La-Z-Boy Inc (LZB) 2016 Q1 法說會逐字稿

Greetings and welcome to the La-Z-Boy Incorporated first quarter FY16 conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kathy Liebmann, Director of Investor Relations and Corporate Communications for La-Z-Boy. Please go ahead.

Thank you, Kevin. Good morning and thank you for joining us to discuss our FY16 first-quarter results. With us today are Kurt Darrow, La-Z-Boy's Chairman, President, and Chief Executive Officer; and Mike Riccio, our Chief Financial Officer. Kurt will begin today's call and then Mike will speak about the financials before turning the call back to Kurt for his concluding remarks. We will then open the call to questions. A telephone replay of the call will be available for one week beginning this afternoon. Slides will accompany this presentation and are available for viewing through our webcast link. These regular quarterly investor conference calls are one of La-Z-Boys' primary vehicles to communicate with investors about the Company's current operations and future prospects.

We will make forward-looking statements during this call so I will repeat our usual Safe Harbor remarks. While these statements reflect the best judgment of Management at the present time, they are subject to numerous future risks and uncertainties as detailed in our SEC filings, and they may differ materially from actual results due to a wide range of factors. We undertake no obligation to update any forward-looking statements made during this call. With that, let me turn over the call to Kurt Darrow, La-Z-Boy's Chairman, President, and Chief Executive Officer. Kurt.

Thank you, Kathy, and good morning, everyone. Yesterday afternoon we reported our FY16 first-quarter results. It was a good quarter, with increases in sales, profitability, earnings per share, and same-store sales of the La-Z-Boy Furniture Gallery network. In particular, we are very pleased with the performance of our Company-owned retail segment, which earned $4.4 million more than it did in last year's first quarter, and posted a 5.5% operating margin. Additionally, even with a $0.04 per share benefit from two items, our earnings for the quarter with solid, and Mike will address these in more detail in a few minutes.

Before I get into a discussion of the three operating segments, I would like to take a moment to highlight our various growth initiatives, to provide a framework for how we think about the business and its growth and profitability potential. We have four growth plans that are running concurrently. The first and largest initiative is our 4-4-5 store build-out strategy, which we have talked a lot about. For those of you who may be new to our story, 4-4-5 is the moniker for having 400 La-Z-Boy Furniture Gallery stores throughout North America, averaging $4 million in revenue per store, with a build-out taking place over a five-year period. We have just started year three of the plan and are well on our way to achieving many of the objectives associated with it. Our second growth strategy is focused on acquiring La-Z-Boy Furniture Gallery stores from independent dealers upon their retirement, which will bolster the size of the Company-owned retail base of stores. As we have talked about in the past, sales through the Company-owned La-Z-Boy Furniture Gallery stores provide the Company with the greatest level of profitability, as we realize the benefit of a stacked margin where we can earn a profit on both the wholesale and retail side of the business. As our retail segment grows, this model will enhance the earnings power of the Company. I will talk in more detail about this in a few moments when I discuss our retail segment.

The third initiative is to grow our other distribution channels, meaning those beyond the La-Z-Boy Furniture Gallery stores. Although much of our focus has been on branded distribution, we have some $700 million in wholesale sales across the balance of the La-Z-Boy business and with our other brands outside of the store system. These other distribution outlets include some of the largest furniture dealers in the country, as well as many small mom-and-pop stores. Today, we sell all of our brands -- La-Z-Boy, England, American Drew, Hammary, and Kincaid -- to about 4,500 doors beyond the La-Z-Boy Furniture Gallery network of stores, and many of our customers are expanding their footprint. For example, Art Van Furniture has opened a number of new stores in Chicago over the past two years, and as they open new locations, our business with them increases. Many similar opportunities exist with our overall customer base. Our fourth growth opportunity is to expand our share in the stationary upholstery market. While we do have the largest market share in the recliner segment of the market, is it the smallest part of the overall upholstery industry. The stationary sofa piece of the market, however, compromises the largest part, and we had a relatively small share in that category, leaving us with a great potential to leverage our brand strength, our great new product offerings, and our vast distribution to penetrate this piece of the market in a more significant way. We believe all four of these strategies will drive growth and profitability for the Company long term.

Now let me turn to a brief discussion of our three business segments. First, upholstery. For the quarter, sales in the upholstery segment increased 3.7% to $272 million versus last year's first quarter, and we achieved a 9% operating margin, an increase from 8.4% in the comparable quarter last year. During the period, increased volume leveraged the fixed cost structure of our plans. We also benefited from supply chain efficiencies, which is a key focus for us, and a favorable change in product mix, including power, which has been a fast-growing category. Written same-store sales for the La-Z-Boy Furniture Gallery system increased 5.3% for the quarter, and we were pleased with that result. If same-store sales pace the mid-single-digit range for the remainder of the year, we should reach the $4 million target we have set for the average revenue per store in our 4-4-5 strategy.

With respect to our store build-out program, during the quarter the network opened two stores and remodeled one. We ended the period with 327 La-Z-Boy Furniture Gallery stores, with 64 in the new concept design. For the year, we expect to complete 35 to 40 projects, including new stores, remodels, and relocations, and plan to end FY16 with 17 net new stores for 342.

As I discussed a moment ago, we are very focused on our opportunity in the stationary upholstery market and enjoyed success over the past couple of years growing our stationary business at about twice the rate of our overall business. In addition to our popular Urban Attitudes collection, we will continue to introduce new on-trend stationary product to appeal to a wider demographic and increase our market share in this large category. We are also moving closer to the early fall launch of our new web and e-commerce technology platform and expect it to provide a best-in-class digital experience, making it easier for consumers to be inspired and informed about our products and shop in the manner that best suits their needs. Traffic to our site continues to increase and there is much anecdotal evidence that consumers are spending a lot of time researching the frames and fabric selections before they come to either a La-Z-Boy Furniture Gallery store or to one of our other distribution outlets. And when they visit a store, they have the opportunity to broaden their experience by seeing the frames and fabric in person and testing out the feel of our furniture before making their final selections. In June, we completed the implementation of our ERP system at our La-Z-Boy branded facilities when we finished with our Dayton, Tennessee plant. Throughout the remainder of FY16, we will be working on the sales order management component of the ERP system.

Now let me spend a few moments on casegoods. Our transition to a pure import model is delivering results in the casegoods business. For the quarter, we improved our operating margin to 7.2% from 5.3% in last year's first quarter on lower sales. By ceasing production at our Hudson, North Carolina facility, narrowing our portfolio of brands, and changing our product offering to include more transitional collections, we believe the business will perform more consistently in the future. With regard to sales decline for the quarter, our newer transitional collections have sold better than anticipated, which created a temporary shortfall in supply. Additionally, last year's first quarter included $2.1 million of sales in our hospitality line, a business that we exited last fall.

Now moving on to retail. We are pleased with the way our Company-owned retail business is growing and performing. For the quarter, sales increased 18.9% versus last year's first quarter, and we posted an operating margin of 5.5%, as I mentioned in my opening remarks. This marks a $4.4 million increase in operating income compared to the prior year's first quarter. On the core base of stores delivered sales for the segment increased 7.2%.

I would like to take a moment and provide some perspective on our base of stores. When the Company first became involved in store ownership back in the early 2000s, for the most part we were acquiring stores with issues that needed to be addressed and fixed. Although markets we acquired were large and vibrant, many of the stores themselves were in poor locations, were old and tired, or there simply weren't enough stores in the various markets to capture a share of voice and to leverage the fixed cost structure associated with those markets. As we discussed in the past, we spent a lot of time working to improve the performance of these stores and have made significant headway to date. Today, however, the composition of our store base is very different. Over the last several years, the stores the Company has opened in dark markets, including Pittsburgh, Southeast Michigan, and Minneapolis, and the stores acquired from the independent La-Z-Boy Furniture Gallery dealers, have changed the overall complexion of our portfolio, as these stores are performing at a much higher rate than stores we purchased a decade ago. Back then, we acquired stores to protect our market and distribution. Today, our acquisitions are more strategic, and the stores added to the Company-owned retail segment are accretive and are contributing to the overall performance of the segment. Early in the second quarter, we acquired two stores in Wisconsin and have also signed an agreement to acquire two stores in the Carolinas from an independent dealer in September. As we move forward, we plan to acquire additional stores from independent La-Z-Boy Furniture Gallery dealers, and believe that when we are done with our 4-4-5 build-out strategy, the Company's ownership of the entire network will increase to between 40% and 50% based on new stores and acquisitions. As we mentioned earlier, as the size of our Company-owned retail business increases, we will enjoy the benefit of the blended wholesale retail margin that's inherent in our model. I'll now turn things over to Mike to speak about our financial performance. Michael?

Thank you, Kurt. Consolidated sales for the FY16 first quarter were $341 million, up 4.4% compared with last year's first quarter of $327 million. For the quarter, consolidated operating income increased 21% to $20 million compared with $16.5 million in the FY15 first quarter, with the consolidated operating margin increasing to 5.8% from 5%. The Company reported net income from continuing operations attributable to La-Z-Boy Incorporated of $13.7 million, or $0.27 per diluted share, compared with last year's first quarter net income of $10.6 million, or $0.20 per diluted share. Our consolidated gross margin improved 2.3 percentage points in the quarter compared with last year's first quarter. In addition to higher unit volume and supply chain efficiencies driving the margin in our wholesale upholstery segment, we recorded a 0.5 percentage point benefit related to legal settlements in cost of sales. The case goods and retail segments also contributed to our gross margin increase.

Selling, general, and administrative expenses for the quarter as a percentage of sales increased 1.5 percentage points versus last year's comparable period. Our warranty expense was 0.5 percentage points higher in this year's first quarter, mainly due to a favorable accrual adjustment in last year's first quarter. Additionally, professional fees were 0.3 percentage points higher in this year's quarter, primarily due to the investments we are making in the business for technology, including our website and e-commerce platform, as well as the ERP system. We also had higher costs related to our new world headquarters, resulting in a 0.4 percentage point increase in SG&A as a percent of sales during the quarter. In addition, because of the higher weighting of our retail segment, both our gross margin and SG&A as a percent of sales increased during the period. Our corporate and other operating loss was $3.2 million higher in the first quarter of FY16 compared with last year's quarter, primarily due to higher depreciation related to our new world headquarters and expenses related to the start-up of our new global trading company in Hong Kong, each of which amounted to $0.8 million. We also had other income of $2 million during the first quarter as a result of higher foreign currency exchange rates versus those in last year's first quarter, as well as gains on the sale of investments.

Now let me turn to the balance sheet. For the quarter, we generated $1.5 million in cash from operating activities. We ended this period with $88 million in cash and cash equivalents, $37 million in investments to enhance returns on our cash, and $10 million in restricted cash. During the quarter, we spent $9 million to purchase 342,000 shares of stock and have 5.4 million shares available for purchase in our program. Based on cash flows, stock market conditions, and other uses for cash, including making investments in the business to drive growth, we'll be opportunistic with respect to our share purchase program. During the first quarter we had $6.5 million in capital expenditures and expect our CapEx for the full FY16 year to be in the $30 million to $35 million range. Lastly, our effective tax rate for continuing operations for the quarter was 35.9% compared with 35.3% for the first quarter of FY15. Our effective tax rate varies from the 35% statutory rate, primarily due to state taxes, less the benefit of US manufacturing deduction, and foreign earnings in jurisdictions with lower tax rates than in the US. For the full year, 35% to 36% is a good range to use for modeling purposes.

Before I turn the call back to Kurt, I'd like to review some numbers related to our Company-owned retail segment to help with your understanding of the segment's economic value and your modeling. When we open a new store, we tend to lease the store and put as many costs in the lease as possible. As a note, approximately 75% of the operating lease obligations outlined in our filings relate to our retail segment. So when we open a store, typically it costs us about $400,000 to $600,000 of capital, plus the inventory of about $300,000, so let's say an average $800,000 in total. We also have about $200,000 to $250,000 in opening expenses, which we have referred to as new store drag in the 90-day period surrounding a store opening. These costs are for technology, advertising, training, salaries, et cetera, before we even deliver a piece of furniture. Our stores typically hit maturity mid-way through the second year of operating, and from that point, generate an average of about $250,000 in annual operating profit. As we have opened up more of the new concept stores, we have seen that sales and profit number trending up. On average, if you just look at the four walls of the retail operation and exclude the advertising and the distribution charges, profit would increase by $300,000 to $400,000 per store. Also, it is important to note that without our stores, it is not reasonable to believe we could replace the distribution and that would hurt the wholesale business. Additionally, we have a unique model in that our retail operation allows us to benefit from the blended margin associated with our integrated retail model. Finally, the markets in which the Company does operate in tend to be more expensive and it's difficult to find independent operators with a capital investment in these markets. And now I'll turn the call back to Kurt for his concluding remarks.

Thank you, Mike. As we move throughout FY16, we are optimistic about our positioning in the marketplace and prospects for driving profitable growth through our four initiatives outlined at the onset of the call. We are working on all aspects of the business, increasing our overall sales, strengthening our integrated retail platform, and growing our market share in various categories, all while working to gain further efficiencies throughout our operating platform. We will continue to make strategic investments in the business to deliver growth and are confident we will enhance our returns to shareholders throughout the year.

We thank you for being on our call this morning and I will turn things back to Kathy to have the Q&A started.

Thank you, Kurt. We will begin the question-and-answer period now. Kevin, please review the instructions for getting into the queue to ask questions.

(Operator Instructions).

Our first question today is coming from Budd Bugatch from Raymond James. Please proceed with your question.

This is Bobby filling in for Budd. Congrats on a very good quarter, and Mike, thank you for the additional detail on the retail segment. Very helpful.

You're welcome.

First question from me is maybe just a little bit more color on the hospitality revenue. How much more revenue should we account for in our models that you guys are going to lap that's not repeating going forward?

Bobby, we have another $1 million in the second quarter that we'll be anniversarying, and then there's a little bit of trail-off, but the only quarter left that has any significance is next quarter at about $1 million or $1.2 million.

All right. Thank you. That's perfect. And then maybe is the out-of-stock items corrected? Is that back in stock and shipping well now?

We believe as we move through the quarter, we will get caught up on the outages and be in a great service position as we head to the October market.

Okay. Perfect. And then on the new e-commerce platform and the website, is there an update on the timeline of that launch?

That is going to be early fall, say maybe mid-September or -- we're just -- with these things, we want everything to be perfect. When you go live, you don't want to have any hiccups. The majority of the work is completed. We're just doing a lot of testing and a lot of sampling and a lot of stress testing on the sites so that we're positive that we don't have any hiccups when it's launched. It's not like our old site is terrible. We're just being cautious and patient to make sure when we do launch, everything is running as designed, and so you'll see something at the latest probably the end of September.

Understandable. I appreciate the color. Then lastly from me, maybe just some additional color on gross margin. Even excluding a legal benefit, it's probably the highest first quarter of gross margin in some time, so can -- I was just hoping to get maybe a little more color about the moving parts and how much runway is left there in that expansion?

There's a number of moving parts there, Bobby. One that Mike keeps reminding people is, as retail becomes a larger part of our business, its implications on both the gross margin, the SG&A, because it's so different than the wholesale business, will have an impact on that. Number two, we particularly had a solid quarter with our power business and our motion sofa growth, which has higher dollar gross margins than the balance of our business. Finally, not only in the La-Z-Boy stores that the Company owns, but you across our network, we're seeing higher sales in our in-home design business and also in our custom business, both of which carry a higher gross margin.

I appreciate that color and best of luck through the remainder of the year.

Thanks, Bobby.

Thank you. Our next question today is coming from Josh Borstein from Longbow Research. Please proceed with your question.

Good morning, guys. This is actually Evan here on for Josh this morning.

Hi, Evan.

Hi. I was just hoping to get maybe a little bit more color if you could on the retail segment. When you just talk about the consumer, how do you feel about where the consumer is going into the second quarter? We obviously saw some impressive numbers there. Is that -- what do you think was driving that? Is that more La-Z-Boy initiatives or the macro environment improving or maybe a little of both?

My initial reaction to your question would be both. Our team executed very well this quarter. It was nice to see a seasonally low quarter give us this kind of results. But I also think the customer is in a good place. We're seeing her more willing to trade up. We're seeing her willing to buy multiple pieces. So the economic environment right now for furniture is fairly positive and we're doing all we can to take advantage of that. So I would probably balance the two between great execution and a pretty stable environment.

Okay. Great. Thanks for that. And just with respect to raw materials, I think you guys said the last quarter that you didn't see any changes -- you weren't expecting any changes from FY15. Is that still how we should think about it?

Yes, -- we don't have a line of sight all the way through our whole fiscal year. We have a pretty good knowledge of what's going to happen between now and December, but our bias today is that compared to last year our raw materials will be flat or perhaps slightly down as the commodity market has changed quite a bit in the last couple years.

Okay. Great. Thanks, guys. And good luck on the rest of the year.

Thank you.

(Operator Instructions)

Our next question today is coming from John Baugh from Stifel. Please proceed with your question.

Good morning and thank you for taking my questions. Congrats on a good quarter. I was wondering, on the retail commentary you gave out, which was very helpful, Mike, as I recall we had all of this drag in the first quarter a year ago, and my suspicion is that's what's got a lot to do with why the margin is so much better. But my question is now that we've lapped that, are we in a position where not only are we comparing against a drag but the stores you've opened are actually going to contribute maybe even a little bit more to retail margin? Or how do we think about retail margin moving forward in terms of store opening drag versus lapping a prior year? Thank you.

In our plan that we've talked about with everyone, we -- the Company is going to open 7 of the 17 new stores this year and that would be fairly consistent with what we did the previous year, John. It may not add up exactly quarter-to-quarter, but on a yearly basis, there should be not any differential in drag year-to-year with our new store openings.

Okay. And then, will there be any compensation issues to call out? I know from time to time, the way the stock comp and other bonuses, there are issues in terms of timing. Any abnormalities there?

John, it's pretty much going to be depending on how we match up against our plan and how we match up against growth this year. If we start hitting our stride and our plan like we expect to, then I would assume that our compensation would go up, but we should be earning the compensation through additional margin and additional earnings. So I don't know how it will affect the overall conversion but it should not affect our overall margin improvements over the course of the year.

Okay. That's helpful. And then on the casegoods sector, I know it's small and the margin performance was pretty good in light of the sales. That number on the revenue front has just dropped consistently for, I don't know, maybe a decade now. And yet you are achieving, with the import model, a positive EBIT number and a decent EBIT number. My question is, I know there's some level of fixed cost there. Can we sustain a roughly mid-single digit EBIT margin in that business, even if revenues there continue to decline or is there some point of no return where you've got to make a tougher decision there because you can't cover fixed costs? Thanks.

Our number one target is to not continue to have our revenues decline. Two situations this quarter, with the hospitality business and being out of stock, but it is our expectation in the second half of the year that we start to see a sales increase. We've been making all the changes to the product lines. As I mentioned earlier, we were too skewed to the traditional side of the business for too long, and frankly, the transitional groups that were out of stock are selling at a pretty good rate. So we believe that we can grow this business again and we believe we can make the kind of margins that an import model should do. So we're at work at making sure that we get the right products, get it in stock, and start to increase our sales in the casegoods segment.

Thank you. And then my last question is just on the stationary motion power commentary. It's been your goal to grow stationary and yet high-class problem to have power, moving motion. Any more color you can give us on the stationary side? How it's doing maybe on an absolute basis and what your plans may be to continue to try to drive that mix of your business up over time?

We mentioned on the call, John, that we've been growing our stationary business, which includes not just sofas but stationary sectionals and occasional chairs. We've been growing that at double the rate of the Company and continue to do that. But the biggest opportunity for us, because we've got the product and certainly we've got the distribution through the vast array of dealers we have, but it's continuing to convince the customer when she's looking for a sofa to get La-Z-Boy on her shopping list. In the 5.5 years we've been with Brooke and her doing the commercials for us, she's never once talked about the La-Z-Boy recliner. All she's talked about is all the other things that we make and all the other services we provide and the styling that we have. So just continuing -- and that's why we're investing in the website and that's why we keep doing our branding commercials, is to get awareness from consumers that we make more than recliners. So that is the biggest funnel we have to open up to help that business grow and we're coming up with creative ways of how to do that all the time.

Great. Thanks for taking my questions and good luck.

Thanks, John.

Thank you. Our next question today is coming from Matt McCall from BB&T Capital Markets. Please proceed with your question.

This is Reuben in for Matt. Good morning, everyone.

Good morning.

I just want to hit on the contribution margin in the quarter. If you take out the 50-basis point legal benefit, it was about 15%. I know you hit on some of the gross margin items. Can you talk about some of the SG&A items in the quarter? I know there was the warranty headwind and you've got IT expenses in that and the new world headquarters. Can you talk about where that contribution margin can go for the balance of the year and maybe which of those items are not going to be recurring?

I'll have Mike give you a little more color on the specifics, but I just want to remind everybody, we've talked about our contribution margin on an annual basis. The fact that we are in a seasonally slow quarter and shut down for a week at our plants in first quarter, we will most likely never convert at the higher rate that we think we can on an annual basis in the first quarter. That's the biggest driver of the differential here, Q1 to the rest of the year. Mike, any other specifics?

No. As we're talking about compensation, the one thing that I did not mention is we do have some component of our compensation that's based on the stock price. Although that's not as large number as some of the other ones, the stock price did drop in the first quarter and so far the first couple weeks of this quarter has gone back up again. So there will be some drag on that if the stock price continues to increase. But again, we should be able to earn our way into that as well. But every quarter we seem to have some anomaly last year that we're overcoming and this year and we'll continue to have that throughout the year as we had some adjustments in some quarters that we outlined in our comments. But we expect to convert on an annual basis in the range that we've always talked about, but it is hard in any given quarter to hit each number that we want to.

Okay. Thank you. Then you guys outlined the growth opportunities outside of 4-4-5. Can you discuss maybe which of those three is the biggest, or has the most potential to drive earnings, and maybe the timing of each of those opportunities?

No, because for a number of different elements of that, of our strategy, we don't control how many new stores our independent furniture retailers open. We don't control how many new placements they give us on their floors. The purpose of talking about that is we've pushed so hard on 4-4-5 that people thought that was the only growth engine we have. And it's not. As the industry continues to do well, and with our products across North America in 4,500 doors, there's a lot more opportunity than just what the stores provide us. But we have the most influence over the stores and can be more predictive about what they do. I would say, in the short term, the acquisitions of the retiring dealers -- and I want to be sure everybody understands -- all these acquisitions we're making with retiring dealers are all very amicable. A lot of them have worked 35, 40 years in the business. They don't have any children coming up and it's a logical move for them to want to sell to us and that's happening. So probably the most immediate one that would be beneficial to us would be the continued acquisition of independent dealers.

Okay. Great. And then one more if I could. The same-store sales number in the quarter was more in line with what you talked about on a year-to-date basis in Q4. Can you talk about the progression month-to-month? Was it still choppy and has your outlook changed at all?

No, we would be -- our outlook for the year is if we could stay at the mid-single-digits for the balance of the year, we would think that was a solid year at a 4%, 5%, 6% same-store sales growth. As we mentioned in June, May was a very good month, and the next two months were not quite as good, but they were all positive and near the mid-single-digit range, but certainly May was the best month of the quarter for us.

Okay. All right. Great. Thanks for taking my questions.

Okay. Thank you, Reuben.

Thank you. Our next question today is coming from Kristine Koerber from Barrington Research Associates. Please proceed with your question.

Good morning. A few questions. First, just wondering how much more old product you still have to clear out as far as the casegoods goes?

We don't have a lot, Kristine. We're always discontinuing old groups, introducing new groups, and that's a part of being in that business. But we sold through all the youth business -- the youth product that we had and then the product that we were manufacturing at Hudson that we didn't transfer to China, we sold through most of that, so not having a lot of that left is also one of the things that's benefiting our margin.

Okay. That's helpful. And then can you talk about trends in international markets and what you're seeing overseas?

It would be hard to talk because of the varying degree of volatility around the world, but the strength of the US dollar is challenging in a lot of the other markets that we're in, to the degree in some places they've had to raise price as much as 25%, 30%. That doesn't bode well if it stays that way for a long time. But I don't have specifics by country to comment on, but the dollar probably is right now the biggest -- having the biggest effect on our international business.

Okay. And then I believe you were going to air two new commercials this summer. Have they aired and if so, what has the response been?

We typically heavy up on our commercials the two weeks prior to Labor Day and we're just coming up on those -- on that date and we're -- you will see a lot more television advertising on La-Z-Boy heading into Labor Day.

Are those -- will they be aired nationally?

Yes.

Okay. And then lastly, I believe you're testing a smaller store in the Baltimore area. How's that going?

Close. We are testing a new store in Logan Circle in DC, about three or four blocks from the capital. My best information right now, it's going to open for us in late October. So it's not open yet but we are doing one. We're very excited about it. We think we can learn a lot from it, but we may have some more detail for you on it at the next call.

Can you remind me of the square footage of that store?

The square footage is probably around 4,000 feet, maybe a little larger, maybe a little smaller. It will have a totally different design. It will have a look and feel of what we're doing in the new concept stores but on a much different basis and the product selection obviously will be geared for the urban markets and a selection of what we think is right for that area displayed in the store.

Okay. Great. Thank you.

Thank you.

Thank you. We have reached the end of our question-and-answer session. I'd like to turn the floor back over to Management for any further or closing comments.

Thank you, everyone, for participating on the call this morning. If you have follow-up questions, you can contact me later today and we'll schedule some time. Have a great day. Bye-bye.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.