羅斯百貨 (ROST) 2002 Q4 法說會逐字稿

Good morning.

Welcome to the Ross Stores fourth quarter and fiscal 2002 earnings release conference call.

The call will begin with prepared comments by Michael Balmuth, Vice Chairman and CEO.

Followed by a question and answer session.

At this time, all participants are on a listen-only mode.

We'd like to remind you that this conference is being recorded.

If you do have a question, you may press one, followed by 4 on your touch tone phone.

At this time, I would like to turn the floor over to your host, Mr. Michael Balmuth, Vice Chairman and Chief Executive Officer.

Sir, you may begin.

Good morning.

Joining me on our call today are Jim Peters, President and Chief Operating Officer, Norman Ferber, Chairman of the Board, John Call, Senior Vice President and Chief Financial Officer and Katie Loughnot, Vice President of Investor Relations.

We'll begin our call today with a brief review of our fourth quarter and fiscal 2002 performance and then talk about our business and outlook as we head into 2003.

Afterwards we'll be happy to respond to any questions you may have.

Before we begin, I want to note that our comments on this call will contain forward-looking statements regarding expectations about future growth and financial results and other matters that are based on management's current forecast of aspects of the company's future business.

These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from historical results or current expectations.

These risk factors are detailed in the company's 2001 form 10k on file with the SEC.

Fiscal 2002, was a year of notable milestones for Ross Stores.

We celebrated our 20th anniversary, the opening of our 500th store, and exceeded $3.5 billion in sales.

More importantly, despite the challenging retail environment, we generated record levels of earnings and cash flow.

Earnings per share for the 13 weeks ended February 1st, 2003 grew 19% to 74 cents, and net earnings increased 18% to $58.7 million dollars.

Total sales for the period increased 14% to $965 million with same store sales up 3% on top of an 8% gain in the prior year.

For the 52 weeks ended February 1st, 2003, earnings per share increased 32% to $2.52, while net earnings grew 30% to a record $201.2 million.

Total sales for the fiscal year grew 18%, to $3.531 billion and same store sales grew a robust 7% over the prior year period.

We are very pleased with the solid sales and earnings gains we posted during the fourth quarter and throughout fiscal 2002.

Our financial results benefited from our ability to take advantage of great opportunities in the market for branded products at compelling discounts.

The great bargains we were able to offer on a wide array of name-brand fashions for the family and the home were an attractive choice for customers seeking value.

Geographically, sales trends in the fourth quarter were relatively broad based with positive comparable store sales gains in all of our major markets, including California, where same-store sales rose 3%.

The strongest merchandise departments were home and shoes, with comparable store sales gains in the high-single to low-double digit range.

Operating margin expanded 31 basis points during the quarter to 10%, leveraging earnings per share growth.

A slight decline in gross margin due to the combination of a sharper pricing strategy, and higher freight costs was partially offset by improved shortage results and lower markdowns and distribution costs as a percent of sales.

Lower general, selling and administrative costs as a percentage of sales more than offset the slight decrease in gross margin due mainly to an improvement in benefit and incentive plan costs compared to the prior year fourth quarter.

As we ended the fourth quarter and the year, total consolidated inventories were up 15%.

This growth was mainly driven by an increase in the number of stores.

In-store inventories were up about 1% over the prior year on a comparable basis, and packaway was about 44% of total inventories compared to 43% in the prior year.

We are excited about the terrific packaway purchases we made at the end of the fall season, with the bulk of this product targeted for shipment to stores in the second half of 2003.

As noted in today's press release, our operating statement results for the fourth quarter in fiscal 2002 reflect the reclassification of buying and distribution costs into cost of goods sold.

The reclassification only relates to the allocation of these costs on the company's operating statement and has no impact on reported sales, net earnings or earnings per share.

Cost of goods sold including related buying, distribution and occupancy costs now includes cost of goods sold, store occupancy and depreciation, and all distribution and buying costs, including related depreciation, and occupancy.

General selling and administrative now includes store operating expenses and general and administrative costs, including related depreciation and occupancy.

Buying costs were previously included in general selling and administrative expenses while elements of distribution costs were reported in several line items.

Depreciation and amortization, costs of goods sold and occupancy, and general selling and administrative costs.

This reclassification should result in improved trend data by collecting all distribution costs in the same line item for each reporting period.

We also expect this change to afford more meaningful comparisons of gross margin and expense ratios versus our industry peers.

Adjustments to reflect these new line item classifications have been made to the 2001 fourth quarter and fiscal year operating statements as well as to the previously reported operating statements for the first, second, and third quarters of 2002, and 2001, which are available on the press release page of the company's web site, located at www.Rossstores.com.

Looking at the balance sheet, the company's financial position remains very strong.

During 2002, we repurchased a total of 3.8 million shares of common stock, for an aggregate investment of $150 million, ending the year with 77.5 million shares of common stock outstanding.

We funded these purchases with cash from operations.

We ended the year with $126 million in cash, net of long-term borrowings of $25 million, which represents the term loan for the new southwest distribution center equipment, and systems.

We are pleased to report that our accelerated expansion program remains on track.

We added 55 net new stores during 2002 for a unit growth of 12%.

Our expansion into new geographic markets also continued with 21 of these additions in the southeast, specifically in Georgia, North Carolina, South Carolina, and Alabama, our newest state.

During 2003, we expect to open about 62 net new locations, including entry into two other markets in Tennessee and Louisiana.

Together with Alabama, we believe that these three new states have the potential for a total of 45 to 55 locations over the next five years.

We also plan continued growth in Georgia and the Carolinas with a target of 60 stores in those states by year-end 2005.

Our goal in all of these new markets is to quickly achieve parity and store count with our competition.

Looking ahead, we remain confident about our ability to achieve our financial targets.

The long-term model is very straightforward.

Unit growth of 12%, combined with comparable store sales gains of 3% to drive top line growth of 13%.

Incremental improvement in operating margin and an ongoing share repurchase program are expected to result in 15% or better growth annually in earnings per share over the long term.

At the beginning of February, we provided detailed earnings guidance for the first quarter and fiscal 2003, which is available on our web site located at Rossstores.com.

As we enter 2003, we decided that being more conservative in our outlook, especially concerning the first quarter was prudent for several reasons.

The recent slowdown in trends during January, the later Easter holiday this year and the usual weather risk to early spring sales, challenging prior year sales comparisons, and a difficulty in quantifying risks associated with the uncertain geopolitical and economic environment.

February same-store sales declined 3%, slightly below the low end of our guidance of flat to down 2%.

A large percentage of our store base was negatively affected by severe winter weather during the month, including the mid-Atlantic, Georgia, North Carolina, Texas, Oklahoma, and the mountain states.

Halfway through March, comparable store sales, again, are tracking slightly below the low end of our forecasted range of flat to down 2%.

Although somewhat disappointing, we are not overly concerned with our performance at this point.

We are only a couple of weeks into the month, with the entire Easter selling period ahead of us in April.

In addition, the Easter calendar shift can be difficult to predict and we could be experiencing more of a negative impact than we originally expected.

As a result, even though we believe that weather and calendar issues may have adversely affected our business over the past couple of months, we expect same-store sales to gradually improve over the balance of the year.

Borrowing a larger than expected impact to consumer spending from the upcoming Iraq conflict, we continue to estimate that same-store sales will increase 1 to 3% in April, benefiting from the Easter calendar shift.

Looking further ahead, we are forecasting same-store sales to increase 2 to 3% in the second quarter, and 3 to 4% during the third and fourth quarters.

As a result, we continue to target an earnings per share range of $2.80 to $2.90 for fiscal 2003, which would represent 11 to 15% growth on top of the 32% growth we reported for fiscal 2002.

Our results over the long-term show that our business strategy, great brands at great prices every day is a proven concept.

With room to grow into numerous new states, we continue to see many exciting opportunities for Ross Stores.

At this point, we'd like to open up the call and respond to any questions that you might have.

Thank you.

The floor is now open for questions.

If you do have a question, you may press the numbers 1 followed by 4 on your touch tone phone.

As a reminder if your question has been answered you may remove yourself from the queue by pressing the pound key.

We do request while posing your question, that you please pick up your handset to provide optimum sound quality.

Once again, ladies and gentlemen, that's 1, followed by 4 to ask a question.

Our first question is coming from Marcia Aaron of Pacific Growth.

Yes, good morning.

A couple of questions.

Once, can you talk a little bit about Kohl's and what's been the response since they've entered.

And then two, as you look at early March sales, is there any regional or geographic difference between the markets to suggest that it is just weather?

Marcia, first of all, talk about Kohl's.

As you know, we've co-existed with Kohl's in major markets for some time, Houston, Denver.

We entered Dallas, Kohl's and Ross entered Atlanta at the same time in March of 2001, and, you know, we continue to be pleased with our market share gains in the Atlanta market.

As you probably know, Kohl's entered Houston last year with 12 stores against our 18 stores, and for Ross last year, Houston had very strong comp sales of 8% for the year.

That being said, 28 Kohl's opened in southern California a couple of weeks ago.

We have 35 Ross locations within about five miles of a Kohl's store.

We actually have seven stores that are in the same center, and we like that.

Obviously Kohl's generates an awful lot of traffic with their marketing programs.

So to date, our Southern California business is at about the same spot as the rest of the company to just slightly ahead, and although we've planned there being a small negative impact on those 35 stores, based on the Kohl's entry, you know, they don't represent a significant number of stores in our comp base, and presently we say that the impact has been negligible.

Great!

Our next question is coming from Richard Jaffe of UBS Warburg.

Oh, thanks very much.

A couple of questions.

The packaway that you are able to buy post-Christmas, could you just compare that to last year, both the quantity and the quality this year versus last year?

The actual dollars committed and the margins this year versus last year.

And then also if you could discuss more broadly the timing of this packaway.

You talked about it being a second half in-store and is that a longer period of packaway?

My understanding was that packaway usually didn't spend quite that much time in the warehouse.

Okay.

First of all, the dollar level on a percentage basis to our total is similar to a year ago.

And the quality level, we just felt the opportunities were extremely strong in some of the areas on particular fall products.

So we will be carrying some of it a little longer.

Okay?

But we feel very good about the mix of it, and the discounts we were able to buy it at.

Do you want to go into the margin opportunity this year versus last?

No, I don't think so.

I -- you know, we -- we always look at packaways having an opportunity in margin and brand quality, and it's nothing I would quantify in this kind of environment.

But directionally, clearly better than last year, both in terms of the margins and the quality of the product?

The margins you don't know until you sell it.

Okay?

So -- but the quality of the product, we feel, is stronger in the area.

And I guess that -- initial margin is what I was referring to, what you had to pay against list price or nationally advertised price.

We feel pretty good about how we bought it.

That's about as far as I will go.

Okay.

Thanks.

Our next question is coming from Kimberly Greenberger of Lehman Brothers.

Great.

Thank you.

Good morning.

A question here about the first quarter.

You indicated that February was slightly below plan.

March month-to-date is running slightly below plan.

Can you comment on how you are feeling about the initial earnings guidance you gave of the 62 to 65 cent range?

And then just a couple of product questions.

Can you just comment on supplies, goods in the marketplace, if you're seeing any fluctuation in terms of supply?

And specifically, if you're seeing a fluctuation in the mix of available goods between the super-premium brands and lower tier brands?

And then lastly, one of your competitors is commenting that they are seeing some gross margin pressures and just wondering if you are seeing any of the same?

From an earnings standpoint, as we stated, at this point, we still feel comfortable with our first quarter guidance.

You know, if we perform in line with our expectations over the next six weeks.

And from a product standpoint, this is Michael.

From a product standpoint, we're not seeing any difficulty at all.

Actually, there's plenty of product out there.

Probably at all levels.

You call it premium versus super-premium.

So I think it's, in many way a buyer's market.

And at this point, I see -- I don't see pressure on margin.

Okay.

And are you seeing any sort of freeing up of spring goods as a result of the fact that many of the department stores have been below planned so far in the spring.

Starting to, yes.

Starting to.

Okay.

Great.

Thanks and congratulations on a very fine fourth quarter.

Thank you.

Our next question is coming from Patrick McKeever of SunTrust Robinson Humphrey.

Thanks very much.

First of all, just a question on capital spending for 2004 and that is what is your plan for CAPEX?

And also if you could just give us a very quick update on the distribution infrastructure initiatives and how those are progressing, the new distribution center in southern California, the retrofit of the Carlisle, DC, et cetera.

We see capital spending at about $150 million this year.

Which is up over last year, really driven by new stores, as well as the investments we're making in our distribution centers.

We expect, next year, to see that number start to flatten out our major initiatives with retrofitting our entire distribution network and our IT infrastructure spending really starts to slow down or normalize.

As far as how we're coming in our Paris distribution center, you know, we're still on schedule for relocating, and continues to, at this point, go smoothly.

Okay.

And just -- I was just wondering if you might comment on product cost deflation or just deflation in general and how it's affecting your business right now, if you are seeing it, if there's any anticipation of a continued -- we've heard that certainly from other retailers.

You know, there's been apparel deflation for years.

Actually, I think, our [INAUDIBLE] merchandise sold a year ago, last year was slightly up, so as we trade up our business, our mix is not showing that.

But certainly in a down business environment, apparel will deflate.

And I would say tough for us to really compare it on a like for like, because on any given day we don't have like for like in the store.

Sure.

Okay.

And then just one final question on synthetic leases.

I know that there's been some talk of putting those on the balance sheet.

I was just wondering if could you just refresh us as to the number out there and what the potential impacts might be if you were to do that like some other retailers have done.

Yes, in fact we came out with new guidance that, you know, we're trying to interpret now and get guidance from [INAUDIBLE].

If we put the synthetics on the balance sheet, we have one in an SPE that would go on.

It would be about 2 cents a year in depreciation if that were to go on the balance sheet.

We have another one that is not an SPE and our current thinking is that would not go on the balance sheet, and that would be an additional 5 cents if it were to go on the balance sheet.

So worst case scenario in total, it would be about 7 cents.

Okay.

Thanks, John.

Our next question is coming from Richard Baum of Credit Suisse First Boston.

Good morning, everybody.

Thank you.

Question for Michael.

Are you finding -- I actually have three questions.

One is, are you finding that the environment now with the department stores in the first quarter is more promotional, less promotional or the same as it was in the fourth quarter which is always a quarter of your greatest concern?

First, I would say the environment today, I look at it versus the first quarter a year ago.

Okay?

And I think it's fairly similar.

Okay?

I think they came out with a lot more fall product that they promoted at wild prices but on spring products, fairly similar.

And just a follow-up to Kimberly's question about the prestige brands.

I guess the thing is a little bit puzzling is the fact that the -- you know, the vendors have made concerted efforts to control their production, the department stores have cut back on their distribution, on their purchases, why do you think that there is such a liquid market for the prestige brands, given that the other side has made these concerted efforts to restrict it?

You know, I really don't know, but I would say department stores, although they have cut back, their sales continue to, their problem, in my opinion, continue to fall below the level they've cut back, and it's the shortfall in sales has created an opportunity and also future cancellations, I'm sure, based on their current trends.

So the mix of current lack of performance, and projecting out because the manufacturers are working, you know, considerably far out.

So I think that's the biggest reason.

And then a question for John.

Your payables are down significantly quarter over quarter, about 28%, by our calculation but this is the fourth quarter in a row that they have been down you know, over 20%.

I guess the two questions are: You know, your explanation of why they continue to be down, and secondly, perhaps more importantly, as you move through this year, and you have these comparisons, what you are expectations in terms of payables versus the great numbers you put up in '02?

Richard, actually the payable leverage at year end, we are at 55% payables as a percent of inventory versus 50% last year, so we're getting more leverage on payables that added to cash about $35 million.

And that has been our current trend in terms of business that our leverage has actually gone up and I think that's demonstrated in the cash flow that we attached to the press release.

How about with regard to the first three quarters of this year?

Leverage is also up.

My question is: As you go through this year, what should we expect to see on the payables line?

I would expect that leverage to come down.

You know, if -- last year, when we were doing double digit comps that payables leverage increased.

As that acceleration comes down, I would expect the payables leverage to come down.

So more in line with --

More in line with kind of -- more in line with more normalized trends, probably up to 5% down from where we trended in 2002.

Okay.

Great.

Thanks.

Our next question is coming from Dana Telsey of Bear Stearns.

Good morning.

Can you talk a little bit about the integration of the core merchandising system, how is it moving along?

Is it still the end of this year that you expect to be fully integrated?

And next on the store refresh program, where do you stand there?

And which stores in which areas of the country have been done first?

And then in your long-term business model that entails slightly improving operating margins, where are the biggest opportunities to improve the operating margin over the next few years?

Thank you.

Dana, from a core merchandising standpoint, we continued to be on track from an integration standpoint, and we anticipate late 2003, you know that we'll have that completed.

We anticipate that, you know, there will be a learning curve obviously as we roll into the new system, how we understand how to use it, how our people and allocation understand how to use it, and, you know, anticipate as we move through 2004, starting to get some benefits from that.

From the store refresh standpoint, the stores that we did first was the state of California, Nevada, southeast markets and the mid-Atlantic.

Those are all completed and the rest of the country should be completed this year by around June.

And, I'm sorry, the third question was?

On the store -- the long-term operating margin plans.

Yeah, we -- you know, our plan from an operating margin standpoint is to be between 9 and 10%, and, you know from increased sales should continue to generate that operating margin growth as well as, you know, the infrastructure investments that we're making should continue to contribute to that.

Okay.

And lastly, last conference call you mentioned about special sizes in the apparel area being a bigger growth opportunity than you expected?

What are you seeing in the complexion of the apparel business and how the different categories are trending, whether it's men's, juniors, special sizes?

Thank you.

Well, the men's business, nationally remains difficult, and I -- you know, modest growth going forward.

The special size business within the lady's complex offers significant growth, as well as juniors, based on the demographics.

But -- and I expect missey to be a really more of a stable business going forward.

Thank you.

Our next question is coming from David Mann of Johnson Rice.

Yes, good morning.

Could you comment a little more detail on what's going on in terms of the benefit costs given than a lot of other retailers are complaining about increases there?

Sure.

You know from a benefits standpoint, I would say a couple of years ago, we put some initiatives together to really get after these costs.

We have seen improvement from our workers' compensation results and as we have done a better job controlling actual accidents at the store level, and the DCs, these costs have not risen as quickly and/or, you know, flattened out and improved over the last couple of years.

So, essentially, it's just we've had better performance and we're starting to see that come through from a cost standpoint.

Are you only seeing those results in workers' compensation or are you seeing that also in healthcare?

I think what we're seeing is in workers' compensation's definitely, we're seeing, as Jim mentioned based on the programs we put in place.

What we've done in the health and life costs is -- was attempt to flatten those out although we are experiencing, you know, cost increases, design plans to flatten those costs out for us.

Okay.

And then in terms of your new store performance in the past year, can you just update on sort of your unilevel economics model and how the 2002 stores performed versus '01 and in the past?

Yeah, I mean, 2002 performance was essentially on our plan from a new store standpoint.

We continued to achieve what we're looking for from new stores.

You know, our first-year plan in a new store is contribution levels of around 13% versus the company up in the high teens and we continue to achieve those levels.

Great.

Thank you.

Our next question is coming from Eric Mase of Credit Suisse Asset Management.

Hi, thanks, my question was actually on benefit costs.

You just answered it.

Our next question is coming from David Yamamoto of Wedbush Morgan Securities.

Good morning.

I have a couple of questions.

First, it appears as though you are expanding the square footage allocated to home.

Am I accurate in my observations?

And if so, how much square footage is that allocated to home?

You know, our home business continues to perform well and increase, I'd say a couple of years ago we started to bring in additional products such as furniture, and in doing that, you know, we had to create some space in our stores.

What you'll see us do as a company is based on the businesses that are growing, or that are hot, you know, we will continue to ebb and flow, the layout of the store.

And we've given a little bit more space to home over the last really, 18 months or so.

And presently we like the amount of space we're giving to it as to where we're at from a prototype standpoint right now.

And what percentage of sales do you anticipate home could grow to?

Home could grow into the low 20% range.

Okay.

And my last question, since home has been such a strong category, have you considered launching an off-price home concept?

You know, we have opportunities in 27 other states.

We'd look at that first.

Great.

Thank you so much.

Our next question is coming from John Berg of Hahn Capital Management.

Hi, my question is on the statement of cash flows.

I see you guys brought in about $51 million last year from issuances, stock under common stock plans.

How many shares went out under those plans?

To represent the 51 -- against the 51 that came in?

Yeah, on the stock plans I think it's probably about 1.5 million shares that went out on those plans.

So that's about -- okay.

So to buy it back, you spent about -- you know, about $59 million.

Is that right?

To buy -- I'm sorry?

Just -- just to keep the share count flat last year, had you to spend $59 million, which is about 25% of what you earned?

Yes.

That's about what we got back.

So -- from -- if you look at it that way we spent 59 and got back 50.

Okay.

So there's only a minor premium there on that.

To some extent it does pay for the shares that the exercises we get, we get cash from those exercises and it helps to offset some of that dilution.

Okay.

Thank you.

As a a reminder if you do have a question, you may press 1, followed by 4 on your touch tone phone at this time.

Our next question is a follow-up coming from Kimberly Greenberger of Lehman Brothers.

Hi, just a question on depreciation.

Can you tell me where store level depreciation is being booked now?

Yes, store level depreciation is being booked in occupancy in gross margin.

Okay.

So when you talked about SG&A, you said store operating expenses and general administrative and associate depreciation that's really more like headquarters depreciation there?

That's correct.

Okay.

Great.

Thanks for the clarification.

Our next question is coming from Margaret Major of Goldman Sachs.

Hi.

This may be a little bit basic but in your discussion where you were talking about your new store, or your markets where you have new stores and the potential for those stores, you mentioned sort of benchmarking against the competition.

Can you just elaborate on why you do that and where you locate your stores?

Are they close to similar concepts to Ross or how do you think about that?

Well, you know, we obviously perform better as we create the appropriate scale or market dominance in a particular area.

So, you know, you don't want to go into a market, say, like Atlanta, and just open three or four stores.

You want to go in and -- you know, grow to the appropriate level.

That being said, you know, we look at a significant number of different demographic statistics to determine where we go, and, you know, in California, as an example, 11% of our new stores this year will be open in the state of California, even though we have over 170 stores in the state.

And it's based on, you know, what type of household income particular markets have, how we're penetrating a particular market, and, you know -- I mean that's really what we're looking at.

Okay.

So when you say, like, you can have -- I think you said 60 stores in Georgia and North Carolina.

Is that correct?

Is that what you said?

I'm sorry, can you repeat that?

I think you said you could have 60 stores in Georgia and North Carolina.

Did I get that right?

That's -- that -- well, 60 stores we're targeting by the end of 2005.

Right.

Are there, I don't know, 60 TJ Maxx stores in those two markets and that's a benchmark that you use?

Well,actually at the end of 2002, there were about 59 TJ Maxx stores, there were about 45 Marshal stores and Ross had 32 locations.

So -- but we're not targeting our store count based on how many stores TJ Maxx or Marshall's has.

We're targeting it based on what we think the market potential is for Ross, based on the number of people.

So we really look at how many people in a particular area, with x amount of income it takes to support a successful Ross store.

And understand that's different by market.

So, you know, some markets you don't need as many people, and other markets you do.

Okay.

All right.

And then at the beginning when you talked about your performance in 2002, you said that the home area and the shoes area were your fastest growing departments for 2002.

Can you talk about what drives a business to grow faster than average?

Maybe use those as examples?

Well, a mix of a lot of things.

The first thing is customer response and customer demand.

And in the case of home, there's been customer demand not just at Ross, but all over the industry for a period of time, so it was a sector that we felt clearly should grow.

And our performance dictated that it should continue to grow inside our four walls.

Shoes was really an issue of growth on us improving our execution.

All right?

We thought there was some executional issues that we corrected and we had some buying opportunities as a result of us correcting our executional issues.

Okay.

Can you say what the penetration of shoes is in the mix for '02?

It's high-single digits.

Okay.

And then just the last question, just wondering, how do accessories play into your business?

Is it a meaningful category for you?

And how did it perform?

Accessories performed very well.

It's a meaningful category.

It's in the mid-single digits of others.

Well, thanks.

Good luck in '03.

Thanks.

As a reminder, if you do have a question, you may press 1 followed by 4 on your touch tone phone.

Our next question is a follow-up coming from Richard Baum of Credit Suisse First Boston.

Yeah, John, just a follow-up to Margaret's question on your planning.

I'm just curious whether when you plan the number of stores, you know, use an example in the southeast that we were talking about.

Do you also project that TJ and Marshall's are going to open 10% more stores as well?

Like they're growing.

Theirs is not a static number either.

Yeah, you know, we certainly look at that, but what we do is we're looking at what we think the Ross store count potential is.

And, you know, within a relatively short period of time, we'll actually achieve parity in the southeast with Marshall's and, you know, we're really looking at how our stores are performing, what we think the sales growth can be for an individual store, what we think the market share can be, for, you know, like a market in total, and, you know over time we look at how close we can actually get our stores together.

Keep in mind, we do well when we have a store that shares a center with a Marshall's or a TJ's.

The only thing I would add, Richard is among our Marshall's and TJ's, they're not at 10% they're growing closer to 6% across 48 states.

I mean, whatever the number is, they'll be 6% more stores.

They will open four stores a year, let's say on average in that market.

And so my question is really more whether you look at it dynamically or statically.

I think it's a combination.

Keep in mind in the southeast, presently, they've got about 100 stores.

Approximately.

We've got 32.

There's an awful lot of room for us still to grow there.

Sure.

I understand.

Okay.

We show no further questions at this time.

I would like to turn the floor back over to our speakers.

Thank you all.

Have a good day.

Thank you.

This does conclude today's teleconference.

You may discount your lines at this time and have a wonderful day.