Ollie's Bargain Outlet Holdings Inc (OLLI) 2016 Q1 法說會逐字稿

Good afternoon, and welcome to the Ollie's Bargain Outlet conference call to discuss financial results for the first quarter of FY16.

(Operator Instructions)

Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from Ollie's. And as a reminder, this call is being recorded.

On the call today from management are Mark Butler, Chairman, President and Chief Executive Officer; and John Swygert, Executive Vice President and Chief Financial Officer; and Jay Stasz, Senior Vice President of Finance and Chief Accounting Officer. I will now turn the program over to Mr. Stasz to get started. Please go ahead, sir.

Thank you, and hello everyone. A press release covering the Company's first quarter FY16 financial results was issued this afternoon, and a copy of that press release can be found in the Investor Relations section on the Company's website.

I also want to remind everyone that management's remarks on this call may contain certain forward-looking statements, including predictions, expectations, estimates or other information that might be considered forward-looking, and that actual results could differ materially from those mentioned on today's call. Any such items including our outlook for FY16 and details relating to our future performance should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

You should not place undue reliance on these forward-looking statements, which speak only as of today, and the Company undertakes no obligation to update them for any new information or future events. Factors that might affect future results are discussed in our filings with the SEC, and we encourage you to review these filings, including the Company's annual report on Form 10-K and quarterly reports on Form 10-Q for a more detailed description of these factors.

Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as adjusted operating income, EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share that we believe may be important to investors to assess the operating performance of our business. Reconciliations of these non-GAAP financial measures to GAAP financial measures are included in our earnings release.

I will now turn the call over to Mark.

Thank you, Jay, and hello to everyone. We had another very strong quarter, and we are pleased with the trends in our business.

Once again, the strength was broad-based and across the entire business with sales, new store performance, margins, expense control and Ollie's Army all performing well. As you've heard me say many times, our business is all about the deals, and our deal flow remained very strong in the quarter.

Our growing size, scale, and visibility in the marketplace is giving us better access to merchandise, expanding our vendor base, and building stronger, direct relationships. This is allowing our buyers to be even more selective, and offer our customers even better bargains on great quality branded merchandise, each and every time they walk into one of our stores. Real brands, real bargains, this is what our customers expect from Ollie's, and this what we continue to deliver.

On the sales side, comparable store sales increased 6% for the quarter, versus a two-year stacked comp of 5.8%. The majority of our 21 departments delivered a comp increase in the mid single-digits or better. Some of the best-performing areas were bed and bath, books and stationary, food and candy, lawn and garden, and housewares. Our stores performed very well, and we saw a very consistent performance across the chain.

New stores continue to perform in line, or above our expectations. We opened five new stores in the quarter, including our first store in the state of Florida in Orlando. We're very excited to be in Florida, and we believe Florida will be another strong state for Ollie's. While the store has only been open for a few weeks, we're very pleased with the customer response, and the sales trends.

In 2016, we plan to open a total of six to eight stores in Florida, with our next store opening in the Jacksonville area in late June or early July. Florida represents the 18th state of operation for Ollie's. And in the next week, we'll be entered entering our 19th state with our very first store in Mississippi. We continue to feel good about ability to open new stores, and we are on track to meet our target of 28 to 32 new stores in FY16.

Gross margin was very strong in the quarter. We discussed in the past, we generally target a full year gross margin of about 40%. Paramount to our business is our offering customers great bargains on major brand name merchandise. We manage our margins very closely, on a category by category basis. And at times as the deals present themselves, we have the ability to realize higher margins than might be typical. We did have a couple of deals like this in Q1, which helped drive our merchandise margin in the quarter. We continue to work hard to control our DC and transportation costs, and we leveraged those costs during the quarter versus last year.

Ollie's Army membership continues to grow well ahead of sales, and members continued to spend significantly more than non-members. In the quarter we began implementing Phase two of our customer loyalty management system and this will continue throughout the rest of the year. We are very excited about this phase, because it will give us the ability to have customized communication with the Army.

Ollie's Army members are our already best customers, and they're always on the lookout for new deals and merchandise. The way we reach many of our customers today is through direct mail and flyers. We think the customized direct email will be a great way to communicate with the Army, but we're also very sensitive to their privacy, and not pounding them with too much information or offers. In summary, we feel very good about our first-quarter results, and the trends across our business.

The majority of our products are basic household items that people need each and every day. The performance of our core departments was strong in Q1, and continues strong in Q2. This time of year, we do carry a higher mix of seasonal items like lawn and garden, swimming pool-related products, and air-conditioners. Weather was favorable in Q1, and we think we may have pulled some seasonal business forward.

Weather in the first few weeks of Q2, I got to tell you was less than desirable for seasonal sales, but we have seen this rebound nicely over the past two weeks. A slower start to the seasonal business, and tougher comparisons could keep a lid on the second-quarter sales. Regardless, we continue to execute the strategy we have laid out for everyone, which centers around opening new stores in contiguous and existing states, strengthening our relationship with vendors, getting -- gaining better access to merchandise, leveraging our second distribution center, investing back in the business, paying down debt, and generating strong returns for our shareholders.

Our deal flow remains very healthy, and we have a full pipeline of new store opportunities. We opened our two newest stores this morning, and we're now up to 212 stores in 18 states. In my nearly 34 years with the Company, I'm more excited today than ever about our business, and our long-term growth potential.

With that, I'll turn the call over to John. He'll take you through the financial results in more detail.

Thanks, Mark, and good afternoon, everyone. As Mark indicated, we had a strong first quarter, and we were pleased with our results.

Net sales increased 19.2% to $193.7 million. Comparable store sales increased 6% versus an increase of 8.8% in the first quarter of last year. The increase in comparable store sales was driven by an increase in the number of transactions and basket.

We opened 5 new stores in the quarter, ending with 208 stores in 18 states, versus 181 stores in 16 states last year, an increase of 14.9%. Our new stores continue to perform in line or above our expectations, and we remain pleased with the new store productivity. Gross profit increased 23.4% to $79 million, and gross margin increased 140 basis points to 40.8%. The increase in gross margin was driven by reduced transportation and distribution cost as a percent of net sales, and higher merchandise margins.

SG&A expenses increased 19.5% to $54.8 million in the quarter, and included $890,000 of transaction-related expenses. Excluding transaction-related expenses, SG&A expenses increased 17.5% to $53.9 million. The majority of the increase was related to higher selling expenses from our new stores opened over the past year, and increased sales volumes. The remaining increase in SG&A was primarily related to public company expenses.

As a percent of net sales SG&A increased 10 basis points to 28.3% in the first quarter. Excluding transaction-related expenses, our SG&A ratio decreased 40 basis points to 27.8% in the quarter. Pre-opening expenses were $1.2 million versus $1 million in the first quarter of last year. The increase was related to timing difference in new store openings.

Operating income for the first quarter increased 35.5% to $21 million. Excluding transaction-related expenses, adjusted operating income increased 41.2% to $21.9 million. Our effective tax rate was 39.2% versus 39% in the first quarter of last year.

Net income increased 76.4% to $11.7 million or $0.19 per diluted share. Excluded -- excluding transaction-related expenses, adjusted net income increased 84.5% to $12.3 million or $0.20 per diluted share. EBITDA increased 32.5% to $23.5 million, and adjusted EBITDA increased 37.6% to $27.1 million.

At the end of the first quarter, we had $37.1 million in cash and no outstanding borrowings under our $100 million revolving credit facility. During the quarter, we paid down approximately $1.3 million of our term loan debt, and ended the quarter with total debt of $198.8 million versus $320.6 million for the same period last year. Capital expenditures for $4.8 million in the first quarter, versus $2.5 million in the same period last year.

Now let me conclude with some commentary on the outlook for our FY16. As we discussed, we had a strong first quarter that benefited from strong deal flow, solid execution, and favorable weather. The first quarter was also our easiest comparison of the year, when looking at comparable store sales on a two-year stacked basis.

We indicated on our last earnings call that we expected comparable store sales to be higher in the first quarter than the rest of the year. Specifically, we expected first-quarter comps to be somewhere in the mid single-digit range, and the remaining three quarters to be in the 1% to 2% range. This equates to a full-year comp estimate of 1.5% to 2.5%.

We face our most challenging to your comparisons in the second and fourth quarters. And as Mark discussed, the weather to start the second quarter was less than ideal for our seasonal departments. With that said, however, we feel very good about our core business, and we have seen improving trends in the seasonal categories, most recently with the return of warmer weather. The deal flow remains strong, and we continue to benefit from better access to merchandise, growing relationship with vendors, and our increased size and scale. As always, we will remain conservative in the way we plan the business and our full-year outlook.

For FY16 we currently estimate the following: total net sales of $868 million to $878 million, up slightly from our previous guidance of $865 million to $875 million; comparable store sales growth of 1.5% to 2.5% which is consistent with previous guidance; the opening of 28 to 32 new stores and no planned closures; operating income of $93 million to $96 million which is up slightly from our previous guidance of $90 million to $93 million; net income of $53 million to $54 million up from our previous guidance of $51 million to $52 million. The updated net income range assumes a full year effective tax rate of 38.8% versus our previous assumption of 38.5%.

Net income per diluted share of $0.84 to $0.86, up from our previous guidance of $0.82 to $0.84 per diluted share. This assumes a full-year diluted share count of 62.5 million shares, versus our previous assumption of 62 million shares. The slightly higher share count, combined with a slightly higher effective tax rate negatively impacts our full-year diluted earnings per share outlook by about $0.01.

Excluding transaction-related expenses, we expect adjusted net income to be in the $53.5 million to $54.5 million range, or $0.85 to $0.87 per diluted share. These are up slightly from previous ranges of $51.4 million to $52.4 million or $0.83 to $0.85, respectively. Finally, capital expenditures are expected to be $16.5 million and $17.5 million. This is up from $14 million to $15 million previously due to an opportunistic purchase of one of our store locations.

And with that said, we would like to turn the call back over to the operator to start Q&A session. Operator?

(Operator Instructions)

Matthew Boss, JPMorgan.

Thanks. Nice quarter, guys. So multi-year, any change to low single-digit same-store sales driving 20% net income growth? And then more near-term, sounds like some puts and takes in May. Clearly, we've seen it from some other guys out there. But where do comps stand quarter to date today? And just what's the best way to think about same-store sales in 2Q, versus the back half of the year?

Yes, Matt, let me answer some of that question for you, and then Mark may have to chime in a little bit. But with regards to providing any type of guidance on where our sales stand for the quarter, we obviously don't provide quarterly information, and we won't do that going forward as well. But overall, we've seen a nice rebound in the business from Memorial Day weekend, and the week of Memorial Day.

So we have seen the momentum pick up in the quarter. But overall, we feel comfortable with the core business, and the seasonal business is starting to work much better than they were in the first few weeks of the month. The overall outlook on a long-term basis, we're really remaining the 1% and 2% comp story, as we continue to grow on a long-term basis. And we believe that will generate the net income growth, in the approximately 20% range year over year. So we're pretty comfortable with our long-term targets we've set, and we believe we still will maintain those as well.

Great. And then just a follow-up, your best margin performance in roughly two years. If we could just break down the 140 basis points of gross margin, how much were your merchandise margins up, versus transportation distribution benefits? Just trying to think of the best way to think about this going forward in terms of drivers?

Sure, Matt. On the breakdown of 140 basis point improvement, about 65 basis points of the improvement was merchandise-related, and 75 basis points was distribution and transportation-related. We obviously, we said in the past we've been working hard to get the distribution leverage, with the opening of the second DC in April of 2014. We're starting to see some benefits there. But most importantly, we saw a very nice pick up in transportation side of the business. We had a pretty tough Q1 last year, with regards to the increased import cost, and we've seen that really taper off significantly, and fuel costs have actually subsided as well. So the distribution and transportation side of the business seems to be getting a little more stable.

The merchandise margins we mentioned was really related to a couple of deals we had during the quarter. We are not modeling out an improvement in the merchandise margin above and beyond what we've started the year with. So that was really a one-time benefit that we were able to capitalize on. We're really focused on the consistent 40% long-term gross margin target that we set out previously.

Great. Best of luck, guys.

Thanks.

Hi, Matt if I could add to that, we planned the business at the 1% to 2% comp. And as you are well aware, as most everybody on the call is well aware, we're up against good, real good numbers for the rest of the year. And I got to tell you, Matt, if we're able to execute our plan and we're at the 1% or 2% -- I mean, I'm giving high-fives, and I'm giving hugs. I'm -- we're up against some big numbers. So I feel really, really good about where we are at.

Great, thanks.

Thanks, Matt

Dan Binder, Jefferies.

Hi, it's Dan Binder. Thanks. I was wondering if you could talk a little bit about just the cadence of first-quarter? I know seasonal for some folks was tough in April, as well as curious what you saw there? And maybe if you could breakout what the seasonal mix looks like this time of year, call it, Q1, Q2?

Sure, Matt. Sorry, Dan, this is John. With regards to the cadence, we actually had a pretty nice seasonal period, from the complete month of March and April. We didn't really see any downtick in the month of April to really towards the backend of it, but did not impact us in any significant fashion, vis-a-vis the weather was so favorable up front. And one thing to keep in mind, we are not as seasonally driven as some others might be. Our core business is really basics, and not seasonal-related. While seasonal is very important for us in Q1 and Q2, and obviously Q4, but our core business is not a seasonal type of business. So it's not something that could necessarily drive us in a bad situation on any material aspect.

And then, just as a follow-up, you mentioned that there was some exceptional buys in the quarter that drove the surprise in the gross margin. I was curious if you could just comment, what part of the business, what category you saw that in? I know your focus is 40% longer term, but with the upside in Q1,s would you expect the gross margin to be higher on the year than you originally thought?

Yes, Dan, in terms of what drove the business, we did really -- we've been really performing well in the bed and the bath. Some folks are going to call it domestic. Books and stationary has been doing very, very well. Food and candy lawn and garden and housewares, those are the ones that I called out. There was a, in particular there was a candy deal, in particular there was a hardware deal that is going to be a long time that we going to have it in the stores, but it's going to continue to sell. And you know my personality, I'm not going to be giving the names of those deals out, but they helped to drive the margins. So we feel really, really good.

In terms of the previous question, with the seasonal activity, I think what really excites me is the performance of the core departments. We did really, really strong. Any store, any department that did not do quite as well in the first quarter, was marginally off. It was no big deal. And including into the second quarter, the core departments are really, really doing well. Weather was crappy. What do you want me to say? So I feel really good about where we are at.

Great. Thank you.

Thanks, Dan.

Brad Thomas, KeyBanc.

Yes, hi. Let me add my congratulations as well on a nice quarter here. To follow-up on that last topic of the deal availability, we get asked pretty regularly is, how much of this of this is a function of Ollie's getting more well-known, versus perhaps the backdrop that we're in, with a choppy consumer and retailers going out of business? Any new insights that you could share for us in that regard, Mark?

Yes, we're -- the phone keeps ringing Brad, and we keep getting the deals, and we keep making major commitments with these manufacturers, and they're some long-term commitments. So I'm really, really excited about that. As far as like the -- any of the activity, with the going out of business situation, the phone has started ringing in some instances. And that perhaps some of the product might have been destined for a sporting goods company. I don't know, but it might be that kind of product related. And just so, that we're perfectly clear, and I know you know this Brad, we don't get the product, or we would not be offered the product, that would be in a GOB in the store.

We would get offered the product that the manufacturer perhaps would have had in their warehouse destined for a particular retailer in the future. And then that creates a backlog, and that might create the offering to us. But the deal flow is very, very strong. I feel good about where we are at. And even on the seasonal side, obviously that we are in right now, for whatever business we do in the seasonal, we're locked, and we're loaded, and we're ready to do business. And we -- I had a really good weekend.

That's great. And if I could add a follow-up question on Florida, I know it's still very early. I appreciate your comments on Orlando. Could you just give us some updates, in terms of what maybe some of the other inputs in Florida might look like? What -- how expensive are these stores, relative to the rest of the chain? What do wages look like, and how should we think about returns on new stores in Florida, as the sales continued to perform as they have early on here in Orlando?

Sure, Brad. Obviously, we're real new into the state of Florida. But in terms of what our rent structure in Florida is a little bit higher than our average, but nothing that is concerning to us, in terms of being able to still get the deals in Florida, and be able to perform the way we have historically performed in line with our model. So not a lot of pressure from that perspective. The wages are in line with what we had expected to be there.

So the early returns would tell you that our new store prototype in the markets, the one market we've entered so far, is not a real trend that I could tell you on a definitive basis. But we believe it, it appears it's going to work right in line with our expectations, and hopefully be a little ahead of what our new store model is at this point in time.

Sounds great. Thanks so much, John

Thanks, Brad

Thanks, Brad

Peter Keith, Piper Jaffray.

Hi, yes. Thanks and good afternoon. Was wondering on the same-store sales growth, you'd commented it's driven by both traffic or ticket. Could you give us a sense, if one of those is a more meaningful driver than the other?

Sure, Peter. This is John. With regards to the traffic and ticket for the quarter, the transaction side of the business was more in the high single-digit perspective, and the overall basket was in the low single-digits. So bigger driver was in the transactions on the quarter.

Okay. That's high single-digit on a total basis, not on a comp store basis?

Of the -- on a comp store basis, Peter. That's how we track our transactions, comp to comp.

Okay. Just also pivoting --

Let me back up a little bit Peter. I wouldn't necessarily say high single mid -- high single-digits, we were in mid single-digits there, sorry.

Okay, that makes more sense. Thank you, John.

Yes.

Just pivoting back to the popular question around deal flow. So I had in my notes that you guys have historically turned down about 80% of deals that are presented to you. I guess, this is maybe, you're becoming a bit more selective, more things coming in, in front of you. Do you have a sense now, on maybe what's being turned down to date?

I would say, it's very, very similar. I think that we're able to, I think, perhaps buy a name brand deal now, because of the relationship, and the chemistry that we're developing with these manufacturers that fit our margins profile, that perhaps did not fit our margin profile before. So I do think we are able to buy a little bit better, and that's fitting our margin profile. Whereas before when it didn't, we perhaps might have turned it down. We just weren't able to make as much money on it, so we just didn't do that.

As far as, and of course, Peter, we don't track the exact calls. It's a merchant heartbeat, when I give you the 8 out of 10 calls. But I would say, the phone keeps ringing, and we're being able to be very selective. And I am extraordinarily pleased with the product assortment, the breadth and the depth that is in our stores.

Thanks, Mark. And maybe just a follow-on from a comment you had made earlier about your making long-term commitments. Could you help us maybe understand, maybe an example of what that would look like? Would it be a commitment for 6 to 12 months or what's the general structure of that?

In several instances, when we've done that, they have been either one or two year commitments.

Okay, sounds great. Thanks a lot, and congratulations.

Thank you very much,

(Operator Instructions)

[Denise Chai], Bank of America Merrill Lynch.

Thank you, and congratulations on another great quarter. Could you talk a little bit more about merch margins? I mean, if you exclude those couple of really good deals, were merch margins stable on the rest of the business?

Yes, Denise. This is John. With regards to the overall merch margin, the merch margin was very, very stable. And the benefit was really deal-driven, and then obviously, leveraging the distribution, transportation side of the business. But the business, the product mix and the assortment continues to work very well for us.

Okay, thanks. And then again, just thinking about the comp lift from those couple of really good deals, was it material? Was it more material for margins than it was for comp for example?

Yes, Denise. The deal flow was more beneficial on the margin side versus the comp lift.

Okay, great. And just a quick one, how do you think about the pull forward out of the second quarter?

That's something that I think is very difficult for a retailer to really answer until the season's done. So from our perspective, we're not really in a position to give guidance on how much of the business we think we pulled forward into Q1 out of Q2. But we will tell you we are, in a very good inventory position, to do the business from a seasonal perspective. And as the weather continues to warm up, the customer is responding. So we feel very good that the business will come around from a seasonal perspective. And as Mark mentioned earlier, the core business remains very strong. So we're excited about the prospects here for Q2.

Great. Thank you.

Thank you.

Edward Kelly, Credit Suisse.

Yes, hi. Good afternoon, guys. Hey, I was hoping that you can maybe give us a bit more color on sort of like what you're seeing from a new store perspective? It certainly sounds like the first store in Florida is going well. What are you hearing from customers, as you enter that market now? Is the merchandising different on that market, and just remind us how big you see the opportunity there?

Yes. We think that Florida could handle 40 to 60 stores. We think that we'll be able to open up six to eight this year. The initial response in Orlando was quite strong, it was above average. It's going to -- that's a great store. I'm excited about our next store, which is scheduled to open late June in Jacksonville. Prospects in Jacksonville is, we might be able to have three or four stores, because geographically it's really, really difficult to get around. But we, as far as the -- how the consumer is responding is very, very strong. I am very, very pleased there.

And we have no notoriety down there. That's just whatever advertising that we have done. So once I get economies of scale down there, and get into the greater Orlando market with perhaps three stores, four stores, or really try to get some economies of scale on the advertising; I think we're going to continue to grow.

As far as the merchandising mix, I'd say it's probably 90% the same. Certainly, Ed -- well, I think we've talked before, I'm not going to put Penn State stuff down in Orlando. That just doesn't work. We also know that the same lawn fertilizer that we sell in Kentucky and in Pennsylvania, is not the same lawn fertilizer that we're going to be able to sell in Florida.

So there are some regional shifts that we have, perhaps we won't sell as much air conditioning in Orlando. I know that's counterintuitive, but most of the houses, or many of the houses have central air down there. We might sell more air-conditioners in Rochester, New York, believe it or not. So there's minor things, but 90% of the product is going to be the same.

Okay. Just a quick question on the new overtime rules, and just labor costs in general. Is there any impact that you might be able to speak to, related to these general retail headwinds?

Sure, Ed. This is John. Obviously, I think this is a two-part question. With regard to new overtime rules and the increase in the minimum wage for the exempt employees, obviously, the ruling just came down very recently. We are in the process of evaluating this, and the impact on the business. At initial glance, we don't view this as a very material impact to Ollie's based on what we currently pay our exempt personnel. In our entire chain of stores, only two people in the stores currently are in the exempt status. Everyone else is already hourly, so evaluating that we believe to be very, very minimal on the business.

But obviously, we need a little bit more time to dig through everything. And hopefully, here in the near future we'll have an update on that, and any potential impacts it would have on the business. We wouldn't expect anything in 2016, as this would not go into effect until December 1. But we will have more information as time comes on.

But with regards to overall minimum wage in general, and the changes that some of the mass merchants have made, we pay what we believe to be a very competitive wage, and benefits, and work environment. And even with the change from last year, we've been able to run our business without making changes of any significance, and continue to be competitive, and not having any issues hiring. So we think we're positioned pretty well, in how we compensate our employee base, and the benefits we offer them. So we feel pretty good right now, that we're functioning without any real headwinds from a wage perspective.

Thank you.

Thanks, Ed.

David Mann, Johnson Rice.

Yes, thank you. Let me add my congratulations. A two part question on your category performance. First, can you update us on where you stand on coffee, is that still comping the comp? And then secondly, the floor covering category is a reasonably good-sized category for you, but it seems to have been a weaker call out the last couple quarters. Just curious, why you think that's going -- why that's happening, given the strength in the housing market? Thank you.

Sure, David. This is John. I'll take part of it and let Mark take the other part. With regards to the coffee, we're -- as you know we're really try to stay away from calling out coffee individually, from the perspective that it's now been in the chain for over two years, and we've pretty much become part of the staple of our business. But in general, coffee has comped well, and we continue to comp positive on the coffee perspective. So we're very comfortable that's become a pretty staple item within our store base, and something that we're not overly concerned with as of today.

So that, from that, we really don't have any concerns there. With regards to flooring, I don't think we called flooring out as a negative within our overall quarter. Flooring definitely did not comp negative for the quarter. So I'm not sure if we misspoke or you misheard us, but the flooring department did comp positive for the quarter. So it was not a negative impact on the business. Flooring is a large part of our business, but it's not the -- it still -- we're pretty, within our 21 departments that we segment the business in, not one single department is what I call a category killer for us.

All right. And then, if you could clarify on the seasonal business, the sales year to date, are you generally on plan? And are there -- is there a potential exposure for markdowns, or would that be some subcategories that you would potentially pack away? Thank you.

Yes I think that would be -- that's a good question, and it could be a little bit of both. If we still -- look, it's June 1, and I had a really good weekend last weekend. So we're really excited. So we got a long way to go.

But we don't have any of the real markdown risk, that a traditional retailer has. Most of our -- as we've talked individually, David, most of the time when we do a markdown, it's cubicly-related. So in other words, if I have patio furniture, and we have that at the end of June, early July, perhaps we might mark that down, because cubicly, we don't want to be challenged by carrying that over. But I think it would be a little bit of both.

Sure.

And David, from my perspective, the overall business is -- with this past week that we just experienced, the Memorial Day business is turning the right direction. So we're feeling pretty good about it. We've got the inventory to do the business. We're not overly concerned, with the markdown [book] that we have right now. So we're in pretty good shape

Great. Good luck with the quarter. Thank you.

Thank you.

Thanks, David.

Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Mark Butler.

Thank you everyone for listening to our first-quarter earnings call. We are pleased with our first-quarter results and the underlying trends in the business. We look forward to speaking to you again on our second-quarter call at the end of August. Thank you very much.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.