梅西百貨 (M) 2007 Q4 法說會逐字稿

Good morning and welcome to the Macy's fourth-quarter earnings conference call.

This call is being recorded.

I would now like to turn the call over to your host, Karen Hoguet.

Please go ahead.

Thank you.

Good morning and welcome to the Macy's call.

I'm Karen Hoguet, CFO of the Company.

Any transcription or other reproduction of the statements made in this call without our consent is prohibited.

A replay of the call will be available on our website, www.macysinc.com, beginning approximately two hours after the call concludes.

Please refer to the Investor Relations sections of our website for discussions and reconciliations of any non-GAAP financial measures discussed this morning.

Keep in mind that all forward-looking statements are subject to risks and uncertainties that could cause the Company's actual results to differ materially from the expectations and assumptions mentioned today, due to a variety of factors that affect the Company, including the risks specified in the Company's most recently filed Form 10-K and Form 10-Q.

We had hoped for better sales performance in the fourth quarter, but we, like others, were impacted by the weak macroeconomic environment.

Our comp store sales declined 2% in the fourth quarter, which represented the low-end of our guidance.

Total sales in the quarter were $8.6 billion, 6.2% below last year, due to one less week in the quarter this year, the comp store sales decline, as well as closed stores.

While disappointing, our sales performance compared well to our peers in the quarter, giving us comfort that our strategies are appropriate and our execution is on track.

We were pleased with our earnings, excluding integration costs of $1.83 in the quarter, given the sales performance.

Recurring gross margin in the fourth quarter was 41.6%, up 70 basis points versus last year.

Remember, we had told you when we released our second-quarter earnings that, due to the calendar, we expected a lower gross margin rate in the third quarter and a higher rate in the quarter, related to the timing of taking clearance markdowns.

Nonetheless, we're very pleased with this result, particularly given the weakness in sales.

And we ended the year with inventory down 5% versus a year ago and with comparable aging to a year ago.

In other words, both the quality and the quantity of our inventory was in good shape as we entered 2008.

This demonstrates our ability to manage our inventories well during uncertain times.

During the fourth quarter, our SG&A in dollars was $2,282,000,000, down 1.3% from last year.

While that is lower in dollars than we expected, the rate was more than a point above last year, primarily due to the weak sales.

In addition to the low sales, this increase in rate was due to higher depreciation expense, higher retirement expense and a higher investment in our online business.

Depreciation and amortization was $327 million in the quarter, slightly below the expected $335 million but above last year's $320 million.

This leads to operating income, excluding the May integration costs, of $1,291,000,000.

As a percentage of sales, the operating income rate was 15%, which is down 0.7 points versus last year.

May integration costs in the quarter were $69 million.

Interest expense, as you saw, was $136 million, and tax expense was $336 million, benefiting from the $78 million non-cash settlement for returns from prior years.

Average diluted share count for the quarter was 435 million shares.

During the fourth quarter, we spent approximately $320 million to buy back 13 million shares at an average price of $24.50.

Once Christmas was over and we were comfortable with our cash position, we decided to take advantage of what we consider to be a great value in our stock.

We have approximately $852 million of our authorization remaining.

EPS on a diluted basis, excluding May integration costs in the quarter, was $1.83 compared to last year's $1.66.

While above the upper end of our guidance, the result included $78 million or $0.18 per share of the tax settlement.

If we exclude the tax settlement from this year's earnings and the gain on the debt tender from last year's earnings, the comparison would be $1.65 this year versus $1.60 last year, so up a little over 3%.

Given the sales performance, we are pleased that we can still grow earnings per share, which was true even excluding the benefit of the tax settlement.

Before moving on to 2008, I want to step back for a minute and just make a few comments about the full year 2007.

As we started last year in February and then in March, you will recall that sales in the legacy Macy's stores continued quite strong.

And at the time, we were focused on improving the new Macy doors or the former May doors.

However, starting in April, while the performance in the new Macy's stores or the former May doors did start to improve, the ready-to-wear business started to soften throughout the Company, and that softness continued into the back half of the year.

Additionally, the general trend in the business began to soften beyond ready-to-wear as we moved through the year.

But, in spite of the overall weakness in sales in 2007, there was some good news on the sales front.

Let me mention five items.

First, the former May doors in many markets improved through the year.

In fact, in the fourth quarter, the former May doors outperformed the legacy Macy doors in some of our divisions.

Two, the big-ticket home business, furniture and mattresses, had a fabulous year in spite of what has been happening in the housing market.

This was due to a change in marketing strategy where we incorporated more online advertising, the introduction of these categories on Macy's.com and the overall improvement in our assortments and execution.

Three, the Martha Stuart launch across all the Macy's doors was successful.

The product itself not only sold well, but also we believe that the launch generated traffic throughout the store by adding excitement to our home selling floors.

Fourth, Bloomingdale's had another great year in 2007, and in addition to strong performance in their existing store base, Bloomingdale's performed very well in all of their new stores, which gives us added confidence in expanding this brand more aggressively.

Fifth, Macy's.com produced tremendous results in the year.

Our investments to improve the shopping experience, as well as the new warehouse, are all paying off.

I should also mention that, while sales were disappointing in some of our private brands, they still in total outperformed the market brands, and our penetration grew to 19%.

The brands with the best sales results were American Rag, First Impressions, Hotel, The Cellar, the men's part ofINC, Club Room, Tasso Elba and John Ashford.

But, as with the store as a whole, the ready-to-wear brands on the private brand side did have the toughest performance.

For the full year, our reoccurring gross margin rate was down 20 basis points, and the SG&A rate was up 30 basis points, which are both disappointing.

But given the 1.3% comp store sales decline and the unexpected weakening of the trend mid-year, especially in women's apparel, it should not be unexpected.

For the full year, our EPS on a diluted basis, excluding integration costs, and the gain on the sale of receivables last year was $2.32 compared to $2.30 a year ago.

If we exclude the tax settlement in each year, as well as the gain on the debt tender last year, the earnings per share this year would be $2.15 or up 3.4% over last year's $2.08.

And in spite of the challenging sales environment, we generated significant cash flow in 2007.

Cash from continuing operating activities less cash used by continuing investing activities was $1,442,000,000.

Relative to a year ago, the cash flow from operations less the cash used in investing activities was $3.5 billion lower this year.

However, this difference can be more than explained by the $2 billion in net proceeds last year from the sale of Accounts Receivable and the $1.7 billion higher proceeds from the sale of Lord & Taylor and the bridal businesses in 2006 versus 2007.

Lastly, the asset sales of properties primarily associated with the May integration contributed approximately $452 million less in 2007 than in 2006.

So if you exclude those one-time items associated with the May integration, the cash flow from continuing operating activities less investing activities was more than $650 million higher in 2007 than last year.

In 2007 we bought back over $3 billion or 85.3 million shares of our stock.

Our average diluted share count for the year was 452 million shares, down 17.5% from last year.

We ended 2007 with no commercial paper outstanding and $583 million of cash on our balance sheet.

Let's move on now to 2008.

But before I talk about our outlook, I want to make sure that you all noticed that we are no longer going to report monthly sales.

This, combined with not providing quarterly guidance, could be misconstrued as trying to cut back on the information that we're providing to investors.

That is not the intent.

In fact, our hope is that you will find the information we do provide going forward will be just as meaningful in helping you to effectively judge our performance and our outlook for the future.

Due to calendar and promotional shifts, we have found monthly sales to cause undue confusion, and we believe performance is better evaluated on a quarterly basis.

So now 2008.

In the months of January and February, we have become more concerned about the economy and consumer spending.

We have tried to reflect that concern in our plans, but we're also maintaining flexibility, given this uncertainty.

Our comp store sales guidance for the full year is a range of minus 1% to plus 1.5%.

The first half of the year and particularly the first quarter could be below the low end of the guidance, but we are assuming that the economy picks up by the mid third quarter.

Our guidance for annual earnings, excluding the consolidation-related costs, is $1.85 to $2.15.

Obviously, our earnings will be a function of the assumed sales guidance.

With sales trends like this, we do not expect to lower SG&A as a rate for the full year, even though the fall season will be favorably impacted by the $60 million of net consolidation savings.

We do, however, expect some improvement in gross margin rate for the full year, even though we are assuming a lower gross margin rate than a year ago for the first quarter.

Costs associated with the consolidations are assumed to be $150 million, and almost all of these costs are cash and all will be incurred this year.

We are now assuming a capital budget of $1 billion.

Over the past few weeks, we've reduced our budget by $100 million in response to business trends.

Depreciation and amortization is assumed to be approximately $1.3 billion for the year.

Interest expense is assumed to be approximately $560 million to $580 million.

The tax rate is assumed to be 37% for the year, although it could vary quarter to quarter.

While we expect to generate significant cash flow again this year, we will probably not buy back stock until we see a change in our sales trend.

In the current environment, we believe it is prudent to conserve cash.

Before opening the call for questions, I want to take a few minutes to just quickly summarize the key aspects of the announcement we made a few weeks ago about our localization initiative and division consolidation.

The objective of these changes is to both accelerate our sales growth and also to increase our profitability.

The key, we believe, is to improve our execution at the local level.

We are changing the field organization and the geographies currently served by Macy's North, Macy's Midwest and Macy's Northwest to help us deliver a more localized experience to the customer.

The key components of this structure are the following.

One, a shorter span of control for store supervision -- 10 stores instead of 16 to 23 today.

Two, more focus on tailoring assortments by location.

This means vendors, sizes, colors, etc.

People in the field will now have more input into this process.

Three, more resources devoted both to store merchandising and also to product knowledge training.

This should make the products look much more interesting on the selling floors and should better equip our associates to help customers.

And fourth, last but not least, we intend to reinvest some of the savings to provide better coverage on the selling floor.

As you know, we're funding these changes through some of the savings from the division consolidation.

Net of these investments, we still expect to save $100 million on an annual basis or $60 million in the fall of this year.

Additionally, we expect these consolidations will enable us to make big merchandising decisions faster and also will simplify our relationship with our vendors.

Improving our collaboration with vendors is very important to us, and figuring out how to do this best will be a priority for us in 2008.

We have been studying the subject of how to accelerate our comp store sales growth for many months, and we are confident that the combination of the consolidations and the localization efforts will help us reach our desired 2% plus annual comp store sales growth and 14% to 15% EBITDA rate objectives over time.

We will update you on our progress each quarter when we release our earnings.

While we're excited about the changes that we're making, we can't ignore the fact that this year does look like it will be challenging for most retailers.

We need to be nimble, disciplined and focused, but that does not mean we should not take risks.

We need to work even harder at finding new, desirable product, both items, categories, vendors, and then we need to go aggressively after those businesses.

Even in tough economic times, and in fact you might say even more so in tough economic times, customers want fashion.

We believe that our combination of fashion and value could be quite appealing.

We just need to be sure that we are edited enough in our offering of basic merchandise.

You should also continue to expect some great marketing from Macy's in 2008, including a new spring brand TV campaign that builds on the successful design celebrity spots we launched last fall.

The concept is to reinforce that Macy's is a destination for fashion brands that are backed by some of the most watched celebrities.

The quality and personality of the brands we carry really do separate Macy's from other retailers.

Our brand marketing will continue to be balanced with promotional marketing designed to underscore the value of Macy's merchandise and drive store traffic.

We're convinced that the financial strength of the Company, the talent we have at all levels of the organization and our experience and willingness to take appropriate risks will allow us to succeed, whatever economic environment we might encounter.

That said, I will now take your questions.

(OPERATOR INSTRUCTIONS) Adrianne Shapira, Goldman Sachs.

Following on your comments on your comp plans, could you share with us how you are planning inventory in terms of the first half versus the second half?

Yes.

Obviously, we're planning inventory consistent with the sales.

As I said, we expect that our comp store sales in the first half of the year, particularly the first quarter, to be the weakest and get progressively better.

So have you been able to -- obviously, you're heading into the first half clean in terms of inventory.

But where would you hope to end inventory, given the fact that comps are going to be weaker in the first half?

What we do is we focus on receipts by family of business by item.

So we really have a very good forecasting process.

Sure, there are some areas where we might be heavy, but overall we feel very good about our ability to adjust our inventory receipts to what's happening on the sales line.

Could you give us any progression of the $100 million in cost savings?

That is for 2009.

In 2008 we had said we were going to save $60 million.

Most of that will come in the back half of the year.

On the May outperformance, could you give us any more color in terms of regions, categories, what you're seeing, what signs of strength are you seeing?

Obviously, at this point we are really no longer breaking out May versus Macy doors because the truth is the performance now is so mixed.

There are some very, very good performing markets within May -- Dallas/Houston as an example.

And so, at this point, we just are not going to be talking about it any more.

Michelle Clark, Morgan Stanley.

First question, what would gross margin have been the rate of improvement in the fourth quarter, excluding the favorable impact of the calendar shift?

As we said with the third quarter, we really can't quantify it, but clearly there was a factor there.

And, in fact, the third-quarter margins were down.

It's not all of the improvement, but it is part of it.

Even excluding it, you would still have seen improvement in the gross margin rate?

Correct.

Then the second question, you had mentioned that you are more concerned about the economy following January and February.

What gives you conviction that we will see an improvement in the consumer environment in the back half of the year?

I'm not sure I'd use the word conviction.

I think, like all of you, we really don't know.

Again, we've got people looking at this.

We are reading.

We think there will be some improvement as we get through the third quarter and into the fourth.

Obviously, we're watching very closely.

Just one last question.

Your thoughts on retaining your investment-grade credit rating?

Well, I think in times like this, particularly, but always we try to retain access to all of the capital markets.

We think investment-grade does help us do that.

So obviously, we're always balancing factors, but we would like to maintain that rating.

Charles Grom, JPMorgan Chase.

Could you provide a little bit more color on your decision I think in mid-December to close the nine stores?

We noticed that a couple were only open, I think, four or five years, which is surprising.

I guess a second follow-up to that, is it possible you will be doing more closings as 2008 progresses, or are we done with the nine for this year?

Well, what we do is every year we're constantly reviewing stores that aren't performing well, or you will notice every year we close a couple of stores.

That's nothing new.

There were a few more this year, largely because we had looked, given the May stores a year before we made a decision to close them.

So we will always close a couple of stores every year, but I don't expect a large number of closings and certainly not in the near future.

Then just on CapEx, like you said, roughly $100 million lighter than your guidance, but your 2008 outlook is back up to $1.1 billion.

I guess my question is, why is it going up in 2009?

Can you give us a little bit of color on mix between new stores, remodels, technology, etc.?

What we said is that in 2008 our guidance is for $1 billion.

I'm not sure what --

So it is roughly in line then.

Yes.

Just on mix in terms of new stores, renovations?

I don't have the number in front of me, but it won't change materially from where it was in our last three-year plan, which is in our factbook.

Then just last on the merger integration line, $69 million.

Specifically, where would these costs have fallen into the P&L had you not broken them out?

Is it more in SG&A, more in [COGS]?

It's all SG&A because, had it been in margin, it would have been in that line.

Dana Cohen, Banc of America Securities.

Going back to the fourth quarter, you missed the middle of your original range, let's say, by $0.07 or something.

How much of that was in gross margin, and how much of that was in SG&A?

I sort of thought the gross margin would be a lot weaker coming into today.

So can you just help us out as to where versus your plan it came in?

Yes.

I can't really give you where it would have been with the guidance because when we give guidance, we look at multiple scenarios that could happen that way.

But it wasn't sales?

I think, as I said, we were pleased with the gross margin, given the sales.

I think we are saying the same thing that you're saying, which is that we were pleased.

Had the sales been stronger, though, I would have expected a stronger gross margin.

So it really had to have been, then, on the SG&A side, really?

What on the SG&A side?

The shortfall in terms of the earnings?

Not in terms of dollars, in terms of rates.

Right.

But your comps did come in below your plan, so I'm just struggling, given that it's not a sales issue versus your original plan.

Well, there's all kinds of different scenarios for getting there, so I don't really know how to answer the question.

Sorry.

It sounds like even versus where you were a few weeks ago when you set the guidance for the year, things continue to be more challenging than you would have expected.

I mean help us to understand how you now think the year progresses?

It sounds like you are pushing a bit into the back half.

I wish I had a crystal ball.

So do we all.

The only good thing I can tell you is, if you think about months in a retail year, if you're going to have weakness, January and February are pretty good months to have weakness.

I really don't know any more than you do, and that's why we're trying to be flexible.

Then lastly, on credit, obviously you don't own it anymore, but it does flow through.

Can't you just give us -- it sounded like last quarter you were very pleased with credit in terms of penetration and what was going on there.

Can you just give us an update?

Yes.

From a penetration perspective, we feel very good about credit.

For the year 2007 our penetration was almost 46%, which was up 230 basis points over last year.

So we feel very good about the card; we feel very good that the marketing relating to the card is working well.

So much of our economics today is based on credit sales, so that's a good thing.

Obviously, like others, we're concerned about bad debt.

Because we don't own the portfolio, it doesn't impact us as directly as it would if we still own credit.

But, like others, we too are concerned about bad debt and delinquency.

And are you seeing debt start to creep up?

It started creeping up in the third quarter, and we really haven't seen anything since then in terms of further creep.

So it's about where it was tracking in Q3?

Correct.

Christine Augustine, Bear Stearns.

I have two questions.

The first is, in your sales assumption for 2008, how much disruption, if any, from the divisional consolidation are you anticipating in those sales?

My second question is, when you start to anniversary the more intense promotions -- I think it is May/June that you cycle those -- what is the plan as you come around that reset of promotions?

Well, the reset of promotions wasn't really a reset.

We still had fewer coupon days in '07 than we did in '06.

It was just more than what we had expected.

There is not a major increase in promotional activity that we're concerned about year rounding this year, which is, I think, what you're implying.

I thought that you stepped that up --

Stepped it up versus what we had expected to do, not versus the prior year.

Do you think you'll have to step up, then, again, just given what's going on with the consumer?

No, because we're planning to not reduce it this year or to the extent we might have otherwise, given what's happening with the consumer.

So we're planning a similar promotional environment this year as last year.

We might have hoped a year ago to be reducing it, but we don't think this is the environment in which to do that.

As for your first question about disruption, we're not planning any disruption in those geographies.

In part, that's what this new structure is intended to fight against, as well as the additional investment in selling in those regions.

Liz Dunn, Thomas Weisel Partners.

Thinking about the decision to suspend the share repurchase until the environment improves, are you talking about a return to positive comps, or what exactly will you be looking for to return to repurchasing stock?

I can't really give you a specific number on that.

But, given the uncertainty in the environment and given the fact that so much of our cash flow comes in in the back half of the year, we just have to be confident in what's going to happen in the back half of the year before I would want to buy back any significant amount of stock.

So I don't know how to give you a specific number on that.

Just to follow-up to Christie's question, are you able to break out how much you are reinvesting?

Obviously, there's savings and there's reinvestment in selling and then also these 250 positions.

Can give us any visibility in terms of how much the reinvestment is?

No, what we have said is that the net will be a savings of $60 million this year and $100 million next year.

Jeff Stein, Stein Research.

Just a clarification on that last answer.

Is the $60 million and $100 million -- are those both incremental numbers, or is it a $100 million run rate capturing $60 million of that $100 million this year?

The $100 million run rate, capturing $60 million this year.

Secondly, you talked earlier about your long-term targets, 14% to 15% EBITDA margin, 2% comp growth.

Wondering, can you get to a 14% to 15% EBITDA margin with just a 2% kind of trend line comp growth rate?

Again, we said 2% plus.

I do think we can get there with a 2% comp; it will just take a little longer.

Can you tell us a little bit about the sales level you achieved in your direct marketing business in 2007?

You did allude to the fact that you have been investing in that business.

Will the higher level of investment continue in 2008?

Yes, it will.

We opened this past year a facility in Portland, Tennessee.

In '08 we will be opening another facility outside of the Phoenix in Goodyear, Arizona.

So that investment will continue.

Also in systems and improving the customer experience, etc., etc., etc.

Obviously, it's the fastest-growing part of our business.

So, for example, when we went to cut CapEx, it did not make an impact on that investment.

So we do expect to continue to invest in that business.

And can you just tell us what the level of sales you achieved in that --

Yes, sorry about that.

We're on track -- this year in '08, we had talked about doing over $1 billion in our online businesses, and we're on track to do that.

Robert Drbul, Lehman Brothers.

Two questions.

You talked about couponing levels.

But can you talk about the advertising expense that you incurred in the fourth quarter and then how you are thinking about it for 2008?

Yes.

I think you will find that advertising expense for 2007 as a whole -- I can't speak to the fourth quarter -- was up just slightly.

My suspicion is, we will keep it flattish in 2008, again reflecting the environment that we're in.

Then, on the private-label, can you maybe address a little bit the sourcing costs and if you're seeing any pressures overseas in terms of what's happening there?

We're beginning to see some pressures, and thank goodness we have a fabulous overseas organization that's all over this issue and trying to move production around and manage the process such that the customer won't see those increases.

But we're watching it closely.

Tina Hwang, Citi.

It is actually Deborah Weinswig.

Karen, you referred to the recently announced division consolidation, the launch of the localization initiative.

Can you elaborate on what we might see with regards to more localized marketing and merchandising, and when should we see these results?

Also, are there systems upgrades or enhancements that are helping with the localization initiative, or is it more a change of processes and people in the field?

Well, there are systems that are being rolled out through all of the Macy's divisions this year to help us better allocate assortments, as well as do better assortment planning.

Without those systems, we would not be able to do the restructuring.

So it's facilitating it, but that was on track to be put into use this year, in any event.

So yes, this technology is working with the restructuring.

In terms of when we're going to begin to see impact, my hope is that you'll see small changes this fall.

But my guess is, any major impact on assortments really won't happen until next spring, just given these organizations won't be in place until the second quarter of this year.

Then with regards to your real estate strategy going forward, one, should we expect more stores to be off-mall going forward?

Then, also you alluded to expanding Bloomingdale's more aggressively?

Can you please provide some more additional color on that?

Sure.

I think the reality of mall construction is such that more of our new stores will be in lifestyle centers as opposed to traditional malls, not because we don't want to be in traditional malls but because there are not as many of those being built.

So we will do both, but I think most of our new stores are going to be in more the open-air lifestyle centers.

In terms of Bloomingdale's, we're obviously looking for real estate sites across the country that we think fit with where Bloomingdale's would do best.

There are not 100 of these sites, but there are some, and we're aggressively trying to find them and get deals going.

The last question.

I was especially impressed with your gross margin performance in the quarter, especially compared to your peers who have reported so far.

Can you talk about the processes and procedures that you took in terms of an approach in the fourth quarter and may be how that translates into what we will see for 2008 as well?

Yes.

It's hard for me to compare to our competitors because I candidly don't know what they do.

But our merchants stay very close to sales trends and are constantly moving receipts relative to sales.

It seems to have paid off quite well in the fourth quarter.

Congratulations in a tough environment and best of luck in '08.

Uta Werner, Sanford Bernstein.

I have a question.

First of all, related to new store openings, I wonder if you could tell us a little bit about the number for the year, how the mix is between Bloomingdale's and Macy's and maybe which regions you see them coming?

I also wonder about the temporary closings.

When might we expect those to open up again?

Okay.

If I look at 2007, we will have opened 12 new stores.

Of those, two -- I'm sorry, two were Bloomingdale's.

In '08 I believe we're going to open five new stores, and none of those are Bloomingdale's.

My second question relates to the credit card business.

You mentioned that, while you're not directly exposed to bad debt, you indirectly are.

Could you comment a little bit about the magnitude of the EBIT stream coming from the credit card and the range within which we might see fluctuations, to the extent you can?

We really don't break that out.

Sorry.

(OPERATOR INSTRUCTIONS) Michelle Tan, UBS.

Most of my questions have already been asked, but I just had a few.

You mentioned the concern over sales trends in January and February.

Is it possible that you share with us any color on how February looks so far relative to January?

Sure.

Early February was weak.

As we've gotten through Valentine's Day, Presidents' Day, business looks better.

Some of the spring fashions are selling.

I'm happy to report thatINC, which had a tough year last year, one of our major ready-to-wear brands, is on fire again, which at least indicates to us when you have newness and you have fashion, it does sell even in these economic environments.

But we will have to see.

So slightly more encouraged by the end of February than the beginning, but I think it's going to be a rocky year.

As far as the online business goes, anything you can share on where the profitability is on that business and at what point you start to leverage these incremental investments that you're doing to drive growth?

It's profitable already.

Okay.

Any magnitude relative to retail?

No.

I mean it's a good business, and it's still related to retail because we do so many things that -- for example, the bridal business.

How do you allocate profits between the two?

But it is a profitable business for us already.

Is it leveraging now with the additional investment relative to the growth?

There are startup costs, and that's one of the things I had alluded to in the fourth quarter as you make the systems investments and bring the warehouses on stream.

Then, finally, on the SG&A overall, you mentioned the deleverage from the sales decline being the biggest piece of the SG&A increase.

It does seem like a significant increase on a down 2% comp.

Can you give us color on how much of it also came from the 53rd week last year not being in the base this year and then also the store closings?

The SG&A was below last year.

No, I know.

I guess I'm saying, when you look at the rate being up 140 basis points.

I'm sorry.

I thought you meant dollars; I apologize.

(multiple speakers) -- piece of it, too.

But it is very hard in this business to lever expenses when you've got a negative comp.

Right.

I guess it's just surprising, 140 basis points, I guess.

Any kind of incremental breakout you can give us specifically on how much was deleveraged on the comp?

You know, it's hard to do that.

I'm sorry.

It appears there are no further questions at this time.

Great.

Well, thank you all very much.

That does conclude today's conference.

We thank you for your participation, and you may now disconnect.