Destination XL Group Inc (DXLG) 2010 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the Casual Male third quarter earnings conference call. (Operator Instructions) As a reminder, today's conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Jeff Unger, Investor Relations. Sir, you may begin.

Thank you, Devon. Good morning, everybody, and thank you for joining us today on Casual Male Retail Group's third quarter fiscal 2010 earnings call. On our call today, 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 review our forward-looking statements and then introduce David for the call.

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 at 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 openings and closings and other such matters. Such forward-looking statements are subject to various risks and uncertainty, that can cause actual results to differ materially from those assumptions that are 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 yours. Thank you.

Thank you, Jeff.

This morning we announced our 2010 third quarter financial results. I am pleased to state thatwe have seen our comp sale performance improve each quarter. We had a negative 0.8% comp in Q1, a plus 0.8% comp in Q2 and we finished Q3 with a plus 3% comp, and we are building momentum.

October was our strongest month of the year, and we're off to a solid start in November. Traffic counts in the store continue to show signs of improvement and conversions also continue to improve.

We also continue to see improvement in our gross margin rate with Q3 improving by 300 basis point to 45.7% for the quarter over last year, and up 270 basis points for the year, compared to fiscal 2009. Our product assortments for fall have been received very favorably by our customers, and our sellthroughs have been the strongest we've experienced in years. The best performing categories this quarter have been Outerwear, Activewear, Woven Shirts, and Bottoms. As far as our direct channels, Casual Male XL and Rochester sales have been consistent with the store sales performance. Shoes XL, Living XL, and B&T Factory Direct are also doing well, and our Sears Canada business is having its best year since we began the program several years ago.

We are excited about our growth opportunities in the years ahead. There's three strategic initiatives that we have embarked on to grow our market share in the future. The first is the Destination XL store concept. The DXL store format is approximately three times the size of a typical Male Casual XL store, and features a significantly expanded merchandise assortment from all of the Company's core brands. A DXL store can carry approximately 2000 styles, compared to 600 styles at a Casual Male XL store. On the last call, we announced that we had opened a DXL store in Schaumburg, Illinois, Memphis, Tennessee, Las Vegas, Nevada, and we are just about to open in Houston, Texas.

Now we have a quarter of sales behind us and our assumptions about the performance of the DXL stores have exceeded our expectations. We focused on two critical metrics that we glean from our surveys and focus groups. One, was that our existing customers expressed that they would be willing to travel a considerably greater distance to shop in a DXL store, as opposed to their local Casual Male XL store. Our customers have certainly lived up to that statement Over one-third of our customers are traveling over 20 miles to get to the DXL store.

The second assumption was that once in a DXL store, our customers would spend more money on their visit, and that is certainly coming to fruition, as the average transaction is 33% higher than in a Casual Male XL store.

These two factors support our model that the four-wall contribution of the DXL store will range from 30% or better, compared to the existing Casual Male store base of 20% and our market share, grosses at the same time, as the sales of the DXL stores exceed the combined sales of the closing stores in the market area.

Finally, the customer experience is critical to the long-term success of this roll-out. We have thousands of exit surveys, where the overwhelmingly consensus, is that our customers love the new concept and only about 1% responded that they would not come back.

These aforementioned results, although early in the test stage, have given us the confidence to accelerate our openings for 2011. We originally planned to open 4 to 5 stores next year, but we are now targeting 8 to 12 DXL stores for next year. Then, if all's going according to plan, we expect to have 75 to 100 DXL store locations by fiscal 2015.

As we close Casual Male XL stores, the Company's total selling square footage will not change significantly over the next five years, but our total store count will be reduced from 466 stores to approximately 350 stores, comprised of 250 to 275 Casual Male X stores, 100 DXL stores, and 6 or 7 Rochester Clothing stores, which would be located in the larger metropolitan markets.

The second growth category will come from our e-commerce initiative. While currently doing 20% of our total e-Company sales through direct channels, there's an opportunity to get significant market share gain with the first quarter 2011 launch of our Destination XL website, which will offer the entire product assortment from all our brands. We anticipate the shopping experience to be more like a DXL store visit and will have a higher transaction per customer than our current sites.

The third growth category is the Company's opportunity to reach a customer base that we don't maximize today. We are underdeveloped in attracting the female mall shopper, who shops for the male big and tall customer. While having stores in the mall would not make sense for us, we have a model where we can be a shop-within-a-shop, in the department store environment. It was recently announced that we've allied with the Bon-Ton department store chain, where CMRG will sell its products on their website, and by the middle of next year will be opening approximately 15 stores in their Men's Department.

CMRG will own the inventory and Bon-Ton will be the operators of the business, and they'll get a percentage of the sales. There's no significant CapEx requirements on our part, as our department will be a natural part of their stores. And based on its success, we plan on rolling out this concept throughout their chain. And because CMRG covers all price points from outlet to luxury, there may be more opportunities for us in the future with other companies.

I'd like to give an update next, on what's happening with our cost of goods for next year's placements. As I said on the last call, we don't have any margin issues for spring 2011. As we are preparing to place our orders for fall 2011, we, like everyone else, are experiencing an increase in price growths, primarily being driven by the cost of cotton, which has more than doubled from a year ago.

One advantage we have is that our receipts out of China for our private label goods is around 2% for next year, so we won't have the added burden of the labor and transportation issues that China is facing today. We have increased our sourcing out of Bangladesh, Indonesia, and Vietnam.

I met with our key factory groups last week and we're working closely together to minimize these price increases. Our goal is to maintain our IMU for 2011. We are increasing our percentage of orders placed directly with the factories, to offset some of the costs and we'll be moderately raising prices, if necessary, to ensure our mark-up requirements.

And finally, I'd like to address the press release from JCPenney's this week, in which they announced they're going to be opening specialty big and tall stores, over the next several years. Until we actually see one of these stores opened, it would be premature on our part to respond to their press release. As the market leader in this niche component of the men's apparel business, we clearly understand the big and tall market and the challenges involved in catering to this customer. To that end, we intend to aggressively pursue our growth opportunities, further exploring and expanding the Destination XL concept, with 8 to 12 stores in 2011, leading to this potential roll-out of 75 to 100 stores, launching the DXL website in the first quarter of 2011 as a multichannel solution to the DXL concept, and becoming acquainted with the female customer, through partnerships with department stores, such as the Bon-Ton chain.

And now, Dennis will review the financial performance for the quarter and year-to-date.

Thank you, David, and good morning, everyone. Thanks for joining us as we review our third quarter results and discuss our outlook for the balance of the year.

With each quarter of physical 2010, we have seen our business strengthen, across all of our brands. During the third quarter, as David said, the Company had a 3% comparable sales increase, the largest sales increase since quarter 2 of 2007, while year- to-date the Company has just under a 1% increase. Furthermore, customer traffic has flattened and turned slightly positive during the third quarter, although overall was down 3% in the quarter. Sales productivity, which is driven through a store-level customer service program we started over two years ago, and is measured through a combination of customer conversion and dollars per transaction, continues to add significantly to the top line.

Moreover, we are producing strong gross margins. In the third quarter of physical 2010, our gross margin rate increased 300 basis points, over the prior year's third quarter, and increased 270 basis points for the first nine months of this year. These increases are the result of solid merchandise margins, as well as realized cost savings from renegotiated leases.

For the first nine months of the year, net income has improved to $10.1 million, or $0.21 per share, compared to $2.6 million or $0.06 per share a year ago, virtually assuring a profitability in every quarter of the year, for the first time in the Company's history.

We have also reduced our total indebtedness at October 30, by 58% over the prior year. As a result of this continuing improvement in our business, we have again raised our earnings guidance for physical 2010, by an additional $0.02 per share, from 29% to 32% range per share, to a $0.32 to $0.34 per share range for 2010.

The Company also expects to generate approximately $24 million of free cash flow during the year, and is therefore planning to not only be debt-free at the end of the year, but also be in a cash position of over $15 million. We are currently planning 2011 and expect that earnings and sales will further improve upon 2010 levels, and partially utilize the Company's liquid position in free cash flow to pursue the expansion of the DXL stores and launching a DXL website.

To elaborate on the outlook for 2010, of EPS between $0.32 and $0.34, our sales are expected to approximate between $393 million and $396 million, gross margin rates to increase between 175 and 200 basis points, and SG&A expenses to increase less than 1% over 2009 levels.

Now I will make a few comments about the Company's third-quarter performance, starting with sales, which increased 1.4% to $89.9 million, compared to last year's $88.7 million. Comparable sales, as I said for the third quarter, increased 3%, which consisted of a 2.6% increase in sales from our Casual Male business, and a 3.9% increase in our Rochester business. Sales across all of our direct businesses increased by 2.2%, while comparable sales from our retail channel increased 3.2% for the third quarter.

For the nine months, total sales decreased 0.8% to $282.2 million, compared to last year's $284.5 million, and comparable sales increased just under 1%. This increase in comparable sales consisted of a 2.1% increase in our Rochester business, while for the year so far, Casual Male business has been flat. Sales from our direct businesses increased by almost 3%, while our sales from our retail channel increased just about 0.5 point, so far for the nine months of this year.

Our gross margin rate for the quarter, inclusive of occupancy cost, was 45.7% compared to last year's 42.7%. The increase of 300 basis points was the result of increased merchandise margins of 190 basis points, and improvement in the occupancy percent by 110 basis points, as a result of lower occupancy costs.

For the first nine months our gross margin rate went to 46% as compared to 43.3%. The increase of 270 basis points was the result of increased merchandise margins of 190 basis points, and an improvement of occupancy percentage by 80 basis points. Occupancy costs also improved despite the slightly lower sales base on a dollar basis. Occupancy costs for the first nine months of this year decreased by $2.6 million, as compared to last year, as a result of our ongoing rent reduction efforts with various landlords.

SG&A expenses for the quarter was 43.1% of sales, as compared to 39.8%. The SG&A increase of approximately $3.5 million, or 10% in this quarter, was due to two things, one, additional SG&A costs primarily advertising store payroll associated with newly opened DXL stores, and number two, bonus accruals of approximately $1.9 million for both our annual incentive, and senior management long-term incentive plan. In the prior-year we did not accrue for these bonus plans until the fourth quarter, when the achievement of the bonus plan targets became probable.

For the first nine months, SG&A expenses were 38.9% of sales, as compared to 37.9% last year. On a dollar basis, SG&A expenses increased 1.8%. This increase relates to incremental expenses associated with slightly higher sales and expected payouts, under our incentive plans from higher-than-expected earnings performance.

Income taxes, a topic for the quarter. Our deferred tax assets are approximately $52.7 million and deferred tax assets, principally relate to our federal net operating loss carry-forwards, that expire through 2029. During this quarter, the Company recognized a tax benefit of almost $1 million or $0.02 per share, as a result of reversing certain tax reserves associated with certain tax positions, due to be expiring statute of limitations.

Therefore, our net income for the quarter was just $300,000, or $0.01 per share, as compared to last year's net loss of $1.4 million, or $0.03 loss per share for last year's third quarter. For the nine months we are at $10 million, at $0.21 per share, of net income, compared to last year's $2.6 million or $0.06 per share, for last year's nine months.

Subsequent to the end of this quarter, we updated our credit facility with our bank, Bank of America, for another four years. The amended credit facility provides for a maximum committed borrowing level of $75 million, which pursuant to an accordion feature may be increased to $125 million, upon our request, in the agreement that the lenders participating in the increase.

Similar to the existing credit facility, our ability to borrow under the amended credit facilities determined using an availability formula, based on eligible assets. The Company downsized the revolver facility capacity, due to its expected limiting borrowings need, in subsequent periods, other than for seasonal cash requirements. Our cash flow under the amended credit facility is largely unrestricted as it relates to payments for transactions, such as repurchases of stock, debt prepayments, dividends, and certain asset acquisitions, so long as the Company maintains an availability of 20% or more of the total borrowing base.

At the end of the quarter, CMRG had 466 stores after closing 17 stores so far for nine months, and opening four stores during the year. We are expecting to end the year with 461 stores, after five more store closings planned for the fourth quarter. The Company's total store square footage approximates 1.77 million square feet. This concludes my comments on our third quarter results and financial expectations for the year. And now, David and I will be happy to answer any questions.

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

Thanks for taking my question, and congratulations on a great quarter.

First question's for David. Maybe can you tell us how you are marketing to the existing shoppers, as well as the new customers at the DXL store? And if possible, can you give us a sense of what percentage of sales you were able to transfer from the stores that you closed?

And then Dennis, a question for you. Now that you've laid out a more aggressive potential plan to expand the DXL format, can you give us a long-range view of CapEx requirements, and what can you tell us about your comfort level in terms of cash balances? Thank you.

First, Tom, on the marketing, there's several stages that take place. Three to six months prior to the existing stores closing, we have a lot of collateral in the stores, telling the customer that the store will be closing, where the new location is going to be. And then prior to the opening, we started direct mail campaign. Then we hit them again for a grand opening campaign, and we have supported this also with some local cable and radio media behind it.

Our intent is to, obviously, move as many of those customers as we can, out of those closing stores up into the new DXL store, and we've been very successful doing that. Without giving an exact percent, it's, again, exceeded our expectations, in getting our customers to move rather quickly, to get to see this store. And then, Dennis?

To elaborate on that, it's a little early to tell, Tom, exactly how many -- our customers come in twice, maybe three times a year. So it's difficult to say yet the ultimate conversion. But over time obviously we'll know much more.

But so far, particularly in the Schaumburg and Memphis markets, that are sort of like what our roll-out plan is, in terms of a market perspective, we're exceeding -- our sales are exceeding the market sales, from a year ago because primarily of the step-up of our new and existing customers, into the Rochester merchandise, and therefore the tickets are higher. And on that strength, we are planning 8 to 12 stores next year.

When you look at a longer range, if success continues, we're looking at a slight higher ramp up from that on an annual basis, perhaps up to 15 to 20 DXL stores. The capital expenditure requirements for such a roll-out will, starting with next year, we're expecting about a $15 million capital expenditure level, and probably on succeeding years it's expected to approximate about $20 million. All such capital expenditures are further expected to be funded entirely from free cash flow from the business, and therefore, will not require any borrowing needs, unless we accelerate further from that plan I just laid out.

Thank you very much, Dennis.

Thank you. Our next question comes from Liz Pierce.

Thanks. Congratulations, nice job.

A couple different questions. I wondered, Dennis, could you just repeat on the store openings, what you had said for Q4?

We're not opening anything in Q4. We're closing five.

Oh, well, closing. So you said, five more closings?

Yes, ending at 461 from today's 466.

Okay. And are those just -- obviously they are not related to a -- or are they related to a DXL? I would think that would be behind you.

No. They are not related to DX. They're just underperforming stores in markets, where the leases are expiring, and we had to plans to close these, independent from what's happening with DXLs.

Okay. And the for next year, 8 to 10 -- excuse me, 8 to 12 for the opening. How many should we think about on the closings?

Well, we're still working that up, but it's an approximate 15 to 20 closings. Many of those are related to the opening of DXL stores. There's probably a half a dozen that are unrelated.

Okay. And those half-dozen, I would presume, you have lease expirations?

Oh, yes.

Are all of them lease expirations, or some you're going to have to buy your way out of?

Virtually all of them are lease expirations, or leases that are about to expire within a very short period of time.

Okay. Great.

Now, in terms of the assortment at DXL. One of the things you said was giving you confidences about accelerating the roll-out is the customer stepping up to the Rochester product. Can you just remind me now what the mix is in DXL between the outlet, the Casual Male product, and the Rochester?

It varies by store. For example, Houston, being an existing Rochester store, is significantly higher than the other stores. Las Vegas is somewhat less, because we had a Rochester store in that market.

I would say where we have -- where almost all of our growth is going to be coming from markets that have never seen Rochester. I think our goals would probably be in the neighborhood of 70% to 75% Casual Male, 20% to 25% Rochester.

Okay. And then what about outlet merchandise?

Outlet merchandise--.

It's about 10%, Liz.

Yes, about 10%.

Okay. On an average basis?

On an average, yes.

Okay. All right. And in terms of -- and by the way I saw the Chicago store the other day. It was amazing. What was more amazing, was people coming in at 10 in the morning.

That is amazing for us, too.

Just trying to get a sense as I looked at that store. And you say that the Houston -- or excuse me, the Memphis store, which I haven't seen, is going to be the more typical prototype, or even Schaumburg could be representative?

I think it's -- Schaumburg's 12,000 square feet basically, and Memphis is closer to 10,000 square feet. I think in most of the markets we're going to be going into, we'd be looking for around 10,000. Bigger markets could grow to 12,000. So that range is going to vary. Of course, we are not going to be able to dictate that. It's going to be available real estate.

From what you've seen, I think Schaumburg will be as big as the store would be, for sure.

Do you have the leases signed for the 8 to 12 for next year?

Probably -- we are close on about a half a dozen of those, Liz.

Okay. I presume you have the locations, you're just still negotiating on the others?

We actually have 18 in mind, and we'll settle on that range of 8 to 12.

Okay.

Also, we didn't note that almost every one of these will be a fall opening, not a spring opening.

That was my next question. So it's going to be back half weighted?

Yes.

Yes.

Is that -- has to do with the timing on lease expirations and getting the stores opened or--?

No, it really started because we didn't really start thinking about next year, until we opened the four stores this year.

Got it.

And once we saw the results and the performance -- we have some in mind, of course, but otherwise we were not signing any leases until we saw performance.

Right. Can you -- are there differences between the four stores that you're seeing, like major differences, that are causing you to think about assortments and anything?

No.

No. That's the beauty of what we're seeing, is that we're not saying we have to tweak here and tweak there. They're all doing pretty consistent performances right now.

Interesting. And just in the business in general. If you think about the customer that really stopped shopping in 2008, 2009. David, what's your sense on how much have they come back, and replenished their wardrobes? Or are you still looking at trying, getting back that business?

Like I said before, we had surveyed several thousand customers, in our database that have not shopped us for 12 months. We did this a year ago, and 90% of them said they planned on shopping with us again. So we feel pretty good that they are starting to come back.

For example, Outerwear, we are having a phenomenal Outerwear run right now, and it's probably because he deferred buying one last year, so he really has to make his choice this year.

Again, traffic is improving every quarter. That's been our one hangup, has been traffic. We've been doing very well on the conversion and the average ticket. And like we've said before, if we could flatten out traffic, our comps should start to hit much better in the positive territory as we're seeing.

And again I said October was the best month we had all year and November's starting strong. So, we have a lot more confidence than we did a year ago.

Okay. And Dennis, on the G&A should we expect that there's going to be some more accrual in Q4?

Well, there's -- yes, there's going to be more accrual in the fourth quarter, Liz, but that's incorporated in the updated guidance.

Okay.

I don't expect -- unless we outperform even what we said, any further accruals for that

And then final question. On the Bon-Ton agreement, does it preclude you from doing this with anyone else that maybe they don't compete with?

No.

So you could negotiate others?

Yes.

Great job. Thanks, guys. Good luck.

Thank you.

Thank you. Our next question comes from Gary Giblen.

Good morning. Fine results, guys.

What are the learnings from the store-within-a-store program you had with Sears Canada, that would help ensure more complete success at Bon-Ton, and others that you might embark on?

Well, I think the key thing is, in Canada, we were the operators. And the expense structure for us to staff a store-within-a-store concept, collapsed the model. It wasn't successful.

The difference here is that basically Bon-Ton's going to get a percentage of sales, so we don't have any overhead associated with this. And that's why this model could work. Should work.

Okay. Any difference on the way the associates, or the revenue-driving part of it? Or is it primarily the expense structure?

I'm not sure what you mean.

In other words, are you going to run this store-within-a-store -- is it designed to run any differently than the Sears Canada was? Other than the cost -- different cost allocations?

The department's intended to run seamlessly within Bon-Ton's men's department. So, it'll be generally staffed by Bon-Ton sales associates. They will be educated on our product, in the technical features and benefits. They'll sell Casual Male stuff just like they would sell their stuff. And the customer won't even know necessarily that -- Casual Male will be branded, but otherwise they won't be able to tell the difference between the store-within-a-store, from Bon-Ton.

Okay.

We are using their existing fixtures. Again, like we said, it should be seamless. It should just be another area of the men's department.

Okay. I understand it now. Okay.

And then Dennis, you sort of got to this but, assuming that DXL continues to be successful and you pick up the pace of physical store openings. What could be -- if we look at a positive case, what would be the square footage sustainable growth in the chain? And also net of closings? Because, it looks that you still have some of those.

That's difficult to say. I think conceptually the way to think about that, because longer-term all this happens, Gary, we said, we're a 350 store chain or so, right? The square footage is probably going to be about the same as it is today.

Right. Because you're adding, but you're also--?

We are subtracting several and adding a store that's, three times as big as our average store today.

Okay. Got it. That's what I was trying to understand, whether you would ever get back to the old days of -- I mean, not necessarily, that was positive. But to get back to 4% footage or something. But that's not in the cards. Okay.

And then finally, could you update us on what you're doing in social media, to add that to the Casual Male mix?

We are working on all fronts, mobile phones, Facebook, Twitter. We're working on all of those.

Our penetration in that is always going to be less than others, some other specialty retailers, simply because of who our customers is -- the age. The average age of our customer is 44-years-old.

But we believe in it. We're working towards continuing to improve upon that. But, I don't think it's -- our comparable on that one will be somewhat short.

On the other side, we're very pleased with how we've multichanneled, with our sales being 20% of our total store basis. And with 466 stores 20% of sales coming out of direct channels, is probably one of the highest in the industry.

Yes, okay. Thank you and keep up the good results.

Thanks, Gary.

Thank you. Our next question comes from Richard Jaffe.

Richard Jaffe. Thanks very much, guys. Very comprehensive call, but just one follow-on regarding expenses.

Looking forward obviously, a big expense increased this quarter. Bonus accruals, perfectly understandable, and new store costs. Advertising's the unknown and clearly seems to be an important part of the DXL stores. Wondering how we should think about SG&A or new store and advertising expenses going forward?

I think going forward we're still working that through, but our expectation, Richard, your expectation should be very small, moderate cost increases, at least into 2011. We are closing stores and its cost structure, that the overall cost structure of the DXL is more efficient than the stores that we're closing.

So marketing expenses, there's more, but that's getting baked into our plans for each and every DXL store. But overall, we're looking to maintain our posture, with very efficient, prudent, SG&A levels and relatively small increases.

And a similar positioning for 2011?

That's what I'm really talking about.

I'm sorry. I wasn't sure if that was fourth quarter or 2011.

It might be similar, perhaps, slightly higher than 2010. But we are not planning anything more than that, Richard.

And it would be -- increases would be coincident with more store openings, seasonal store openings?

That's correct.

Got it. Thanks very much.

Thank you. Our next question comes from Tom Filandro.

Hey thanks, just two quick follow-ups.

Just to be -- I want to be very clear about this Bon-Ton. You guys talked about it being seamless. So it will be Casual Male product? Will we see any DXL exposure there and who's actually selecting the assortment to put into the stores? And then I have a follow-up question on the website.

It's all going to be assorted by us. We're going to own the inventory. We're going to put in the right balance, based on the sales performance that they're feeding us on their stores. So, some stores may have Polo. Some stores may have Calvin Klein. We have to look at their mix, because, as you know, Bon-Ton has a lot of different demographics within their portfolio.

So, we're going to match up the best we can with their customer base, in those existing stores. And we're going to have the DXL name associated with these stores, but we haven't specifically come out with that yet.

Okay, and then -- thank you, David. That helps.

And then just on the website launch, you talked about for the spring. My question on that is, will the customer, when they go to a Casual Male website or to Living XL or Shoes XL, will they just be diverted to the new DXL website? Is that the plan?

Well, that -- there is a -- it is a two-pronged plan. There is a transition to that, Tom.

Initially we're going launch an independent DXL site, so we can monitor, fine tune it, perfect it over the spring period. Over the summer, we will be -- the existing websites will be connected into DXL, such that a CasualMale.com customer, coming to CasualMale.com, could stay within CasualMale.com environment, if he so chooses or optionally go over to DXL in a very easy manner.

Okay. So, he won't be pushed into DXL initially?

No, we do not want to push our guys into -- we want to transition them over.

Understood.

And then, the functionality and the features that I believe you will have with the DXL website, which are more enhanced than what you currently have, will that Casual Male customer, once it's integrated, or the Living XL or Shoes XL, will they have those same feature capabilities?

Yes, Tom.

Okay. Terrific.

Absolutely.

Thank you very much.

Thank you. (Operator Instructions) We have another follow-up from Mr. Filandro

I'm sorry. One more question. Dennis, can you tell us what the average cost per square foot is for opening up the DXLs currently? And do you have a view of potentially some value engineering, as you're rolling into these 8 and 12 new stores in 2011?

You mean the preopening costs, Tom?

No, the cost per actual square foot to open.

Oh, to open. Okay. We are targeting around $80, $85 a square foot, Tom.

$85 a square foot. And the average store you are targeting for 2011, is it less than the 12 -- I do not know what the average is now.

It is probably -- we don't have them all, but I think, it's probably going to average 10,500 to 11,000.

Okay got it. Thank you again. Best of luck.

Thank you.

Thank you. I'm showing no further questions at this time, sir.

Okay. Thank you all. Hopefully, we're going to have some great results for the fourth quarter, and we'll be talking to you next year. Thanks for joining the call.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all now disconnect. Thank you and have a nice day.