Shoe Carnival Inc (SCVL) 2002 Q3 法說會逐字稿

Good afternoon everyone and welcome to Shoe Carnival's third quarter earnings conference call.

Today's call is being recorded and it is also being broadcast via live webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited.

This conference may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements.

These forward-looking statements should be considered in conjunction with the discussion of risk factors included in the company's S.E.C. filings and today's press release. Investors are cautioned not to place undue reliance on these forward-looking statements which speak only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements talked about during this conference call or contained in today's press release to reflect future events or developments.

Now for opening remarks and introductions, I would like to turn the conference over to Mr. Mark Lemond, President and Chief Executive Officer of Shoe Carnival.

Mr. Lemond, please go ahead, sir.

Thank you.

Welcome to Shoe Carnival's 2002 third quarter earnings conference call.

Joining me on the call this afternoon is Kerry Jackson, our Chief Financial Officer, Cliff Sifford, General Merchandise Manager, and Tim Baker, Executive VP of Store Operations.

We are pleased to announce another record setting sales and earnings performance in the third quarter and for the first nine months of fiscal 2002. Despite a continued difficult retail climate in the apparel and footwear sectors.

Sales rose 10 percent to $137.7 million for the quarter, from $124.8 million last year and earnings grew to a third quarter record of $4.96 million, or 38 cents per share. This increase in earnings was achieved despite doubling the number of new stores opened during the quarter and thus incurring a significant increase in preopening costs associated with those stores. After a flat Back-to-School season, we saw a very erratic consumer shopping pattern unfold during the last two months of the third quarter.

The comparable store sales declined 5.2 percent in September was followed by a 13.7 percent comp store sales increase in October. This was our largest comp store sales increase in over four years and allowed to us show a comp store increase for the quarter of 1.3 percent. That's net of an apparel effect of .4 percent of sales on a comp basis. In other words, we had gotten out of the apparel business and the lack of sales in the third quarter caused our third quarter comps to decrease by .4 percent.

Customers definitely responded in October to two things, the change in the weather due to cooler, more seasonal temperatures, and increased promotional efforts. Due in part, however, to a leaner inventory, we experienced only very slight drop in gross margins on a year-over-year basis as a result of the increase in promotional activity. In fact, the one tenth of one percent decrease in the gross profit margin to 29.4 percent for the third quarter resulted from a slight increase in distribution and occupancy costs as a percentage of sales. Our merchandise margins were virtually flat with last year's third quarter.

Inventories on a store-for-store basis were down about 4.8 percent at the end of the third quarter. SG&A expenses, as a percentage of sales, increased to 23.5 percent for the quarter from 23.2 percent last year. This increase was attributable to the increase in preopening costs to 0.6 percent of sales this year from 0.3 percent of sales in last year's third quarter. We opened 10 new stores in the third quarter of 2002 versus five in the third quarter of 2001.

Net interest expense decreased to $161,000 in the third quarter from $480,000 last year due to the combination of lower earnings -- or excuse me, lower borrowings and a lower effective interest rate. As I mentioned earlier, net earnings for the quarter increased to $4.96 million, or 38 cents per share, from $4.63 million, or 37 cents per share last year.

Turning to the first nine months of 2002, sales increased 10 percent to $391.7 million from $356.-- or excuse me, from $356 million last year. Comp store sales increased by slightly less than one percent. Gross profit margin increased by 0.2 percent of sales.

We are especially pleased to see both sales and margins increase in a very promotional retail environment while we have reduced inventories by an average of about 5 percent for the year on a store for store basis.

Additionally, we have been able to leverage SG&A costs against the growing sales base despite incurring higher new store pre-opening costs due to our accelerated expansion program. This is due to tight cost controls across the number of expense categories. Consequently, the operating margin for the first nine months improved to 5.9 percent from 5.6 percent last year and operating earnings have increased by over 15 percent to $23.3 million.

Interest costs for the year-to-date period have declined to $625,000 from $1.9 million last year, again due to the combination of lower debt levels and a lower effective interest rate. We are certainly pleased with the result of 24% increase in earnings to a record 414.17 million, or $1.09 per share this year, from $11.42 million, or 92 cents per share for the first nine months of last year.

Though we think it's even more impressive that the -- is the 85 percent increase in cash flow generated from operating activities during the first nine months of 2002 versus 2001. This is due in part to our strategy of lowering inventory on a per store basis. Although total inventories have increased by 7.7 percent from the end of the third quarter of 2001, the number of stores in operation has increased by over 13 percent.

Therefore, on a store for store basis, our inventory at the end of the quarter was 4.8 percent lower than the end of the third quarter last year despite taking advantage of significant number of closeout buys in September and October of this year.

Depreciation included in SG&A expenses in the third quarter and first nine months of 2002 was $3.19 million and $9.16 million respectively. Capital expenditures for the first nine months of 2002 were $14.7 million, net of lease incentives of $1.1 million. We expect full-year 2002 capital expenditures net of lease incentives to be slightly over $15 million.

During the third quarter, we opened 10 new stores versus 5 in the third quarter of last year. New stores opened in 2002 now total 25, and this completes our store expansion program for 2002.

One of our stores in the Indianapolis market was closed in September due to damage from a tornado, but is expected to re-open in the middle of December. Therefore, we should end this fiscal year with a total of 207 stores.

At this time, we plan to open approximately 40 new stores in fiscal 2003, concentrating on existing markets when viable real estate opportunities arise. With the expectation of only a couple of store closures next year, we plan to end fiscal 2003 with approximately 245 stores. Capital expenditures for 2003 are expected to be between $17 and $18 million net of lease incentives.

Looking ahead to the fourth quarter and beyond, we will continue to manage footwear inventory levels with the expectation of low single-digit comp store sales increases. Our decision to eliminate apparel sales will negatively impact total fourth quarter comp store sales by approximately 0.7 percent.

Most of you are familiar with the shift in Thanksgiving, and the impact on the weeks leading up to Christmas. With this shift in Thanksgiving, and the consequent changes in our advertising calendar on a week-for-week basis, we recognize the need to combine November and December sales results for a truer picture of the holiday sales season. Our financial position continues to improve.

In summary, during the last four quarters, we have increased net earnings by 26 percent and earnings per share by 20 percent, generated $28.3 million in cash flow from operations, opened 25 new stores, paid for almost $15.5 million dollars in capital expenditures and still reduced interest-bearing debt by $16.2 million. Cash advances outstanding under our $70 million line of credit were slightly over $25 million at the end of the third quarter, a 38 percent reduction from the third quarter of last year.

After consideration for outstanding Letters of Credit of $2.1 million, we have availability under that credit line of over $40 million, more than enough to fund our expansion program for the next year. Our previous earnings guidance for the fourth quarter was 12 to 14 cents per share. This would equate the annual earnings per share of between $1.21 and $1.23 per share. Although we are not changing guidance at this time, we do feel more optimistic about the fourth quarter than we did immediately after September. What I'd like to do now is turn it over to Cliff Sifford for a brief discussion of the performance amongst the various product categories and then we'll open it up for questions after that. Cliff?

Thank you, Mark.

It was a very interesting quarter. After slightly down comps in August and a very disappointing September, the weather cooled and our customers woke up and rewarded us with a terrific October.

It was a quarter that finally saw our women's business come alive. With major losses in both August and September, our business was robust enough in October to trim our women's loss for the quarter to low single digits. Highlights in women's for the quarter were the junior dress business which was up high double digits led by our junior prom shoes that sold through at terrific rates.

In addition to this, our basic sport business was also up double digits with categories like clogs, Euro casuals, and comfort performing very well. Even in boots, where we took big losses in August and September, we saw a rebound of sorts for October. Tall shafted boots, shooties, weather boots, and fashion junior boots all performed well for the month and quarter.

With the addition of some of our new brands, we were able to raise our average price per pair by close to 6 percent in spite of the fact that we had to lower our average price in boots. Women's shoes excluding boots average price was up 8.5 percent.

In men's shoes, October was also a breakout month. After strong double-digit comp store increase in October, men's shoes finished the quarter with low single-digit comp store increase.

The continuing importance of denim and corduroy in apparel propelled our casual business for both the month and quarter. As the weather cooled in October, our rugged casual business enjoyed very robust sales. These sales increases were enjoyed not only within our traditional business but also within our young men's department, as well.

Our urban business proved to be more difficult as urban casuals such as bowling shoes and retro casuals did not meet expectation. But urban boots with wallaby styled uppers or deep rugged soles performed very well.

Our kids brown shoe business also had strong performance for October posting double-digit sales increases led by sales in the boot category. It was not enough, however, to take the department positive for the quarter.

Disappointing sales in boys and girls boots and infants boots and sandals led to a low single-digit decline for the quarter. Kids athletic also proved to be disappointing.

Early in the quarter our girls athletic did not perform but as the quarter progressed this business turned around and our boys athletic did not perform. The early quarter loss in girls came out of the running classification. Although we had to become more agressive from a pricing standpoint, we did see this business rebound in the second half of the quarter.

In boys athletic we saw strong performances early in the alternative closures like slip-ons and zippers but as that technology lost some of its appeal, there was no other excitement to take its place. Our kids athletic business finished up low single digits for the month and down low single digits for the quarter.

Our adult athletic business was outstanding with high double digit increases for the month and high single-digit single increases for the quarter. In ladies athletic our business was led by the clean white classic product as well as running and the walking classification.

Our men's business was led by basketball, classic white product, and traditional running.

Our accessories business was down low doubles for the month and quarter as we continue to exit the handbag business in smaller stores and the apparel business in all stores. Our accessory business with those two departments pulled from the equation was up low single digits for the quarter.

In closing I'd like to say that our strategy of keeping our inventories clean and our ability to quickly react to market conditions were paramount in the quick turnaround from September's disappointing loss to October's exciting increase. Our solid performance with our opportunity buys allowed us to get aggressive with non-performing product and still finish the quarter with inventories leaner than last year.

I'd like to congratulate the buying staff upon reacting to and executing this strategy so successfully.

Now I'd like to turn this call over to the moderator for questions.

Thank you, sir. Today's question-and-answer session will be conducted electronically.

At this time, if you would like to ask a question, please press star key followed by the digit one on your touch-tone telephone. If you are using a speaker phone for today's conference, please make sure to un-mute your microphone in order for your signal to reach our equipment.

Once again, if you would like to ask a question at this time, please press Star 1. We'll pause for just a moment to give everyone a chance to signal. We'll go first to Robert Buchanan with AG Edwards.

Yes, good afternoon and congratulation on October.

Thanks, Bob.

Just wanted to check with you guys. First of all, in the women's nonathletic area, have there building every been some personnel changes there and if possible if you can just comment on what the situation is there now?

Bob, this is Cliff.

Over the last year, we've hired two new women's buyers -- actually, three new women's buyers. One did not work out and had to leave.

So we have over the past year two new ladies buying our women's shoes. Both are very strong, strong product people and I believe that has begun to show in the results in October.

Okay. And related to that, Cliff, for the fourth quarter, in the women's nonathletic area, as you attack that business, do you have expanded open to buy dollars available heading into the fourth quarter?

We have a little open to buy for any additional opportunity buys, but what we did, Bob, as we headed into October was we spent some of the fourth quarter money a little early if you know what I mean to bring in the closeouts. So we are about 95 percent booked.

Okay, and you spent that money when, again?

We spent that late September, early October.

So those store -- those shoes have they been in the stores for a while?

We got about three weeks worth of solid selling out of them in October and obviously all of November.

Okay. And then just one one final question, just kind of trying to model out the fourth quarter.

It looks like the expense ratio comparison is fairly difficult given that you had some pretty big improvement. Either last year or the year before that I think it was last year you went down about 100 basis points. Would you hope that you could improve upon the expense ratio -- and I guess, if so, on what kind of comp assumption?

Well, right now, we're assuming low single-digit comps as I mentioned, Bob.

This is Mark.

As I mentioned we expect a little bit less than a 1percent decline in overall comps due to the lack of apparel sales because we exited that business in the fourth quarter. So, you know, even though we're a little more optimistic about what's going on out there in retail, we're still fairly conservative because of that combined with the little bit tougher January comparison from last year.

So we're expecting, you know, low single-digit comps somewhere around, you know, one percent or slightly higher. Off of that we think we can leverage the increase in sales on a year-over-year basis due to the new store impact.

Okay.

So we do expect a lower SG&A ratio than what we had last fourth quarter.

Okay. And November, what's guidance for November if that's possible?

We don't typically give out monthly comp store guidance.

Okay.

And particularly would not this year because of the -- the, uhm, the shift in the Thanksgiving holiday and the way it impacts the weeks leading up to Christmas. You know, again, as I say, in my prepared remarks, I think you are going to need to not only for us but for most retailers take November and December to get a much more accurate picture on sales.

Right. You would agree that it will hurt November?

It's not going to have as big an impact for us as it would for a lot of retailers, for example, specialty apparel retailers that rely on the holiday season for a majority of their business throughout the year.

You know, as you know, shoes are not that big of a gift item, so we don't typically look at the holiday season as being a huge year, although our sales do ramp up somewhat over typical weeks. So the shift is not going to be as dramatic.

What -- what -- the way it impacts us for the fourth quarter is that shifting of Thanksgiving and consequently the weeks after that has a week-to-week impact on how we operate our advertising plan.

Okay.

So it's got I -- it's got a -- it's really a week-for-week difference in the ad calendar in the way that affects our sales on a week-to-week basis.

Thanks very much.

Yup.

We'll take our next question from Jeff Stein with McDonald Investments.

Good morning -- good afternoon, Mark. Sorry.

Uhm, question regarding the mix of closeouts in the fourth quarter. It sounds like you've kind of really loaded up on your closeout mix this year. I'm wondering what your inventory composition of closeouts is at this juncture versus a year ago.

As a total, our -- 10 percent of our current inventory, Jeff, is closeouts. And that ranges anywhere from about 4 percent in kids brown to close to 13.5 percent 14 percent in athletic.

Okay. All right.

And Mark, in your opening comments, you indicated that since September, you've turned increasingly optimistic. Could we -- could we assume that you're pretty satisfied with, uhm, what your sales trend has been in November so far without, you know, telling us exactly where you're at?

Well, Jeff, as you and I have discussed previously, the change in weeks and the resultant change in the ad calendars makes things a little bit, uhm, you know, we can't look at it on a comp basis. Certainly, with the week that we're in relative to last year's week, which included the Thanksgiving period. So it's from a comp store standpoint, it's really -- it really mixes things up.

Certainly it mixes things up from a -- from an advertising basis for us because we typically advertise around a holiday period in terms of weeks prior to and weeks subsequent to that -- that, uhm, that key day after Thanksgiving.

So, you know, given all of that, you know, it's going to be a -- it's going to be an upside down month of November and month of December and like I said, you should combine the two to give a truer picture. With all that said, you know, our sales so far would be pretty much in line with what we would expect, given the changes in the ad calendar.

Okay. And what are you seeing generally from a promotional standpoint right now from competitors? What are the in-line mall-based athletic chains doing? What are the department stores doing in footwear?

Well, everybody's getting aggressive with boots. Particularly women's fashion boots. If you go to department stores, if you go anywhere, basically, boots are going to be on sale.

A couple of our competitors in the family footwear sector have become a little bit less aggressive in terms of price promotion, but in the athletic sector, I would -- what I've seen in my travels over the past few weeks is they have remained very competitive from a promotional standpoint so... you know, that's kind of what we're seeing right now.

I would suspect that, you know, if you look at what the economists are projecting for the holiday season, it's not robust but it's not a disaster, either. So I would suspect it's going to be pretty promotional kind of environment, uhm, particularly in the middle price point sector for footwear.

Okay. And final question, Mark.

Of the 40 store openings that you might hope to see next year, how many of those are already committed?

Jeff, I don't have the schedule in front of me, but I -- but I'm going to say about 10 of those stores are -- are, uhm, committed in terms of a signed lease or waiting for return leases.

Okay. Thanks.

We'll go next to John Shanley with Wells Fargo.

Good afternoon, guys. And nice quarter in a tough market environment.

Thanks, John.

Mark or Cliff, I wonder if you could comment on the merchandise mix in the third quarter? Was there any noticeable change in terms of higher rates of sales in one product category versus another that may have changed markedly from what you generally do in the third quarter?

John, the -- this is Cliff.

The -- the real change came in October, but let me give you -- I'll give you the breakdown and you can see what I'm talking about.

For the quarter, our women's business was approximately 23 percent of the total. Men's 15. Kids was 7 -- well, close to 17.5 percent. Athletic was 41. And the rest was accessories. Athletic drove about 53.5 percent of our total athletic -- kids and athletic drove about 53.5 percent of our business.

When you looked at October and what happened when the weather cooled down and customers -- our women's products started taking off, our women's business ranked about 32 percent of the total, men's at 19, kids at 14, athletic close to 32, and the rest was accessories. And athletic was only including kids was only 40 percent of the business.

So you can see we've had a tremendous ramp-up in our women's business. Which was -- which was a market share increase for us within the -- within the corporation from a year ago in October in women's.

Generally, your margins are higher in the women's nonathletic product category. Was that the case again, Cliff, in the third quarter?

John, that should never be a generally. That should be an always.

Always.

[ Laughter ] At least on a year-to-year base. But women's -- women's margins were higher in October.

Are you getting more department store type brands in the women's area that's helping to fuel that type of pretty sensational rate of growth?

Well, John, we -- as you know, we announced -- I think last quarter, that we have started -- we picked up Nine West, Bandolino, Easy Spirit.

We have picked up a couple of other department store brands but I got to be honest with you that other than Easy Spirit, we don't carry the -- well, Easy Spirit and Bandolino, the other major department store brands we don't have enough stores to really ramp up the price for the total corporation.

I will tell you though, that with the performance of the other two brands, though, Easy Spirit, Bandolino, that did play a part in our average price per pair going up.

We have heard from a number of department store merchants that the women's business and department stores has been particularly weak this fall season. Is that helping your business, and could that likewise cause more brands to look at Shoe Carnival as a viable alternative in terms of distribution of their products?

I don't know quite how to answer that, John.

All I can tell you is that as long as we continue to do our business the way we're supposed to do our business and grow our business in the correct manner, the brands are going to look at us to expand their business. Right now, to be perfectly honest with you, we're fairly happy. There are a couple of brands we would like to have but we're fairly happy with the brand of mix we have today.

John, this is Mark.

Let me further that comment by saying that the -- we don't look for brands that have fallen out of favor with department stores. And that's -- that's key.

You know, when we add brands, it's because we think it's a viable brand and it's got some, you know, sales potential in this middle price point I want to make it clear that we're not looking for leftovers from department store business.

No.

I assumed that was the case, Mark, I just was commenting in terms of just the general weakness of the overall department store business for all brands.

Cliff in terms of the athletic, are you still seeing, you know, some benefits being derived from a more willingness on the part of some of the brands, particularly Nike, to offer you a wider assortment of their merchandise mix?

We -- you know, all the athletic vendors are working better with this -- with family footwear channel. They all see us as very important part of their overall business. And with that, I think that they're putting more resources behind it from a product standpoint and from a marketing standpoint. So to answer that question, I would have to say is yes.

Great. Great. You commented on closeouts. Is there a lot of closeouts available to you?

And can you also comment on the availability of "At Once" business from the manufacturers if your business starts to really pick up in one category versus another, is there a lot of goods that you could source to help drive that particular category's incremental sales increase in your stores?

From a closeout, let me address the first question first.

We're pretty much done with our closeout as I mentioned a second ago. We went ahead and spent some of our November and early December money to bring closeouts in, in October. So we're pretty well done with closeouts and look forward to now bringing in fresh spring merchandise as December comes and draws to a close. So we are really not out looking for closeouts.

So from an availability standpoint, I really couldn't tell you we haven't been pushing the vendors on it very hard for the past 10 days.

From a product category, we do believe that's one of our strengths that as fashion changes and as we see customers move from one department to another, as they did several years ago moving out of women's fashion into women athletic as denim gained an importance, we were able to shift because the way we control our inventories we were able to shift funds into the athletic sector of the business and go after that business.

Now, that does create a problem as you bring up that -- as you brought up, the availability of product. We have always been fairly successful at getting product.

We don't -- when we see something like that happen, John., we don't sit back and wait for the vendors to call us. We're all over them.

So the answer to that question is, if we see a shift in business, we will be -- we feel confident that we can fill the shelves.

Okay, great. Good enough. Then one last question, Mark, on the real estate going forward, how should we model the average store size of the new stores for '03? Will they be about the same store size on average as what you currently have in your portfolio?

Yeah. John, I would expect that -- I think we're averaging right now around 11,5500 square feet and I would expect them to be dead on that.

Okay. Any change in prestore opening expenses or anything else that you're planning for next year?

No. You know we're still incurring about 80 -- between $80 and $85,000 in preopening costs. It may ratchet up very slightly next year due to advertising cost but only very slightly. I would -- I wouldn't guide you any further than the higher end of that $80 to $85,000 range per store.

That's very helpful. Appreciate it. Thanks, guys.

We'll go next to Ellen Schlotzberg with William Blair.

Thanks.

Cliff, I just want to understand something on this closeouts issue. If I heard correctly, you brought in some closeouts for third quarter selling that was with some money that was originally earmarked for fourth quarter, is that right?

No, that would be incorrect. We brought in, in October.

Most goods, you know, Ellen that you bring in in October is for selling for November and December.

But you said you got a good three weeks of October selling --

Yes. We were by getting them here early we did realize some sales on them in October but the majority of those goods were bought with the thought of selling them through the fourth quarter.

Okay. So you don't feel that, uhm, your weeks of supply on that type of merchandise is at risk or that you pulled sales from November and December into October?

Absolutely not.

Okay.

Then you had talked about some -- like retro and bowling not working that great. Do you have a big position in those? I know it's not huge, but what does that look like?

And also, what do you think is going on with the kids athletic business that continues to trend weak? You know, do you see a light at the end of that tunnel or what's going on there?

First question first.

Retro and bowling is -- for the company as a whole, in men's is not working. But as you look at the larger markets, metropolitan areas, it is working, Chicago, Atlanta, Memphis and we have begun already to move shoes into those markets as is he they will sell through them. We don't see a great risk there luckily, we didn't try to corner the market. But we did -- we are finding pockets of areas where they are selling.

As far as the kids athletic business, we see -- you know, we're always optimist about what we have coming in, but then we do know that the biggest brands for kids business Nike and Reebok are working on this problem, working on this opportunity, extensively.

The problem, Ellen, to be perfectly honest with you, is that in kids business, what's really working are the retro styles, the Air Force 1s and our trade channel has not been open to that kind of product. But, and in true entrepreneurial fashion, the other vendors have seen this, know exactly what's going to happen and know exactly what's happening with retail, and we've been made -- product has been put on the shelf for us.

So we have that coming in the fourth quarter and we feel optimistic that will sell through pretty well.

Okay. Great.

And then on the women's side, can you just share with us what you're expecting for boots for the fourth quarter versus last year?

And then as we move into spring, we're starting to anniversary now some big inventory declines and I know that the business is starting to take off. But it's also somewhat seasonal. So how should we think about inventory levels for that women's nonathletic pieces of business going into spring?

We're looking at keeping our inventory levels basically flat. We have some opportunities where we can lower our inventory in certain departments and raise them in others but overall it would be flat as we had in the spring.

Okay. Then what your plans for boots for this holiday season?

We plan to originally when we put the plan together, we have our boot planned -- boot sales plan flat for fourth quarter.

Right.

We feel optimistic about that. So you think -- okay.

Uhm, Mark, with respect to the marketing, I know you said that the timing shifts a little bit but is there anything from a content perspectives that you're doing different?

Our promotions are going to be pretty much the same especially in the global promotions that we use but it's going to be a matter of the media spin primarily that shifts from week to week.

Okay. So it's really just the timing.

And then that store that reopens after the tornado hit it, is that -- did you just kind of fix that site, are you relocating it to a different location? And if so, is it a bigger store?

Actually, it's going to be slightly larger than it was when it blew down. But it's going to re-open in exactly the same spot.

Okay. Great. Thanks.

Mm-hm.

We'll take our next question from David Berman with Berman Capital.

Hi, guys. Just two quick questions.

First of all, the accounts payable looks like it went up to 40 days. -- from 34 days. And, uhm, it looks like it contributed to more than half of your cash increase year-over-year.

So if you could just comment on your accounts payable, you know, how much further can you stretch it out, and, you know, what's gone on over there. And then a related question.

Well, you closeout business you mentioned if you can -- what percentage of your business is closeout and can you just embellish a little bit upon what kind of special buys you have been getting?

Let me talk about the first one first.

The buyers and the merchants have done a phenomenal job of getting extended dating from pretty much the entire universe of our vendors. So I would attribute the majority of that accounts payable increase to that exactly that extended dating from or better dating from the merchandise buys.

With respect to the closeout buys, it's going to vary season to season. I don't want to get into specific targets obviously for competitive reasons. But, you know, in certain seasons, we'll get as high as between 13 and 15 percent of certain categories will be closeout buys. But again, that's going to be seasonal.

As it shifts between colder weather, nonathletic product and athletic product in a warmer seasons.

Right. Okay. So you don't want to talk about the exact percentage.

No.

Okay. Thanks very much. And well done.

Thanks.

We'll take our next question from Steve Martin with Slater Capital Management.

Hi, guys. I apologize I got on a couple of minutes late.

Is there -- did you comment on anything geographic about your business and the trends? And could you also talk about what's going on in sort of more of the weather-related product?

Well, geographic trends are exactly that, weather-related. As we saw cooler weather come across the Midwest, Steve, particularly in the northern regions, those areas that you think would take off in terms of sales did take off in terms of sales.

Surprisingly, our southern stores actually accelerated quicker than our northern stores and again, I think that was, you know, although it was not as cold in the southern areas as it was in the northern areas, the relative change was different, as well. So with the exception of the Southeast, the Southeast was, you know, continued to be a little bit warmer and we saw sales lag there a little bit. Through the end of the third quarter. What was the second question?

On the boots and the brands? Can you be more specific about what's working and what's is it not.

Cliff, I'll let you talk about the style of boots. We do not want to talk about specific brands for competitive reasons so we are going to not talk about brands on a relative basis, certainly relative to each other on this call.

Okay.

Do you want to talk about the boots?

Steve, we started off the quarter fairly slowly, real slow in boots for August and September. With double-digit declines. But October as the weather cooled down boots kicked in especially the fashion boots. Anything that fit tight to the leg, high shafted, did incredibly well.

New category that was out this season called shooties. I mentioned them in my prepared remarks.

Actually, it's like a pump that is just a little higher font foot, looks like worn with pants it looks like a boot, performed very well. So we are -- anything with patchwork performed well. So we are seeing some strong performance out of boots.

What is the ASP look like for you in boots? Going in? You know, prediscounting. I don't know in the boot category.

I don't know as you want to talk about initial markups. That's why I assume you mean initial markups.

I'm just talking about your average retail selling price per pair. Are you higher, lower?

We are slightly lower. I mentioned that in my prepared remarks.

I apologize, I got on late.

We have -- due to the selling in August and September, we did a bit more aggressive with the boots that were not selling.

All right. Thank you. And I apologize for being late.

No problem.

We'll go next to Teresa Meyer with DA Davidson.

Yes.

Already touched upon my question it was related to the athletic performance between kids and adults and the disparity there. And you mentioned you didn't have access to some of the hotter product in the -- that was in the kids channel like the Air Force one. But that you were going to be addressing that in subsequent months? Could you elaborate on that a little bit? [ Laughter ]

Uhm, what -- several of the vendors have, as you know, [ Laughter ] -- several of the vendors have put together product that we feel will compete directly with that product. And we were able to -- we bought into that.

All right. Thank you. I was just trying to understand the --.

No problem. I was a little confused myself. [ Laughter ]

Okay.

We'll go next to Travis Serral with RBC Capital Markets.

Good afternoon. Thanks for taking my call.

Kerry, could you give us an update on new store productivity?

From the standpoint of -- how they --

How are they performing against your, like mature store base.

The newer stores you're saying, Travis?

Yes.

Travis, this is Mark.

We're not happy with new stores in the aggregate at this point in time. There's slightly lower than what we would expect. But again, I want to, you know, reiterate as I have in past calls that we're -- we're focusing the predominant portion of our advertising expendatures on comp stores in the larger markets.

And that will -- for the most part as, you know, as we see this continued tough retail climate be our strategy on a go-forward basis. If you look at our new stores, it's not significant but they are slightly below what we would have planned for this past year. -- slightly below.

Okay. One last question. Could you tell me the ending square footage at the end of the quarter?

Two million four hundred thousand.

Okay. Great, thanks.

As a reminder, ladies and gentlemen, that is Star 1 for questions. (Pause) And we do have a follow-up question from Ellen Schlotzberg with William Blair.

Hey, Mark. I want to follow up on the new stores question.

Did the new stores also pick up in October relative to the more mature stores?

Yes, they did.

Okay. That's all I had. Thanks.

Yup.

This does conclude today's question-and-answer session. At this time, I'd like to turn the conference back over to Mr. Lemond for any additional or closing comments.

I'd just like to thank everybody for joining us. Talk to you next quarter.

This concludes today's conference call. We thank you for your participation. You may disconnect at this time.