Shoe Carnival Inc (SCVL) 2005 Q3 法說會逐字稿

Good afternoon and welcome to Shoe Carnival's third quarter earnings conference call. Today's call is being recorded and is also being broadcast live via 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 discussions of risk factors included in the Company's SEC filings and today's press release. Investors are cautioned net 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 revision to 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 for opening comments. Mr. Lemond, please begin.

Thank you and welcome to Shoe Carnival's third quarter 2005 earnings conference call. Joining me on the call this afternoon will be Kerry Jackson our Chief Financial Officer and Tim Baker, our Executive Vice President of Store Operations. Cliff Sifford, our GMM, normally joins us on these calls but he's traveling today, so he's unavailable.

After a slower than expected start to the back to school season, our business improved significantly as we moved through the third quarter. And culminated with a record comp store sales increase in the month of October, of 21.2%. Consequently we are pleased to report record sales and earnings for the third quarter of 2005. Net sales for the quarter rose 12.3% to 182.7 million from sales of 162.7 million in the same period last year. Comparable store sales for the quarter increased 8.3%. Net earnings for the third quarter were 7.2 million, or $0.53 per diluted share. This was a 46% increase over net earnings of 4.9 million, or $0.38 per share in the third quarter of 2004. Our earnings increase for the quarter were driven primarily by our fifth consecutive quarter of comp store sales increases and a continuing increase in gross profit margin.

The gross profit margin increased by 40 basis points to 29.5% of sales from 29.1% last year. Although we experienced higher incentive compensation costs and significantly higher healthcare cost during the quarter, we were still able to reduce selling, general and administrative expenses as a percent of sales by 1 full percentage point on a year over year basis. Consequently, our operating margin for the third quarter of 2005 improved by 1.4 percentage points to 6.4% of sales from 5% last year.

We are also excited about the operational and merchandising improvements we saw in the third quarter. Each of our major product categories posted comparable store sales posted for the quarter and was led by an increase in excess of 20% in women's nonathletic product and a mid-double-digit increase in our men's nonathletic like category. To reiterate our message to you in recent calls; we are placing a tremendous amount of importance on improving our men's, and more particularly, our women's dress and casual businesses. Since these product categories generate higher gross margins than our athletic product, the intent of this product initiative is to increase our total gross profit margins over time by increasing dress and casual sales as a percentage of the total.

Obviously, the progress our merchants have made thus far is having a positive impact on both sales and gross margins. We look for this trend to continue into fourth quarter and into next year. From a product standpoint, in our women's nonathletic department, the increases in the third quarter were led by dress shoes and boots. Both which have categories recorded 40% comp store increases for the quarter. Our junior business continues to be very strong. Driven by dress shoes, fur lined and western boots and ornamented flats. As I just mentioned, our women's nonathletic business was up over 20% on a comp store basis for the quarter.

Our men's business increased in the mid-double-digit range in the third quarter of 2005. This was driven by low profile or Euro casual looks along with fashion, urban casual and boot product. We also saw a big increase in men's sandals earlier in the quarter. Our children's category started more slowly than we expected on a comp store basis than the early part of the third quarter. However, this part of the business improved as the quarter progressed. And we ended the period with a mid-single-digit comp store gain.

Athletic product outperformed nonathletic product in kid sizes, with boys skate and girls running categories particularly important. Adult athletics finished the quarter with a low single-digit increase after starting slowly in August and September. The category came back in October with a double-digit increase, with women's products outperforming the men's. Both women's and men's running shoes continue to be dominant classifications. Women's fashion classics and casual athletic product also made a recovery as the season progressed. Accessories increased mid-single digits for the quarter, led by handbags, backpacks and sport bags.

Inventories ended the quarter flat with last year on a per store basis as our buyers did a great job reacting to the much better than expected sales performance in October. They have been able to replace inventory with core fill-in styles and by picking up viable close out and opportunity buys as they were made available. We feel good about both the content and the quality of our inventory as we head into the fourth quarter and the holiday season.

Turning to store openings and closings. We opened two stores in the third quarter, one in Sioux City, Iowa, and one in Chesapeake, Virginia. One additional store opened in the Chicago area in November for a total of 15 new stores in fiscal 2005. We closed three stores in the third quarter and plan to close four more stores in the fourth quarter. Two of which will close in the very last week of the fiscal year. Next year, 2006, our plans include opening 15 new stores and closing four.

Looking forward; despite higher oil prices, higher natural gas prices, higher interest rates and natural disasters in the Midwest and coastal states the consumer continues to by footwear. At least in Shoe Carnival stores. Our business in November, thus far, has been strongest especially when you take into consideration that we shifted a large part of our advertising budget from November to December on a year over year comparison. Comp store sales are up low double digits at this point in time in November. And our gross margins continue to trend above last year's margins. And our inventories are in good shape. Consequently, we feel good about our business prospects in the fourth quarter.

We are excited about the trends we are seeing in Shoe Carnival's business. We have recorded comparable store sales increases for the last five quarters. Gross margins have improved in each of the last four quarters when compared to the prior year. SG&A expenses have decreased as a percentage of sales for each quarter this year when compared to last year. Operating margins have improved each quarter this year when compared to last year. And earnings per share for each of the last four quarters has increased in excess of 30%. We see these trends continuing into the fourth quarter.

And in closing, I would like two take this opportunity on behalf of the Board of Directors to say congratulate our many associates for their efforts in the aftermath of the three major hurricanes. And more recently, by the killer tornado in our home town of Evansville, Indiana. The tremendous support exhibited by the Shoe Carnival team financially, physically and spiritually in supplying relief to those impacted by these natural disasters; makes us very proud. And right now I would like to turn it over to Kerry Jackson.

Thank you, Mark. Our net sales for the third quarter increased 12.3% to $182.7 million, compared to $162.7 million for the third quarter of 2004. Our same store sales were up 8.3% for the quarter. By month, comparable store sales were as follows. August was up 2.4%. September was up 6.5%. And October was up 21.2%. Hurricanes were the big story in September and October. All of our stores have reopened and in fact we are seeing meaningful increases in the comparable store sales in the hurricane affected stores.

Gross margins for the third quarter 2005 increased 0.5% to 29.5% compared to 29.1% in the same period last year. This increase resulted from a 0.7% decrease in our buying, distribution and occupancy costs. Partially offset by an 0.3% decrease in our merchandise margin. The decrease in the buying, distribution, occupancy costs was primarily due to the leveraging effect of the comparable store sales increase. The decrease in the merchandise margin was primarily due to higher inbound freight costs, due to the spike in fuel costs during the third quarter.

SG&A expense as a percent of sales decreased to 23.1% for the third quarter, compared to 24.1% in the same period last year. The decrease resulted primarily from leveraging our expenses against the larger sales base. New store preopening costs incurred in the third quarter were $215,000, or 0.1% of sales, compared with 456,000, or 0.3% of sales last year. We opened two new stores during the third quarter, 2005, compared to opening six stores in the third quarter last year. Store closing costs included in SG&A in Q3 were $196,000, or 0.1% of sales. Last year in Q3, we incurred $351,000 in store closing costs or 0.2% of sales.

Operating income for the third quarter increased 43.7% to $11.7 million, compared with $8.1 million in the same period last year. Our operating margin increased to 6.4% in the third quarter versus 5.0% in the third quarter last year. Interest expense decreased to $100,000 for the third quarter, versus 135,000 last year, due to lower average borrowings. The effective income tax rate for the third quarter 2005 decreased to 38.4% from 39.0% in third quarter 2004, due to lower state income taxes. We expect our income tax rate for the fourth quarter and full year to be about 38.4%.

Net income increased 46.3% to 7.2 million for the third quarter, compared to 4.9 million last year. Diluted earnings per share rose 39.5% to $0.53 per share, compared to $0.38 per share last year. For the first nine months, net sales increased 10.3% to $492.1 million, compared to $446.3 million in the first nine months of 2004. Same store sales increased 5.5% for the first nine months of 2005. Gross margin for the first nine months increased 0.4% to 29.1%, from 28.7% last year. The increase in the gross margin resulted from a 0.1% increase in the merchandise margin and a 0.3% decrease in buying, distribution and occupancy costs as a percentage of sales.

SG&A as a percentage of sales, decreased 0.6% to 23.8% from 24.4% in the first nine months of 2004. Preopening costs were 704,000, or 0.1% of sales, compared to 1.3 million, or 0.3% of sales in the first nine months of 2004. Store closing costs were 633,000, or 0.1% of sales, compared with store closing costs of 451,000 in the first nine months of 2004. Operating income for the first nine months increased 35.9% to $26 million, compared with 19.1 million in the same period last year. Our operating margin increased 1% to 5.3%. Net income for the first nine months of 2005 increased 39.1% to $15.8 million, compared with net income of $11.3 million in the same period last year. Diluted EPS increased 35.6% to $1.18, from $0.87 last year.

We are in solid financial condition. At the end of Q3, our inventories were up 3.6% to 178.6 million, due to operating additional stores. We have reduced our long time debt by half from this time last year. Long-term debt at the end of Q3 was $12 million, compared to $24 million at the end of Q3 last year. Long-term debt to total cap at the end of the third quarter was 6.3%. Depreciation expense for the third quarter and first nine months of 2005 was 3.7 million, and $11.1 million respectively. Capital expenditures for the first nine months of 2005 were $12.3 million, detailed as follows. 2005 new stores were $4.1 million. The remodeling and relocation of stores cost $3.5 million. All other additions were $4.7 million. Cash lease incentives received so far this year totaled $874,000. Capital expenditures for the full year of 2005 are expected to be about $14 million.

I would now like to provide some guidance for the fourth quarter of 2005. Earnings per diluted share in the fourth quarter are expected to range from $0.13 to $0.15, compared with earnings of $0.09 in the fourth quarter last year. Included in the Q4 earnings guidance is a comparable store sales assumption of an increase of between 3% and 5%. We also expect gross margins to increase slightly. And to leverage SG&A with a comparable store sales increase. Earnings for the full year, are now expected to be between $1.31 and $1.33. This compares to earnings of $0.96 in fiscal 2004. This concludes our financial review of the third quarter and I'd now like to open up the call for questions.

[OPERATOR INSTRUCTIONS]. Our first question come from John Shanley with Susquehanna Financial Group.

Nice job in the quarter. Mark, can you give us a break down of your merchandise sales in the quarter by major merchandise categories?

Percentage wise?

Yes, please.

Women's was about 22.5, men's about 13.5, kids, about 18.5. That includes athletic, John.

Right.

Athletic product was around 41.5. And accessories were the difference.

So if you combine the kids athletic and regular athletic are you still over 50% athletic?

For the quarter it was - - pardon me - - 56%.

56, okay.

For the quarter.

Thanks. Then on the - - you had a very strong women's business. Obviously you mentioned casual and dress were both up nicely in the quarter. Is that a trend that's fashion driven do you think, Mark, or is it just your shoppers are discovering the assortment that you now have in your stores and are frequenting Shoe Carnival more often for those type of products?

In my opinion, John, it's both. I think that there's no question that some of the fashion direction is athletically inspired but in classifications that we carry outside of the athletic department per se. It's some of the Euro casual look, some of the low profile looks that we include as some of the casual product in women's nonathletic. So, there is some of that that is fashion driven. The other piece of it is we put a lot of energy into improving our nonathletic women's business. Now, we've said that repeatedly over the past year that that's an initiative of ours to drive higher margins and it's working.

We've increased not only the entire business I think because of that initiative but our margins are escalating because of that. And the women's business is seeing an increase in business as a percent of our total. This past third quarter the women's percent, as I just told you, was 22.5% of the total. Last year it was 20%. So, we've escalated that business by about 2.5 percentage points of the total. So we are real happy with that. And we think that's one of the reasons why our overall business is better is its being led by the women's group.

That's great. Are you offering new brands or different brands and different price points than you might have done at this time last year?

It's pretty much the same. We put a big emphasis on being more fashion driven than we have in the past. That's probably the biggest difference. In fact, I will tell you in our women's nonathletic assortments - - not true with athletic but not athletic assortment, the price point has probably gone down just slightly. We are carrying a little more private label product or quasi-brand as we like to look at it, product. As opposed to the higher end, more recognizable branded vendors. So, it's - - I don't want to say it's a huge movement away from branded vendors. That's not the case. That would be misleading if I said that. But it's a slight move away in certain categories to not necessarily branded vendors. So - - and that entails a slightly lower price point, not a dramatic lower price point but a slightly lower price point. In athletics we are seeing just the opposite. It's still very much a 100% branded business and our price points in athletic are actually increasing.

Great. Then the last thing before I get off of women's, the 40% comps in boots is really kind of amazing particularly since half your stores are in areas that I suspect weather played a negative factor in terms of prompting people to buy boots. Are you doing something different this year in your boots product category to really stimulate that kind of high level of demand?

Yes, buying better boots. I's going to say that only half facetiously. Our assortment I think is better than it has been in the past. We also in the Midwest, had a little bit of a cold snap in the middle of October that really spurred boot sales. Although boot sales for us were up until that point in time, it really spurred sales of boots in October. And that's one of the reasons why the October comp on an overall basis, was both in women's and our total business, was up was that little bit of cold snap - - one of the reasons.

That's great. And just one quick question on real estate, the 15 new stores plan for '06, are they all backfill or are you thinking of going into any new markets? And is there any change in terms of the average size of the units planned?

No, for the most part they are all backfill. And I would say the average size is going to be right around that 10,000 square foot number.

Thanks a lot. Nice job in the quarter, again.

We'll go next to Jeff Stein with KeyBanc Capital Markets.

Good afternoon, Mark, again, great quarter. Couple of questions. First of all can you tell us a little bit what kind of influence inbound freight had on the gross margin in the quarter?

It was a, right around 0.2 of a point increase.

Because even if you back that out, it sounds to me like given the strong sales trend; were you trying to be a little bit more promotional? Because it almost seems like with those kind of sales you would have, one would have expected more selling at regular price?

No, the promotional cadence was pretty much in the third quarter this year as it was in the year before. Most of our promotions, Jeff, are done at a minimum a month out and most of the print pieces that we do are planned two to three months out. So, it's - - our promotional cadence is pretty much set. Obviously we can react instore much quicker than a lot of retailers can because of the very nature of our stores and promotional activity within the store. But the promotional cadence was pretty much the same.

If you back out the impact of inbound freight, your merchandise margins were still down, let's say, about 10 basis points. And your women's business is a higher margin category and that's growing faster. So, maybe - - can you just perhaps explain a little bit why the merchandise margin then was down to last year?

Well, part of it that you can look at from this overall, Jeff, is that more of back to school was included in Q3 than it was last year. We talked about how back to school occurred later this year and that it really completed itself. What we see is that athletics drives a lower margin in our business than the nonathletic side. By putting more of the back to school in Q3 than the year before you can start to see a little bit of that margin. What we saw is our margins were a little below last year at the beginning of the quarter and were above last year at the end of the quarter.

Okay. All right. That would explain it. With regard to your store openings, 15 stores for next year but only a net of 11. Given the fact that you guys are really kicking everyone's behind right now, wouldn't it be strategically more appropriate to step up the expansion a little bit, get a little more aggressive; given the fact that you seem to be taking share of market?

We don't think so forward next year. One of the reasons why we are still going to maintain a slightly slower growth rate is we are going to be in the throws of - - well, we are in the throws right now of designing, developing and constructing a new distribution center and new administrative space. So, we will be right in the middle of that in 2006. So, we thought it would be a little more prudent to get through that crunch in 2006 and the early part of 2007 before we started expanding at a quicker rate.

That makes sense. And CapEx for next year, Mark?

I think it was around, somewhere around 11.5 to 12 million, Jeff.

Okay. And final question. When we get around to lapping these numbers next year are we going to be talking about tough comparisons or do you guys just think that the model is changing, you've got the product right and that the comps should continue to grow?

Well, when we get to - - I think October is a little bit of an anomaly, 21% comps. We certainly don't expect that kind of comp store increase on a go forward basis. Although, I will say that November has been pretty good. To comp that is a different issue. But it's a challenge to our merchants to finds the appropriate product to sell and try to meet that number.

Okay. Thanks.

Next question, Dave Turner with BB&T.

I was curious about the rebound in the comp in athletics in October. Was there any shift in merchandising strategy? I know it would be hard to implement in one month's time. But was there - - what was different about October versus the previous month? Was there more close out or something along those lines that would have led to or I guess contributed to such a rebound.

I think the consumer decided to shop for footwear. If you look at the October numbers, and I think our numbers were, maybe a little bit ahead of some of our competitors. But I would suspect that a lot of our competitors' sales in October got better than they were in the August and early part of September time frame. So, I think it was partly a rising tide issue. The consumer is definitely shopping for footwear. I think that in conjunction with some of the things that we've done in changing our women's mix. And maybe getting fortunate from an advertising standpoint when we did advertise in October. It seemed to be the right timing with respect to boots and cold front moving in, cold weather. So, I think there were a lot of factors that played into it. It was almost as if the consumer said, "I am not going to buy cars. I am going to buy something cheaper. And I am not going to buy it at the expensive stores, I am going to buy it in the more value driven channels". And consequently our sales for us were explosive and I would suspect for some of our competitors were pretty good. Although, I haven't heard much 21% comp numbers. I would suspect that sales in our competitive set went up in the month of October.

I guess it was probably over a year ago or maybe a year ago you went about - - initiated some new marketing campaigns. My sense is we've had long enough - - or you probably would have had long enough now to kind of vet the results from the new campaign. Is there any - - is this obviously the results agree or there is evidence that the campaigns working. But can you add some color as to what kind of metrics you look at? Or is the - - what's behind, how much of the catalyst has the marketing been versus the overall improvements that you made?

Coming from a financial background the thing I hate about the marketing world is that it seems like when sales are down you can never measure what the impact of marketing is in retail. And when sales are good it's definitely marketing, though it can never be proven out. The fact of the matter is we did change advertising campaigns. I think it's working very well. We are going to in the next couple of months do some analysis of that from an external standpoint. So, we are going to do some research and see what the customers think, both customers and non-customers. See what they think of that new advertising campaign. We've also have just recently come up with a new campaign, still incorporating that red nose idea but in a little bit different way for the holiday season. So, I am really anxious to see that get on the air and see how that plays out. I think it's definitely a step up from where we have been really with the new campaign overall. But the answer to your question is; I think it's working on an overall basis. But I don't think you can measure that on an individual promotion or a week to weak type basis. It's very difficult.

So, maybe then another just anecdotally or whether you have some hard numbers; do you - - is traffic up? Or is it just the traffic the same same, you are just getting more conversions? Or do you monitor? Is there any sign - - I know you just answered this. Is there any science behind maybe in the markets where you've done new campaigns?

Well, there's no question traffic is up. We are not driving 21% comp store gains off of increase in sales price. But traffic is up. Our conversion rates are up. So, we are enjoying more foot traffic in the stores, there's no question about it.

Lastly on the new DC, does the 12 million CapEx figure that you cited for '06, is that included the - - at least the initial steps or the build out for the DC or does that - -?

Yes, I'm glad you brought that up. It does not include any work in process or work in progress on the distribution center nor the administrative facility. And we are not sure at this point in time whether we are going to own those facilities or whether we are going to let a developer do the facilities and lease it.

Okay. Thanks. Happy holidays.

Thank you.

Our next question comes from David Berman, Berman Capital.

Hi. Those are great numbers. I have a quick question, I was wondering, your inventories are very well controlled and yet your same store sales are dramatically higher in October. You must have been instructed to get inventories. And I was just curious how you can position yourselves for this increased level of business in time for the increased demand?

Well, like I said our merchants have done a great job reacting to those sales. We obviously are buying product every week. Certainly we can't replenish all of the product when you see an increase of cost of $4 million from one week to the next. But the buyers have done a great job in replenishing that merchandise. And as I've said we are flat with inventory levels on a per store basis at the end of the quarter. And November sales have been good. So, they've done a good job replenishing inventories.

Just another one, it's not clear in the conference call you were pleasantly surprised with business, correct in October?

What did you say?

You were pleasantly surprised with business in October. It's not clear to me exactly what it was that changed the tone of business.

Well, as I mentioned - -

Beyond your expectations. Not that you didn't have good expectations to begin with but what it was?

Well, as I mentioned I think a lot of retail businesses got better in the month of October. As I said, despite oil prices increasing and gasoline prices increasing; some of the negative macro factors somebody told the consumer to go out and shop. And somebody told the consumer to go out and shop for shoes. As I mentioned, a lot of our competitors enjoyed much better business in October than they saw during the back to school period. So, I'm not sure I've got all the answers as to why the consumer decided to shop. We saw a change in the season - -.

Well, the weather helped.

We saw a change in the seasonal weather in October. As I mentioned, some of the ad pieces that we did have planned for October coincided very nicely with that change in the weather. So, I've got to attribute some of the increase to that. But you never know for sure why business is tough. And you never know for sure why business is - - all of a sudden takes off like it did in October.

Okay. Well, thank you very much and keep up the good work.

Thanks.

We'll go next to Steve Martin with Slater Capital.

Hi, guys, I will follow with my congratulations but I've already done that. Most of my questions have been answered. The stores you closed, you talked about the close in costs but did those stores lose money at the four wall basis?

Yes, they did. And I don't have all off the top of my head how much they did.

Are they from a geographic standpoint or they in location where you are liking to recapture some of that volume in other stores?

In one instance, yes, in the other two stores, no. One store we've already replaced and we will capture - - recapture some of that. But the other stores, we don't anticipate going back into those particular markets, a little bit smaller areas.

And you were just talking about inventory levels, is there product out there right now from a closeout standpoint for you to keep filling the pipeline?

Our merchants have done a great job identifying - - and again I want to make that point, viable closeouts. We just don't go out and by shoes to put on the floor. So, this fourth quarter I would say that we've got more closeout product in our inventory than we had last fourth quarter. And that's one of the reasons why we are very excited about the upcoming holiday season. There has been product in the marketplace. There are certain vendors particularly important vendors for example, Nike, which we've done very well with in the athletic side in the fourth quarter - - or excuse me, the third quarter, there are no closeouts to be had. So, it's vendor by vendor whether or not there are closeouts available. Both inside and outside the athletic industry. So, there are some out there, yes. Are we still taking advantage of it, yes. A lot of the replenishment, if you will, has been core fill-in styles. So, merchants have done a good job with that.

You talked about shifting some advertising, I guess it was dollars and some promotion into December.

Correct.

When would that have - - when did that occur last year and when is it going to occur this year from a dollar standpoint? Is it equal dollars?

Second and third weeks of November. And from a dollar - - I don't know whether those two weeks are equal or not.

And where is that shifting in December?

Steve, I don't know the exact weeks but it's in - - well I take that back, it's all throughout December, both pre and post Christmas.

Got it. And those transportations - - carry the transportation surcharges have those been eliminated now?

No. Diesel prices have not fallen as quickly as gasoline prices had. So, we are expecting to see some year over year increases in our freight in costs.

Got it. And I notice Cliff hasn't piped in so I will ask the question about your athletic product looking out into the first half of next year. What does it look like out there?

We are excited about it, particularly because of the Nike product that we are seeing. Running is still the dominant category, both in men's and women's. We are not as excited about the basketball product and that's a category that I wish would take off again as well as most other people that sell athletic product. But our Nike business has gotten much better than it has in the past. You've got to attribute that to the product that we are buying not only as a Company but as a trade channel in the footwear sector. And I think the product has gotten better, it's gotten a little more technical and the consumer is reacting very nicely to that product. So, that's exciting.

From what I've seen come out of the Nike building the product is getting even better for next year than it was for this year. So, we are excited about that. We are also excited about some of the brands that we've put into play this year that we really didn't do a very good job with in prior years. One of those that comes to top of mine is Asics . We've done a much better job with the Asics brand this year than we did last year. We just met with the folks from New Balance. And we've got some exciting programs planned with the New Balance product for next year. So, there's a lot going on in our athletic mix for 2006.

And average price point in that athletic mix?

Is increasing somewhat. And we expect it to continue to increase somewhat next year. Not dramatically but - -.

And in the past you've complained about the competitive nature of that athletic business, whether it's Kohl's or J.C. Penney or Sears. What's it look like out there now?

I don't know that we've complained so much about the competitive nature of the - - you must have us confused with our neighbors somewhere else. But what we have expressed a desire for is; more technical product in the mid tier channel. Particularly, from the important athletic vendors like Nike, Adidas and a couple others. So, that's what we have really clamored for, both us and some of our near competitors in the mid tier channel. I think we are getting some of that right now. And I think that as we continue to see that product flow into 2006, those results are going to continue to escalate.

One last question. Given your November month to date comp level. And given the fact that you've shifted some advertising. And the fact that you said you've got some reasonably easy comparisons. Why are you being so conservative or are you being conservative about your comp guidance for the quarter?

Well, so far the consumer, Steve, has said, "we are going to by footwear regardless of what gasoline prices do. And we are going to by footwear regardless what have interest rates are. And we are going to by footwear regardless of what the weather is". So, I want to make sure that that continues before I start to plan on the kind of comp store increases in we've seen over the past five or six weeks. I'm certainly not going to let my buyers go out and by 20% comp store gains. I don't think that's prudent when we can chase a good portion of that product. So, that's the range that we are planning to.

If we see, so far this November - - and like I said we see double-digit comp store increases. If we continue to see those kind of gains then certainly we are going to be chasing some product. But we are - - you've got to understand fourth quarter for us is not the huge quarter that it is for a lot of apparel retailers. We are in the liquidation business in the middle of December forward. So we look at it as; if traffic does continue it's a huge opportunity to sell a lot of product that we want to get out of. But understanding that it might be at a little bit lower price than the product that we're selling in the early part of the season, like October. So from that standpoint, we're just being a little bit conservative in how we go about and merchandise the stores. And that's really what we look at when we talk to Wall Street what our expectations. We're telling Wall Street what we are planning on and how we are operating this business on a net basis.

Thanks a lot.

Okay.

[OPERATOR INSTRUCTIONS]. Next question, Todd Cohen, MTC Advisors

Good afternoon and great quarter. Just a couple of questions questions. You indicated that your women's dress and casual business was up substantially. And them you spoke about Euro casual as well. I was just kind of wondering if you can talk about separate and apart from your private label stuff, which vendors have done a really good job for you in that area? I know you - - when you talk about athletic. Let me know who those vendors are. So, who's doing a real good job for you in those arenas?

I am going down a road we don't normally go. We typically don't like to talk about vendors on a conference call. I did mention a few in discussing the athletic because they are so important to our business. In the women's side, it's a lot of private label vendors. There are some branded vendors but we did a very good job with some offshoots of labels from branded vendors that I would rather not get into naming the branded vendors in the women's, Todd.

Okay. And then secondly, you usually talk about your comps in the northern areas versus southern. So, I would like to know a little bit about that. And then I was also wondering if kind of the transplants out of the New Orleans and Gulf Coast area, obviously subsequent to the hurricanes, is affecting your are outstanding comps to some degree?

We have continued to see larger comp store increases in the south than we have in the north. Although, the north comps were pretty decent in the month of October and recently. And as far as the hurricane impacted people, we have seen the stores along the Gulf Coast from Houston over through Mississippi, Alabama. Those stores have generated some nice increases because of the aftermath of the hurricane. As far as transplants from the hurricane in other parts of the country, we really don't track anything down to the individual level in terms of - - I would say that what we track at our store level is sales by zip code. But we don't look at individual transactions necessarily to determine where each individual comes from.

I understand that. I just knew that there was a big influx of people into the Houston and whether those stores saw a substantially larger increase than other stores.

Well, we are seeing - - the increase along the Gulf States in a good number of the stores is larger than we have seen across the other parts of the country, there's no question.

Thank you.

At this time we have no further questions. I would like to turn the conference back over to Mr. Lemond for any additional or closing remarks.

Well, I would just like to thank you for joining us on the call today and look forward to talking to you after next quarter. Thank you.

This does conclude today's teleconference. Thank you for your participation. You may now disconnect.