Shoe Carnival Inc (SCVL) 2003 Q4 法說會逐字稿

Good afternoon, and welcome to Shoe Carnival fourth quarter earnings conference call. Today's call is being recorded and is also being broadcast via live webcast. Any reproduction of 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 statements. These forward-looking statements should be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's press release.

Investors are cautioned not place undo 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 publically 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.

I would now like to turn the conference over to Mr. Mark Lemond, President and Chief Executive Officer of Shoe Carnival. Mr. Lemond, please go ahead.

Thank you. And welcome to Shoe Carnival's 2003 fourth quarter and year end earnings conference call. Joining me on the call this afternoon is Kerry Jackson, our CFO, Clift Sifford, our General Merchandise Manager and Tim Baker, our Executive Vice President of Store Operations.

We are clearly disappointed with our sales and earnings results for fourth quarter and full fiscal year 2003. Our comp store sales results were below our expectations due to lower than anticipated traffic volume. We also experienced high levels of promotional activity while we achieved good cost controls, we could not offset the deleveraging affects of the negative same store sales on both our gross margins and the SG&A line.

Additionally our gross margin in the fourth quarter were affected by higher than anticipated levels of mark down, particularly in the food category. This all led to lower than expected sales in earnings results for the fourth quarter and the full year.

Net sales for the fourth quarter rose 4.9% to $134.2 million from sales of $128 million in the same period last year. Comp store sales for the quarter declined 4.9%.

Net earnings were $113,000 or 1 penny per diluted share in the fourth quarter compared to net earnings of $1.7 million or 13 cents per diluted share in the fourth quarter of 2002.

Net sales for the full year 2003 rose 7.4% to $557.9 million from sales of $519.7 million in the comparable period. Same-store sales for the full year declined 3.0%. Net earnings for fiscal 2003 were $1.2 million or 94 per diluted share compared to net earnings of $15.8 million or $1.22 per diluted share for the full year 2002.

What I would like to do now is go into some detail about the issues we have experienced over the past several years and the steps we are taking to rectify those issues.

We believe the decline in operating margins is due to the increasingly promotional nature of the mid-tier retail sector and deflationary pressures in the footwear industry. We also believe certain geopolitical issues and a soft economy have caused much of the malaise in recent year.

Certainly the mid-tier sector did not follow the rebound of the highend retailers in 2003, and Shoe Carnival store traffic suffered throughout the year. Consequently not only did comp store sales decline by .4% and 3% the last two years respectively, our new store performance over the past few years as suffered as well.

We have experienced declining gross margin margins over several years from a peak of 30% in 1999 to a low of 28.4% in fiscal 2003. The biggest decrease in gross profit margins have come from higher levels of buying, distribution and occupancy costs as a percentage of sales due to the deleveraging effect of slower sales.

They have increased over 110 basis points from 1999 to 2003 as a percentage of sales. We also have experienced a slight decrease in merchandise margins over the same time period; although, for 2003, merchandise margins actually rose by .2% of sales.

Softer sales over the last few years also resulted in a deleveraging affect on store level selling costs and has limited the leverage we have gained by tightly controlling administrative costs.

What I'd like to do now is discuss certain initiatives we are undertaking in three key areas of our business to address these issues. These areas being promotions, advertising and store expansion strategies.

First, we expect to raise our gross margins during 2004 particularly in the second half of the year. One of the primary ways we intend to achieve this goal is by running fewer store wide entire stock promotions than we have in prior years. While promotional events have run rampant in the mid-tier retail sector, we believe that there's going to be an opportunity to become less depend upon BOGO events that include all SKUs.

Even though one of our mid-tier department store competitors started this year with buy-one-get-one-free and buy-one-get-one-half-off promotions, there seems to be a general consensus among the larger retail chains that this promotion causes more long-term problems than short-term gains. Consequently most retailers seem intent on reducing the number of these store-wide promotional events.

Therefore, we intend to reduce the number of weekly BOGO events, although the strategy will impact the promotional calander in all quarters of the year, the largest impact should occur in the second half. This strategy will allow us to focus markdowns on poor performing and slow moving products instead of selling our most desirable products at deeply promotional prices. Thus we expect to sell rate the accelerate the liquidation of weaker performing products which should ultimately lead to inventories turning faster.

The second key area pertains to our advertising and marketing efforts. We plan to shift a portion of our advertising expenditures to our most opportunistic markets in 2004. During the fourth quarter of last year, we completed a market penetration study which measures Shoe Carnival's market share to the total footwear potential for each of the markets we currently occupy.

We have utilized this data along with market segmentation analysis and competitive analysis to develop our marketing plan for 2004. The result is a planned shift of the advertising budget to those markets with the greatest opportunity to improve the sales performance by increasing market share through additional advertising.

Not surprisingly and you have heard me say this before, a number of those targeted markets are newly entered or underpenetrated markets. The plan to enhance the advertising effort in these markets is obviously tempered by the need to protect key core comp store markets with a appropriate level of advertising and we fully intend to do that. We just feel that some of our markets are so well penetrated and our brand name is so strong we can afford to pull advertising from these markets. This initiative will gain steam as the economy strengthens in the midwestern states.

The second major advertising initiative is to utilize more television and decrease the usage of print and radio mediums. While we are increasing the television time, our plan is to maintain approximately the same percentage of sales for advertising expenditures in 2004 as we incurred in 2003.

Third, we plan to focus our advertising expenditures more heavily around primary and secondary selling periods. We will concentrate a larger piece of our advertising effort during the three key selling periods, Easter, Back to School, and the Thanksgiving to Christmas holiday season. To a lesser extent, we intend to create events around certain secondary selling periods.

The third key area regards new store expansion. We are going to limit our storage expansion to existing large and small markets within our current geographic foot print. We are combining our efforts to increase advertising in larger newly entered markets with plans to fill in the underpenetrated markets with additional stores. We believe both parts of the strategy are reliant upon each other to produce better results.

In addition to filling in larger markets, we intend to enter smaller markets within our current geographic areas. We have proven we can dominate the competition in these markets with 100,000-200,000 people with a slightly smaller and less costly store. Also most of these markets are more efficient from an advertising perspective. Thus we intend to increase the store count in 2004 by 20-25 stores net of closing.

Finally, we intend to very tightly control the absolute increase in administrative expenses in 2004 and as a result we expect to see better leverage on the SG&A line than we have in recent years.

Just one thing before I turn the call over to Cliff. I wouldn't ordinarily do this but since there are numerous questions, I would like to comment briefly on the Foot Star bankruptcy filing. As most of your are aware, most of the Foot Action stores are mall based, and so are less of a competitor for us, but we do tend to compete with the is Just For Feet stores as they are strip mall-based.

The early indication is that all or most of the Just For Feet stores will be closed. Consequently there's a good possibility that the real estate will be converted to something other than a footwear retail use. Although we must endure one more round of Just For Feet product liquidation, we believe the closing of these stores will be a long-term positive to the overall athletic footwear environment. We currently overlap in about 29 markets or about 50 stores so we expect to see increased foot traffic in some of these markets later in the year.

Now I'd like to turn it over to Cliff for merchandising comments.

Thank you, Mark.

As Mark stated we experienced a 4.9% comp decline for the quarter and 3% comp decline for the year. I will take the next few moments and walk you through each department to shed some light on these results. I will also give you some input on where we see trends developing for spring.

In women's, nonathletic, our comparable store sales for the quarter were down high single digits. Dress shoes were up low single digits. We saw gains in the tailor dress categories but took comp losses in our casual and boot categories. The sport casual losses came directly from a slow down in [inaudible], where as the boot loss was in the leather boot and booties, weather boots and junior categories.

In looking back at the season and knowing all that we know today, it has become very evident that we missed the changing trend in the junior classification. We bought the category too casual with very little assortment in junior dress shoes and dressier boots.

I believe not only did our buyers miss this change but our key vendors did as well. As it became clear that our customers were voting no on our product offering, we became very aggressive to clear through this product so we could start the spring season fresh and clean, which we accomplished.

We then reviewed our entire inventory and made adjustments to make sure we are trend right for 2004. For February we began to see the results of the changes we made and have experienced significant increases in our key junior categories.

In men's non-athletic, our numbers were down low double digits on a comparable store-basis. We suffered losses in every category. As I mentioned in the last conference call, we did not see a short-term turnaround in this business and that we would keep our inventories tight and fresh as we searched for a viable trend to get this business going.

I did mention that I thought we would see some improvement within the men's dress shoe category. I'm pleased to tell you we have begun to see that change come to fruition. I believe that the trend toward dressier product just like in women's will continue.

Our overall athletic business outperformed the company posting a low single digit comparable increase for the quarter. We saw continuing streaks in the basketball, skate and retro product. The walking catagory for us, as well as the industry continued to show year-over-year declines as there continues to be no exciting products for this customer.

As we have moved into the spring season, we continue to see positive sales trends within our athletic departments. In addition to this, inventories are fresh and we are in excellent position to take advantage of additional opportunistic buys that may arise in the marketplace.

In closing, let me make a couple of comments about the spring season. Early results have definitely pointed to the fact that dress shoes for both women and for men are going to be an important part of our business. We have completely changed the way we plan our comp increases so that we can properly fund this growth.

In the past we plan a high category conservatively and chased the business. That thinking will not work in this situation since there is very little product available at once. Since we see a major shift of fashion from the sport casual classification to dress, we have aggressively taken sales from this category to fund trends.

Additionally we have raised inventory turns in our volatile seasonal departments in an effort to raise our inseason liquidation rate. Moving from product I'd like to tell you about two initiatives we have implemented or are in the process of implementing.

First as our new assortment system. We have prided ourselves on being able to merchandise our stores to the specific customer profile, but most of this work was done by hand and was a very difficult process to accomplish. Our department working with the merchants have given us the tools that allow us to analyze performance down to the store and SKU level. We can then take that information and apply it to this season's product and quickly create an order.

We now have the ability to quickly look at performance of a brand, category, size profile or SKU by company, region, style or color. This tool will assist our people and make them smarter and more timely decisions.

The second new tool which will be available very soon is a dynamic modeling program. This tool will measure the performance of any style where we have a model established and based on prior performance and future expectations, it will adjust those models up or down to the store and size level. These two tools not only help us manage our future purchases but also our current inventories with assistance from our excellent IS team, we will continue to look for ways to make our inventories more productive.

Now I'd like to turn the call over to Kerry Jackson.

Thanks Clift.

I will start off with the income statement and then work my way down to the balance sheet. Net sales for the fourth quarter increased 4.9% to $134.2 million compared to $128.0 million for the fourth quarter of 2002. Our same-store sales were down 4.9% when compared to last year. Comparable store sales were down 7.8% in November. Down 3.8% in December and down 3.3% in January.

Gross margin for the fourth quarter of 2003 decreased 50 basis points to 26.4% compared to 26.9% in the same period last year. This decrease resulted from a 30 basis point increase in the merchandise margin offset by an 80 basis point increase in buying, distribution and occupancy costs. The improvement in the merchandise margin was driven by better inventory controls and the increase in buying distribution occupancy costs was due to the deleveraging affect of negative same-store sales.

SG&A expense as a percentage of sales increased 130 basis points to 26% for the fourth quarter compared to 24.7% in the same period last year. The increase in SG&A expense is a percentage of sales is primarily due to these leveraging effects of negative same-store sales.

Included in the SG&A expenses for the quarter was the charge for the retirement and impairment of assets of $354,000 compared to $150,000 last year. This increase in the charge from last year represented about 1 cent of the decrease in EPS between the two quarters.

Operating income for the fourth quarter was $551,000 compared to $2.8 million in the same period last year. Interest expense increased to $212,000 for the fourth quarter versus $160,000 last year due to higher debt levels.

I typically don't comment on the tax rate but due to the substantial increase in the fourth quarter of 2003, I'd like to explain what had occurred. Due to an increase in state income taxes, the effective tax rate for the full year increased to 38% and we made a year to date adjustment in the fourth quarter of 2003. The effective rate for the fourth quarter after this adjustment was 66.5% compared to 37.5% in the fourth quarter of 2002. We expect our tax rate to approximate 39% in fiscal 2004.

Net income was $113,000 for the fourth quarter compared to $1.7 million last year. Diluted earnings per share were 1 cent per share compared to 13 cent last year. For the full year of 2003, our net sales increased 7.4% to $557.9 million compared to $519.7 million in 2002. Our same store sales were down 3% for the year.

Gross margins for the year 2003 were down 40 basis points to 28.4% and SG&A expense as a percentage of sales was up 100 basis points to 24.8% primarily due to deleveraging affect of negative same-store sales. Including SG&A expenses for the full year was a charge for retirement and impairment assets of $789,000 compared to $278,000 last year. This increase in the charge from last year represents about 2 cents of the decrease in EPS between the two years. Interest expense for the year 2003 was $714,000 compared to $785,000 last year. Net income for 2003 was $12. 2 million compared to $15.8 million last year. Diluted earnings per share for 2003 were 94 per share compared to $1.22 per share in 2002.

We are in solid financial condition as of January 31, 2004. Our inventories were up 13% to $165.1 million, but down 1.3% on a per store basis. Long-term debt was $22 million versus $15.5 million at the end of 2002. Long-term debt to total capital stood at 13.2% at the end of the year versus 10.6% last year. Depreciation expense for the fourth quarter and fiscal year ended 2003 was $3.5 million and $13.8 million respectively.

Capital expenditures for the full year 2003 net lease incentives were $17.3 million broken down as follows: New stores for 2003 were $11.1 million, expenditures for 2004 new stores were 700,000, the remolding and relocation of stores cost $2.8 million, approximately $1 million was spent on technology and all other additions were $1.7 million.

I would now like to provide guidance for first quarter and full year 2004. We currently expect sales for the first quarter increase year over year between 12-13.5%. Inherited in the sales assumption are comp store sales expectations in a range of decline of 1% to an increase of 1%. This expectation takes into account the positive comp store sales relicensed in February.

We expect our gross margin in Q1 to be up slightly and SG&A expenses to be down slightly compared with last year's first quarter. We currently expect earnings per diluted share 43 cents to 47 cents per share for the first quarter. For the full year 2004, we expect earnings in the range of $1.10-$1.20 per share. We also expect depreciation expense to be about $14.5 million, capital expenditures to be about $14 million.

Currently we are planning to break ground on a new distribution center during the spring of 2005. Our capital expenditure expectations for 2004 do not include any expenditures for the new distribution center.

Lastly I'd like to comment on second quarter expectations. While we are not providing sales and earnings guidance at this point, we want to make everyone aware of the potential negative effect on our comparable store sales due to the shift of tax free days.

Multiple states where we have large presence and will be shifting tax free shopping days from the second quarter last year into the third quarter this year. This is causing us to lower our comparable store sales expectation to a low single digit decrease during the quarter.

I would now like to open up the call for questions.

Thank you, Mr. Jackson.

If you'd like to ask a question on today's conference, please press the star key followed by the digit 1on your touch tone phone, again that is star 1. If you are using a speaker phone, please be sure that your mute function is turned off to allow your signal to reach our equipment.

We will pause for just a moment to assemble the queue. We will take our first question from Jeff Stein with McDonalds Investment.

Good afternoon, guys. First question for Clift. Clift, I wonder if you would care to comment on women's fashion trends for spring, and also if you guys feel comfortable now that you have the right junior product in the stores.

Jeff, first on the women's fashion trends, we see a lot of color. There is just a ton of color in the marketplace. Started showing up in November and December, color in dress shoes, sandals and we think that's a positive thing for women's fashion. They haven't had color for so long.

Obviously if you've been in the stores, you've seen a lot of pink, you have seen some green, some yellows, and we see that not only in women's but also translating into the athletic arena as well. From a junior aspect, we have been working very hard since November to get the right junior product in, it's flowing in as we speak. As I stated in my comments, we've already seen the fruits of some of this labor where our junior business has been trending up and gaining momentum each and every week.

Okay. Wondering if you can comment, Mark, perhaps on some of the markets where you are intending to beef up your advertising?

Well, won't by market-specific, Jeff, but as I said in my prepared marks, most of the larger markets are very much underpenetrated markets of Shoe Carnival. What we intend to do is, obviously not flood the market with advertising where we don't have a good concentration of stores. But, as we add stores to the larger markets, we intend to beef up the advertising as percent of sales particularly for those new stores.

So it's not, not a strategy that as of March 1 all of a sudden we're going to change the advertising to new markets. What we're going to do is shift that advertising spend to newer markets and underpenetrated markets as we add additional stores.

Okay. And final question, Mark. In recent years, some of your newer stores have not performed well. I'm wondering are you doing anything this year as you open new stores to tweak the model at all. And when I say tweak the model, I'm talking about how the stores actually look to the consumer in terms of the fixturing, where departments are located, the type of games and so forth that you include in your investment in the stores, are you making any changes?

There's a lot of answers to one big question there and that's why our new stores are not performing and what are we doing to correct it. From a store design standpoint, you know that we've opened all the stores that we opened in 2003 with a new store format that essentially focuses the product that we want highlighted in the store and that's women's non-athletic product. It brings that to the front of the store and gives us a better presentation on women's product. Along with that, we've done a great deal more of visual merchandising within the store to highlight not only seasonally important product but important product from a brand standpoint.

So those are two things we've done for the store format to really highlight the product we want highlighted within the store and to try to improve the sales results.

I think from a new store standpoint, a few years ago, our new stores, the average of our new stores that we opened, the initial year sales was approximately 85% of our existing average store sales. That's declined now to about between 75-80% so still not a bad number. The biggest number is the decline in the overall softness in terms of total sales and I think even though we've got problems that we need to address internally, I that that largely has come from a more macro issue in terms of economic slow down and so forth.

Having said that, what we are intent upon doing is three pieces to the strategy that we just outlined and that's to be less promotional but key on certain product within stores to open the stores with a cleaner format and highlight the product that we want highlighted. A lot of that will be higher priced product, and to focus the advertising much more around the new stores as we penetrate these larger markets.

Okay. Thank you.

We'll take our next question from Mike Shrekest with Delaware Assessment.

Hi guys. Just wanted to ask you a question on your strategy about doing less BOGOs and less promotions on your better selling sneakers and better-selling shoes. Are they more proprietary to your stores or are they the stuff that can be found in mid-tier channel stores. Wondering how you'll challenge that if the mid-tier doesn't stop promoting those items.

Mike, this is Clift. The answer to that question is yes to both. Our athletic shoes and our regular ground shoes are a combination of special makeups that are just inherent to us and inline product that you can find not only in other mid-tier stores but department stores as well. We'll always be competitive.

We will not, our plans are not to match buy-one-get-one free promotional strategy and we do plan as Mark said to cut back on the BOGO events. That doesn't mean we will stop promoting in store or stop promoting. We'll be promotional every week of the year. The bottom line strategy here is we don't want the customers to come in and take the markdowns for us. We want to take markdowns on the products that the customers have voted no on and allow us to make more GP and better sales on the product that the customers are wanting to take off the shelf.

Do you think on some of those better or better priced shoes or higher-priced shoes that maybe you are giving away too much margin on those and you think that that versus the competition, you can recapture some of that margin?

Yes. The answer to that would be yes. We think in the past what happens even though we could drive sales with a BOGO event, the customers come in and take the most desirable products off your shelf. At the end of a season or any promotional time period, you take a look at your sell-throughs and end up taking markdowns on products that are less desirable. You take a double hit. You take a hit on the desirable product when the customers bought is at a BOGO event and then you take another hit when you had to mark the less desirable product down. This way we concentrate our markdowns on the less desirable product, thus raising our margins.

Great. Thank you.

We'll take our next question from John Chanedly with Wells Fargo Securities.

Good afternoon, guys.

Mark, you commented on concentrating your efforts on the most potential markets, can you give us an idea how many overall markets Shoe Carnival competes in and then what percentage of those markets would be those you designated most potential?

John, the approximate number of markets what we consider markets from an advertising standpoint would be about 75. So in terms of where our opportunistic markets are, obviously we have stratified that group of about 75 markets into various market share percentages.

In other words, what Shoe Carnival penetration of the total footwear market for any particular grouping of stores and that's how we determined there are certain markets out there both large and small, I might add. Some of these are small markets as well that we feel we have a huge opportunity to drive market share with additional enhanced advertising.

This also correlate with where new stores are going to be placed?

In a lot of cases, yes. Where we have smaller markets that are fully penetrated from a store count standpoint, but yet underpenetrated from a market share standpoint, we intend to increase advertising in those markets as well. But, primarily those larger markets where we don't have sufficient stores presently to do a good bangup job in advertising. As we add stores to the markets, we'll enhance that advertising the sales ratio on those markets.

Great. Thank you for the insight. That's helpful.

Can you give us an idea, Mark, from the old Just For Feet how long it took those characters to liquidate their inventories so we can get some kind of a sense of what may transpire with the foot store Just For Feet liquidation process?

I'm not sure one is really relevant to the other, John. You know, you hear various things, if you keep your ear to the market. We've heard that the Just For Feet stores are not chock full of inventory and a lot of the inventory is not good inventory. I personally have not been to enough Just For Feets to surmise that.

We're doing certain things promotionally we think are going to be necessary to combat the liquidation sales. I don't want to get into all those, obviously for competitive reasons. Our tendency is right now from what we've heard and what we've seen is that the liquidation sales won't be that dramatic at the very beginning and certainly won't last too long. I'm hoping they'll be over well before the end of July for the Back to School period and we can have a more rational retail climate for the Back to School period.

Also in issue in terms of the merchandise mix, can you give us a sense in terms of the fourth quarter of how your sales broke by major merchandise category on a percentage basis?

Have that on the top of your head?

As a market of fact, I do. Two seconds, John. I have it.

I got it right here, John. I'm going to give it to you in two categories, that's what you're probably interested in. We had 52% of our business in athletic for the fourth quarter, John.

Right.

Women's, and this is an interesting way to look at it. Look at women's both ground and women's athletic, 43% of our total business was done there.

All right. And men's and kids?

Kids ground was roughly 5%. Women's ground was 24%. Women's brown was 15.

Great. And margins on women's dress shoe category, Clift, is substantially greater than and look like it's growing more than the overall industry?

I'm not sure it's growing more than the overall industry but it is substantially higher than the rest of the product categories.

Okay. And last question for whoever Mark or Clift, can you give us a sense of how the promotional environment so far in the fourth quarter, is it about what you expected, a little bit less than you expected how does the overall tempo of the market seen right now?

I think it's polarizing. I've seen some retailers come out in the new year like I mentioned in my prepared remarks with much more aggressive promotions and I've seen the rest of the retail sector particularly in the family footwear side not as promotional. That's why I say we look at it, there's been a lot of talk in the industry about getting off these BOGO promotions whether first is free or first in half or whatever the case may be and that's certainly good for the industry long-term, no question about it.

Because of all the discussion regarding the avoidance of the BOGO promotions in 2004 and 2005 or the shifting away from those promotions, we think there's a huge opportunity for Shoe Carnival to become much less reliant upon entire stock and throw the entire store into a promotion as opposed to being more targeted in product promotions, and that's really the intent and one of the ways we intend to enhance the gross margins margins in 2004. What that will impact is the way that we clear product within the stores and we think we'll be much more efficient in the way that we clear product, the slow moving poor performing product as we move into this year and next year.

Thanks a lot, guys. Appreciate it.

And our next question from Virginia Generro with Merrill Lynch.

Good afternoon, gentleman. Two questions. One maybe for Mark.

The new advertising strategy, are you going to spend more Mark than as a percent of sales as advertising? I think you've been spending 4.8% and some of those markets are more expensive. Bigger DMAs.

Virginia, we've actually targeted slightly less as an overall plan for 2004 in terms of the percent of advertising expenditures against sales. I'm a firm believer of advertising so I will typically up that budget as the year goes along. Expect about the same.

Are you seeing any, I know Easter is still a ways away, a month away or so, are you seeing any, you haven't started that advertising but are you seeing any sort of traffic pickup? Have you done any advertising that would drive any traffic pickup, and if so have you seen that pickup?

We did. It's somewhat of a convoluted answer. Because, the promotional calendar in the first quarter for a lot of retailers is going to change because of the shifting of Easter. Some of these initiatives we set forth, we ran a small piece advertising piece beginning of last week and consequently, that in combination with the warmer weather pattern in the midwest, we saw sales that were very good on both a plan and comp basis.

I certainly don't want to project one week's worth of more spring like sales into a full Easter season. We've got to get into the latter part of April before we realize what's going to be the impact of our advertising efforts. Other than that one small piece, we have had virtually no advertising during the months of February and March.

Great. And lastly, on a store opening plan, the net 20-25, I think that is a little less than you've been targeting. Was that a conscious effort on your part Mark, or was that sort of dictated by market conditions, fewer attractive sites available.

It's a combination of both. As I've seen all along, with respect with the way we're going to open stores this year and that's to back fill from a geographic standpoint, it's got the possibility of limiting our store growth this year because things happen with real estate deals that don't come to fruition or just not enough available in our marketplace or come available, so that has been a limiting factor which we fully expected. So 20-25 net new stores is slightly less than I talked about in the last couple of months but not significantly so.

Great. Thank you all.

There are no further questions. Mr. Lemond, I will turn the call back over to you for additional or closing remarks.

In closing, I would like to say, while we are not pleased with our 2003 results, we firmly believe the Shoe Carnival format is the strongest in the shoe family sector and believe we've identified the appropriate steps necessary to drive customers back into our stores and restore the historical operating profitability in 2004. Importantly this operating plan should allow us to improve the operating margins in 2005 and beyond and that's what we are striving for. Thank you for joining us today.

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