Steven Madden Ltd (SHOO) 2006 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Steve Madden, Ltd. conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. Any reproduction of this call, in whole or in part, is not permitted without prior expressed written authorization of the company and, as a reminder, ladies and gentlemen, this conference is being recorded. I would now like to introduce your host for today's call, Ms. Leigh Parrish of Financial Dynamics. Please go ahead.

Thank you. Good morning and thank you for joining this discussion of Steve Madden, Ltd., third quarter results. Before we begin, I would like to remind you that statements in this conference call that are not statements of historical or current facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other unknown factors that could cause the actual results of the company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. The statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the company's reports and registration statements filed with the SEC. Also, please refer to the earnings release for more information on risk factors that could cause actual results to differ.

Finally, please note that any forward-looking statements used in this call should not be relied upon as current after today's date.

I would now like to turn the call over to Jamie Karson, chairman and CEO of Steve Madden, Ltd. Jamie?

Thank you. Good morning and thank you for joining us as we review our third quarter results. With me today is Ed Rosenfeld, our senior vice president of strategic planning and finance.

We are very pleased with our third quarter results, which significantly improved over the last year. Our top line grew 23%, and our net income increased an impressive 129%, which was driven by broad-based strength in both wholesale and retail. The foundation of our success stems from our outstanding creative team led by Steve, who continue to deliver the fashion-forward trend right product our consumers have come to expect from us.

Superior product offerings serve to drive robust full-price selling, and we effectively leveraged our expense structure in order to drive bottom-line gains well in excess of our top-line growth.

During the quarter we also made progress on our stated goal to evolve Steve Madden into a global lifestyle brand by signing a license agreement for Steve Madden and Steven by Steve Madden dresses. The new dress lines, which will initially ship in spring 2007, join our existing watch, outerwear, eyewear, girls' apparel, and hosiery offerings. We are excited about the initial dress collections and are pleased to be able to offer our growing customer base, another category in which they can experience the Steve Madden lifestyle.

We are also pleased to be expanding our presence beyond footwear and accessories and believe dresses mark a very logical extension of our brands.

It is important to highlight that we have been able to achieve our solid financial performance and make progress on our strategic initiatives while maintaining a very solid balance sheet with no debt. Our solid financial foundation combined with our stated commitment to return value to our shareholders led our board to approve a special, one-time cash dividend of $1 a share of -- excuse me -- $1 per share of outstanding common stock. The dividend will be paid on November 22nd to shareholders of record as of November 13th.

Combined with the 8.3 million of share repurchases so far in 2006, this one-time dividend will increase the amount of capital returned to shareholders this year to approximately 29.3 million, which is in addition to the approximately 21.5 million we returned to shareholders in 2005.

At this time last year, we pledged to deliver at least 15 million to shareholders over the next 15 months, and I am very pleased to say that we have nearly doubled this target 12 months into the time period. Additionally, I'd like to reiterate that we are able to provide this special dividend while still reinvesting in our business and funding our initiatives for future growth.

I'd now like to take a moment to discuss the key strategies we are focusing on as we conclude 2006 and look ahead to 2007. Our top priority remains delivering fashion-forward, trend-right footwear to our ever-diversifying customer base. As such, we are committed to supporting our outstanding design team led by Steve and ensuring that they have the resources they need to continue to deliver superior design.

By providing product that excites our customers, we are able to not only drive strong full-price selling but also build our brand equity. Having a very solid brand equity leads me to our next area of focus, which is diversifying our business.

Our first diversification strategy is to continue to develop some of our new brands. SM New York, for instance, which we launched in the fourth quarter of 2005 has been growing steadily, and we are optimistic about our ability to continue to grow that brand into 2007. We are also testing and developing various other new brands where we see a strategic opportunity to do so.

Natural Comfort comes to mind, which we launched last quarter. A second way we are looking to diversify our business is by continuing to leverage the strong brand equity we have developed into other logical categories outside of our core footwear offering. By developing Steve Madden into a global lifestyle branded company, we will enhance our opportunities for future growth. As I mentioned, we recently furthered this objective by signing an agreement for Steve Madden and Steven by Steve Madden dress collections.

In sum, we are focused on sustaining and building upon the growth that we have achieved thus far. We are optimistic that we are on the right path to continue to grow and diversify our business.

And with that, I'd now like to turn the call over to Ed, who will discuss the financial results for the quarter in more detail and provide our outlook for the business.

Thanks, Jamie. Consolidated net sales increased 23% in the quarter to 123.2 million driven by strong growth in Steve Madden woman's wholesale; Steven by Steve Madden women's wholesale; and our retail business as well as the contributions from SM New York launched in Q4 of last year and Daniel M. Friedman and Associates, which was acquired in Q1 of this year.

Gross margins for the quarter increased significantly to 41.4% from 35.2% in the comparable period last year as customers continued to respond to our trend-right product driving more full-price selling, fewer closeouts, and fewer marked down allowances to our wholesale partners, accordingly, the overall gross margin improvement, select margin improvements in both the wholesale and retail divisions.

We also controlled costs and leveraged our expense structure against the increasing sales leading to a 170 basis-point decrease in operating expenses as a percentage of sales.

Net income grew 129% to 12.6 million this year from 5.5 million in the third quarter last year. Diluted EPS for the quarter was $0.57 per share on 22.1 million diluted weighted average shares outstanding compared to $0.26 per share and 21.1 million diluted weighted average shares outstanding in the prior year.

Now I'll talk a little bit about the performance of each of our divisions. Net sales for the wholesale division increased 29% to 91.8 million from 71.0 million in the comparable period. This division was comprised of 12 segments in the quarter -- Steve Madden Women's, Steve Madden Men's, Steven by Steve Madden, SM New York, Stevies, Candies, LEI, Rule, Natural Comfort, Steven by Steve Madden Men's, Jump, and Daniel M. Friedman.

Net sales for the Steve Madden's Women's wholesale division increased 20% to 39.5 million versus 33 million last year. Product successes in our flagship division included wedges with peep toe silhouettes and flats, particularly in ballerinas. Animal print was also very strong.

Net sales in Steve Madden's Men's were 15.2 million in the quarter, a 1% increase over last year's 15.1 million. Dress shoes continued to perform well in our men's division, but sport fusion look slowed down.

Net sales in Steven by Steve Madden were 6.6 million in Q3, up 77% from the 3.7 million we achieved in the comparable period a year ago. The sales gain we driven in part by a substantial increase with Nordstrom. From a product standpoint, anything in leopard performed very well, particularly low-wedge casuals. Suede was also good.

SM New York, which continues to gain traction contributed 7.3 million in the quarter. Product successes in the quarter for SM included ballerinas, dress shoes, and boots.

Net sales in Stevie's were 2.3 million in the quarter compared to 2.9 million in the third quarter of last year. The decline reflects our decision to transition much of our Stevies business to a commission-based, first-cost model where we never take possession of the inventory and don't book any top-line revenue.

To add the income from the kids' business now done through our Adesso-Madden first-cost division, our total operating income from our kids' business was up in the quarter.

Candies net sales were 4.9 million versus 6.7 million a year ago. The sales decline reflects a transfer of sales from Q3 into Q2 as Kohl's elected to push up a back-to-school program from July into June this year as well as the discontinuation of a holiday program from last year that didn't perform as well as expected.

LEI net sales were 100,000 in the quarter versus 9.7 million in the comparable period. As of September 30th, we are no longer the licensee for LEI Footwear.

Rule had total net sales of 1.7 million in the quarter. This included 1.3 million of net sales in Rule Women's and approximately 400,000 of net sales in Rule Men's.

We also had small sales contributions in the quarter from three new divisions that we have been testing and developing -- Natural Comfort, Jump, and Steven Men's. Wholesale sales under these new brands totaled $1.5 million in the quarter.

Our last wholesale division is Daniel M. Friedman accessories business acquired earlier this year had net sales of 12.7 million in Q3. The division also took an important step to position itself for future growth by signing a new license agreement with Tracy Reese for the exclusive right to manufacture and distribute handbags, belts, and related accessories under the Tracy Reese and Plenty by Tracy Reese brand name. This is very exciting, as it gives DMF and entre into top-tier department stores and specialty stores including Neiman Marcus, Sak's, Bergdorf Goodman, Barney's, and Intermix.

Taking all of this together, we delivered a 29% increase in overall wholesale sales, and the strong reception of our products by the end consumer resulted in a 790 basis-point increase in our overall wholesale gross margin to 37.9% compared with 30% last year.

Moving on to our retail division, third quarter net sales were 31.5 million, up 8% from last year's 29.1 million. Comp store sales increased 10.5% in the quarter on top of a 12.3% comp increase in the third quarter last year. Gross margin in the retail division improve 360 basis points from 48.1% last year to 51.7% this year due primarily to a reduction in promotional selling.

As of September 30, we had 95 stores in operation including our Internet store. During the quarter we opened one new store and closed one under [inaudible] location. For the 12 months ended September 30, 2006, stores opened for the full 12 months generated $746 in sales per square foot.

Moving to other income, the company's commission and licensing fee income, net of expenses, increased 74% in the quarter from 2.2 million to 3.8 million this year. Our Adesso-Madden first cost division continued its strong performance as commissioned income net of expenses increasing 89% to 3.1 million in the quarter compared to 1.7 million in the third quarter last year.

Licensing income also increased from 568,000 last year to 733,000 this year. In addition, as Jamie mentioned a moment ago, we recently signed a new license agreement for dresses under the Steve Madden and Steven by Steve Madden brand. The dresses will launch for spring 2007.

With respect to the balance sheet, we continue to maintain a debt-free balance sheet and ended the quarter with 112.5 million in cash, cash equivalents, and marketable securities. Total inventory at the end of the quarter was 35.7 million, and our inventory turn for the 12 months ended September 30th was 7.3 times.

Accounts receivable and due from factor were 59.2 million reflecting average collection in 58 days. Capital expenditures were 2.7 million for the quarter and stockholders' equity as of September 30th was 221.3 million.

Now on to the outlook for the balance of the year. Based upon results to date, we are increasing our outlook for the year and now anticipate fiscal 2006 net sales will increase approximately 25% to 26% over fiscal 2005. With respect to the bottom line, we currently expect that earnings per diluted share will range between 2.05 and 2.10. While we are still finalizing our formal budget for 2007, we also wanted to provide you with our preliminary thoughts on guidance for 2007.

Overall, we are optimistic as we move forward and believe we are better positioned than ever before, primarily because our product and our core Steve Madden brand are stronger than ever. That being said, we expect sales and profit growth to moderate relative to 2006 as we focus on sustaining and building upon the dramatic improvements we achieved this year.

Our initial expectations for 2007 are for sales to increase in the mid single digits on a percentage basis and earnings per diluted share to be between 2.20 and 2.30.

In sum, we are pleased with our progress to date and believe we have the plans and programs in place to continue our progress into 2007. We look forward to reporting back to you after the fourth quarter.

Now I'd be happy to answer any questions you may have.

Thank you. [Operator Instructions] Scott Krasik, C.L. King.

A question -- you know, just preliminarily on the '07 guidance -- how much visibility do you have into your wholesale business for, let's say, spring of 2007?

Well, certainly, in the cut to order businesses, we have a little bit more visibility, but as we've always said, for us it's really not about backlog. The driver for us is going to be how good the product is, because if the end consumer doesn't respond to it, it's not going to matter what our order file looks like. Our financial performance is not going to be good.

So we've got a sense for spring, but, as you know, we're Steve Madden, we work close to season, and so I wouldn't say that there's a high level of visibility.

So then what would be the main drivers to get either above the 2.30 or below the 2.20? Would it be wholesale operating margins? Better retain comps? What are you guys looking for in the next year -- the key driver?

Well, look, I hate to sound like a broken record, but the single greatest driver of financial performance for us is the strength of our product. So, to the extent that our product continues to be received as well as it has, that's going to allow us to continue to achieve the very solid operating margins that we've done this year.

As far as upside, I think that there is certainly more upside in the retail business on an operating margin basis than there is in wholesale. In wholesale, we're really going to be focused on sustaining the improvements that we've made this year on an operating margin basis, but there's a little bit of room for improvement in retail.

Okay, so from that it sounds like not a lot of improvement on the wholesale operating margin side for the year, is that right?

That's right.

Okay, and then just, lastly, the quarter on Candies -- you talked about a holiday program that wasn't continued; that wasn't successful. What sort of confirmations have they given you about business for next year? Are they starting to do some work on sourcing product themselves? What are your conversations with them coming to?

First, just to clarify -- on the holiday program last year that was just an evening footwear program that they elected not to do because it resulted in a lot of markdowns last year. It cost about 500,000 on the top line.

But all indications are that we're moving forward as their sole provider of Candies footwear. They've given us plans for spring. Our plan is up over last year, and we're already having discussions about the balance of the year.

Good, okay, good. Hey, I'm sorry, also, Steve Madden Men's -- obviously, you're growing your dress business but the athletic side is a much bigger part of that. Can you offset, if you have declines on the sports fusion side, with dress or should we expect that to be down next year?

No, I think it's going to be -- I think because of the shift away from sport fusion and into dress, it's going to be a struggle, but the men's team has done a great job of expanding the breadth of assortment and improving our dress offerings, and that's why you saw, in this quarter, that we were able to be basically flat. We actually had a 1% gain in net sales even with the decline in the sport fusion category because we were able to make up the volume with dress. So I think over the next quarter or two we're going to be looking at sort of flattish type performance there and then, hopefully, we'll be able to resume more accelerated growth getting into Q2 of next year.

Okay, great job, guys, thanks.

Jeff Van Sinderen, B. Riley & Company.

Good morning and congratulations on a good quarter. I wonder if you can go through your operating margin by business segment versus last year, and then as you're looking at your business this quarter and maybe further out, where do you think the opportunities are to increase operating margins and how do you get there?

Okay, well, our wholesale operating margin was 18.5% this year versus 9.7% last year. Our retail operating margin for the quarter was 5.7% this year versus 1.5% last year. And just to repeat what I said to Scott, I think that the wholesale operating margin, we're not looking for substantial improvement next year over what we did this year. We really want to just protect the gains we've made this year, and we feel good about where that business is on an operating margin level.

But, retail, we do see room for improvement there. I think there's a little bit of room for a gross margin improvement in retail and, as we grow that business, we should also get a little bit of leverage on SG&A expenses.

Okay, so it's not necessarily specific segments in your wholesale business where you feel like you have maybe opportunities while I guess maybe in the men's part of that business with the shift, maybe you don't have as much opportunity but, again, I guess at the end of the day, you're not seeing a whole lot of opportunity for operating margins in wholesale. Let me ask you this -- as far as your retail business goes, what do you think you can get to on an operating margin basis there -- 5.7 is probably not your peak, but what do you think that peaks out?

I would like to get to double-digit operating income in retail.

Okay, good. Let me ask you this -- now that many of the Federated Store conversions are complete, how do you feel about that business in terms of how it's developing and what do you see as the near-term challenges for you in the department store space, if any?

We're very pleased with our business with Federated. I know everyone is looking for us to say that they're a behemoth that is killing us on margin, but we partner very well with them. Our business is going to be down roughly $5 million on a $70 million business this year, which is exactly what we had projected based on the store closures associated with the merger, and we feel very good about how we're working with them. Our shoes are doing well there, and we're always looking for ways to improve the way we partner with Federated.

We did something different last month, something new. We brought all of the buyers from all regions of Federated to New York for what was essentially a little mini shoe show just for Federated and showed them the line, and they wrote orders for 1/25 and 2/25 deliveries, and that's something normally we would have waited for the December shoe show to do. So we're working a little bit farther out with them in certain cases, and we think that's going to help us both plan our business better.

Okay, good. And then, it seems like you guys are making some pretty significant progress on the licensing front with dresses now part of the mix. What else should we look for? Anything else on the horizon there that could develop?

We're looking at a couple other small accessory categories right now, but I think dresses is a really important one for us, and we are going to put all of our attention on making the dress license as successful as possible and then, of course, continuing to focus on -- while this isn't a license, it's another category extension -- continue to focus on the handbags as well.

Okay, and then as far as your retail store comps, what should we look for there, going forward? I'm just wondering what you have baked into your guidance and what kind of progression we should look for?

Yes, as you know, we never talk about comp guidance. I'm going to punt that one. Positive for '07.

Positive for '07, okay. Fair enough. Thanks very much and good luck this quarter.

Jeff Mintz, Wedbush Morgan.

Hi, guys, nice quarter. A couple of questions for you, Ed. Sticking with retail stores, do you have any kind of store-opening plans for next year that you could share with us? I mean, obviously, it's subject to availability, et cetera, but do you have some kind of plan baked into your numbers?

Yes, well, for Q4 we've already opened one store in Atlantic City, and we have three leases signed for next year already for Q1. And beyond that, we're still really finalizing our plans. I think a reasonable range to think about for now is six to eight new stores, and we'll update you on our plans there on the next call.

And do you still think there are underperforming stores that you're going to want to close in 2007?

There are some stores on the watch list and right now, I think, two is a reasonable number, I think, about for closures. But, again, it's very preliminary, and we'll give you more detail on the next call.

Okay, great. And then on the Daniel M. Friedman business, can you give me two pieces of information -- one is the inventory that's currently related to Daniel Friedman in your inventory number?

Sure, that's 7.5 million.

Okay, and then, I don't know if you want to give me the exact number or just kind of a sense of how sales were for Daniel Friedman this year over last year when you didn't own it?

Sales were up over last year -- roughly, 10%.

Okay, great. And then just kind of a general question on the men's business -- especially the Steven's Men's business. Obviously, you lumped that in with Jump and with Natural Comfort, but what are you seeing in terms of door counts and acceptance of that line from retailers?

It's so early to say. This is the first quarter of shipment. We did $500,000 of business. We have it in Nordstrom and Federated and Dillard's, and it's an opportunity for us, but it's very early. I think we'll have to give you more detail on that later when we see how the goods perform for a quarter or two.

Okay, great, and then just on the tax rate for the quarter -- I noticed it was up a little bit. Was that just to account for potentially it being up in Q4, or what shall we look for, going forward?

We settled up something in Q3 that was an underpayment from a prior year. So the tax rate will return to 42% starting in Q4.

Heather Bosken, Sidoti & Company.

Real quickly, one housekeeping question -- I didn't catch the SM New York revenue number when you read it off.

It was 7.3 million.

Okay, and 20% revenue growth out of the Steve Madden brand at wholesale, and a 10.5% comp off out of the retail stores, you know, obviously, the merchandise looks good if you're putting up those kind of numbers, but can you give any color beyond that as to where the successes were?

Sure. There were a lot of different things working for us -- flats were tremendous for us, particularly ballerinas. Dress shoes continued to be very good. The peep toes were still good, the platforms -- recently we've seen a pickup with the single-sole dress shoes. As far as boots, booties were very strong for us. From a material standpoint, animal print was very good, suede was good, we're now seeing a big pickup in these multi-materials, so satin or patent mixed with leather. So there's a lot of different things that are working for us.

And with respect to the retail stores and the comps you're putting up there, are you seeing -- is this increased conversions, increased traffic? Is there any color you could share there?

Well, the average unit retail was up quite nicely for us in third, and that was particularly impressive because, keep in mind, we were going up against those western boots from a year ago. So it was a tough compare on averaging and retail, but we were able to increase that, really, by more full-price selling. So boots was a lower percentage of the total, which would indicate that averaging retail might go down but because we were selling the entire product portfolio at more full price, we were able to increase averaging at retail.

Lastly, your spinning off that special dividend. Any outlook on -- is this it? Or will we see, going into '07 and '08, you know, additional returns of cash to shareholders?

We haven't established any dollar target for return of capital, going forward, but we're always focused on maximizing shareholder value here, and so we're going to continue to evaluate at all times, whether or not returning capital is the best way to do that. And so we do have a substantial amount of cash left in the bank. We are generating cash and so, to the extent that we don't find acquisition or investment opportunities that meet our return criteria, then we're going to continue to return capital.

One last quick question -- the smaller brands, 1.5 million in revenue out of Natural Comfort, Jump, and, I guess, Steven Men's -- somebody already touched on the Steven Men's side of it but Natural Comfort, it looks like it's performing -- just from what I've seen in the channel track pretty strongly. Can you touch on where the opportunities are, do you think, for that brand?

Yes, we are pleased with Natural Comfort. It's something we're excited about. We think we have really found a market niche with Natural Comfort, and we've got it in Nordstrom, Federated, Dillard's -- it's doing phenomenally at Nordstrom, which we are very pleased about, and, as I talked about and, as I talked about last time, we've also gotten into some of the real cool specialty boutiques that we weren't selling before we had the Natural Comfort offering. So that's been exciting.

But we really think that's a big opportunity. We're actually -- we've taken a lease on the Lower East Side of Manhattan for a Natural Comfort store that's going to open Q1, and so we're thrilled about that, and we think that's going to really help drive the brand.

Is that one of the three store openings that you have a lease for for Q1 that you mentioned?

Yes.

Susan Sansbury, Miller Tabak.

A couple of questions -- I just want to probe this guidance a little bit -- the 2007 guidance. I noticed, for example, that your gross margins in the third quarter were 100 basis points below the first half, and you suggested that the opportunity to increase wholesale margins next year was limited. Is something going on here that we should be aware of, either in terms of -- any fashion shifts of any significance going on in the business? Do you expect -- is there an issue in boots, do you notice? You said sports fusion was going to be down. Are you looking for any down quarters?

The answer is absolutely not. The reason we're not looking for a substantial improvement in the gross margin at wholesale is because in 2006, we're going to be nearly 700 basis points above where we were in 2005. This is the best year this company has ever had by a lot, and so we have our work cut out to protect and sustain the improvements that we achieved this year. But we're not seeing anything in the business that makes us not optimistic. As I said in my formal remarks, the product is stronger than ever, the brand is stronger than ever, and we feel very good about where we are.

The second question relates to the margin on the retail side of the business. You said your ultimate goal was to have double-digit margin. What is the expectation for 2007?

I'd like to do that in 2007.

You'd like to do that in 2007?

Yes.

Okay, and the key catalyst to get you there?

Well, I think it's gross margin improvement, and I think we should get some leverage on sales -- on the expenses as well.

Okay. Another somewhat niggling question -- if I back out inventories, if I back out Daniel Friedman, your inventories are up -- I think it's roughly 24, 25%, but you're only looking for a 19% increase in fourth quarter sales. Can you parse that for me?

Sure. Well, let's look at the different pieces. If you look at retail, we're up from 11.7 last year to 13.5 million this year, and the sales forecast supports that. By the way, the turn is identical -- 4.2 last year to 4.2 this year. So in wholesale we're up from 10.9 last year -- this is wholesale excluding Danny Friedman -- from 10.9 million last year to 14.7 million this year. But 2.2 million of that increase is in Madden Men's, and the reason for that is the increased open stock business that we're doing in Madden Men's. Last year we were approaching 50% of the business on the open stock replenishment model. This year it's more like 80%. And just as a reminder, the open stock model requires us to maintain inventory in our warehouse to support the replenishment model, but we think it's worthwhile because it drives high margins sales with limited markdown liability.

But if you take out the men's piece, all the other divisions, the inventory has grown at a slower rate than sales.

Okay, great. So in terms of this 2007 preliminary guidance, we should go away with the idea that it more than likely may turn out to be conservative. Again, assuming that you have the right mix of fashion merchandise out there that the consumer will continue to respond to. There isn't anything going on that would suggest otherwise?

Our guidance right now is our guidance. You know, we wanted to give you some preliminary thoughts earlier than we normally do. Usually, we wait until the fourth quarter call. As I said before, we haven't finalized our formal budget, so it could change when we report back to you next time but, for now, it's 2.20 to 2.30.

Okay, analysts professionally try to manage downside risk. Don't, you know, if it's not [indiscernible], I certainly understand this. Okay, great, sounds good, thanks very much.

Angelique Dab, Nollenberger.

Most of my questions have been answered. I just have a quick question on the system upgrade that starts in November. Could you give us some more detail on that, please?

Sure. It's actually already started. We are doing an upgrade of our communication systems, our phone, our network, e-mail. We went from the stores -- we used to be dial-up, so we're upgrading that, and it's about a $4 million project. We've already spent a couple of million dollars, and it will be completed.

What we also -- will be completed shortly. What we are also doing, though, is we have consultants in who are reviewing the rest of our systems, and they are going to be evaluating the state of our current systems and what we want to do there, and then we'll make a judgment about what kind of investments we want to make next year.

Do you have a loyalty program in place in the stores right now?

Loyalty program? You mean --

Are you collecting information on your customers right now in the stores?

How do we collect information -- you know, I have to get back to you on that. I believe we have a loyalty program, but I'll have to get back to you on that.

Thank you. There are no further questions. Please continue with any closing comments.

Thank you for participating in the call, and we look forward to hearing from you -- speaking to you in the next call. Goodbye.

Ladies and gentlemen, that concludes our conference call for today. You may all disconnect and thank you for participating.