Brand House Collective Inc (TBHC) 2012 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Kirkland's Inc.'s first-quarter 2012 conference call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions). As a reminder this conference is being recorded Friday, May 18, 2012. I would now like to turn the conference over to Ms. Drew Anderson of Corporate Communications. You may begin, ma'am.

Good morning, and welcome to this Kirkland's Inc. conference call to review the company's results for the first quarter of fiscal 2012.

On the call this morning are Robert Alderson, President and Chief Executive Officer, and Mike Madden, Senior Vice President and Chief Financial Officer.

The results as well as notice of the accessibility of this conference call on a listen-only basis over the Internet were released earlier this morning and a press release that has been covered by the financial media.

Except for historical information discussed during this conference call the statements made by company management are forward-looking and made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve known and unknown risks and uncertainties which may cost Kirkland's actual results in future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in Kirkland's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K filed on April 12, 2012. With that said I will turn the call over to Mike for a review of the financial results. Mike.

Thanks, Drew, and good morning, everyone. I'll begin with a review of the first-quarter financial statements and finish with financial guidance for the second quarter and our updated performance goals for fiscal 2012.

For the first quarter, net sales were $97.8 million a 3.6% increase versus the prior-year quarter. Comparable store sales including eCommerce decreased 1.2%.

E-commerce sales were $3.3 million for the quarter, a 101% increase over the prior-year quarter.

Average sales per brick-and-mortar store increased approximately 1%. For brick-and-mortar stores, the comp sales decline was driven by a 5% decrease in transactions, offset by a 2% increase in the average ticket. The decrease in transactions resulted from a decline in the conversion rate, partly offset by a 1% increase in the traffic count. The increase in the average ticket was the result of an increase in items sold per transaction combined with a flat average retail selling price.

Sales performance by geographic area was relatively consistent across the chain. Similar to the fourth quarter, sales results in Texas and Louisiana lagged the company average, while results in North Carolina were above the company average.

Merchandise categories showing comp increases were art, mirrors, floor -- floral, wall -- I'm sorry, outdoor living and furniture. These increases were offset primarily by declines in decorative accessories, wall decor and lamps.

In real estate we opened five stores and closed 17 stores during the quarter, bringing us to 297 stores at quarter end. 85% of the total stores at quarter end were in off-mall venues and 15% were located in enclosed malls.

At the end of the quarter we had 2.1 million square feet under lease; that's an 8% increase from the prior year. Average store size was up 7% to right at 7,000 square feet.

Gross profit margin for the first quarter decreased approximately 100 basis points to 39.3% of sales from 40.3% in the prior quarter.

The components of gross profit margin were as follows. First, merchandise margin increased 60 basis points as a percentage of sales. As we anticipated inbound freight costs on inventory were lower than in the prior year, positively impacting the merchandise margin by approximately 50 basis points. Excluding the freight impact merchandise margins were up slightly versus the prior year.

Second, store occupancy costs increased approximately 100 basis points as a percentage of sales, reflecting the negative comparable store sales results, combined with a reduction in the number of leases with negotiated rent reductions in comparison to the prior year. Additionally, due to these renegotiations the prior-year occupancy ratio benefited from accelerations of tenant allowance amortization in the stores that were affected.

Third, outbound freight costs increased 50 basis points, reflecting an increase in e-commerce sales, which carry higher shipping costs and an increase in diesel fuel prices.

And finally, central distribution costs increased 10 basis points versus the prior-year quarter, reflecting the comparable store sales decline combined with the increase in e-commerce sales.

Operating expenses for the quarter were $32.3 million or 33% of sales as compared to $29.7 million or 31.4% of sales for the prior-year quarter. 140 basis points of the increase was due to an increase in marketing expenses, primarily related to two seasonally-focused direct mail mini catalogs that were dropped during the quarter. The remainder of the increase was primarily due to deleverage stemming from the comparable store sales decline.

Depreciation and amortization decreased 30 basis points as a percentage of sales, reflecting accelerations of depreciation in the prior year for stores impacted by lease renegotiations.

Operating income for the first quarter was $3.2 million or 3.2% of sales as compared to $5.2 million or 5.5% of sales for the prior-year quarter.

Income tax expense was $1.2 million or 38.4% of pretax income versus expense of $2 million or 38.2% of pretax income for the prior-year quarter. The slight increase in the rate reflects the lower amount of pretax income versus the prior year.

Net income for the quarter was approximately $2 million or $0.10 per diluted share as compared to net income of $3.2 million or $0.15 per diluted share in the prior-year quarter. At the end of the quarter there were 18,170,236 shares outstanding.

Turning to the balance sheet and the cash flow statement, inventories at April 28, 2012, were $47.5 million or $160,000 per store as compared to $44.6 million or $152,000 per store in the prior year. This represents a 6% increase in total inventory and a 5% increase on a per-store basis.

On a per square foot basis, inventories are down 4% year over year. We expect to end the second quarter with inventories in the range of $46 million to $48 million.

At the end of the first quarter we had $73.2 million in cash on hand as compared to $90.3 million at the end of the prior-year quarter and $83.1 million at year end.

During the trailing 12-month period we repurchased 2.3 million shares of our common stock for a total of $26.6 million as part of our share repurchase authorization that was established in August of 2011.

No borrowings were outstanding under our revolving line of credit. And capital expenditures were $4.1 million for the quarter. Of the total capital expenditures, $1.9 million related to store construction and $1.9 million related to information technology projects with the remainder relating to maintenance items.

The final item I'll cover before turning the call over to Robert is to provide guidance for the second quarter and our updated outlook on the full fiscal year.

For the second quarter ending July 28, 2012, we expect total sales to be in the range of $94 million to $96 million, reflecting a range of comparable store sales results between flat and a decrease of 3% compared to sales of $89.7 million and a comparable store sales decrease of 8% in the prior-year quarter.

We expect gross profit margin to be roughly equal to the prior year, reflecting a slight improvement in merchandise margin offset by increases in outbound freight, occupancy and central distribution costs as a percentage of sales.

Operating expenses for the second quarter should be slightly below that of the first quarter. Based on these high-level assumptions we expect to report a lot of $0.07 to $0.11 per share for the second quarter. We expect to open 10 to 12 stores during the quarter and close five stores.

For the full year fiscal 2012 we expect to open 40 to 45 new stores and close approximately 30 stores, many of these representing relocation opportunities. The overall store activity would equate to unit growth of 3% to 5% and square footage growth of 8% to 10%.

We expect total sales for fiscal 2012 to increase 7% to 9% over the prior year. This expectation for total sales growth reflects the additional week in the retail calendar for fiscal 2012, which includes 53 weeks. This level of sales growth would imply comparable store sales of slightly negative to flat, excluding the impact of the additional week of sales.

Based on our current outlook, we would expect operating margin for fiscal 2012 to be below last year in the range of 90 to 140 basis points. An increase in our expected levels of promotional activity during the second quarter and gradually rising outbound freight costs will make merchandise margin gains more difficult to achieve than originally anticipated.

Continuing investments in technology infrastructure, personnel additions in key areas of the business and an increase in marketing activities will also provide operating margin pressure in the short term.

With a tax rate assumption ranging between 38% to 38.5% for the year we would expect earnings per share to be in the range of $0.87 to $0.97 for fiscal 2012.

From a cash flow standpoint we anticipate capital expenditures totaling $29 million to $32 million before landlord construction allowances for new stores. Approximately $16 million to $18 million of total capital expenditures will relate to new store construction, $7 million to $8 million will relate to information technology, with the balance relating to distribution center improvements and store merchandise fixture enhancements and other refurbishments to stores.

This level of capital spending combined with our operating performance expectations would yield positive cash flow for the year before assumptions of share repurchase activity.

Thank you, and I'll now turn the call over to Robert.

Thanks, Mike. The first-quarter results disappointed our team after the effort in prior months to address merchandising and marketing opportunities that we felt would improve our first-half business and continue the sales momentum we had slowly built in the back half of 2011. Certainly, we were cautious in setting expectations for the quarter, but we felt that a different approach to our Spring merchandising would provide a more cohesive first-half merchandise mix and more quickly and strongly address the change in seasons and the resulting customer preference for Spring colors and outdoor related merchandise.

While gross sales only fell slightly below our expectations, comparable store sales lagged the prior-year quarter despite a small lift from eCommerce sales. As expected we had a small and time-limited merchandise margin advantage of about 50 basis points from inbound freight differentials entering the quarter.

Final merchandise margin results were slightly up to the prior-year quarter. Traffic, a big emphasis of our marketing effort, was slightly up on a comparable basis for the quarter. And our work throughout 2011 to address improved average unit retails, items per transaction and average transaction yielded almost $1 increase in average ticket, but our conversion rate fell about 6% to produce a slight drop in comparable sales.

We noted that the quarterly results were significantly affected by what seemed to be a change in consumer sentiment in the last 5 to 6 weeks of the quarter. We produced in-line and comparable sales in February and throughout half the month of March. Sales lagged thereafter, likely influenced by another rise in fuel prices toward $4 per gallon and [live] speculation that prices would go higher in this run up.

Promotional activity to drive traffic and sales in order to counter the customer pull back was accelerated and limited our year-over-year merchandise margin gains. Fuel prices have recently pulled back from recent highs, but consumer confidence has not rebounded. Sufficient noise remains in the macroeconomic environment to suggest a cautious outlook for retail in the near term is reasonable.

Our category continues to lead our business with strong sales and merchandise margin performance to plan and last year, delivering almost 20% of our first-quarter sales. Furniture mirrors, floral and outdoor living offer these respectable comparable sales results.

Alternative wall decor made great progress versus our plan but continued to lag in comparable sales due to the reallocation of the inventory spend in this category.

Decorative accessories continued to be an area of concern as this important category represented almost 13% of our total business for the quarter, but lagged our sales plan and last year. A new initiative for Kirkland's outdoor living merchandise relating to pool and patio was a late-quarter entry to the mix and has performed reasonably well.

However, in hindsight, with the exceptionally mild winter and very early spring we delivered to our stores a bit later than would have been optimal for this merchandise.

Some of our categories were pushed up slightly in price point as well as on the style scale for the first half, mostly furniture, decorative accessories, candles and lamps. Furniture benefited the most from including some current market trends such as industrial and distressed within our traditional mix.

In lamps and decorative accessories we introduced new colors, style, scale, materials and price point with some success but we may have moved the style and price too much and too high, respectively, and are adjusting slightly to be sure to include sufficient merchandise for our traditionally styled customer and to continue to deliver easily identified value to the customers.

Mike gave our cautious opinion about business expectations for the second quarter, pretty much in line with much of the retail community. We expect continued slow economic growth and cautious consumer spending, consistent with April's slowdown.

In setting those expectations we are very aware of the environment, but our primary focus is and must be focused on the delivery of consistent and reasonable growth in period-over-period sales and earnings comparison. That effort is set against a background of major undertakings in our business, such as increased spending to support continued steady store replacement and modest growth; finish our four-year program to upgrade our most critical information systems; upgrade our in-store and multi-unit supervisory talent to support a better and more consistent store experience; maintain growth and momentum in our eCommerce; and significantly improve the content and delivery across all forms of our marketing message to customers about our strong value proposition and constantly renewed merchandise mix.

I don't believe we're very far off, but the last several quarters suggest our primary focus must remain on merchandise sales improvement. We are an industry leader in the productivity of inventory and have demonstrated ability in the high priority on the consistent control of inventory volumes. That won't change.

What we are well aware must improve to produce strong creation of shareholder value is consistent sales productivity. Over our 46-year history, including our almost 10-year public experience, we've maintained a merchandising plan featuring item-focused buying, a constant flow of new products, high turn, volume sales and value pricing. The result has been a retailer that is sometimes very hot and sometimes not.

We've also gathered a very loyal group of customers across more than 30 states that are fans of the merchandising experience.

As we have resumed growth and exited in close malls and moved off-mall into strip centers and a larger footprint since 2008, that method has produced a store model that features rapid maturity and consistently strong cash flows. However, our comparable store sales experience has featured long runs of both strong and weaker comp sales.

So our task is necessarily to continue to address the core problem without changing our merchandise DNA or deserting our customer base or sacrificing our organic growth opportunity. We don't think our measured new store growth should or must stop while we address those issues.

We are unique in our sector at less than 300 stores with an obvious growth potential in a period of great real estate opportunity. A very large amount of our new store activity over the past three years and projected and planned for 2012 has been for replacement stores remaining in the same markets as their mall store predecessors.

By 2014 we will be very close to finalizing a seven-year plan to move out of small, expensive and closed-mall locations. Replacing stores in existing long-term markets in proximity to the prior mall store is a safe bet to deliver a productive store, but doesn't guarantee comp sales increases for new store classes, and clearly shows the importance of merchandising success.

Our focus as we steadfastly move toward fall 2012 or early spring 2013 to turn on our new generation Oracle merchandising software system, is to apply better information to the decisions about what to buy, how it's priced, and if, how and when it's replenished and how it's allocated. While more and better information is wonderful and we expect to enjoy a much enhanced decision-making process with our new merchandise hierarchies, thematic tracking, store-specific inventories and later markdown optimization, we recognize that we need to add to our merchandising ability with experienced senior management additions and to continue the modifications to our merchandising process to utilize a more data-driven approach in all aspects of our buying and merchandise planning and allocation.

Therefore, over the next several months and beyond, as necessary, our management and board will work together to identify our needs in process change and talent. And to fill those needs while maintaining our focus on creativity and product development and delivering value to our customers we know that we can deliver new and unique merchandise at great prices and at the same time be more structured, efficient and disciplined, propelling our merchandise organization toward more consistent productivity.

We will continue to apply that same effort to marketing. Asking customers for their business effectively is a relatively new thing for us, given nearly 41 years as predominantly mall-based retailer. For the first time we delivered two spring sales catalogs to our e-mail customers and to over 1 million potential new customers. We've begun an aggressive campaign to add more e-mail recipients to our 2.5 million base, retain that group and return former recipients.

We continue to expand Facebook and other social media followers, and to evaluate the return on those investments. We are constantly evaluating the effectiveness of our increased marketing spending, but recognize the considerable lag between spend, recognition, creation of a widely known brand and creation of new customers, a necessary endeavor.

As with merchandising we will continue to press on improvement in process and people to seek maximum penetration and productivity.

We've already made great strides in learning to drive in our new off-mall neighborhood, yet, we have much more important work to do. We'll remain very focused on optimizing short-term results, but we will also ensure that we make decisions for the long term that deliver shareholder value that we know Kirkland's is capable of providing.

We appreciate your interest and patience. I'm confident we've set the right course and look forward to reporting our progress.

Operator, we'll take questions now.

(Operator Instructions). Brad Thomas, KeyBanc Capital markets.

Thanks. Good morning, Robert; good morning, Mike. I wanted to just ask first of all about the marketing side of things. Robert, you mentioned that it can take time for new marketing efforts to drive new customers. But as you reflect on the investments that you made on this quarter, how much do you think it helped benefit comps? Is it a case that you didn't really see any benefit from it and that negative 1.2 comp was kind of reflective of just advertising that you had been doing over the past year? Or do you think things would've been worse without that advertising? How are you guys looking at the current investment?

Carefully. We are trying to understand what it added and what it didn't add. We inserted coupons into the -- both of the books in order to get some idea about how the redemption from those coupons affected business. I think it's very difficult on our first two efforts to assess that. There's a lot of anecdotal information that we get from stores. And when we are in stores we see people using the catalog to shop.

And we've had a good bit of nice comment about it. But all in all, as I look back at the first quarter, I'm not sure I'm glad we did it because I'd like to have had that $1 million on the other side of the line. So it's a little bit of a difficult decision right now as to where we want to go with it. (multiple speakers)

Just to add to that, on the coupon redemption, which we can measure pretty easily, I mean that by itself would suggest that the sales lift wasn't much. But as Robert said there are anecdotal -- there's things out there that suggest it drove more than that, and we certainly think it did. But just looking at that measurable coupon redemption, it didn't look like a big impact.

Okay. And then just to follow up on the store actions that you all have had over the last couple years, it's been, by my estimate, about 25% of stores that are in a new location or a new store. Can you just give us an update on how those newer stores are performing when you look at a metric like sales per square foot or four-wall profitability that kind of adjust for the larger size that they have?

If you look at the new stores, and really, I mean when you look at the last two classes or last three classes would be more representative of the new real estate we're going after and the relocations we have done that you referenced, those stores are comping right with the company average. If you look at the class of '09 and class of '10 they're very comparable to what we are seeing in the rest of the chain.

On a per square foot basis, it's a similar story, another bigger store so we are generating more sales. And they are also in real estate where the occupancy cost is more attractive and not as high as some of the older mall and early off-mall stores. So they are more profitable on a dollar basis, but we've yet to see the comps lift, and as well as the sales per square foot. And some of that may have to do with the fact that they are relocations and you're dealing with the same customer base.

Okay. And then just one housekeeping item, I believe last quarter the guidance excluded any benefit from share repurchases. Is that the case again for this quarter?

It assumes kind of a modest amount of that going forward.

Got you. Okay. Thanks, guys.

David Magee, SunTrust Robinson Humphrey.

Good morning, guys. Just a couple of questions. One is when you slice and dice the chain based on geography, are you seeing anything different as far as where the stores are located versus the sales trends?

Could you repeat that, David? We're having a hard time hearing you. You were a little low on volume there.

Yes, sorry, I'll say it louder. When you look at the chain and the look at the differences of the store performances throughout the chain are you seeing anything different with regard to geography where the stores are located that would account for any trends?

Not really. In our prepared comments there I think the overriding comment is it's a consistent sales trend across geographies. We did call out Texas being a little bit -- and the Gulf area to be more precise -- being a little bit below that company average. And then in the Carolinas, we've seen better results. I think some of that has to do with improvements we have made in staffing and those stores in that area of the country, and the comps they were up against. But that's -- the general statement is pretty consistent.

Are you seeing anything different now versus a few months ago with regard to promotions by other retailers?

You know, we try to keep up with what's going on promotionally. I don't think we see much difference, honestly. I think when we are highly promotional, we can drive traffic and sales, but that's certainly not margin productive. And for example, we had one of the -- I guess we had the best Saturday before Easter -- excuse me, before Mother's Day that we've ever had, but that was a highly promotional day. And it's nice and we enjoyed it, but you'd like to drive that without a high level of promotional activity around it. So I think it's somewhat the same.

Do you sense that there will be any difference going into the fall, based on what you see in the sector over the last month or so?

Absent a change in consumer sentiment, I don't.

Do you think it will be promotional this fall then?

I do.

Yes. Okay. Well, thank you.

Anthony Lebiedzinski, Sidoti & Co.

Yes, good morning. I wanted to follow up on the previous question in regards to the marketing strategy; so the catalog didn't exactly pan out the way you guys had expected. So going forward, what changes are you making to your marketing strategy?

Well, I think we'll take a really hard look at how we use a vehicle like that. We may do it exclusively online, we may do a much less robust offering. The mailing is really the big cost other. And the effort was really directed toward new customers more than existing customers, all of whom got it online. So I think we are still in the process of thinking about how that works for the fall, but I would expect that we will try to pare back some of the cost.

We'll continue, as I said, to push hard to lift our e-mail base, because that is a well-proven source for business. And we communicate with that e-mail base very frequently.

We have been very -- somewhat of a leader, I guess, in our sector. I would think we are, in working with social media and trying to gain some customer recognition and transfer there.

I'm not entirely sure that we'll know the results of that for a while, because there's so many new avenues, interest and others, that are making some interest impact.

We will continue to do that, but I don't know that that will be the major focus. I think e-mails and maybe a more or a less costly way to provide some interaction with a new customer will probably be the approach.

Okay. And the wall decor business, decorative accessories -- those were down last year in the first quarter over here, so, what is your plan to revive these segments?

We've been working on wall decor for a while, and we are seeing I think some nice results to plan, but we've taken some spend out of that; mainly because one of the most important segments of that, the shadowbox segment, was really ineffective in the second half of last year. And we felt like we needed to reduce the spend in that category and put it other places. So I think we are doing a good job in the wall decor area.

There are some bright spots in decorative accessories. In some of our classes we did extremely well. We just didn't do particularly well in a couple of big ones, clocks and containers come to mind immediately. And we are obviously evaluating exactly what we did and what we think about and why it didn't work and how much money we want to put in that area going forward.

Deck is a very important category for us, because it helps us establish some ideas about what's actually happening with our customer relative to style, color and other trends that exist in our sector. So we pay a lot of attention to it and we will continue to do that.

Okay. And --

We refocused our -- and regrouped our buyer that we formerly had on deck and had moved somewhere else; we put her back in place. And I think over time we'll do well with it. I think the opportunity for us there is to continue to add new and to help with new styles, new colors, but also retain a little bit more of our traditional-style customers' merchandise.

Got it, okay. And can you talk about impact of weather on your business?

The only impact that I really think it has, I wish probably we had delivered some of our outdoor living merchandise earlier because we certainly had an earlier spring. Throughout the South and Southwest, where we have most of our stores, we had virtually no winter, and so a very early look by the consumer at spring product.

That's something that was a little bit different for us to sell, and I think our timing can be improved. So I think we'll do a better job with that going forward. But I didn't see any other impact that I thought was particularly compelling. We were prepared very early in the new year and to -- and did deliver new spring colors, spring-oriented and outdoor merchandise. And that's a change from prior years.

Okay. Can you just give us a store count, off-mall versus mall locations at quarter end, please?

It's 44 off -- or 44 on mall and I guess that would make 200 and -- 49? 249 off.

Okay. Thank you.

Neely Tamminga, Piper Jaffray.

Good morning, guys. So just a little bit of questions here as well as maybe a wee bit of summary.

So it seems to me that you guys historically over the years that we've covered you is that you do very well seasonally in the second half versus the first half. I mean that's really kind of where you guys tend to shine with your customers and the relevancy and the top of mind. So I hear what you're saying about store is important, deck is important, things like that, but are there ways you can actually flow the product differently in micro-stories maybe in next year? Or was it just simply you just didn't have the right product at the right time because of the warmer weather? Just wondering if it's a flow issue or a lack of a category dominance issue in the first half? Any thoughts on that?

Well, you are absolutely right, we are better in the second half of the year when there is a heavy seasonal influence. That's something we have been probably the most adept at over the years.

Neely, this year we -- as I said earlier we introduced a lot more spring and outdoor-related merchandise. We did pretty well with that merchandise through the first half of the quarter, and then seemed that we hit a wall. And it's a little hard to tell whether the wall was entirely us or there was some macro effect to it, but we had a big slowdown in April.

And our Spring collections that we entered the year with actually had a couple 100 basis points in margin improvement over the company. We had a nice average retail. It turned pretty well.

I mean I think as we look back at that, maybe the thing that we -- when you relate to flow maybe the thing that we didn't do is have enough backup flow of that merchandise. And I think we were trying to be extremely cautious with it as we entered sort of a new group of merchandise and a new way to go about the first half. So we may have out-thought ourselves a little bit. But it seemed like the right thing to do at the time, so I would like to have had a little more of what we sold in February in the first three weeks of March.

Okay. That's really helpful. And in terms of your seasonal build and relevancy with your customer, does that kind of kick off that late July time frame or is that more kind of that September, October? Can you remind us in terms of when she is really coming to convert in your store?

We will begin to have some seasonal merchandise in the form of harvest Halloween by mid-August in the stores. And that sort of -- that piece of seasonal will go strongly through and conclude with Halloween weekend. And then we'll introduce Christmas in September. And of course we'll exit immediately after New Year's on that. So we are well into buying for that, and anticipate a reasonably good seasonal season again this year.

Neely, in terms of the flow, the volume, though, in addition to the seasonal nature of the merchandise, we have -- the seasonality of the business has historically really started to kick up in July in terms of just volume -- sales volume as we run a semiannual event. And then it continues on through the back half.

We've, in the last five years or so, had somewhat of a lull in the business, kind of April to June timeframe. So that's just the seasonality pattern we have established over the years.

Okay. That's really helpful, Mike. And we will be watching you guys closely through this transition. Thanks so much for your help.

Thank you.

(Operator Instructions). Bill Dezellem, Tieton Capital Management.

Thank you. Relative to the new store openings and the closings, would you please remind us again when it is that you anticipate shifting from the strategy of closing mall locations and opening the off-mall relocations? I know you mentioned it in your opening remarks, and I just missed what you said.

And then secondarily, would you go into some more detail in terms of what you think the implications of that shift will be on the business when it does take place?

I'll take the first part of that, Bill. We mentioned approximately 30 closings this year. There's 44 mall stores left at the end of the first quarter, but there's also a couple of dozen other smaller lifestyle center stores that ultimately we want to reposition as well. So I think the level of closings -- this is probably a high point this year, and they'll start to dwindle as early as next year.

But that will continue to work off, and you think of about 60 stores or so over a reasonably long period of time. I think the pace of closings is going to slow as early as next year.

I think in terms of the implication of it is that we are working now to do some remedial work in the stores, off-mall stores, that we'll keep to re-fixture those so that they are more uniform in fixturing. And I think that will allow us a little bit better opportunity and visual and store operations to be more homogeneous, and also to present a face to the public that's more recognizable as Kirkland's.

I think the move off mall, as Mike mentioned earlier, has produced a more profitable store with a little bit larger size but lower occupancy cost. And I think how we use that opportunity that we have with additional space, how productive we are with that, will go a long way toward determining how we maximize the move off mall. I think we have some work to do there.

Thank you both.

Thanks, Bill

Thank you.

Mr. Alderson, we have no further questions at this time, sir. I'll turn the call back to you.

Thanks, everyone, for your time and interest. We'll talk to you next quarter. Thanks.

Ladies and gentlemen, this does conclude the conference call for today. We thank you all for your participation and kindly ask that you please disconnect your lines. Have a great weekend, everyone.