Destination XL Group Inc (DXLG) 2012 Q2 法說會逐字稿

Good day and welcome to the Casual Male second quarter 2012 earnings call. Today's conference is being recorded. At this time I would like to turn the call over to Mr. Jeff Unger. Please go ahead, sir.

Thank you, Melanie. Good morning, everyone, and thank you for joining us today for Casual Male Retail Group's second quarter fiscal 2012 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 read our forward-looking statement and introduce David for the call. Thank you for joining us.

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 Company's website at www.DestinationXL.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 condition. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those indicated. Such risks and uncertainties may include but are not limited to the failure to implement the Company's business plan for increased profitability and growth in the Company's retail stores and the direct-to-consumer business; the failure to achieve improvements in the Company's competitive position; changes in our miscalculation of fashion trends; extreme and unseasonal weather conditions, economic downturns; a weakness in overall consumer demand, trade and securities restrictions and political or financial instability in countries where goods are manufactured; increase in raw costs from inflation and other factors; the interruption of merchandise flow from the Company's distribution facility; competitive pressures and the adverse effects of natural disasters, wars, acts of terrorism or threats of either -- or other armed conflicts in the United States and internal economies. Information regarding risks and uncertainties are detailed in the Company's filings with the Securities and Exchange Commission.

David, the call is all yours. Thank you.

Thank you, Jeff, and good morning, everyone. I would like to start the call by announcing some exciting news related to our Destination or DXL strategy. Four years ago, we were in the idea stage of opening a new super store concept that had the ability to deliver the best shopping experience ever for big and tall men. After conducting several focus groups and surveys, we then designed a store that would change the future of our Company. We opened four test stores in Chicago, Houston, Memphis and Las Vegas. The response from our customers was incredible, and in the first year these four stores did 120% in sales compared to 12 stores we closed in these markets.

In 2011, we learned a lot because we opened 12 DXL stores in some secondary market and also tested a smaller box, to analyze the floor and selling space efficiency. Specifically, we learned that we could build a more streamlined store and that the Destination XL concept plays well in smaller markets. This year, we opened 13 new stores in markets including Minneapolis, Oklahoma City, Milwaukee and Indianapolis, and we're finding the customer response is exceeding our expectations. They love their new store.

Based on the success we have had thus far with our Destination XL stores, we've decided to accelerate the execution of the strategy and more aggressively open DXL stores and close our traditional Casual Male XL stores much sooner than previously announced. We see this as an opportunity to more quickly take advantage of the significant financial benefits that the DXL store provides to our bottom line. And if you haven't been in a Destination XL store, I encourage you to visit. What you'll find is very exciting and a world apart from our traditional Casual Male XL stores. What we've done is combine the offerings of our Casual Male XL stores and the designer names and quality clothing of our Rochester Big & Tall stores, all in an upscale, aesthetically pleasing environment designed around the needs of our best customers. For the first time, big and tall men can find Polo, Ralph Lauren, Lacoste, Michael Kors, Tommy Hilfiger, Robert Graham and many more iconic brands in their size. When visiting the stores, I am proud of how wowed these guys are when they walk in and experience the store for the first time.

In my discussion about our accelerated strategy this morning, I will talk about why we are so excited about DXL from a customer perspective, the paradigm shift in our market perspective and our longer-term financial expectations for DXL. As those of you who have been following the Company know, we have experienced reduced traffic at our Casual Male stores for some time and our sales have been declining for about five years. Our comps at the Casual Male stores have never broken into the double digits, and we were less than 1% in Q2 2012.

At the same time, our new DXL stores have been consistently in the double digits and we reported a 17.1 comp in Q2. The performance of our DXL stores is exceeding our expectations, which is why we are taking this aggressive step to capitalize on DXL's success.

DXL is far superior to our previous format in that it satisfies a full range of big and tall apparel needs. A customer would have to visit at least two or three other stores to assemble the same wardrobe solutions that can be purchased at one DXL location. DXL offers more than 2000 styles versus 600 in our traditional stores, more private label brands and more than brands. DXL -- we are also offering a much greater selection of higher-ticket priced clothing than ever before, along with our made to measure custom tailoring service that provides an even broader variety of options.

Of course, generating customer traffic at our new DXL stores isn't as simple as opening the doors. Our marketing capabilities have been lacking in the past, and we are executing a new approach to improve awareness of DXL to capitalize on the concept.

We recently engaged a marketing consultant to provide an objective analysis of the DXL customer purchase model, and what we found was highly encouraging. Only 17% of potential customers in our addressable market of men with a waist of more than 40 inches had even heard of DXL. And of those who are aware of DXL, only 8% had visited the stores. Now, that may seem very discouraging. However, of those who visited the DXL stores, 73% made a purchase and 89% of those who made a purchase intend to return. But those that are aware of the benefits of DXL love the store and expect to be return shoppers. And that's providing us with an excellent opportunity to use marketing to increase the awareness of DXL and, in turn, grow sales volumes and profitability.

On our last call we mentioned that we had retained an advertising firm and that would be hiring a new Chief Marketing Officer. In June, we hired Derrick Walker, who led successful campaigns at LensCrafters and Finish Line, as our new Chief Marketing Officer. And he is now leading the effort to create and build brand recognition for DXL. Derrick and his team have been very busy since his arrival developing new marketing concepts and messaging around the DXL brand. Beginning in the fall, we will be testing these concepts in messaging in five key geographic markets. Then, we will launch our national marketing campaign in the spring when we expect to have a DXL store in nearly every major metropolitan market. Our marketing efforts will also be focused on our direct channel, where we are shifting resources from catalogs to DXL's digital presence.

Last fall we launched our new Destination XL.com website where customers have access to all six of our brands and can shop by concept, brand, lifestyle or price point. The direct channel is important in this space as big and tall consumers shop for apparel on the Internet 50% more than the general population. We've been successful in increasing our direct sales as a percentage of our overall sales from the single digits in 2004 to between 18.5% and 20.5% during the past five years. With a greater focus on our digital presence, we expect to grow that percentage further.

So now let's look at the DXL strategy in terms of the potential impact on sales, profitability and shareholder value. We already have impressive Company-wide gross margins inclusive of occupancy costs of north of 46% but have not been able to generate the sales volume to translate our gross margins into good profitability growth. By offering a one-stop solution in a highly fragmented market, we expect to attract and expand the customer base, take market share and increase sales volume. We see an opportunity to grow our current market share from 11% to a range of 15% to 20% over the next three years by increasing the awareness of the DXL brand, improving our direct sales business, capturing greater wallet share of existing customers and extending our target customers to include what we call end-of-the-rack shoppers. End-of-the-rack customers have a waist size between 42 and 46 inches and tend to be younger. These men represent about 65% of the Big & Tall market, but only 20% of our current sales. Not only will we broaden our customer base and increase traffic, but we will also be able to increase our wallet share of these customers.

Our experience with DXL thus bears this out. At our DXL locations, we have been able to increase our dollars per transaction to $142 from $101 at our Casual Male XL locations. For these reasons, we've decided to accelerate our rollout schedule of Destination XL stores and the closure of our Casual Male XL locations. Our prior plan was to close all the Casual Male XL stores through attrition by 2017 and not incur any lease write-offs. We now plan to close all of our Casual Male XL stores by the end of 2015, two years ahead of schedule. The acceleration plan does not affect the Casual Male XL outlets. Dennis will provide more detail on how the opening and closing schedule looks for the remainder of the year and going forward in just a few minutes.

This accelerated schedule means that we will be increasing our investment in this effort over the next three years, and that will affect our bottom line and cash flow in the near-term. Most importantly, our plan still entails using free cash flow and not borrowing additional cash flow to fund this accelerated DXL rollout.

In return, we expect a significant sales volume increase and resulting operating leverage and improved margins and profitability. We expect to begin to fully realize the benefits of the DXL concept in fiscal 2016, where we anticipate revenues of more than $600 million and operating margins greater than 10%.

Given these numbers, you can see why we are excited to be accelerating our DXL strategy. The DXL concept is working very well and we now need to generate a great deal more awareness among customers and execute on the openings of the new stores. By growing our share of the end-of-the-rack customers, increasing our overall dollars per transaction and expanding our market share, we are well-positioned to substantially grow sales and achieve double-digit operating margins.

With that, I'll turn the call over to Dennis who will review our results for the second quarter.

Thank you, David, and good morning, everyone. Today, I'll provide you with some financial highlights for from the quarter as well as additional details on our strategy to accelerate the rollout of DXL. I'll end with our revised guidance for the full year of 2012.

For the second quarter of fiscal 2012, total sales were $100.5 million, or essentially flat compared with the prior year. Comparable sales increased 2% versus the same period last year. Casual Male XL stores which are in close proximity to an existing DXL store location experienced negative comparable sales for quarter two of approximately 2.8%. Sales from our retail business overall were up 1.6%, while our US direct business grew by 3.4%.

Overall, sales continued to grow slowly in line with the economy. If you look at just our 25 DXL stores that have been open for more than one year, we experienced a 17.1% comparable store sales increase over the prior year, which is primarily responsible for driving the growth in the total comp sales.

Now let me step back for a moment and define what we mean by comparable sales. Comparable sales for all periods include retail stores that have been open for at least one full fiscal year. Stores that have been remodeled, expanded or relocated during the period also are included in determining comparable sales. Most DXL stores are considered relocations and comparable to all closed stores in each respective market area. Therefore, unless we have opened a DXL store in a new market, of which we have four DXL stores in new markets today, a DXL store is considered a comparable store. Direct businesses are included in the calculation since we are a multi-channel retailer.

Our traditional Casual Male XL stores have seen a decrease in transactions and some erosion in our customer base due to the close proximity to new DXL stores. This is a great sign for the DXL stores in the long run but a negative for our traditional Casual Male XL stores in the near-term. For example, during the second quarter, the Casual Male stores within close proximity to a DXL store performed almost 4 full percentage points less than an average Casual Male store unaffected by a DXL store. As we open additional DXL stores, we expect further erosion to our Casual Male XL store comps in traffic.

For the second quarter of fiscal 2012, income from continuing operations was $3 million or $0.06 per share compared with $7.1 million or $0.15 per share in quarter two of last year. Due to the reversal of our tax valuation allowance in the fourth quarter of fiscal 2011, our tax rate for the second quarter of this year return to a normal tax rate of approximately 41.8% compared with only 9.4% for quarter two last year. The annual income tax rate is expected to approximate 40.5%. Assuming a normal tax rate, adjusted income from continuing operations would have been $0.10 per diluted share for the second quarter of last year. Our gross margin rate inclusive of occupancy cost was 46.4% compared with gross margin of 48.4% for the second quarter of last year. The decrease of 200 basis points was primarily a result of a decrease in merchandise margins of 120 basis points and by an increase of 80 basis points in occupancy costs. Our merchandise margin was negatively affected by a promotional event that we hosted in May.

In an effort to improve customer traffic in the second quarter, we held an exciting promotional event that featured our most popular private label brand, Harbor Bay. The event was very successful in improving traffic over the weekend of the event, but the traffic trends declined for much of the remaining quarter and basically neutralized the positive impact of the event, contributing to the gross margin erosion. The results for this promotional event reinforces the importance of comfort and fit, merchandise lifestyle selection, service and convenience over price to our target customer. On a dollar basis, occupancy costs for the second quarter of fiscal 2012 increased 5.3% over the prior year due to the timing of our 13 DXL store openings and the associated preopening occupancy costs incurred.

Now I'd like to focus on the accelerated conversion plan for our Destination XL concept. Since the start of fiscal 2012, we opened 13 DXL stores for a total open at the end of the quarter of 29 DXL stores. We plan to open an additional 22 DXL stores by year end, resulting in 35 stores open in 2012 and a total of 51 DXL stores in operation by the end of the year. By that time, we will have at least one DXL store located in most major metropolitan cities across the US. As David discussed, based on the early success of our DXL stores, we will be accelerating our rollout plan. We are targeting between 225 to 250 stores open by the end of fiscal 2015. As we open more DXL stores, we will be closing existing Casual Male XL stores in each respective market area, virtually leaving in place only our outlet channel stores of approximately 50. For fiscal 2012 we currently expect to close 70 Casual Male stores and expect to close another 120 in fiscal 2013.

By the end of fiscal 2012, the DXL stores are expected to be generating approximately 25% of our stores' sales, which is up from 10% in the current quarter and nearly 50% by the end of fiscal 2013, on an annualized basis in our retail channel. As a result of our strategic decision to accelerate our store rollout, we expect to incur incremental costs during the next three years. These costs are primarily associated with lease terminations and asset impairments as a result of early store closures, which is expected to approximate in the range of between $15 million to $20 million, as well as an additional SG&A expenses of between $2.5 million and $3 million per annum to support the accelerated rollout.

As David mentioned, the rollout is expected to be mostly completed by the end of fiscal 2015 when we will begin to see the full effects of a bottom-line benefit from DXL with significantly greater top- and bottom-line growth in 2016 and 2017. The capital expenditures and incremental SG&A and other charges associated with the rollout expected to approximate $150 million over the three years is expected to be fully funded from operating cash flows.

David discussed the more aggressive approach that we're taking with respect to marketing. We plan to increase our marketing budget to about 6% of sales, up from 5% of sales. However, that number could change slightly as we determine a specific marketing strategy based on the testing that is occurring this fall. We will be able to better speak to our 2013 marketing plans later in the year, once the testing results have been dissected and synthesized.

With that, I will give you our revised guidance for fiscal 2012. Due to the sluggish consumer spending environment and the sales erosion at Casual Male XL stores due to the new DXL stores, we are adjusting our total sales range to $405.5 million to $410 million, down from $416.5 million to $423.9 million, which is based on a comparable sales increase of 3% to 4%. We expect gross margin to be flat to up by -- we expect gross margin to be flat to 75 basis points increase from fiscal 2011 and be between 46.2% and 47% based on our merchandise margins improving by approximately 40 to 100 basis points with a 25- to 40-basis-point increase in occupancy cost.

SG&A costs are expected to increase by $2.2 million to $5.2 million, to a range of $155 million to $158 million, increased primarily due to additional store payroll and advertising costs associated with the planned DXL store openings and expected bonus accruals. Included in this increase is approximately $2.5 million for an additional 53rd week in this fiscal 2012. As a percentage of sales, SG&A expenses are expected to improve over the last year by 10 to 40 basis points to between 38.5% and 38.8%.

Consolidated earnings per share from continuing operations are expected to be in the range of between $0.22 and $0.25 per share. We also expect cash flow from operating activities to be about $40 million, resulting in free cash flow of approximately $5 million. We anticipate our cash balances to increase to approximately $15 million by the end of the year.

Our capital expenditures for fiscal 2012 are still expected to be approximately $35 million. These expenditures will be spent primarily on our planned opening of a total of 35 DXL stores in 2012.

This concludes my remarks. We will now take your questions.

(Operator instructions) Thomas Filandro, Susquehanna Financial Group.

Thank you very much, and congratulations on making the leap. A couple of questions -- first, David, could you possibly offer a little bit of an update maybe on the performance of the 2012 DXL openings? And if you could, provide maybe any metric variances compared to the initial DXLs.

And then on the marketing awareness campaign, if you would be so kind to let us know when that test is occurring, in which markets and how many? And then I have two follow-ups.

Okay, first of all on the new DXL stores we opened this year, we are extremely pleased. I'd say we are on a roll, and we've opened up in a lot of these what I call secondary markets, like Indianapolis. We opened two in Minneapolis, Oklahoma City, Milwaukee. And it's just amazing in these markets how they have responded. There was some concern will they trade up into the basically the aspirational brands, and they love it. Again, they are seeing this product for the first time. The guys that used to wear Polo and Lacoste at some point in their life and they outgrew it, and they have ever been offered the opportunity. So that's usually the first thing that gets them excited when they walk in the stores, to see all these brands.

The second part that we accomplished was we were able to convert the rest of our hybrids. Those were the Casual Male/Rochester combinations. So all those stores are up and running right now.

Great, and on the marketing?

On the marketing, we are in a transition stage right now. We've laid out the commercial. Actually, the models are being fitted this week. It goes into production next week and we will be rolling out the commercial in five -- TV commercial in five markets in October. We are not going to name the markets at this point in time until they are alive, for any competitive reasons. But each market is going to have a different combination of media events going on. Some will have TV and radio; there will be some social media things going on; there could be some billboards going on. And then, after that flight is finished, which is going to be a 4- to 6-week period, we will be analyzing the results of each type of media and then laying out the platform for next spring, when we roll it out on a national level.

Okay, excellent, thank you. A couple of things, too, on the Harbor Bay promotion. Am I hearing that what you're saying, Dennis, is that the event, although successful, appear to be more of a pull-forward? And then the second piece of that is, generally speaking, can you give us an update on the inventory position on an average store basis maybe as well as your carryover position? And then one final one, I promise.

Yes, it was a pull-up completely, Tom.

Okay, and total inventory position in carryover?

Total inventory position -- it's basically constant to the beginning of the year. It's up about, what, $6 million-$7 million from a year ago, Tom, but that's primarily price increases caused our units. Inventories are actually down by about 2% or 3% at the end of this quarter. And the carryover -- we don't have any carryover, Tom.

That's what we like to hear, Dennis. The final one is, is the -- will the rollout of DXL have any meaningful implications on I guess I'll call them your sibling brands, Living XL and B&T XL and Shoes? Will they still exist under this umbrella when we get to 2015, or maybe in a different way?

Well, certainly the product represented by those brands is an important element of our DXL stores, which are Shoes XL. As to on the direct channel side, they do attract other customers that overlap and perhaps transcend our target market for the stores. And so we see, obviously, Shoes XL and Living XL surviving.

As you know, our current web, Tom, is a Destination XL Web with brand tabs. Right? So Casual Male, Rochester, B&T, etc., are tabs represented on the DXL website. What happens to those tabs over time, we'll see. But, certainly, on the web, it's all about DestinationXL.com and trying to emulate the same experience on the web as you see in the store.

Excellent, I wish you all the best of luck, thank you.

(Operator instructions) Liz Pierce, ROTH Capital Partners.

Good morning, everyone, and congratulations on the DXL decision. David, what's happening in the competitive landscape? What are you hearing?

Well, it has been an interesting year. We've been pretty silent about what took place a year ago, but I think we can comment on it today. So it was a year ago, when Men's Wearhouse stated that they were going to go into the specialty men's Big & Tall business and they opened up three stores right in our backyard. And from what we know is approximately 6 months into the project they abandoned it and they've already taken their signs down and it's not an initiative going forward.

The second part was that JCPenney's came out with the specialty chain called The Foundry and said they are going to open up 300 stores in the next several years, and I think by now they were supposed to have 150. Well, they opened up 10 in our markets, and those stores virtually had no impact on our existing Casual Male stores. We didn't even have a DXL store in those markets at the time. And that has gone totally silent. So they are still stuck on those 10 stores in those two markets.

So I think we have once again shown the challenges of being in this business, in the specialty business. And it may look good from the outside, but there's so much involved in making this successful from assortment planning, size management, making clothes that fit properly. And I think we've really shown the industry that we are the best at this and the specialists, and that was with Casual Male. And now with DXL, we're just taking it to a much higher level.

Okay, and what about -- and you may not want to name anything. But do you guys have more new brands lined up that you are going to be introducing to DXL?

Yes. You know, right now, our plate is getting pretty full. And if we bring in new brands, virtually something has to come out. But we are very excited that in November we are going to be launching Tommy Hilfiger sportswear. We have the clothing in right now, and we're going to be -- in specialty we are going to have an exclusive on it. We think that's right in our wheelhouse. It's going to be a great price point. The brand is doing extremely well and it fits right into our guys' lifestyle and price point. So we are really looking forward to that launch. But outside of that, we are very comfortable with the family of brands that we are offering our customers today.

Okay, and just to piggyback on Tom's question about the Harbor Bay promotion -- so was that an event that had been planned? It sounds like more you decided based on what was happening with traffic you decided to do that.

We planned it before we went into the year. We kept seeing traffic erosion. We figured Harbor Bay is our core brand. It would certainly attract a lot of our customers into the store. It was only for four days, but it was amazing the amount of customers who came in. And the disappointing part is they came in for the promotional Harbor Bay and really didn't buy much around it. So it really drove the markdown rate up high. It's a promotion we run every year for 2 days at Thanksgiving. We've been doing for years. We tried to do it in the spring season. But, again, going back, we used to run 24 promotions the year and now we're down to 5. We've leaned it down over the years for that specific reason. We thought this could be a jumpstart, but in the end, it just -- it was like Dennis said, we just pulled the traffic up earlier and took markdowns that we wouldn't need to take. And it's an event we are not going to anniversary next year.

Okay, that was what I was about to ask. Is there way to tweak it, or you just won't even bother?

We won't even bother with something like that. Again, next year's marketing is going to look totally different. We've never really spent money branding, and our mission for the next two years is to make Destination XL a household word for guys that are our customers. So we're taking a totally different approach.

Got it. And then in terms of going after the end-of-the-rack customer, I know you've talked about I think introducing perhaps the size more geared to that end-of-the-rack customer. Can you just give us an update on that? And if you mentioned it, sorry, I got distracted by another call at the beginning of your call.

That's a great question. It's a big project for us. We inherited this Company, and it had been established for 20 years. And there was a specific size scale made for Big & Tall guys, and we've been operating under those sizes forever. But what we've seen in the DXL stores is these end-of-the-rack guys are coming in, and we are doing very well with fitting them in pants, because pants are waist and length and very identifiable to fit into.

On the other hand, they are putting on our opening size top, whether it's a woven or a knit, and it's just too generous, the size. So he's not getting to fit he wants. And fit, as we understand, is everything. So we've created a brand-new size that will fit a guy who has got a 42-inch waist, and maybe he weighs 210 pounds and 6'2" that will be a major move for us. And this is very complicated because we have to take the whole industry with us. So all our brands now are working with us to create this new size, and we are going to be launching this next spring along with our marketing campaign, because the marketing campaign, as you will see over time, has a direct response to the end-of-the-rack guy that we are going for.

Great, that's so helpful. Thanks and best of luck, guys.

(Operator instructions) Bruce Baughman, Franklin Templeton.

Could you give us a little bit of help breaking down the $5 million change in 2012 projected free cash flow? How much of that is from the increased preopening and store closing costs, for example? How much from other factors?

The impact of store openings, DXL-related costs -- I take it that's your question?

The question is about the -- you reduced guidance for this year of free cash flow (multiple speakers) a couple million dollars, and I'm just trying to understand how much of that comes from the acceleration in the plan.

The acceleration is not affecting 2012 in any great degree. It's really as a result of the lesser sales volumes. If you noticed, our guidance on sales dropped by almost $10 million to $15 million. And that's really contributing to the drop in the free cash flow. We initially expected free cash flow to approximate $10 million, and we took that down to $5 million.

Okay, and then what were the sales per square foot in that DXL stores in the quarter?

In the quarter, we approximate that of Casual Male moment, and those aren't numbers that we typically divulge on a brand basis.

If the promise of the DXL stores, so much of it is store productivity, it's surprising that the sales per square foot are about the same.

I think, as we get more of these stores opened -- we tend to do things on profit per square foot, because as these stores -- we are in very favorable rent scenarios, freestanding strip centers. And we are fairly low occupiers. So when we could get incremental sales, a lot of that flows through, especially with our high merchandise margins. Our merchandise margins are north of 60%. So there's -- every incremental dollar for us is quite significant. And I'm saying this as opposed to the traditional mall stores, where they are paying a lot of rent and have a lot of payroll for long hours to operate. I can understand where you need that efficiency on the sales per square foot. But for us, it's about profitability per square foot because what we've said in the past is the four--wall profitability of Casual Male is the 17% to 18%, and in the DXL world, they are 25% to 30%. We could map it out for you at some point in time, but we have been asked this question quite often. We're not evasive about it, but our model is quite different than the traditional mall retailers out there.

The other part of this is that the DXL store is a much better mousetrap to capture market share. We expect our sales per square foot in an average DXL store to reach about the $250 sales per square foot number over the next several years as we gain that market share from having DXLs rolled out, from having a marketing program to bring market awareness to the DXL store and capture more market share. And so that's where a lot of the leveraging and the operating margin enhancements is going to be driven from. And so, when we open up a DXL store, it gets started at an approximate average level of what we are experiencing today. But the great promise of a DXL store is what's going to bring the profitability to the business over the long-term.

Okay, thank you.

[Jonathan Tarpia], [US Wealth Group].

Good morning and congratulations, gentlemen. We have a quick question regarding the technology. Has there been any discussions in terms of embracing RFID, or radio frequency identification technology? And if so, is it something that's going to happen is the stores are being converted into DXL's?

No, we aren't focusing on RFID. We are focusing on many, many other technologies, but we are not focusing on RFID for the simple reason that the benefits don't outstrip the benefits that we are expecting from other technology advances that we are planning.

Okay. Are you at this time able to share what type of technology or when we can start seeing that change being implemented?

Well, we have focused a lot of our efforts this year on our website and direct channel. We are going to see a much better supported customer experiencing -- the experience in the stores by introducing mobile transacting and mobile customer servicing early next year. And so I think those primarily are the two intermediate-term technology improvements that we're working on here.

Fantastic, okay, thank you. (Operator instructions)

And we have no other questions at this time.

Okay, well, thank you for being on the call. Again, we are extremely excited about the next few years as we get to change the face of Casual Male Retail Group into the Destination XL world. Again, thank you for joining us.

That does conclude today's conference. We thank you for your participation.