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Operator
Good afternoon, ladies and gentlemen w welcome to the Kohl's Department Store third quarter earnings release conference call.
At this time all participants are in a listen-only mode.
I would now like to turn the call over to miss Patty Johnson, Chief Financial Officer.
You may begin.
- Chief Financial Officer
Thank you and welcome, ladies and gentlemen, to our third quarter earnings release conference call.
Joining me today are Arlene Meier, Chief Operating Officer, Kevin Mansell, our President and Larry Montgomery, Chief Executive Officer.
Before we begin, let me remind you our discussions and comments made during the course of this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements which reflect management's current views of future events and financial performance are identified by forward-looking terminology such as "plans, beliefs, expects, may, will, should, anticipates" or similar expressions.
These statements are subject to certain risks and uncertainties which could cause Kohl's actual results to differ materially from those anticipated by the forward-looking statements.
These risks and uncertainties include but are not limited to those described in Exhibit 99.1 to Kohl's annual report on Form 10-K and other factors as may be periodically described in Kohl's filings with the SEC.
Also, please note that replays of the webcast of this call will be available for 90 days, but this recording will not be updated, so if you're listening after August 15, it is possible -- excuse me -- after today, it is possible that the information discussed is no longer current.
Okay, I'll turn it over to Arlene Meier to recap our financial performance.
- Chief Operating Officer and Treasurer
Thanks, Patty.
As you all have seen by now, we had an absolutely outstanding quarter, so I'm going to recap from a financial statement perspective and then I'll turn it over to Kevin.
Top line from a sales standpoint, as you know in the quarter, a 21.8% to total sales increase, comp store increased 5.9%.
Year to date, that's a 24.6% total sales increase and a comp store increase of 8.1%.
The only thing I want to point out is that that 8% comp is pretty consistent; if you look at over the last five years we have averaged about an 8%.
When we look at the breakdown between stores and their second through fourth year, versus more mature stores, again on a year to date consistent with the average over the last five years, those younger stores ran comps between 10 and 14%, and the more mature stores ran between 5 and 6%.
Gross margin for the quarter on a five-fold basis, 34.84%, compared to 34.68% last year.
Year to date, 35.3% compared to 35.09% last year.
So as you can see, rate improved again on the quarter.
We increased about 16 basis points on the quarter and 21 basis points year to date.
I'll let Kevin kind of talk to you about the mix of sales and what kind of happened by category in a minute.
On a LIFO basis for the quarter, 34.7% compared to 34.56% last year.
And year to date, 35.18% compared to 34.97%.
So you'll see LIFO provision consistent on the quarter as what we have done for the first half of the year.
Moving down to SG&A, we are pretty pleased obviously with SG&A performance on the quarter. 21.24% compared to 21.64 last year.
So leverage of 40 basis points on the quarter.
Typically with the kind of comp store increase that we ran, you would normally expect about 20 basis points.
The primary reason why you're seeing greater, to be honest with you, is just the strength of that strong comp in October.
So with that high of a comp, we did not add as much expense as we typically would have.
Year to date, SG&A is 21.75% compared to 22.31% last year.
So 56 basis points of leverage.
Again guidance going forward for mid single digit comp, again I would tell you we would guide 15 to 20 basis points of leverage.
Depreciation and amortization, consistent with what you've seen all year; about 49 million on the quarter compared to about 40 million last year, about a 22% increase in the same thing on a year-to-date basis.
Preopening, on the quarter, 11.7 million, pretty consistent with last year at 11.2 million.
Year to date for the 75 stores that we now spent year to date preopening 31.6 million compared to 26.6 a year ago.
We opened 37 new stores in the quarter, compared to opening 28 in the same quarter last year.
The stores we opened this fall were primarily fill-in stores as well as the fourth mall prototype.
Combined with the spending that we incurred for these same stores in fiscal 2001, on average we spent about 500,000 a store for those 75 stores.
Guidance for fourth quarter and first quarter of next year, between these two periods, we will spend between 22 and $23 million related to the 35 stores that we plan to open in first quarter.
We would expect about 35 to 40% of that expense to hit fourth quarter, and obviously the remainder to hit first quarter of next year.
Operating income for the quarter 228.3 million compared to 175.8 a year ago, a 29.8% increase.
From a margin standpoint, 10.7% of sales compared to 10% last year.
So significant margin rate improvement.
Likewise for the first nine months, 625.3 million compared to 460.7 a year ago, a 35.7% increase year to date.
Again, operating margins significant increase: 10.5% compared to 9.7% at the same time last year.
Interest expense is pretty comparable to a year ago for the quarter: 13.8 million compared to 13.6, and year to date, 39.4 million compared to 37 million last year.
Provision for taxes, we did not change the tax provision rate, so we continued on the quarter to provide at 37.8%.
That compares to about 38% last year.
So bottom line net income, 133.4 million on the quarter compared to 100 million last year, a 33.1% increase.
Year to date, 364.4 million compared to 261.9 last year, a 39.2% increase in net income over last year.
That resulted in EPS on the quarter of 39 cents, compared to 29 last year.
Therefore, year to date 1.06 a share compared to 77 cents a year ago.
Just a couple other statistics that I know a lot of you are interested in.
The first is square footage.
This now completes all stores that will open for the year, so this should well be ending square footage on the year.
From a growth standpoint, 40,557,000 compared to 33,458,000 a year ago. 22.8% increase on growth square footage.
On a selling basis, for those of you that track that, 34,490,000 compared to 28,540,000 a year ago.
So a 20.8% increase in selling square footage.
Turning to the balance sheet, let me just hit on two or three items, the first being accounts receivable.
Net accounts receivable increased about 21% over last year, from 805 million to 975.5 million this year.
Kohl's charge sales increased about 33% on a year-to-date basis, shared this year for the first nine months, 34.8% compared to 32.6% a year ago; so 220 basis points over last year from a share standpoint.
We are continuing to see pretty high turnover of that receivable portfolio.
Last year, it was 3.1 times what we're running so far now this year is 3.3.
So it continues to have pretty rapid turn.
Part of that obviously is payment percent.
As we told you last quarter, we have seen payment rates up versus the year ago.
Last year we ran 24 to 25% of billed balances and were paid the following month.
This year we continue to run 27 to 28% as far as that payment rate.
From an inventory standpoint, I know Kevin will probably comment to the content of the inventory, but from a dollars standpoint, a 22% increase over last year.
We had about a billion 7 at the end of the quarter last year and just shy of 2.1 billion this year.
Obviously, that's comparable to what you're seeing for sales increase.
Dropping down to accounts payable, balance at the end of the quarter, 865 million roughly this year compared to 678 last year; as a percent of inventory, 41.6% compared to 39.9% last year.
As we look forward, we would continue to expect that as a percent of inventory to run in the high 30s to low 40s. so pretty consistent with what you're seeing.
Cap Ex in the third quarter was 494.8 million.
We continued to expect to spend about 750 million in the full fiscal year with obviously a lot of the spending for those California stores that will open in first quarter now happening in the fourth quarter.
So with that, I'm going to turn it over to Kevin.
- President
Thanks, Arlene.
Let me make some comments first regarding third quarter performance.
As Arlene said, I think all of us are very pleased with our final results for the third quarter.
All of our regions performed well, and all of our merchandise categories contributed to the total results.
From a regional standpoint for the third quarter, the West and the Northeast regions led the company and achieved double-digit comp store increases.
The remaining regions performed well and ranged from single-digit to high single-digit comps for the quarter.
On a year-to-date basis, we drove double digit comp increases in the mid-Atlantic, the Northeast, the West and the Southeast regions.
The remaining regions were mid to high single-digit comp on a year-to-date basis.
Looking at the business from a category standpoint and what the key elements were for the quarter, all of our merchandise categories posted positive comp store increases for the quarter, with several apparel areas leading the company.
From a merchandise point of view, the leading categories were Women's Accessories, Women's Apparel and Children's.
In the Women's Accessories area, we had strong double-digit growth in the jewelry business, including both fine and fashion jewelry, and even stronger double-digit growth in the sleepwear business and in the basics categories of casual hosiery and intimate apparel.
In the Women's Apparel area, we had strong double-digit growth in juniors, especially in junior bottoms and in junior separates.
And the missy area had even stronger growth in the contemporary career category, including our new Nine and Co. launch and our Access test stores.
In the Children's area, we had strong double-digit growth in small sizes from newborn apparel all the way through little boys and girls, and we had similar double-digit growth in the sleep wear and Basics area as that which occurred in the Women's Accessories business.
As throughout the year, our key traffic drivers across the whole store in the third quarter continued to be the successful execution of our Get It key item program and our Table and Tower program.
In addition, we launched a new merchandise initiative around Basics, marketed as "Where Comfort Counts".
Our Get It program continued to expand in penetration in several merchandise categories in both our third quarter items and the launch of our fourth quarter items were well-received across the store.
Our Table and Tower program was centered on Basics throughout the store early in the third quarter, and we then introduced our holiday program in early October.
The "Where Comfort Counts" initiative positively impacted our sleepwear and accessories businesses, as I mentioned in our overall results.
Looking forward into the fourth quarter, as Arlene said earlier, we think we are very well-positioned for the holiday season.
Our inventories were well controlled coming into November and in balance, overall, as we entered the season.
In addition, we have taken strong inventory positions on categories which we already have seen very good selling on in the third quarter.
These include, as I mentioned, jewelry, sleepwear, and accessories throughout the store; and our Get It key item program and our holiday Table and Tower program.
We will continue to be very aggressive with marketing and pricing, and we continue to guide flat gross margin rate in conjunction with the mid-single digit comp store increase.
As you all know the holiday selling season clearly spans both November and December.
Due to the shift and the timing of Thanksgiving this year, we are guiding for a flat to low single digit comp for the month of November and a mid to high-single digit comp for the month of December, which would represent a mid-single digit comp for the two months combined.
I'm going to go ahead and turn it over to Larry to spend a few minutes to talk about our expansion plans.
- Chief Executive Officer
Thanks, Kevin.
First of all, just a couple comments on the third quarter that both Kevin and Arlene talked about.
The company is really pleased with achieving a 33% increase in net income.
Particularly in light of the fact that that was on top of a 31% increase for the same period a year ago.
It was our 11th consecutive quarter of 30% or greater earnings growth.
And it was achieved with a performance of both new and mature markets.
Currently, we are on track for our 7th consecutive year of earning earnings growth over 30%.
We are well positioned coming into the fourth quarter, and we continue to be committed to a high-end stock position and driving sales very profitably.
I'll take a minute and just recap 2000 openings for you.
We opened 75 stores in the full year.
In the spring, we successfully opened 38 new stores.
With our new market entries into Houston, Boston, and Nashville, all three we're very pleased with.
We opened 37 stores in the first week of October, our fall openings.
New entry into Providence, Rhode Island, with four stores.
We came back to Boston with two more.
We had 14 additional fill-in stores in the midwest.
Five additional stores in the tri-state.
And eight new stores in other existing markets, along with the four small prototype stores that we opened.
Our remodel program during the full year of 2002, we remodeled 22 stores and relocated two stores.
The biggest piece of that was in the Milwaukee market.
We just got done having the grand reopening in October.
The Milwaukee market consisted of relocating two stores, remodeling and expanding 13 stores, and opening 3 brand new stores.
We are very pleased with the sales performance there and significantly in the last year.
In addition, during this same timeframe, we remodeled six stores in Chicago and three stores in other markets.
Moving to 2003, we plan to open approximately 80 stores for the full year, including 35 stores in the first quarter. 28 of those stores are going to be our entry into the Los Angeles market.
We are going to come back in the spring with three stores in San Antonio, Texas, another new market.
One store in Springfield, Massachusetts, one store in Grand Rapids, Michigan, one store in Boston, and one store in Philadelphia.
In the fall, approximately 45 stores including our entries into Phoenix and Las Vegas, and additional fill-in stores in existing regions.
Quick comment on earnings guidance: The range for the fourth quarter is 79 to 86 cents with consensus at 81 cents and we are comfortable within the range.
Be happy to open it up for any questions now.
Operator
Thank you.
We will now open the question-and-answer session to sell side and buy side analysts.
If you have a question, you'll need to push the 1 on your touchtone phone.
You will hear an acknowledgement you have been placed in queue.
If your question has been answered and you wish to be removed from queue, press the pound sign.
Your questions will be queued in the order that they are received.
If you're using a speaker phone, please pick up the handset before pressing the numbers.
If there are any questions why, please press the one on your touchtone phone.
First, Ron from Goldman Sachs is online with a question.
Please state your question.
Thank you.
Let me be the first of many to congratulate you on the quarter.
I'd like to ask a question about brand migration.
You have obviously been major beneficiaries of this trend, but we hear on Target's conference call today that they expect to get a major sportswear brand coming in shortly.
We know that LEVI's is putting a signature brand into Wal-Mart.
What is your strategy going to be if this trend continues?
Obviously you could do space reduction, you could stiff them, just a differentiated label might be adequate.
How do you you expect to approach this issue?
- Chief Executive Officer
Specifically if you're talking about LEVI's, I mean -- let me go back for a second.
Brand migration has been going on for a long time, there's nothing new about that.
I would fully expect that will continue to go on and, you know, brands are just looking at where business is being done, where the customer is shopping.
I think we have been the beneficiary of that.
Others have been.
We will continue to be a beneficiary going forward, I'm sure others will be as well.
Specifically as relates to LEVI, they are an important vendor at Kohl's, not just the LEVI's brand, which you're talking about, but also with the Docker's brand.
As I understand it, I think there's differentiated product in the LEVI launch at Wal-Mart for next year.
They have made a very strong commitment as a company to support the LEVI Red Tab business, which is their primary business, continues to be the lead business, and we are going to continue to support LEVI.
I don't see that changing going forward.
As far as merchandising around brand migration, that's just what we do.
Does that imply that there might be changes in space allocation, et cetera?
- Chief Executive Officer
Again, as it relates to LEVI, no.
I think we are very committed to the LEVI Red Tab business and it's an important element of our denim business, and that's not going to change.
Thank you.
Operator
David Cumberland from Robert Baird is online with a question.
Please state your question.
Good afternoon and well done again.
Kevin, on the Table and Tower program, on your plans for holiday, how does this year -- this year's holiday look different perhaps from last year's holiday?
- President
Well, in terms of the size of the program, it's not significantly larger in terms of the number of items and the number of fixtures.
In terms of productivity per fixture that we are expecting based on last year's results, it's significantly higher.
And that's just a result of learning more and more about the items and what the customer is most interested in getting on that program.
So content-wise, there's a significantly higher proportion of apparel and accessory items on the Table and Tower program for holiday than last year.
That's probably the biggest single change.
And that's strictly in response to results we got last year.
And then a question on the entry into the L.A. market: Is there a plan for an additional inventory commitment in this market as you had -- as you entered tri-state a couple years ago.
- President
We are going to be -- we think that California and the Southern California opening is going to be a really big deal, and we think we have got an enormous amount of sales opportunity out there.
We are going to take -- I think you know us, we'll take a very aggressive approach in terms of how we inventory the stores to open and how we go to market.
But we're also going to take a very aggressive approach, as we did in the tri-state, of ensuring that we can flow back in goods as they seel, because each of those stores will be a little different and each of those individuals markets within the Southern California market will be different.
I guess the bottom line results is we're going to take a very strong position on owning in-stock size and color in Southern California.
Sounds good.
Thank you.
Operator
Daniel Barry from Merrill Lynch is online with a question.
Please state your question.
Let me add my congratulation grass, as well.
You didn't comment too much on the small stores, the tests; can you give us any crumbs of information would be appreciated, size or early results?
- Chief Executive Officer
It's Larry.
I don't have a whole lot of crumbs to give you.
One of them has only been open for a few weeks, and the other three have been open for a couple months.
We certainly have to get the the holiday season and through the transitional seasons, spring and summer, before we're able to say what's going on there.
So anything I could give you now you wouldn't be able to hang your hat on anyway.
I'll ask the question next time.
- Chief Executive Officer
Okay.
Operator
Sherry Eberts from JP Morgan is online with a question.
Please state your question.
Hi, everybody.
Congratulations on a great quarter.
Couple of questions: I was wondering if you could give us any insight into what type of product mix you've planning for California, and if that's going to be different at all from what we see in some of your other markets?
- President
The -- well, this is Kevin, Sherry, from a content standpoint, I don't think we'd be in a position where we want to stand spend a lot of time about what we're going to do, obviously, from a competitive standpoint.
But we have, you know, I think we as we have said to you in the past and others, we have been studying the Southern California market for more than two years, both looking at content, looking at the importance of brands, looking at space allocations, what's more important out there versus maybe some of the markets we haven't -- that we are in today.
All of that is going to be included in the way we open the stores.
So are there going to be differences in Southern California from whether they be like the markets we have now or our core market?
Yeah, there will be probably be significant differences, but I don't think we'd want to go through those with you today.
That's fair enough.
And then Arlene, I was just wondering if you could give us any update on what you're seeing in the delinquency trends in the credit business?
- Chief Operating Officer and Treasurer
Sure.
As we look at credit, delinquencies are modestly down versus a year ago.
And what we are seeing for write-offs is that we are running as a percent of receivables, the quarter was a little less than a year ago, similar to what we saw in second quarter.
So I think right now we feel very good that we are not seeing any further deterioration.
So it seems to have pretty much levels off, Sherry.
That's great.
And then last question, just clean-up, do you have the share count, I didn't see that on the release?
And then what you might be thinking for LIFO for fourth quarter at this point?
- Chief Operating Officer and Treasurer
Patty looks at share comp.
From a LIFO standpoint, we really wait until we get through December, and then we'll apply BLS indices.
I would expect that potentially if you look at other years, potentially we might see some pickup, but it's a little too early to tell on that one, Sherry.
- Chief Financial Officer
And, Sherry, it's Patty - we are on the[IPS] converted method of accounting for the third quarter.
So you'd have to add back the interest on the convertible debt of 1.4 million for the numerator, and for the denominator you have to add back interest on the -- excuse me, the shares associated with the convertible debt of 3, 946,000.
So the math numerator, 134,856,000, divided by the denominator, the number of shares is 346,766,000.
Great.
Thanks so much.
That's only for the third quarter.
The fourth is not -- isn't converted for the full year.
Operator
Deborah Wineswig from Salomon Smith Barney.
Please state your question.
Good afternoon and congratulations.
A few questions: One, if you could give us an update in terms of how the six-way fixtures are being accepted by customers and to see if it's enhanced efficiency in the stores, and also with the rollout of the new stores, with the grand opening, the new jewelry and shoe fixturing in the store.
And one last question on the -- it sounds like Nine and Co. is now fully rolled out.
How many stores is it accessed in and when will we get a better read in terms of if that will be rolled out throughout the chain?
- Chief Executive Officer
As far as the six ways go, the customers certainly seem to receive them very well.
I think that the feedback that we get and what we observe ourselves is that the merchandise is presented far more compelling than it is on four ways.
Number two, we're getting a lot more merchandise on the floor and still creating a feeling of shoppability.
The new fixtures in accessories and jewelry have only been there for a pretty short period of time.
We like the way they look, we like what the customers have said.
But I can't give you any true feeling as to whether it means additional business right now, but we certainly get more goods out.
- President
It's Kevin.
As it relates to the brands, and Nine and Co. launched to the rest of the company basically in August, so we've had it on the floor for about 90 days.
It's doing great.
We're very very happy with the results.
Access is in around 125 stores or so, and we are going to roll that out to the entire company in February.
We are also, at the same time, going to launch in the whole company Access for Men, which will be the same kind of target demographic, a younger, modern, more contemporary product line from Claiborne.
So we'll have Access for Women and Access for Men in the whole company beginning in February.
That sounds great.
Thanks so much.
Operator
Linda Christianson from UBS Warburg is online with the question.
Please state your question.
Actually most of my questions have been answered.
But just one on credit share: It jumped almost 200 basis points, it's picking up a little momentum in terms of share on the card.
Could you talk about what's driving that faster share?
- Chief Financial Officer
I think what we're seeing, Linda, is obviously more productivity, better productivity in all of our direct mail pieces.
But, too, we've done pretty well on opening new accounts.
I think we have done a better job in store and even in tab in communicating the benefits of using a Kohl's charge card.
At the same time, we continue to see significant increases in the percent of the file that are qualifying for MVC status.
So I think what it all comes down to is just increasing loyalty.
That customer is just shopping more often and we are getting more people interested in that program.
Do you have any target or a sense of how much further that could move up; do you think that could move up to 40% or so?
- Chief Financial Officer
There really isn't a target number out there.
What we like is continuing to add people to the file so it allows us to expand that group of people we can direct market to.
But to be honest with you, once I get them in store, I really don't care if they put it on their Kohl's charge card or they want to put it on their Visa card because they'd rather have mileage, or they want to put it on their debit card because they want it taken out of right out of their bank account.
It's really more of a file and a vehicle to allow me to direct market to a great customer base.
Thanks a lot.
Operator
Christine Augustine from Bear Stearns is on the line with a question.
Please state your question.
Good afternoon.
I have two questions.
The first is just on the Home area, you didn't really talk about that too much.
I just wondered if there were any highlights there or any new initiatives that we could look for going into next year?
And then the second question is on -- for the opening in California, can we expect to see national network advertising?
- President
It's Kevin.
As it relates to Home, we didn't call it out just because we were calling out the two or three classifications really that were significantly above the company's total of 5.9.
Home was basically right in line with the company totals.
So from a performance standpoint, they had a really good quarter.
As it relates to new initiatives in Home, we have I think you know, been rolling out into all of our new stores and remodels our Home concept, which is a different merchandise fixturization and layout and visual presentation.
That's continued to be real well received.
I forget the other part of that question.
Well, the second question was marketing in California; are you planning to do national network advertising?
- President
The answer is yes, we are planning to do national network advertising beginning in 2003.
Thank you.
Operator
Philip Goodson from CSFB in online with a question.
Please state your question.
Good afternoon. [Philip Goodson], CSFB Fixed Income Research.
My sincere congratulations, as well.
I have actually two questions today.
The first one with regard to the credit card business, can you -- because many people obviously are focusing on that side of the business these days throughout the industry; can you just kind of quickly walk us through the P&L again, how you account for the various aspects of that business in terms of interest income, expense, and operating expenses?
And then the second question: Do you have already a preliminary number for Cap Ex for next year, and would that require you coming to the debt markets, thank you?
- Chief Operating Officer and Treasurer
First, as it relates to how we account for credit, if you take finance charge income and all of the expenses to operate the call center, that all nets through SG&A.
So when you're looking at top line, top line is totally sales, everything else is going through SG&A.
Any financing of the receivables, we really look at the receivables just as part of working capital.
So anything that we need to support inventory or receivables, any borrowings that we need to do, that interest expense would all be on the interest expense line.
As it relates to Cap Ex, Patty, I don't think we've given out a number yet for next year.
As you look at us opening 75 stores this year to 80 next year.
We'll spend 750 million this year, you can expect next year it's just going to go up proportionately.
Do you plan to come to the market at all?
- Chief Operating Officer and Treasurer
If we were to come to market, it would more be because of liking interest rate environment.
Obviously, interest rates are at an all-time low, so if we were to do anything, it would be to do something opportunistic, not because we would need anything to fund the expansion program.
If I can ask one final follow-up on the receivables.
I've forgot what you've mentioned in the past; is this break-even or a cost center at this moment?
- Chief Operating Officer and Treasurer
When you look at receivables net, it actually does contribute to operating income; not significantly because of the way that we run that program.
I don't know if , Patty, you remember the numbers off the top of your head.
- Chief Financial Officer
Last year, about 48 million pretax.
It's in the 10-K.
Great.
Thanks very much again.
Operator
Jeff Kleinfelter from piper Jaffray online with a question.
Please state your question.
It's actual Dina Friedman calling in for Jeff.
My question is, in terms of the port issue, are there any pushbacks in term of different circulars dropping; are you making any adjustments out of potential delays?
- President
No.
I mean, the short answer is no.
We have had -- there have been clearly items that have been slowed due to the port delay, but overall we haven't had a significant impact.
And then I think the way things have developed in the last few weeks, clearly they're moving in the right direction.
So, no we haven't had to make any changes from that viewpoint.
And when you say 'some items were slowed', what types of items were those?
- President
Nothing specific, it's not like it was a category or classification or country of origin, but during that period when the docks were stopped, there were items that were flowing in slower than we would have typically planned for.
I don't know if you remember, but we also talked about the fact that we had kind of anticipated that happening, and we had set all of our holiday programs, our Get It items and our Table and Tower in aisle program earlier by a couple weeks and last year just to try to compensate for that, and it worked out really, really well.
Great, thanks a lot.
Operator
Davie Yamamoto from Wedbush Morgan Securities is online with a question.
Please state your question.
Good afternoon and congratulations on an outstanding quarter.
I have three questions: First, you had mentioned the opening of 28 stores in Southern California in the first quarter of next year.
How many stores do you plan to open in Southern California in Q3 of next year and in 2003?
- President
In Southern California, it's going to be about 28 stores for the year in Southern California.
Okay.
- President
We have some pretty significant expansion plans beyond 2003 for California.
Okay.
And do you have a timeframe for stores in Northern California?
- President
Not that we are discussing.
Okay.
And I understand that your Houston stores have been open for only six months or so.
How are they performing so far?
- Chief Executive Officer
I think all -- when you look at all of our hot and warm stores for the quarter performed either at or better than the company.
Great.
Thank you very much.
Operator
That concludes today's question and answer session.
At this time, do you have any concluding remarks?
- Chief Operating Officer and Treasurer
No.
We appreciate everybody joining the call today so thank you.
Operator
This concludes today's teleconference.
Thank you for participating, you may now disconnect.