Shoe Carnival Inc (SCVL) 2009 Q1 法說會逐字稿

Good afternoon and welcome to the Shoe Carnival's Fiscal Year 2009 First Quarter earnings Conference Call. Today's call is being recorded and is also being broadcast via live webcast. Any reproduction or rebroadcast of this or 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 a discussion of risk factors included in the Company's SEC 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 these 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. I will now turn the call 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 first quarter fiscal 2009 earnings Conference Call. Joining me on the call this afternoon is Kerry Jackson, Chief Financial Officer, Cliff Sifford, Executive Vice President and General Merchandise Manager, and Tim Baker, Executive Vice President, Store Operations. I'm pleased to report that Shoe Carnival team met or exceeded most of our internal goals for the first quarter of 2009. First, we ended the quarter with relatively flat comparable store sales. During our fiscal 2008 year-end earnings call on March 19th, we conveyed to you we had seen a reversal of the 2008 sales trend during the first part of 2009 with February comparable store sales increasing by high single digits. We believe this resulted from pent-up demand from the fourth quarter combined with tax refund checks and rising mortgage delinquencies.

However, we indicated caution at that time as the sales environment was still very promotional and the true heart of the Easter selling season was still in front of us. Although the combined months of March and April were softer than last year, the increases in February were strong enough to result in a decline of just 0.3% for the quarter. This exceeded our original expectations of low to mid single digit decline. The stronger than anticipated sales results came largely from children's and adult's athletic product early in the quarter. Then when the weather warmed in April, our sandal business really started to take off and the gross margin started to climb. Importantly, as we look forward to the remainder of the year, we feel that we were able to increase market share in a very tough business climate. We attribute that to the strength of our full family, multi-product line value priced concept. Our gross profit margin for the quarter declined to 27.9% as compared to 29% recorded in the first quarter of fiscal 2008.

There were two primary factors that contributed to this decline. First, as we have stated many times in the past, the quality and aging of our inventory entering a seasonal sales period is a high priority for our merchandise management. Thus, during February and early March, we focused on the aggressive liquidation of women's and to a lesser extent, men's fall and winter footwear to clean up our inventories in preparation for the Easter selling season. This liquidation period was then followed by a very promotional Easter, which continued the trend we saw all of last year. Inventories at the end of the quarter on a per store basis were 8.4% below last year's level. This reduction is in line with the expectations we communicated to you at year-end. As we looked into the second quarter, we believe that our inventories are at the appropriate level for our future business plan. Therefore, we do not see further significant year-over-year reductions in inventories on a per store basis.

Of even more significance, as Cliff will talk about in a minute, the age of our inventory has never been better. Our store level, distribution center, and administrative management groups did an excellent job controlling expenses in the first quarter. This management group was able to hold the dollar increase in selling, general and administrative expenses to $733,000 or an increase of just 2% over the prior year's first quarter, despite opening ten new stores and operating an additional 20 stores at the end of the quarter. Thus, we were able to leverage selling, general and administrative expenses as a percentage of sales, even with a slight comparable store loss. And finally, we continue to improve our balance sheet over the prior year periods. Our cash position improved at the end of the first quarter by over $10 million from the end of the first quarter last year and we had no interest bearing debt at the end of each respective quarter.

Excluding the increase in cash, working capital actually declined by over $3 million year-over-year, again despite operating 20 more stores at the end of the first quarter of 2009 compared to the first quarter of 2008. During this difficult retail period, the importance of redefining Shoe Carnival in the eyes of the consumer has become all the more apparent. Last year we renewed our committment to deliver a single consistent message to the consumer and to differentiate ourselves from our competitors in order to retain the experience that is unique to Shoe Carnival. We have shared this philosophy with you before and we are pleased with the changes that have been implemented. As discussed in the second quarter of fiscal 2008, we decided to rollout enhanced visual graphics, incorporating the new look and color pallette of our television and print advertising campaigns to all of our stores.

Additionally, we are making certain changes to our store layout and fixtures to better feature our women's fashion product. It was our plan to have most of these changes in place by early 2009. The graphics package and most of the fixture changes were implemented in the first quarter. The remaining display fixtures will be installed in the second quarter. Our focus on total customer service is stronger than ever and we believe it will continue to play a significant role in our ability to gain long-term market share. For 2009, we still plan to open approximately 15 stores, ten of which celebrated grand openings on March 28, 2009. These 15 stores will average approximately 9700 square feet, slightly smaller than the chain average of 11,100 square feet at the end of fiscal 2008. 13 of these new stores will be located in existing, large and small markets within our current geographic footprint.

We have adjusted and will continue to adjust our annual store growth rate based on our view of internal and external opportunities and challenges. We will also continue to review underperforming stores for potential closure, especially those locations with expiring leases or kickout opportunities. We currently plan to close ten stores during fiscal 2009, one of which was closed in the first quarter. The majority of these costs -- the cost involved in closing these stores were recorded in prior periods when we made the determination to close these specific locations. At the end of the first quarter, we operated 313 stores in 29 states. As we look forward, we recognize that our target middle income customer will continue to be impacted by the economic downturn and sales within the retail sector may continue to experience downward pressure.

Due to shifts of tax free holidays and back-to-school dates into the third quarter and certain other factors, we currently expect a mid single digit decline in comparable store sales for the second quarter. However, due to these shifts and the strength of our back-to-school business, if we see any increase in consumer spending, we think third quarter earnings could be relatively strong. Kerry will speak more in a few minutes about the underpinnings of those future expectations. As we discussed at the end of fiscal 2008, we will continue to manage our business conservatively throughout fiscal 2009. We remain focused on cutting back new store expansion and tightly controlling our inventories and cost structure. As we stated to you recently, our objectives for 2009 remain focused on profitable operations, cash generation, and gaining long-term market share. We are well on our way to accomplishing all three this fiscal Year. Now I'd like to turn the call over to Cliff for more details on the merchandise.

Thank you, Mark. As Mark stated, our total comparable store sales were basically flat for the quarter, even with traffic down 2.7%. However, average transactions were up 2.3%, units per transaction were up 0.7%, and conversion for the quarter was flat. In our women's non-athletic department our sales ended the quarter down low single digits. However, we have been pleased with the good results within our women's sandal category, as Gladiators, sports sandals and thongs all selling well. Unfortunately, the strong performance of sandals was not enough to overcome the disappointing performance of casuals, especially the flat and low profile classifications. These two classifications along with carryover fall dress shoes required additional markdowns in order to keep our inventories clean and current. This promotional activity resulted in a significant reduction of margin in this department.

Our buyers have done a good job of getting through this product, and as a result, we experienced margin improvement as we moved through the latter part of first quarter and into second quarter. Looking toward back-to-school, we are encouraged with the positive performance of our junior shoe department. We believe that with the current economic climate this customer is looking for key trends, such as up front shoes and sandals in both dress and casuals, flat boots, and moccasins at value prices. We have built a solid business over the years of meeting this junior customers' needs and she will look to us for this product at back-to-school. In our men's non-athletic department our comparable store sales were down mid single digits for the quarter. We considered -- we continued to see a move to more traditional classifications, such as comfort dress shoes, boat shoes, and sports sandals.

Here, just as in women's, we have seen a slowdown in low profile casuals. The children's combined businesses of athletic and brown was up mid single digit for the quarter. The children's athletic business was the strongest department throughout the quarter, reporting a double digit comparable store increase. Boys running, girls low profile and Chucks all showed strong sales. In adult athletics comparable store sales were up low single digits for the quarter. We were pleased with the performance of several key classifications, such as Converse Chucks, urban fashion styles along with the running category for both men and women. We believe that in challenging economic time periods, buying habits shift from want to need. Therefore, our strong position in children's and athletic shoes will serve us well as we enter the all-important back-to-school time period.

We continue to shift inventory dollars to these departments to insure that we capitalize on their full potential. By keeping our inventories' position lean, we are able to take advantage of excess inventory buys that key vendors may have at opportunistic prices. As we have reported over the past several years, the true back-to-school time period is moving later and later into August. It is not only -- not only are the schools opening later, but kids are waiting until just before or just after school opens to make their shoe buying decisions. With this in mind, we feel that it is important that we be well positioned from an inventory level standpoint as we enter into August. Therefore, we have planned our buys and inventory levels to be slightly up on a per door basis at the end of second quarter compared to last year.

In closing, we have cycled through a full year where we have followed a very stringent inventory control program. We have kept our inventories clean and fresh, with aged inventory at an all-time low. We believe that overall inventory levels that were achieved over the past year are sufficient to service our customer with both size and selection, therefore, our plan on a go-forward basis to keep our inventories flat to slightly down on a per door basis. Now I'd like to turn the call over to Kerry Jackson.

Thank you, Cliff. Let me begin by discussing the results for first quarter, followed by information on cash flows and ending with certain expected financial metrics for Q2 and the year. Our net sales for the first quarter increased $5.2 million to $167.3 million compared to $162.1 million for the first quarter 2008. The increase in sales resulted from an increase of $9.4 million for the new stores opened since the end of fiscal 2007, partially offset by loss of sales for the stores closed since the end of the first quarter of last year and 0.3% comparable store sales decrease for the quarter. Gross profit margins for the first quarter of 2009 decreased 1.1% over the same period last year to 27.9%. The merchandise margin decreased 1.3%, while buying and occupancy costs decreased 0.2% as a percentage of sales. The decrease in the merchandise margin was primarily due to our effort to significantly lower inventories in our women's footwear during the first quarter on a per store basis.

This aggressive liquidation resulted in a majority of our decline in the merchandise margin. However, we're very pleased with our ability to leverage buying distribution occupancy costs as a percentage of sales and to hold the total dollar increase to approximately $300,000, despite operating an additional 20 stores at the end of the quarter. A $750,000 increase in occupancy expense in our new stores for the first quarter was partially offset by rent reductions on certain existing stores, plus other cost saving initiatives in our buying and distribution function. We currently expect this trend to continue. In each quarter the rest of the year, we expect our total buying distribution occupancy costs in dollars to be flat to slightly down from the prior year, despite operating those additional stores. SG&A expense for the quarter was $40.1 million. These expenses increased $733,000 for the quarter, but as a percentage of sales decreased 0.2% to 24%.

The increase in dollars resulted primarily from an increase in store pre-opening costs, higher store labor and benefit costs due to operating additional stores, and higher healthcare costs. Pre-opening costs incurred -- increased $447,000 in the first quarter to $481,000 or 0.3% of sales compared to $34,000 in the same period last year. We opened ten stores in Q1 compared to two stores in Q1 last year. Operating income for the quarter was $6.6 million or 3.9% of sales compared with $7.8 million or 4.8% of sales in Q1 last year. Our effective tax rate for the first quarter was 36.9% as compared to 38.4% for the first quarter last year. We expect our full year rate to be approximately 38%. Net income for the quarter was $4.1 million compared to a net income of $4.8 million in Q1 last year. Diluted EPS for the quarter was $0.33 versus $0.38 earned in the prior year first quarter. Now let me discuss information affecting our cash flow.

Capital expenditures for Q1 were $3.2 million, of which $2.9 million was for new stores. Depreciation expense was $3.8 million and no shares were repurchased during the quarter under our share repurchase program. My final comments today are on certain 2009 metrics for Q2 and the full year. As Mark mentioned earlier, we currently expect a mid single digit decline in comparable store sales for the second quarter. This is attributable to a combination of three items. First, our concern over the continuing difficult retail environment. Second, stimulus checks were received by consumers in the second quarter of last year but will not be repeated this year. And third, a shift in the retail calendar is moving the majority of sales tax free holidays from the end of our second quarter into the third quarter this year. This year we have 169 stores in states with tax free days. 19 of those stores will have their tax free days in Q2 versus 121 stores with tax free days in Q2 last year.

This shift will be to the detriment of Q2 sales, but will benefit Q3 sales compared with last year. In Q2 we expect our gross profit margin to be relatively stable with last year and SG&A in actual dollars spent should decline between 1.5% and 2%, partly due to lower pre-opening costs and adver -- and additionally advertising costs due to the shift in the tax free days. Depreciation in fiscal 2009 is expected to decline by $1.8 million to approximately $15 million. The decline is due to opening fewer net new stores in both 2008 and 2009 and tightly controlling capital expenditures. Total capital expenditures in fiscal 2009 are expected between $10 million and $12 million. We should also receive about $1.1 million lease incentives. We intend to open approximately 15 stores and expected aggregate cost before lease incentives of about $5.5 million.

We also expect to send between $1 million and $3 million in 2009 to remediate our distribution center. The remaining capital expenditure expected to incurred to relocate one store, necessary store remodels and various other store improvements, along with continued investment technology and asset replacement activities. This concludes our financial review for the first quarter. I'd now like to open up the call for questions.

(Operator Instructions) Our first question comes from Jeff Stein with Soleil Securities. Please go ahead.

Hi, Mark, question for you regarding your sales performance in the quarter. You guys out performed both DSW and Famous Footwear and I'm just kind of curious if you have any thoughts in terms of why there may have been such a big spread between the three companies?

Jeff, I should say that -- that the one thing I think we do that's different than those two competitors, particularly, is we may be a little bit stronger in the athletic categories, which really had a big impact in February and I think we probably do a little bit -- little bit overall more business in a lot of our markets with the urban consumer, as opposed to Famous Footwear and DSW in the non-urban category. So when we saw the early part of February with checks coming out, refund checks, and I'm not only -- I'm not only addressing the urban consumer, but particularly with the athletic customer early on in the season that I think that may have been a reason why we saw our sales tic up. I don't know, at least I didn't hear those two competitors talk about their monthly comps in either of the calls or if they did I missed it, but I would suspect that their business might have gotten better in March and April, as we saw the non-athletic products start to perform.

And just generally, how are you kind of feeling about the promotional environment here in the spring and how do you feel about industry inventories in footwear relative to where they were a year ago?

Let me address the promotional environment and I'll let Cliff talk about the inventory positions, particularly as it impacts our -- the vendor community. It's been very, very, very promotional. A lot of -- lot of retailers are still utilizing first and half, including Shoe Carnival, to drive business in a very tough economic climate. So I continue -- I look to see that continue into the second quarter and probably even in the back-to-school given the uncertainty with the economy. As we get through the third quarter and into the fourth quarter, if we see some sort of pick up with consumer spending, and I'm not saying that we will but I'm saying if we do, then the pressure on promotional activity may ease a little bit. But the way we're planning it, the way we're addressing all of our business -- all of our business right now is from a very promotional standpoint. Recognizing that we could still see some pressure on the margins, we are putting a lot of pressure on SG&A costs, obviously, as we discussed in the call.

And do you happen to know how many weeks of BOGO promotions you had this year versus last quarter?

It's exactly the same for us in the first quarter and second quarter as it was in the prior year. We haven't increased or decreased any.

Okay, thank you.

Our next question comes from Sam Poser with Sterne, Agee.

I might have missed it. Good afternoon. Can you talk about by month what comps were and how you're running so far in May?

Well, Sam, we don't get into specifics on our exact details on the comps by month, but -- but I will tell you that, again, the February month was up high single digits and March-April combined, which you have to look at combined because of the shifts in Easter, was a mid single digit decline. What we saw that really impacted the business, more importantly and more importantly from a margin standpoint, was the shift in the mix of business from athletic early on in the quarter to our non-athletic or dress and casual, which we include sandals in, both men's, women's and children in the April month and as we see it continue in the month of May. So really from a margin standpoint, that mix had a tremendous difference in the margins that we recorded towards the end of the month as opposed to the beginning of the month and I'm sorry what was the second part of the question?

Well, May to date because of the -- the effect of the -- of the stimulus checks from last year and the shift that -- you've mentioned parts of it and the shifting of the tax free holidays out of, really out of Q3 into -- out of Q2 into Q3 and all of that, how do we -- how do we just think about the whole thing in between the next two quarters?

I will tell you that our -- I will tell you that our guidance that Kerry just gave was for mid single digit decline in the month of -- excuse me, in the second quarter. Obviously, as we talk about the shifts out of the second quarter of tax free -- tax free shifts into the third quarter, you're going to see a bigger impact in July than you will see in April -- or excuse me, May and June. Having said that, I will tell you that our sales relative to our plan in the month of May so far is exactly on plan.

And -- and do you think you can keep the same kind of control in the SG&A that in the next two quarters? I mean your SG&A was -- was up a hair. Can we expect SG&A dollars to -- should we expect them to be up a hair in the next couple quarters again, or could we actually -- could you actually be down on a year-over-year basis?

Well, because of the -- this year in the first quarter we opened ten stores and I think last year in the first quarter we opened one or two stores. In the second quarter, we're opening zero or two stores in the second quarter of 2009 and we opened 12 stores in the second quarter of 2008. So without those pre-opening costs impacting the SG&A line this year, we should see, barring some unforeseen impact of healthcare costs, which has been a drag on our SG&A, excluding that impact, we should see a decline in SG&A costs for the second quarter.

Sam, an additional item for SG&A for second quarter is because of the shift in sales that we're having for the back-to-school, those tax free days, we're shifting some advertising associated with those sales also. So the two items that are helping to control costs in Q2 besides your normal programs are to -- is the pre-opening and advertising.

Got you. And then -- and then -- and just, Kerry, what about your tax rate full year?

Full year we expect to be about 38%.

Still? Even though you came in under that in this quarter?

Yes. It will blend out the rest of the year.

All right. And then, Cliff, is there -- I mean, are there any highlight brands or anything -- anything really worth calling out other than categories, anything specific that you call out on a positive or a negative?

Sam, we have seen some highlights, we normally don't talk about brands but I'll make an exception for you.

Thank you.

We had a -- we did see -- we continue to see great performance out of our largest brand, Nike. The running category, as I mentioned, was strong and that was Nike and Asics and of course Converse has been a strong brand for us for the quarter.

Okay, all of athletic. Nothing really to call out in the non-athletic world?

In the non-athletic world the strongest part of our business has been the junior business, and there we -- we do a lot of business with pseudo brands and private brands, so it wouldn't be of any interest. I would like to call out in our men's department that our Sperry business continues to be strong. I mentioned the fact that -- I mentioned the fact that our traditional category in men's was increasing and that draws light to Sperry and brands like Dockers.

And what about -- and then if -- if back-to-school doesn't come back quite the way you're seeing it right now, are you going to be able to control the order flow well enough to cancel enough orders or move them around to manage that or are you planning -- or are you pushing your turn? Are you continuing to push your turn through adjusting the flow of goods?

Well, we definitely continue to push turn. We -- we feel -- we feel definite that our inventory levels are sufficient to take care of business as we move through fall. We also think that with the shifting of sales out of July and into August that we have to be prepared going into August with sufficient inventory levels to hit the demand, therefore, that's the reason we are planning our inventories just slightly up at the end of July. Normally that inventory would have been sold the last two weeks of July as schools were going back and tax frees were happening and since that's now shifted to August, it's vitally important we have that inventory in the stores ready for back-to-school time period.

Thank you. One last question. Can you -- can you just -- what kind of percent, I mean on a -- on a basis point, can you attribute -- are you attributing now to the shift of the tax free days? I mean, is it like -- is it like three comp points out of one into the other? Do you know what I'm saying with the shift? How big a move is this?

It's three or four basis points, Sam. I don't have the number off the top of my head, but it's got to be in the range of between 2 and 4 basis points.

Okay, thank you very much. Good luck.

Our next question comes from Heather Boksen with Sidoti & Company. Please go ahead.

Good afternoon. Yes, I know you guys don't like to talk about the specific brands, but I just was wondering is there any specific product for back-to-school that maybe you're excited about or that we should be looking for that will drive that business?

We don't like to talk about forward-looking potential brands as well, Heather, for obviously competition purposes.

I guess category wise?

Well, Cliff mentioned that the junior business is expected to be very, very, very strong again and I don't know, Cliff, you might expand?

Just -- just won't talk -- really quickly in the junior business, it's all about up front styles, you'd recognize it as Gladiators or product that just goes up the front of the foot. We see that in dress shoes especially as we go in the back-to-school and as we are very important along with moccasins, as I mentioned in my prepared remarks. Obviously that's -- be in the junior non-athletic business won't be the driving force. The driving force will still come out of the athletic area.

All right, that's helpful. And just curious, maybe I wrote it down wrong, but last quarter I thought you said SG&A in the first quarter was going to be up 5.5%, 6%. Just curious what changed. Did some costs move around or what's going on there?

Well, not dramatically, no. We had some cost savings that -- we said we were going to continue to put pressure on cost savings, though we didn't build into our guidance and we did come up with additional just controlling payroll and other costs like that, not a dramatic change. So we also has -- on the back side of it we had additional healthcare costs that we hadn't expected, so it was a mix of numbers. I'd have to go back and look, but I'm not sure that I was expecting SG&A up that high. I think it was -- I think it was going to be closer to 1% or 2% up.

All right, thanks.

Our next question comes from Jill Caruthers with Johnson Rice.

Good afternoon. If you could talk about your second quarter expectations for gross margins to be basically flat with last year, seems as though you're getting some good traction on occupancy leverage through rent reductions. On the merchandising side, is your expectations for that to be up just given the shift you're seeing to non-athletic and kind of a stabilizing promotional environment?

Well, if I understood the question, you're asking if we expect margins to be up and merchandise margins to be up because of the sales of non-athletic product?

Yes, like what's driving the expectations the second quarter overall gross margins to be flat?

Well, we do expect that our sandal business and our women's business to continue to be strong as we move through second quarter, but we also expect the athletic business to kick in toward the end of July as we move toward back-to-school, which will have a moderating effect. The one thing that we're not sure of and we have built into our model is the fact that it has become a very promotional environment, as Mark mentioned in his remarks, and we need to -- we need to be prepared for that to react to that promotional environment.

Jill, the other side of that on the [bond issuries] and occupancy costs, even though we expect flat to slightly down dollars spent, because of that shift in the tax free days, that's a pretty big sales difference, though we're going to incur the same amount of costs to process the inventories Cliff was saying he's going to have slightly higher of in the stores because that shift in sales. So on a percent basis, we're expecting BD&O to be slightly flat to slightly up.

Okay, so that would assume you're expecting some favorable merchandise margins in the quarter?

We're -- that would -- .

That is correct.

We are expecting relatively flat merchandise margins during the quarter.

Okay, okay. And then just last question, your initiatives to take clearance on women's dress, to a lesser extent men's non-athletic products, was that mainly fall and winter goods and how are you feeling with Easter-type product and if you will have to accelerate any type of liquidation type period in the second quarter?

The clearance product that we had in February and early March was mainly out of fall and it was not only dress product but it was casual product, flats and low profile product that did not sell well in the fourth quarter, so we cleared through that product. We actually came very clean out of Easter or relatively clean out of Easter in dress shoe product. Our dress shoe business, especially in the junior and urban categories, really caught fire in the month of March and April and we were able -- we did come clean with relatively high margins. So very pleased with where we are and that's one of the reasons we are saying our margins are going to remain flat to last year in the second quarter.

Okay and just last quick question. You've pointed to some strength from the kind of the urban categories. Do you think that's from the consumer spending more or are you actually seeing better products from some of those brands?

I think it's a little bit of both. I think when, as Mark said, when the tax refund checks came out, it put extra dollars in their pocket and they came to the stores and obviously spent it. But I also think that with the product that we're getting from some of our key guys, a product that is addressing holes that we had in our inventory in past years, that product is selling very well for us. Not only in the athletic category, which I've mentioned in my prepared remarks, but also in the dress shoe category.

Thank you.

(Operator Instructions) Our next question comes from Chris Svezia with Susquehanna Financial. Please go ahead, sir.

Good afternoon, gentlemen, and nice job on the quarter. A couple of questions. I guess just on the -- on the inventory and how you're looking at inventory per store going into that -- going to the tail end of the second quarter, you're expecting it to be up slightly. I guess given the shifts in terms of tax frees, would you anticipate or are you at least planning in terms of your buying to assume that that third quarter comp, and again taking into consideration the comparisons here in the -- over the past couple years that would be a flattish or a positive comp for that third quarter, without divulging too much information. It's looking pretty far out, but what are your thoughts in terms of how you're building out inventory in terms -- in terms of sales expectation?

Chris, this is Mark. In terms of planning for inventory, we will plan sales around flat for third quarter. Now, obviously, we're expecting much better things to come out of August than July or September and October, so when you talk about at the end of a finite period like July, you're talking about timing differences with respect to receipt of that inventory. So you've got to be careful about how you look at the inventory, again, at the end of those finite periods. Accounting numbers are as of a finite period, unfortunately, and don't take into consideration the ebb and flow of inventory at the times that you need it with respect to what's in the store and when it's going to sell.

So, having said that, we are planning a little more inventory at the back-to-school period, but we're in a position with respect to future orders to curtail that inventory after back-to-school if we need to. Hopefully we'll see some increase in consumer spending and we'd be able to spend up to and over what we currently have planned. So I don't know if that answers your question or not, but what we're planning is relatively flat subsequent to back-to-school and we're looking for a pretty decent back-to-school, actually.

Okay. No, that helps, thanks, Mark. And just on the ASP trends and I know you guys have been pretty tactful in terms of improving your ASPs and product, is that -- is that trend as you look at your buys and look at opportunistic purchases, I assume that -- that continues in terms of how you're looking at your inventory?

Yes, it is, with the exception of the clearance product that we had in February and early March, particularly with dress and casual product, ASPs were pretty much up across-the-board for the first quarter, so we're pretty happy with that. We've got work to do on the dress and cas -- the fashion side of the business, if you will, outside of the junior product. So although it's not dramatically down, it was down in the first quarter and, again, primarily because of the clearance period of -- of February and March.

Okay. And then for -- for Cliff, just on -- could you comment a little on skate product, the skate category and maybe a little color on classics in terms of what's --what's going on there by any chance?

We have not -- I'll take the second part of that question first -- we have not yet seen the turn in classic product. In fact our business in the classic categories continues to decline. We do, however, think that we could see an increase for back-to-school in the classic category because we are open to -- we've been open to a new product that we have not been open to in the past couple years, so we are looking for an increase in that category for back-to-school. The skate product, we actually showed a decline in skate product for the first quarter, but we do look for skate to rebound as we go into back-to-school. We've got some very, very exciting product for the stores as we move toward August and I think that's -- August, Chris, is probably 70% of all skate business during the year and with this new exciting product we look for increases in August in skate.

Okay, all right, that's helpful. And then just -- Kerry, just real quick for you just on the SG&A piece, could you just maybe quantify to any degree the shift you're talking about Q2 being down a couple percentage points, obviously fewer stores, shifting some campaigns as you look to the shift in back-to-school, third quarter, I know it's kind of early but do you expect that to be up a couple percentage points and maybe any color for how you might -- you might end the year? You've been pretty flat for some time in terms of SG&A dollars. Is that still sustainable for the year?

Well, we said in the first quarter that, or at the end of the year in our fourth quarter call that we'd expect to control our SG&A the whole year. You're going to see SG&A rise a little bit in Q3, but it's not going to be a blowout. It's -- it's -- given the environment it's really too difficult to pin down right now where we're going to look at overall SG&A because marketing will play into that at back-to-school, so there's still decisions to be made on that, but right now we plan on it being up a little bit but not dramatically.

All right. And last thing just real quick, Cliff, regarding the classic product in key specific vendor, is that -- is that going to be pretty much all stores or is there a -- is there a focus on just a percentage, a certain level of stores that you're going to be putting this classic product in?

It will not be in all stores. It will be in stores that are in our urban markets.

Okay. All right, fair enough. Thanks guys, appreciate it.

And there are no further questions. I'd like to turn the call back over to Mr. Lemond for any further or closing remarks.

Well, thank you all very much for joining us and we look forward to speaking with you after the second quarter. Thanks, again.

And that concludes today's teleconference. Thank you for your participation.