounds like you're anticipating that, how quickly -- well maybe I should ask it this way. Long term view, how should the fleet look assuming that DXL is the go forward strategy and how quickly can you start to build the DXL with given your leases on your current locations?

Well, we're scheduled to open up the sides this year and assuming it's going to take us through the rest of the year to analyze it, we would look at 2011 as a similar type year because of the timing of being able to get this done. We look at 2012 as a break out year where we could be ramping up in the neighborhood of 15 to 20 stores in a year, based on when our lease expirations are going to take place. The metrics we're using at this time, which of course will have to look at the performances of the different markets like in Memphis, is that we've identified markets that have 750,000 population or greater, which is about 70 markets, and beyond those 70 Markets some of those markets could handle multiple DXL stores. So that's kind of the view we're looking at now and we'll have to analyze each one of these markets for where the threshold is going to be basically on a population basis, what can support a DXL concept.

Okay, great, and one final one please. The comment I think you said, David, or maybe Dennis said it, you had 20 promotions in 2008, you went down to I believe nine in 2009.

No, no, let me correct you. I said when we acquired the Company, we ran 20 promotions. We've slowly been weening it down and this year, we got it down to seven.

Okay, and how should we view the promotional cadence AUR outlook for 2010?

Well, the promotional cadence won't be any different per se in 2010. The AUR -- the AUR, Tom, will be slightly better in the first half because it will be without the excess of clearance markdowns we saw in quarter one last year. So that's why partially we're going to show gross margin improvement in quarter one.

Got it.

As the year progresses our AUR should somewhat flatten out to last year.

Okay. Again, thank you and best of luck.

Thanks, Tom.

Our next question is a follow-up from Richard Jaffe.

Thanks very much. Just a quick question on store closing, the balance between the XL locations, the new openings, and what we're seeing is about three store closings on average of the Rochester and/or regular Casual Male stores. So as we look ahead, how should we anticipate store closing for the next --

Well for 2010, I said we're expecting to close between 15 and 20 stores, Richard.

And we should assume in each XL market should be about three?

The margins -- it will vary from market to market, the way to think about that is unfortunately, a range. A one to three Casual Male stores, depending obviously upon the size of that market.

Got it. Okay, thanks very much.

Yes.

(Operator Instructions) Our next question comes from Liz Pierce.

Actually, it's kind of what Richard asked. I just want to make sure. So Dennis, for this year, we should expect five DXL stores to open?

Yes.

And then you're saying 15 to 20 closes in Casual Male or Rochester, some combination?

Within the DXL markets there's other routine normal business as usual closings that are occurring as well.

Okay.

But in total, in total, we're expected to close 15 to 20 stores this year.

Okay, and then for next year, you're saying possibly a similar number of DXL stores opening. So five to six or something?

Yes, that's the way to think of it, yes.

And then we should -- should we continue to use that same ratio like for every one, there would be possibly up to three closing?

Again, it depends by market. It could be in certain markets one, others could be two. Average of two stores probably is the way to think of it.

Average of two, okay. And then the following year is when you think that you could open 15 to 20 of the DXL stores?

If all is successful and produces the way we are expecting it to, yes, we would be in a full rollout year.

Okay, and then continue to maintain that like a two average of closing?

That's our expectation.

Okay. And then I just wanted -- on the DXL website, is there going to be a separate website for DXL or that's going to be all in the existing combined?

No, it's going to be a new website that will have the combined product reorganized from all of the other existing websites that we have.

So there's only going to be -- I guess that's what I want to understand. There's just one website with all products?

Well initially when we rollout and launch DXL website, the other websites that currently exist will also be operating as well. Over time, we'll determine what the proper transition is with respect to all of our websites, but initially, we'll operate with all of our existing websites including the newly launched DXL website.

Okay. Thanks.

Yes.

(Operator Instructions) I'm not showing any other questions at this time, gentlemen.

Okay, well thank you all for joining us. We'll be back in two months with a lot of color on the first quarter. Thanks again.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference. You may now disconnect. Good day.