Hibbett Inc (HIBB) 2009 Q4 法說會逐字稿

Good day everyone, and welcome to the Hibbett Sports Incorporated conference call. Today's call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to Chairman and Chief Executive Officer, Mr. Mickey Newsome. Please go ahead, sir.

Thank you, this is Mickey Newsome, and I have with me Jeff Rosenthal, our President and Chief Operating Officer, and Gary Smith, our VP and Chief Financial Officer. We appreciate you being on the call with us today, and we appreciate your interest in Hibbett Sporting Goods. Before we start, Gary Smith will cover the Safe Harbor language.

In order for us to take advantage of Safe Harbor rules, I would like to remind you that any projections or statements made today, reflect our current views with respect to future events in our financial performance. There is no assurance that such events will occur, or that any projections will be achieved. Our actual results could differ materially from any projections, due to various risk factors, which are described from time to time in our periodic reports with the SEC.

Thank you, Gary.

As you know from our press release late yesterday, our fourth quarter earnings per share were $0.26, compared to $0.25 one year ago. Also we improved our cash position year-over-year, we ended the year with $20.7 million in cash, and no debt. Overall sales for the quarter increased 3.6%, and same-store sales decreased 2.8%. November was negative 2.6%, December was negative 2.6%, January was negative 3.8%. But January actually was stronger than as indicated. We had 350 days of closed stores, due to the snow and ice in Kentucky and surrounding states. Without that, we feel January would have probably been a little bit better than November and December.

Number of items per transaction were positive 1.2%. And the average selling price of an item was up 2.3%. Both of these indicate a little less traffic in our stores in the fourth quarter.

Now I am happy to report first quarter sales have greatly improved through yesterday. We are positive high-single digits through yesterday. We are encouraged but cautious with these results . There is lots of uncertainty in front of us, and in front of the economy in general. The first quarter feels good to us, obviously.

The second quarter could be more of a challenge, because we had a 5% comp store sales in the second quarter last year, and we had the stimulus checks in the second quarter last year, and those were very meaningful to our consumer, but we do feel good about the third and fourth quarter, but we are cautious because you never know what is out there in the future.

Now why have sales greatly improved in the first quarter? Number 1, we have improved as a company in Hibbett Sporting Goods. It is all about systems, systems, systems. We are in-stock more, with the right product and the right stores, and the right quantity relative to last year. Number 2, our stores are selling each customer more items versus last year. Our items per transaction are up.

Number 3, our merchant's selection of the right merchandise has been great. We are really on target. We are getting greater vendor support as we grow. Vendors know we have cash on our balance sheet and that we are not a credit risk. That is resulting in more of the best and most effective merchandise.

In real estate last year, we opened 69 new stores and closed 12. Many of the 12 closers were in closed malls. This year we expect to open 65 to 70 new stores, with 15 to 20 closers, or net of relos. We expect to open 40 to 50 new stores net of closings. Real estate is very uncertain in these times. We are having fallouts from the landlord side.

We are going to be conservative with our projections on new stores. Most new stores will be in strip centers, and not enclosed malls. We will do more relocations and expansions of our overperforming stores this year. We will probably do 10 to 12 of each of those. When the current economy improves, we will grow our new stores faster. There is no shortage of small markets that need us.

Now, Gary Smith will speak to you about our

Fourth quarter sales were 147.9 million, a 3.6% increase from the previous year. Comps were down 2.8%. Gross profit rate increased 260 basis points, due to improvements in markdowns, inventory shrinkage, and inbound freight. Also we levered occupancy and warehouse costs.

Store occupancy cost is down mid-single digit on a per-store basis year-over-year, due to more stores in favorable percentage rent, and distribution costs in the fourth quarter were less dollars than the previous year. Selling and admin costs increased 138 basis points over the prior year, due to increases in incentive competition and a deleveraging of store payroll. Operating income was 12.7 million and 8.6%, versus last year's 11.8 million and 8.2%. Diluted earnings per share came in at $0.26 versus last year's $0.25.

From a balance sheet perspective, the Company ended the quarter with 20 million in cash, and zero short-term debt. Total inventories increased 7.3% over the previous year, but decreased 1% on a store by store basis, and 3% on a comp store basis. Aged inventory as a percent of total inventory improved slightly year-over-year. We spent 13.4 million in CapEx for the year, versus a 24 million budget. We did not buy any stock back in the quarter. But year-to-date, we have repurchased approximately 1 million shares, at $16.9 million and that was in the first quarter.

Thank you, Gary. And now Jeff Rosenthal, our President and Chief Operating Officer will speak with you.

Our strip centers outperformed enclosed malls, we have approximately 73% of our stores are now in strip centers. Our non-urban stores outperformed our urban centers. The three major areas of business, apparel, footwear and equipment.

Apparel is broken into two areas of business, branded and licensed. Licensed was very disappointing, down double digits. However, top performing areas and license were mixed martial arts, which was mostly TapouT, and MLB hats by New Era. Branded apparel was off low-single digits, but fashion urban apparel was off double digits. However, athletic apparel, led by Nike, Under Armour, and North Face were up high-single digits. Youth apparel, both boys and girls were up low to mid-single digits.

Branded accessories and footwear accessories were up mid-double double digits. Footwear was up low-single digits, led by kids and men's lifestyle products. Women's was off double digits. Key performers were Nike Shox, Air Force Ones, and Jordans. Under Armour Training, Asics Technical Running shoes, DC Footwear. Equipment was off double digits.

However, we are a much improved company going into this year. Our results in the first six weeks have greatly improved. Strip centers are still outperforming malls. Highlights, footwear is up double digits, and women's are comping positive. Apparel is up in the single digits. Equipment is just slightly off, a much improved performance, and we have less inventory.

Inventory is in much better shape versus last year, and the mix of product that we are carrying over. E3, our new replenishment system, is a major factor in sales and inventory turns. Our marketing efforts with our MVP program, and our visual presentations with Nike and Under Armour are greatly improved. Our items per transaction and our excellent customer service will continue to improve for this year.

Thank you Jeff. Operator, we are ready for questions.

Thank you, sir. (Operator Instructions).

Our first question comes from the line of Chris Svezia from Susquehanna Financial Group.

Good morning everyone. From Susquehanna Financial Group. Congratulations to you, to Gary.

Thank you.

Just a quick question here, excuse me, to Jeff. Just when I look at your guidance and your thoughts here, could you just maybe talk about how much is a function of systems and merchandise planning, versus the external environment? Obviously it seems like footwear is doing very well here early in the first quarter, but maybe you can just talk about how much of your inventory is on E3 replenishment, and kind of where you see that going throughout the year?

Yes. We have approximately 20% of our inventory on replenishment. We would like to grow it up over the 30% range at some point, and we are very excited, all of the buyers are anxious to get put more and more on E3, and really this is something we think we are just beginning to get some of the fruit from putting into the new system.

We have seen numerous occasions that we are doing a lot more business, and have less stock-outs with less inventory, so we feel very positive about this, and I think a lot of it is there is a lot of low-hanging fruit that we really didn't realize, until we really have gotten into having all these system upgrades. And, Jeff, what is on it right now?

When you talk about 30%, when do you anticipate getting that 30%? Is that possibly by Back-to-School, and what is on it right now? I think you had accessories on it. What is on it right now?

A lot of it is basic items. Most accessories like branded accessories, and footwear accessories, and we have a hard good items, like athletic tape and baseballs, and those accessories and gloves, and we have a lot of apparel on it, a lot of Under Armour and Nike, compression and shorts, and those type items. We have a little bit of footwear from Asics and New Balance. We see that growing. We are trying to get it up as fast as we can, and we have a good challenge but a problem is we are just trying to keep up with the forecast with our vendors, and trying to keep that going.

Okay. That is helpful. And Gary, just unclear. When you look at your guidance, $1.03 to $1.17, can you maybe just talk about the inputs into getting there, what you think, when you look at the bottom end of that, is that sort of a worst case scenario, what kind of comp are you talking about, and when you get to the higher end, just what had kind of comps or margin assumptions are you assuming in those numbers?

Mr. Newsome mentioned that the second quarter will be a challenge for us, because of the stimulus checks, and that could be worth a couple million dollars, but we think that worst case scenario would be zero the rest of the way out, and put us at the bottom end, and if we had probably a 2 to 3, we would be at the top end, or maybe a little bit higher.

Okay. And the last question I have here is you will mentioned you leveraged occupancy distribution center, costs seem to be coming down, is that -- how easy is it now given everything that you are doing from a rent perspective, to start leveraging the occupancy piece when you talk about a flat comp? I mean, it would seem to be a slight positive? What do you need now to do that?

Leveraged occupancy in warehouse last year on a 0.5, basically on a flat comp, we have approximately 15% of our stores in a favorable percentage rent factor. We expect that to increase as we go through the year, as more centers are in co-tenancy violation, so we would think that we could probably manage to lever both of those line items, with just a flat or slightly positive comp.

Okay. All right. Thank you very much and good luck, guys. Thanks.

Thank you.

Thank you and our next question comes from the line of Dan Wewer from Raymond James. Please go ahead.

Good morning. First question I had, is trying to understand how the shift in Easter impacts your business? With Easter earlier a year ago, I am assuming you ran some Easter promotions probably this time a year ago?

Yes. Some of that will shift a little bit into April.

So just make sure I understand, Jeff. So we are running at high single digits even though you are probably at a disadvantage, in terms of the promotional calendar from a year ago?

Yes, you really start hitting that I believe next week is we are going really against Easter, so in the next couple of weeks it is going to be up and down a little bit, just because of the shift.

Okay. And second question I had, Gary, on the balance sheet, it looks like your net property and equipment is lower than a year ago? Does that just reflect that you depreciated a significant amount of assets at a faster rate than what you are growing?

Dan, we took some impairment charges and expedited our depreciation. It had a little bit of effect into fourth quarter, but we are in pretty good shape.

Did you run those through during the fourth quarter, or was that in a prior quarter?

Well, we ran a few more through into fourth quarter than we normally did, but we do it on a quarter by quarter basis. We look at those stores that are not contributing, that have a negative discounted cash flow.

So that went through the income statement, or just the balance sheet adjustment?

It went through the income statement.

How much was that?

It was probably 600,000 or 700,000 in that line in the fourth quarter, probably maybe 1 million for the year or so.

And that would be before or after tax?

Before tax.

And then I think the last question for Jeff, given that business is a lot stronger now than what you were probably expecting two months ago, how does this increased demand impact your purchasing plans?

We are still going to be very cautious, Dan. One of the strategies for this year is really to get inventory turned. There is a lot of product out there to get if we need it, but we are going to be pretty cautious just because we really don't know where it is all going.

Okay. Great. Thank you.

Thank you. And our next question comes from the line of Sam Poser with Sterne, Agee, please go ahead.

Good morning. Just a couple of questions. Number 1, the inventory levels which look pretty much in-line, but they were a little bit higher than what I expected to see. How much of that was equated to the Under Armour launches right at the end of the year?

It was a little over a million dollars.

Only $1 million of the Under Armour footwear of the launch?

A little bit over that.

Okay. And I know you did the Under Armour shoes a little bit differently than others, but what kind of performance are you seeing there right now?

It performed what we expected. It is kind of a steady, steady shoe. It is doing very well.

And when we look at the footwear business, you said the footwear business is running up double digits right now quarter to date. What is driving that one right now?

It is really all genders of footwear are running up. We are proportionately, really the kids and the lifestyle pieces running up the most. What I am excited about is that the women's for the first time, we are starting to see some positive results that we haven't seen in a while.

Okay. And then, Jeff, you mentioned also that E3 was running at around 20% of your total right now. What percent was it this time last year?

I don't have that off-hand, but I would say it would have been about half maybe.

And then how much can you bring your inventories down here? I mean, you are opening stores and so on and so forth. Or is this a matter of sort of keeping it constant, and just being much more efficient?

Our average inventory per store would probably be in the $200,000 at cost level, Sam, and so that would equate to coming down another 3 or 4%.

Okay. And then the store openings that you are planning for fiscal 2010, can you give us some order of when you are planning to open them?

Probably be pretty similar to last year, more back end loaded. We think we might have a few more in first quarter because of some of the fall-outs, but every day we look at the list, and some fall off, because the landlord or the developer wasn't able to fill it out, or to get financing, so it is going to be a challenge throughout the year.

And we should be looking at 2010 and fiscal 2011 pretty similar with store opening/closing, as we see it today?

Probably. If things improve, we can probably get a little more aggressive in 2011, but right now you would have to say you are right.

And then you sound somewhat confident about Q3 and Q4. What, I mean besides the comparison with the store closures and what not, I mean, what other reasons, what are you seeing out there that is giving you that confidence?

Sam, I think we are just a much better improved company. I think the system piece has really taken us awhile to get going, and with E3, we will build history, which will increase our sales so we see a lot of opportunity there. I just think we are a lot more focused, and knowing what we are doing from an allocation standpoint, and I just see that we still have some low hanging fruit out there, that we can improve on.

Sam, in addition to that, we had that $4 gas in the third quarter last year. Hopefully we won't have that again this year.

And how much is Wal-Mart, I mean, Wal-Mart came out with very good comps in February, and I don't know how they are running to date in March, but I mean with your overlap with your strategy to be inner or adjacent to the Wal-Mart centers, how much do you think that has helped you for traffic in the so far quarter to date?

I think it has helped because our strip centers are outperforming our enclosed malls, and most of our strip centers are in Wal-Mart influenced centers.

And have you seen noticeable change in fourth quarter in that regard, or an acceleration of those stores versus the malls?

Slightly, yes.

Thank you.

Thank you.

Thank you. And our next question comes from the line of Rick Nelson from Stephens Incorporated. Please go ahead.

Thank you and good morning.

Good morning.

I would like to ask about the gross margin improvement that we saw in the fourth quarter with the systems initiatives really pulling together. What sort of gross margin would you expect in the new year?

We have planned, certainly an improvement in gross margin rate. If we can stay low to mid-single digit comps, and a 25 to 50 bip is not unreasonable.

Great. Can you talk about geographic areas of strength and weakness, the Texas market in particular, what are you seeing there?

Up through the middle of the country, Texas, Oklahoma, Arkansas, Kansas, Nebraska, Missouri, that is where the strength is. The weakness is more up the East Coast.

Okay.

And the corollary, in a lot of our markets the unemployment rate is significantly below the national average.

Right. And then the equipment category, I didn't catch the comp for the fourth quarter.

We were off double digits, Rick. We have seen a lot of improvement the first six weeks in a lot of our categories. We are just slightly off for the first six weeks of this quarter. We were off double digits for the fourth.

What do you think is changing there, Jeff?

I think we brought in some other buyers, and I think just our direction has changed, and I think the replenishment piece is being a big part of us getting better.

Thank you. Good luck.

Thank you.

Thank you. And our next question comes from the line of Anthony Lebiedzinski from Sidoti and Company. Please go ahead.

Good morning. Your gross margin was up quite a bit in the fourth quarter. Could you guys quantify the reasons for the gross margin expansion, how much came from better systems, how much from occupancy leverage, and so on?

90% of it was due to improvement in the retail product margin, and the other 10% or so the increase was due in the leveraging of occupancy and warehouse.

Okay. And the reasons for the retail product margin expansion, were you guys less promotional in the quarter, and also, how much do you think was the result of the better systems?

Well, I think certainly our inventories were in better shape during the holiday season, and we didn't have to liquidate them as quickly, or as we did last year, and then I think as we move up on the replenishment side, that is almost a guaranteed sale at full margin rate, so I think a number, a good percentage of that is due to the system side.

Okay. Also, I was wondering if you guys are planning to do any other system upgrades? I know in previous calls you have talked about price optimization. What is your outlook on that?

What we are working on now is the planning system, which gives us two important components. One is size scaling, so we can do better pretax throughout the states in the different demographics, and the other one is what we call store clustering, so that we can put like type stores together with our demographic information, so we can compare like sales and we think that is the next leg in picking the low hanging fruit.

Okay.

And we will start that this spring.

Okay. Also I was wondering, how many leases do you guys have that are up for renewal this year, and how do you feel about your ability to renegotiate those to lower rents now?

We think we have a very good opportunity out there to lower rents, and I would say with our kickouts, and with our five-year, and five year it is anywhere from 20 to 30% of our leases are probably eligible for some sort of negotiation.

Okay. And my last question is, it looks like you guys are going to generate some good cash flow over here, and it looks like your CapEx is going to be fairly modest here, so would it be safe to say that you are going to be looking to accumulate cash, or are you going to do anything else?

We are right up this morning we think we will have $2 worth of cash on the balance sheet by the end of the year.

Okay. All right. Thank you.

Thanks.

Thank you. And our next question comes from the line of Reed Anderson from D.A. Davidson. Please go ahead.

Good morning. Thanks for taking my questions. Jeff, I was just curious if you looked at your footwear business, what portion of that really comes out of the women's category?

It is the smallest portion. I am trying to think of the percentage. I don't have it right in front of me. I believe it's about 10% of foot, 10 to 20%, but I can get you that number.

That is fine. I just wanted a ballpark. And I am just curious, because seeing that start to perform is a nice turn here even though it is a small piece, but are you doing anything different there, whether it is from a marketing standpoint, an assortment standpoint that would account for why that might be starting to work a little bit better right now?

I believe we are trying to focus a little bit more on technical running, and we are doing a lot more of that on replenishment, so we really had to almost start over, because the last two or three years has been extremely tough.

Yes.

And I think it is starting to pay some dividends.

Okay. And then shifting gears a little bit, obviously there are a lot of opportunities out there with some good named products, to maybe get some good deals. Are you doing more from a, I don't want to call it necessarily a close-out, but just to take advantage of probably some good buying opportunities? Did we see that reflected at all in the fourth quarter, or does that something you're going to be doing near term here?

We are always looking for good deals. We are seeing a lot more product available, so we are working out much better pricing going forward, and with a lot of people that don't have the means to pay for inventory, we are taking advantage of that.

Okay. And then curious also, Nike as you report that as a percent of your business. I mean, did that go up or down last year, versus what it was in the prior fiscal year?

It went up.

Order the magnitude?

Slightly up. It is probably over 50% of what we buy.

Okay. Good. And was that a function of just your expanding more or less the assortment, or was it more pricing, units? Just what would have been the dynamic for why that would have gone up?

We look at it just because of the demand from the consumer.

Okay.

So we didn't really strategically, say that they are going to be X percent of our business. It is just more for the demand from what our consumer wants.

Good, that makes sense. And then lastly, Gary, I mean, if you just look at the first quarter, and I mean you look at kind of what you did in the fourth quarter, trends, margins, et cetera. I am going to presume even if you did a flat comp in the first quarter you could even see EPS up for what they were last year. Does that make sense or am I too positive on that assumption?

It makes sense.

Okay. Great. Thank you. That is it for me.

Thank you.

Thank you. And our next question comes from the line of Mitch Kaiser from Piper Jaffray. Please go ahead.

Thanks, guys. Good morning. Could you help us remember how the first quarter trended last year? I think you had a pretty negative March, if I remember correctly, and then April bounced back. Is that right, Gary?

Yes, I think that is fairly correct. March, first quarter the last two years have been fairly flat.

Okay. Okay. So March is the easier compare and maybe April got a little bit, becomes a little more challenging, then? That is a fair--?

Switch Easter, Mitch.

And then on the product margin side, I know a couple years ago you did, or two years ago you had pretty significant markdowns, so I am just trying to extrapolate, maybe an easier compare, and then really just some benefits from the E3. If you could just talk about that maybe a little bit?

I believe our inventory is in much better shape, but year-ago fourth quarter we came off a pretty negative fourth quarter, which we had some carryover from, especially in apparel, which we do not have this year, and the bigger percent that we put on E3, should drive our margins up, because it is merchandise that we won't have to mark down.

Okay. That is fair. And then maybe just thinking longer term, I know a lot has changed over the last couple of years, but I think a few years ago you were talking about potentially getting to mid-teens operating margin, but could you just help us think about where you think the longer-term operating margin might be, certainly it seems like you are getting some traction from E3.

It seems like rent is going to provide an opportunity for you, and the product side seems to be going pretty well.

We would like to think this year that we get closer to double digit. Hopefully next year if we have the same sort of momentum, we could be in the double digit range again.

Very good, guys. Thank you and good luck.

Thank you. And our next question comes from the line of Elizabeth Montgomery from Longbow Capital Partners. Please go ahead.

Hi guys, thanks for taking my questions. I wonder if you could talk about compression sales, and whether you have seen in change in terms of the sell-through of any of those items over the past several quarters? Thanks.

Yes, I would say the compression business in general has matured. There isn't a lot of expansion there. I think it is a pretty mature business. There are a lot of items around the compression, but in general the compression business is a pretty mature business.

And if I can ask too, what are the key brands that you guys have within that category?

Really the two main brands would be Nike and Under Armour.

Okay. All right. Thanks very much and congratulations.

Thank you.

Thank you. (Operator Instructions). Our next question comes from the line of Jeff Mintz from Wedbush Morgan Securities, please go ahead.

Thank you very much. Jeff, can you talk a little bit about what was driving the AUR up? Was that more of a mix shift or was that just kind of higher AURs across the board?

It really came from footwear and apparel, just we are selling the higher footwear, and in apparel we have picked up North Face, which has done pretty well.

Okay. Great. And then on the Under Armour running shoes, can you give us a sense of how many of your doors that is in currently, and is that expanding going forward?

We are expanding Under Armour footwear. We played it a little differently than most. We looked at the training piece as being a big part of it, but with Under Armour athletic shoes we are over 400 locations.

Okay. And then Gary, can you talk a little bit about kind of how your CapEx ended up coming in so low compared to plan, or to budget in 2008, and also what the plans are for 2009?

Sure. The reason that it came in so low is we really had penciled in that we were going to open store count would be at 764, so that was almost 20 stores that we didn't open up.

Another part of the CapEx was in the IT part, mostly with PCI, the planning system, and some of that is going to fall into this year. The plan next year is that 17 million gross, but I would expect that we will probably only spend 11 million or 12 million.

Okay. Great. And then finally in terms of store openings in 2009, can you just talk a little bit about, where you are opening them in terms of kind of your core markets, versus some of the newer markets, how you see those openings?

We are in 24 states, and we are going to open new stores probably some in all of them, but most of them are going to be in the Sunbelt. We even got some new stores we will have in Alabama ,and that is our most mature state, so there are a lot of places that we need a Hibbett Sporting Goods store. We have got to wait until things get a little better, the landlords can get their money and get them built, and we can accelerate our store growth.

But there is an opportunity in every state that we operate in.

Jeff the #1 state that we opened in last year was Texas, that had a plus of eight, and Louisiana with a plus of eight, so we are still finding numerous opportunities in our core states to open new stores.

Great. That is very helpful. Thanks very much.

Thank you. And our next question comes from the line of John Curti from Principal Global Investors. Please go ahead.

Good morning. I wanted to know what caused the tick up in the tax rate in the fourth quarter, and what kind of a rate we should be using for the upcoming year?

The tick up in the rate in the fourth quarter was really due to just to an adjustment. We were at 37.8 for the year, I think 37.7 the year before that. I am using 38 for budget purposes going forward.

Okay. And would you talk a little bit about what additional developments you will be doing on the systems front this year, what will be rolling out, and maybe kind of an anticipated timeframe for some of this stuff to become operational?

Well, from a merchandise side we are enhancing the planning piece, so that we can deal more with size and detail level, and we are looking at the store clustering piece for an assortment standpoint. We are going to be cutting over on that piece this weekend, and we will start planning going forward second, third, fourth quarter, and next year on that. So we would expect to see some benefit for that towards the end of the year.

All right. And is there much in the CapEx budget for systems this year? It was kind of, I guess, delayed from last year into this year?

Yes, I think it is probably the 3 million to $4 million range, yes.

Thank you very much.

Thank you.

Thank you. And our next question comes from the line of Jim Chartier from Monness, Crespi & Hardt and Company, please go ahead.

Good morning. I was wondering if you could talk about the impact of Foot Locker and Finish Line having greater, or more doors with Under Armour apparel in it, and how that has impacted your business?

I am sure it has to affect us some where we compete, but we only have 27% of our stores are enclosed malls, and some of those malls were the only ones because we are in small towns, so I would say it would be minimal.

Okay. And then how many doors are you carrying North Face in, and what is the plan to expand that going forward?

Yes. We worked really closely with North Face, and we are working on how many stores it is going to be. Right now we are still working on it, and we really don't know.

How many stores had North Face in fourth quarter this year?

We just really don't want to give it out for competitive reasons.

Okay. And then can you tell us what percentage of your sales was done on automatic replenishment in fourth quarter, and then what the plan is for first quarter in FY '09?

I would think it is probably in fourth quarter 10 to 12%. Jeff thinks we are at 20 now. We would probably want to get to 30 by the end of the year.

Great. Thank you.

Thank you. And our next question comes from the line of Sean McGowan from Needham and Company. Please go ahead.

Thank you. Mickey, looking at the issue of store openings and how it is affected by real estate development, I wanted to ask, if you could have opened all of the stores you wanted, how many more would it have been? If that were not a factor, the lack of development in some markets?

We would like to have had another 20 to 25.

Okay. Were there any particularly noteworthy weather issues in the fourth quarter, that we might want to be aware of going toward the end of this year?

We had the snow and ice in Kentucky and surrounding states in January, that impacted our January sales, but other than that, anything else you all can think of?

We had snow in the Southeast in March.

We had snow in the Southeast in March, but it didn't last but about two hours.

I did catch that, about 5 inches in Atlanta, I think, right?

It didn't last long.

Okay. But outside of the Kentucky ice, nothing that you think will have an impact next year?

I don't think so.

Okay.

We had the storms in the third quarter.

Yes. Gary just mentioned we had some storms in the third quarter.

How many was it?

Three, I think.

Three.

Texas and Louisiana.

Yes. That does seem to be pretty common that time of year. Last question, then, Gary, what do you expect the depreciation and amortization to be in '09?

Probably in the $15 million range.

Okay. Thank you very much.

Thank you. And I am showing that we have no further questions. I will turn back to management for any closing remarks.

Okay. Thank you. Obviously we are encouraged with our start in the first quarter. We have improved as a company year-over-year, especially in the systems area, and most of the benefits from these improvements in systems are in front of us.

Our small market approach is sound and solid, and has a lot of potential for a lot of growth in the future. We have identified more than 400 additional markets in our 24 state area, mostly in the Sunbelt where the population is expected to continue to grow. We think we can be a very large company in the future.

We have a great future, we appreciate you being on our call today. We look forward to May the 22nd at 9:00 Central Standard Time, when we will discuss our first quarter results. Thank you for being on the call.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.