Tillys Inc (TLYS) 2013 Q4 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Tilly's Incorporated fourth quarter fiscal 2013 results conference call. Today's conference is being recorded. I will now turn the conference over to Anne Rakunas of ICR. Please proceed.

Thank you and good afternoon everyone. Thank you for joining us today to discuss Tilly's fourth quarter and fiscal 2013 results. On today's call are Daniel Griesemer, President and CEO, and Jennifer Ehrhardt, CFO.

A copy of today's press release is available in the investor relations section of Tilly's website, at Tilly's.com. Shortly after we end this call, a recording of the call will be available as a replay for 30 days in the investor relations section of the Company's website.

I'd like to remind you that certain statements we will make in this presentation are forward-looking statements. These forward-looking statements reflect Tilly's judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting Tilly's business. Accordingly, you should not place undue reliance on these forward-looking statements.

For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our fourth-quarter 2013 earnings release, which is furnished to the SEC today on Form 8-K, as well as our filings with the SEC referenced in that disclaimer.

We also note that this call contains non-GAAP financial information. We are providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP. And you can find a reconciliation of these metrics to our reported GAAP results in the reconciliation table provided in today's earnings release.

Also for today's call we have a limit of one hour. So when we get to the Q&A portion, please limit yourself to one question at a time, to give others the opportunity to also have their questions addressed.

And with that I will turn the call over to Daniel Griesemer, Tilly's President and Chief Executive Officer. Dan?

Thank you, Anne, and good afternoon everyone. Thank you for joining us today. On our call I will be providing you with an overview of our fourth quarter and full-year performance and key factors that drove our results. I will then provide an overview of our key initiatives for fiscal 2014 and then Jennifer will review our financial results in more detail and provide an outlook for the first quarter. I'll provide a few closing comments and then we will open up the call for your questions.

While our fourth-quarter results were as expected, we are not satisfied with this level of financial performance. I am, however, pleased with how we navigated the challenging retail environment, which reflects the disciplined execution of our team. We controlled costs, appropriately positioned our inventory levels, and adhered to a planned promotional strategy in the quarter that delivered better product margins than the prior year.

We delivered earnings per share of $0.19 in the fourth quarter, in line with our outlook. And we began the first quarter of fiscal 2014 with inventory well-positioned at down 13.5% per square foot.

We increased our cash balance in the year and our strong balance sheet reflects our disciplined approach to managing our business. We maintained our strict expense discipline throughout the year. While we opened 27 new stores in fiscal 2013, increasing our square footage by approximately 15%, we remain debt-free and expect our cash from operations to continue to fund our growth.

Clearly the continued challenges in the retail environment have impacted our sales, as they have for teen retail in general. Acknowledging the challenging landscape and our goal to grow earnings, we have developed three key initiatives for fiscal 2014 that we believe will lay the foundation for increased market share, brand awareness and improved profitability. These are increased product differentiation and innovation, a greater emphasis on our digital platform, and evolving our real estate strategy.

Let me now expand on each of these. First, increased product differentiation and innovation. This year we will increase the products and increase the brands that are new, unique or exclusive to Tilly's, especially in men's and juniors.

We will also be establishing new exclusives and exclusive collaborations with our brand partners, much like the Neff Snoop Dogg collection in men's and the Neff Austin Carlisle collection and juniors that we recently rolled out. We are also actively building upon and identifying new product offerings like our Full Tilt active line for juniors, which was recently launched and which we plan to expand in 2014, as well as growing our home and electronics offerings, which are available both in-store and online.

These are just some of the ways we plan to drive incremental sales by providing our customer with relevant merchandise that fits their action sports-inspired lifestyle.

Second, a greater emphasis on our digital platform. Over the past several years we have been layering on elements of our omni-channel strategy, and we recently completed the implementation of our fully integrated digital platform.

With this foundation, and because of the clear indication of our customers increasingly interact -- customers increasingly interact and shop this way, we see extraordinary opportunity before us. As a result, we are directing much of our focus and capital investment this year towards further improving our capability across a variety of key digital channels to give our customers seamless access and increased ease of shopping. We believe this will increase our market share and our brand awareness and recognition.

Improvements in this area include leveraging our new loyalty program, Tilly's Hook-Up, to drive more direct and targeted communications with our customers and to gain more insight into their shopping behaviors and preferences. Upgrading our eCommerce and mobile platforms, increasing digital marketing, and enhancing our customer analytics.

eCommerce remains a critical driver of future sales growth, and we now believe eCommerce sales could represent a significantly larger percent of our total business than previously communicated. Our new state-of-the-art automated eCommerce fulfillment facility will also allow us to capitalize on this tremendous growth opportunity and is expected to be operational in the second quarter of this year.

Our third initiative is evolving our real estate strategy. While we continue to expand our store footprint, we have refined our store operating model to better focus on opportunities we believe will improve profitability. We have reduced our expectations for annual net store growth in the near term to low double-digits, compared to our prior target of mid-teens growth. For fiscal 2014 we expect at least 18 net new stores.

Further fine-tuning our store model, we are tailoring our size to the market and the venue. And we plan to reduce the average new store size by approximately 10%, representing a target of 6700 square feet to 7200 square feet compared to our prior target store size of approximately 7500 to 8000 square feet.

And we are launching an outlet strategy in fiscal 2014. Our outlet model reflects improved profitability with a smaller store footprint and a tailored store design that requires less capital investment. We expect approximately 30% of new stores this year will be outlets.

We will have a dedicated team as well as unique product offering and store operations model, but all in keeping with the Tilly's brand.

Now I'd like to turn the call over to Jennifer for more detail on our financial performance in the quarter and to update you on our fiscal 2014 first-quarter outlook. Jennifer?

Thank you Dan and good afternoon everyone. For the fourth quarter net sales decreased 0.6% to $139.9 million, an $875,000 decrease compared to the fourth quarter of 2012 that included a 53rd week. Comparable store sales decreased by 4.9% compared to the same 13-week period in 2012 with a similar level of comps in guys, lower in footwear and accessories, while juniors and kids posted positive comps.

Our eCommerce net sales grew 2% and 11% compared to the same 13-week and 52-week periods in 2012. When looking at eCommerce merchandise sales only, we had a meaningfully higher increase in both periods. Our fourth-quarter comps reflect lower traffic, and to a lesser extent, average transaction value partially offset by an increase in conversion. However, on a full-year basis we had increases in both average transaction value and conversions that partially offset lower traffic.

Gross profit was $43.8 million or 31.3% of net sales compared to 33.3% of net sales in the fourth quarter of 2012. Appropriately positioned and manage inventory resulted in a 40 basis point increase in product margins, which was offset primarily by deleverage in buying, distribution and occupancy costs as a result of a negative comparable store sales.

On a full-year basis, product margins increased by 30 basis points. Selling, general and administrative expenses were $35.3 million or 25.2% of net sales, compared to an SG&A rate of 22.7% in the fourth quarter of 2012, and reflects $1.8 million of store asset impairment charges, store payroll deleverage on lower sales and comp, and increased depreciation and other costs related to prior capital investments.

Our operating margin was 6.1% compared to 10.5% in the fourth quarter of 2012, reflecting the previously discussed deleverage of buying distribution, occupancy and store payroll cost, the store asset impairment charges and other SG&A cost pressure, partially offset by higher product margins.

Net income was $5.4 million or $0.19 per diluted share, based on the weighted average diluted share count of 28.2 million shares and an effective tax rate of approximately 36% due to a one-time tax benefit related to return to provision adjustments. This compared to an adjusted net income in the fourth quarter of 2012 of $8.9 million, or $0.30 per share after applying a pro forma 40% expected long-term [effective in] corporation tax rate.

Turning to the balance sheet, we ended the quarter with cash and marketable securities of $60.4 million with no borrowings and no debt outstanding under our revolving credit facility. As we announced today, the Company amended its revolving credit facility agreement to adjust certain terms and extend the maturity date to May 2017.

Cash used for capital expenditures during the quarter totaled $6.7 million compared to $7.7 million in the fourth quarter of 2012, and were primarily related to our new eCommerce fulfillment center, new stores open during the quarter and new stores under construction during the quarter that are scheduled to open in the first quarter of 2014.

Inventory totaled $46.3 million at the end of the quarter, representing a decline of 13.5% on a per square foot basis compared to the prior year.

Looking ahead to the end of fiscal 2014 first quarter, our plans continue to reflect our strategy of delivering healthy product margins and maintaining strong management discipline. Therefore we have planned inventory per square foot at the end of the first quarter to be down in the mid-single digits. We believe this best positions us with the right level and composition of inventory in order to optimize the spring break selling period.

The fiscal 2014 first-quarter outlook that I will now outline reflects achieving this level of inventory. Our outlook for the fiscal 2014 first quarter reflect a cautious tone due to a continuation of volatile and weak traffic trends in a highly promotional environment in teen retail, as well as a lack of visibility into the very important spring selling period as a result of the Easter shift.

If these trends continue, we would expect first quarter comparable store sales to decline in the mid-single digits and net income per diluted share to be in the range of $0.00 to $0.04 per diluted share. This assumes an anticipated effective tax rate of 40% and a weighted average diluted share count of 28.2 million shares. First quarter 2013 net income was $0.08 per diluted share based on a weighted average diluted share count of 28 million shares.

Capital expenditures are expected to decline in fiscal 2014 to between $24 million to $28 million as our new eCommerce fulfillment center is near completion. The majority, approximately $22 million is related to the opening of at least 18 net new stores and remodels and refreshes of our existing stores, as well as investments to further improve capabilities across our digital channels, as Dan previously mentioned. Capital expenditures associated with completing the new eCommerce fulfillment center are approximately $3 million for fiscal 2014. We plan to continue to fund our capital expenditures with cash from operations.

In fiscal 2014 we will adhere to our culture of strong cost discipline and will continue to diligently control our expenses while appropriately planning for long-term growth. Considering the volatility of trends in this challenging retail environment, we are not providing any further outlook for 2014 at this time.

Now I would like to turn the call back over to Dan for some closing remarks. Dan?

Thanks Jennifer. This was a challenging year in which our financial performance was unsatisfactory. However, our team executed well given the headwinds we face and I am pleased with how we managed inventory, controlled costs and increased product margins in this environment.

We increased our cash balance and maintained a strong debt-free balance sheet while expanding the Tilly's brand into new markets. As we look to increase our market share and improve profitability in the long-term, we are intensely focused on three key initiatives this year, which include increased product differentiation and innovation, a greater emphasis on our digital platform, and evolving our real estate strategy.

We have a dedicated and collaborative team here at Tilly's and we are working hard to operate more effectively and efficiently at everything we do in these challenging and changing retail environments in order to drive quality, sustainable earnings over the long-term. Before I close, I'd like to thank everyone at Tilly's for their hard work and dedication this past year, our brands for their continued partnership, and our shareholders for their continued confidence and support.

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

(Operator Instructions). Dave Kang, ROTH Capital Partners.

Good afternoon everybody, this is Joe Bess for Dave. My question is on eCommerce. It sounds like you guys are seeing some nice growth there, and you see it actually improving even beyond what you guys are previously anticipating for that portion of the business. Can you talk about some of the drivers behind that and what kind of revenue as a percentage of total sales that could be in the future now?

Previously we had communicated that we think it could be at least 15% of total sales. We really don't have a limit on it. We just recognize that given all of the initiatives we have in place, our customers' engagement and activity online and in mobile really indicates that there is a significantly greater opportunity than just 15%. And we recognize that also as we continue to grow our store footprint.

So the drivers of that are the drivers that have been in place now for quite some time, as well as a whole new set of capabilities. But the drivers are an expanded assortment; a more dominant, more compelling, exclusive assortment of more brands; more categories, more styles from those brands; a very vibrant shopping experience.

And now with the completion of comprehensive digital platform with the launch of our -- just final launch of our iPad app yesterday, that kind of puts in place some capability that we have been really setting up now for almost two years. And so we look now to be able to leverage those investments and get very good at the capabilities that we now have at our disposal, and the things that I talked about around increasing our digital marketing spend and getting smarter about customer analytics, and a whole host of things.

So we are very bullish on the potential, and it syncs very nicely with our continued store growth and see them working hand-in-hand for the long term.

Great, thank you.

Lindsay Drucker Mann, Goldman Sachs.

Good afternoon guys. I know that you're not giving full-year earnings outlook, but in light of some of the strategic initiatives you're talking about, new differentiated products, new exclusive partnerships, and the eCom investment, can you talk about your SG&A plans for the full year, how we should be thinking about that, or how we should be thinking about product margins given some of those investments?

Sure. Looking at SG&A we are planning that with minimal cost increases aside from some of the initiatives that Dan discussed. And in the grand scheme of things, a lot of work put behind those initiatives. But from an investment perspective, some of that is CapEx versus from an expense perspective, so a little bit less on the expense side for those initiatives, but overall minimal cost increases in SG&A.

(multiple speakers) product margins side?

Q1 guidance that is reflected does show improved product margin for the first quarter. And we continue our strategy, and our focus for the year will also be to deliver healthy product margins as well.

Okay. And on the outlet piece, Dan, maybe you can talk about, first of all, where those outlets that you're looking to open in 2014 are going to be located, how you're thinking about the product that you will stock in outlet stores, and how that sort of squares how you're partnering with your vendors, and how that squares with your strong view on protecting the brand from being overly discounted.

Sure. So we are very excited about the opportunity we have before us. As part of the total store growth, and its incorporated -- our plans for outlet are incorporated in our total plans for fiscal 2014 and embedded in all that. Where will be the great outlet centers, either that are coming online or that are already established; outlet is not new to us.

We have 10 to 12 stores in outlet centers today that operate more as full-line stores than true outlets. We are very familiar with the venues, we are familiar with the business model, we've dedicated a team and have a unique store operations and product line that is a combination of purchases from our brands, again leveraging our tremendous relationships with our brands, purchases from our brands and our own private label product that will be mixed in order to provide a relevant offering in a true outlet environment.

So it's a combination of well-priced branded and well-priced private label product consistent with an overall outlet plan. And we've been working with our brand partners on filling the pipeline with appropriate product in that regard. So we are very excited about the opportunity and the unique store format and access to this vibrant channel.

(Operator Instructions). Jeff Van Sinderen, B. Riley.

Good afternoon, and just to follow up on the eCom business, Dan, maybe you could just give us a sense of how much that is of your business today. And then also since it was up, I think you said 2%, just wondering how you are thinking about with that within the context of the broader shift that seemed to happen, toward eCom throughout the industry in Q4.

Do you feel like you fell behind maybe a little bit in developing capabilities for that, and now you're catching up with some of the initiatives you're doing?

And then also maybe you can just touch on performance in terms of geography. Where did you see a difference, where are you seeing a difference in early 2014? On the weather, maybe touch on mall versus off-mall performance. And then also if you could just touch on inventory being down, I think you said 13.5% per foot, how we should think about that. Thanks.

There several. I think I got them. So eCommerce ended up at 12% of the total business for fourth quarter; it's actually 14% of the total business. It's extremely vibrant. We are very, very bullish about the potential there.

The results of 2% are a little bit misleading because that's net of a lot of pushes and pulls. But the long and short of it is, as we have mentioned, overall traffic certainly had an impact on the total business, and it was not unique to outlet. It was obviously influencing the stores.

But the real kind of headwind that we had was as we began the quarter with leaner inventory in fourth quarter, we talked about less clearance inventory and anticipating less clearance selling. Clearance is productive on outlet, but with less -- I mean online, but with less inventory I think the online business was more negatively affected.

So we actually began the first quarter with significantly less fall/winter product, and we know that that had an impact on our sales, on eCommerce as well as anticipated and planned shipping promotions as part of our overall planned promotional strategy that also had an impact. So we are very capable in this regard, feel very good about the things we are doing.

In fact we've got initiatives, as I mentioned, to enhance -- further enhance the mobile and desktop platforms going forward, and a whole host of other initiatives to try to drive that business. There were not really many geography differences. I think you're kind of wondering if there was a difference in weather. Sure, weather impacted our stores that were impacted by weather, and we see that. But it wasn't significant or material, that's why we didn't necessarily call it out here.

But yes. We certainly know that stores that were affected and regions that were affected by weather did not have as good a business as those that were not. And no real meaningful differences between mall and off-mall in terms of venue, traffic or performance. No outliers there. Again, the whole kind of slightly lowered river applies in relationships.

And then in terms of inventory, this remains a great skill of the Company and I am very proud of the way the team has executed and managed this. Exiting the fourth quarter, having done what we needed to do to solve some problems, any problems that happened in the fourth quarter -- solved them, and exited with inventory down 13.5%. I think in Jennifer's comments we talked about somewhere in the mid to high single digits down for the end of the first quarter. We will remain vigilant on keeping that inventory clean and current.

Having newness and relevance is critical, and so as you think about it, if we really began that much cleaner with residual fourth quarter projects -- product coming into the first quarter, that gives us the opportunity to really put forth a lot of newness for spring and summer. So we feel good about where we are in that regard.

Steph Wissink, Piper Jaffray.

Good afternoon everyone. Just a clarification: I want to make sure we are interpreting your comments on differentiated merchandise correctly. You estimated you assuming that you span that percentage of the mix, or is it just better emphasize that existing offering?

Actually it is both. It is an expansion, so we are increasing the number of brands and increasing the number of products that are new or unique or exclusive. So it's a combination.

Then we are using both our digital capability and our catalog capability and in-store capability to communicate that newness more effectively. And that includes newness and exclusivity from very large and well-established brands that are a meaningful part of our business like Volcom and RVCA and NIKE and all kinds. So it's I'm not just referring to adding on a few small brands, it's really across the board.

If I may follow-up on the comments around store size, you're rethinking that pro forma. Could you just talk about some of the tests or the internal models that you have drawn up in terms of those store sizes?

And I think I also heard you talk about localizing the store size. If you can tell us a little about how you're thinking about the localization factor, how you are assessing essentially the appropriate size by market. Thank you.

Sure. Our store average is a blend of a variety of stores in a variety of sizes and markets and venue types. So, with almost 200 stores open and stores ranging from around 4000 square feet to over 10,000 square feet, we've got a lot of information and analytics to be able to look and see kind of what is optimal.

Some of what you are seeing in this decrease in square footage is driven by the outlet store format that's included in that total number. And those are obviously smaller and appropriate for that venue type.

But we are also kind of saying, well, if it's a new market it might be one size. If it's a mall versus an off-mall, you might see the same kind of relationships we have seen before -- slightly larger in off-mall, slightly smaller in mall. And if it's a heritage or established market, or certainly here in California where we continue to see great opportunity, you might see the store size be slightly larger.

But you are really tapped -- asking a question about -- this is really about customizing the right size for maximum efficiency to grab -- create the best experience and deliver the best long-term profitability.

Sharon Zackfia, William Blair.

I guess this is a follow-up on some of the other questions. So, talking about having more differentiated exclusive merchandise in the stores, and then talking about both strategies seem to me to be a bit diametrically opposed. So if you could talk about when you are thinking about the Volcoms and so on of the world, and how you're going to get more exclusive product from them, how are you sourcing? And what kind of product will we expect to be seeing in the outlets? And are your channel partners or your brand partners comfortable with the idea of you pursuing both strategies?

They are, and they really aren't diametrically opposed, and they are not really related. We've got a real great team of merchants that are driving the most relevant product for this action sports inspired customer across a broad range of brands and our own private label product in the full-line stores, which remains huge -- the majority of the business.

And we are launching an outlet-specific format that gets us access to true outlet venues. And so that product will be uniquely sourced from our brands and from our own private label product. It's special purchases and things that are relevant and appropriate for the season and for the price point strategy, and really don't get in the way of the full price execution that we have in the majority of the stores.

Betty Chen, Mizuho Securities.

It's actually Alex Pham on for Betty. My question is just given the focus on sort of less clearance selling, can you address any sort of marketing plans or traffic drivers the team has in place to compete with some of the deeper discounts other retailers may be offering? And then just in regards to the real estate strategy, are there any updates in terms of the longer-term store count? Or is that 500 store count still in place? Thanks.

Okay, I'll take the second one very quickly. No, we haven't backed off of the long-term opportunity. As you can tell by looking at outlets, we are including now the outlet opportunity as part of that, so the total number and the long-term potential still exists.

Again there's no race, and it's about bringing to the business only the deals that make absolute sense from a long-term market share and profitability standpoint. So that's kind of how we are thinking about the national opportunity.

And we've just opened stores recently in places like Albuquerque, New Mexico and Fort Wayne, Indiana and Fayetteville, North Carolina and Wichita, Kansas, all doing extraordinarily well. There remains a huge opportunity for this brand to be present throughout the country. So we will do that, but do it smartly and disciplined and very thoughtfully.

In terms of less clearance selling, we expected that that might be a bit of a headwind. We talked about it for both our stores and for eCommerce as we began the fourth quarter. We are seeing that being the case currently. And we remain focused not on a promotional strategy, but leveraging both our new digital capabilities and omni-channel capabilities, as well as what we think is a continuously improving and more relevant product offering from the product exclusivities and innovation, and creativity that we have been talking about as the real ways to drive this. But the combination of our digital capabilities across a loyalty program, mobile app an iPad app, a vibrant eCommerce platform, in-store digital capabilities, the mobile POS Direct-to-Consumer, the list goes on and on of things we believe we have in our arsenal now, a full complement of social media, all of it enabled to drive the best results possible but in a very high caliber, quality way.

Pam Quintiliano, SunTrust.

Thanks so much. I just have a few for you guys. First off, just one final on the differential between the outlet versus the full price. Can you talk about just if there's any overlap at all in the actual product that we would see in the stores? There should be an overlap in brand, if I'm understanding correctly. But is there -- a 30% differential you're looking for in price points to make it appeal to a different customer base than that core full price customer? Or how do we think about that?

Sure. So there are clearly overlaps in brands, but there's also going to be some overlap in product. We know from the 10 to 12 outlet stores we have currently that the Tilly's brand -- and we talked about this -- performs very well in a variety of venues. So that gives us the opportunity to take a look at that and see what sells well.

We know that our own proprietary product or product that we have made for us, not necessarily under our own brand names, but that brands make for us, many of that -- much of that can be relevant and appropriate and is well priced and appropriate for an outlet venue. So, I don't have specific percents for you to kind of nail that down, but suffice it to say that the offering will be meaningfully different and priced in an appropriately compelling way, with margin structure and cost structure commensurate with outlets.

And we look for that to be even more profitable than the full line venue. So it's a full outlet strategy. We are a little too small to be making for outlet at this stage, but we don't need to because we've got a lot of access to product from our brand partners.

But if you say at this stage, I would assume that means longer-term that is an opportunity to do some of the made for?

Completely. As we scale the business, absolutely.

Okay. And turning to the full price, with the product brand initiatives, just where are you with that? And when should we expect to see a meaningful difference in the stores?

Well, so if you went into our stores today, which I think look really compelling, and I am very excited to see what happens as we get into the real meaningful spring break and pre-Easter time period, which is so important to the first quarter -- you would see several new brands across men's and in juniors as well as in accessories.

In hardgoods, you would see some categories that are new and exciting versus ones we had last year. But this is -- it's begun and will be increasing as the year goes on. So each quarter I think we'll see more and more of it.

And that's kind of commensurate with the relationship with the business. So much of our business is in the back half of the year. We've got a lot of exciting initiatives there, and as I said, not just newness, but additional and exclusive products and collaborations and category expansions. We are -- we've got a lot of things going I'm very excited about.

Lindsay Drucker Mann, Goldman Sachs.

Thanks for taking the follow-up. I was hoping first for just one housekeeping question for Jennifer. Could you tell us how much the 53rd week added? And any -- were the store impairments in COGS or SG&A?

And then the second piece for Dan, just on your new store productivity, I know we don't have great visibility to this because we only have limited metrics, but it looks like that metric has fallen off for you guys in the last couple quarters. Can you just comment on how that's trending for you? Thanks.

Sure. Thanks Lindsay. The 53rd week, as we talked about in the past, it did contribute about $5 million in topline sales. And we look at that from an operating income perspective. Not a significant -- much of an impact by that; it was around $500,000 in operating income.

And when you look at store impairments, you're asking geography of that on our P&L. It does show up in SG&A.

Thanks.

And on the new store productivity, on average, new stores are performing relative to our established stores, the way they have performed for a long time. There's a variety of stores in malls and in off-malls across a variety of venues, some new markets and some established markets. But on total we are very pleased and see, as I had mentioned just some recent examples of some just exceptional performance, that indicates that new stores remain a huge growth vehicle for the Company.

There is no race, so we are not rushing and we are not compromising what's right for the long term. But the relationship of new stores to the rest of the chain remains the same.

Lorraine Hutchinson, Bank of America Merrill Lynch.

Thanks, it's Paul Alexander for Lorraine. Dan, on the slower store growth rate, I believe you said the change will be near-term. Did you mean to say that just the near term rate will be lower, or did you mean to say that at some point you might re-accelerate? And if you're leaving it open for acceleration again in the future, what signs would you be looking for to re-accelerate, either in the environment or your own business?

So, the near term could be short or long. It depends. And we'll just continue to read a variety of signals, including the real estate landscape, and see if there's any shakeout in the real estate landscape or the competitive set. And how we continue to perform and watching very closely reading to make sure the new stores continue to perform as they have and as we need them to do, in order to bring long-term profitability and growth.

We are going to be very judicious, very thoughtful, only bring the stores that make sense. And that number can flex up or down depending on a variety of factors. But it still remains a huge opportunity for us to grow and grab market share and increase profitability over the long-term.

Dave Kang, ROTH Capital Partners.

This is Joe again. Just a quick question. Can you talk about what the sales mix is between men and women in Q4, and then just some of the growth drivers, both negative and positive for those genders? Thanks.

So our business remains slightly larger male than female. That hasn't really changed. It's a very diverse and broad-based, balanced business across a variety of ages and demographics and categories.

So, without getting into a whole lot, we said that men's was kind of around that number, juniors was a little bit better, and footwear and accessories was a little bit softer. But those relationships aren't huge swings. They are just small kind of -- small variations on that. So there's not really all that much to call out in the total. Just I think if you read juniors business is a little bit better than men's, and the footwear and accessories business is a little bit softer than the average.

Pam Quintiliano, SunTrust.

Two quick follow-ups. Juniors, could you address any information at all on what she was responding to, given there's just been this pervasive lack of fashion that people spoken about, so it's nice callout the juniors are doing well for you guys.

And also, when we think about quarter to date, others have commented that with improving weather they have seen improvements in traffic and conversion. Are you seeing any type of correlation there as well?

So, I guess good weather helps and bad weather doesn't help. And when it's all said and done, we are incorporating what we are seeing into our guidance for the quarter. So I don't know how -- it's probably not as much color as you would like on that, but that's kind of how we are thinking about it.

And so much of the quarter and so much of the indication of the things that we are doing lies before us, as we get into the peak spring break and Easter time period with the much later Easter this year, as well as get into the key summer time period. So we've got a lot to read here, so we are going to remain with that view.

In terms of juniors, we are -- I am pleased with what's going on with the junior business to see the strengthening of that business. And if you were to go into our store right now, you would see some very clear trends, some very clear silhouette changes, some very clear print direction that's going on. So I think the team is doing a very good job there being trend right, fashion right, and reacting to the variabilities that are inevitable in junior fashion.

Thanks so much.

Jeff Van Sinderen, B. Riley.

I guess I just had a follow-up on the level of clearance product. Just wondering if we are through moving toward less clearance product in the stores and the assortment at this point. And then also, how should we think about your promotional messaging plans going forward? Is that evolving in the full price stores?

Yes. So we really get -- if you think about it, inventories really got more in line with overall sales early in the third quarter. So we do have some of that that we are up against in a somewhat diminishing way between now and then. So that's kind of how you think about clearance, clearance inventory.

The makeup of that inventory is critical to understand, though, of how much cleaner it is right now of fall/winter product than it was a year ago. So that's a very healthy thing.

And our promotional plans aren't really designed, as you well know, to try to just drive topline at whatever cost. Our inventory remains in line, so it's not like we need to be solving a lot of problems there. And our promotions really are around the key time periods, key categories or things that we have in our arsenal.

We have tried several different things in the fourth quarter. We are doing some different things with new capabilities currently, and continue to test both online and off-line a variety of things to continue to build capability in that regard. Because you well know, we are not a high/low discount play.

This is about newness and relevance at a very good price, and the relentless pursuit of that and then executing extremely well to make sure that product is as compelling as possible. Regular price performance in this business remains very high, very healthy and continues to confirm for us the strength of this business and business model as we move forward.

(Operator Instructions). Janet Klopp (sic), JJK Research.

I'm sorry I got onto a little bit late. I was just wondering in the first quarter right now, are you seeing any weakness across the [mid-single-digit comp rate]? I know some of that's attributable to weather. But would did you say some of it is concentrated in any particular product category, Dan, or is it across the board?

No; yes, it isn't any particular product category. As we said, the relativities of the businesses, the very large businesses of guys and juniors, accessories, footwear and kids, provides this very stable and diverse business, and so there's no one outlier in there. It's largely traffic pattern from the customer that abates during natural selling time periods and seems to be -- it's this variability we've been talking about now for a few quarters.

So this business model in our dynamic merchandise model, the ability to react to changes in fashion and trends and looks and brand selling is what helps us navigate this to keep the business balanced and relevant.

Ladies and gentlemen, that is all the time we have today for questions. Mr. Griesemer, I will turn the conference back to you for closing or additional remarks.

Thanks again for joining us. We look forward to discussing our first-quarter results with you in late May. Thank you and have a good evening.

Ladies and gentlemen, that does conclude our conference for today. We thank you all for your participation.