Urban Outfitters Inc (URBN) 2006 Q2 法說會逐字稿

The following discussions may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Please note that actual financial results of the Company for the periods being discussed may differ materially from the financial results projected or implied in the forward-looking statements.

Additional information concerning factors that could cause actual financial results to differ materially from projected results is contained in the Company's Annual Report on form 10-K and in other documents filed by the Company with the Securities and Exchange Commission.

The Company disclaims any intent or obligation to update forward-looking statements.

No recording or rebroadcast of this call is permitted without the Company's expressed written permission.

I would now like to turn the call over to Mr. Richard Hayne.

Thank you very much.

Good morning, everyone.

I am Rick Hayne, Chairman and President of the Company.

Welcome to the Urban Outfitters conference call.

Earlier this morning, the Company issued a press release outlining our financial and operating results for the quarter and six months ended July 31, 2005.

I will now review those second-quarter results and discuss the Company's current business trends.

After that, our Brand Presidents,Ted Marlow and Glen Senk, along with John Kyees, Freeman Zausner, and Bob Ross from our corporate staff will join me to answer your questions.

Please note that the facts of today's conference call will be available at the Company's corporate web site.

The address for that web site is urbanoutfittersinc.com.

That's all one word, urbanoutfittersinc.

In the second quarter, our teams continue to produce excellent results.

It was easily the best second quarter in the Company's history and in fact from the standpoint of revenues generated, it was the Company's best quarter ever.

Even surpassing last year's holiday quarter.

Highlights of the three month ended July 31st this year versus last are total net sales topped $253 million, a 34% increase.

Total comparable store sales rose by 10%.

This is on top of a 26 and 11% comp store sales increase in second quarters of fiscal year 2005 and 2004, respectively.

Total gross profit margins expanded by 72 basis points.

Total SG&A expenses leveraged by 79 basis points.

Total operating margins exceeded 19.5% of net revenues.

Total earnings jumped by 49% to $30.6 million or $0.36 per diluted share outstanding.

And finally, the Company successfully moved its direct-to-consumer call center and fulfillment center operations to a larger, better-equipped facility.

A more detailed analysis of the second-quarter results revealed that all brands and distribution channels made significant contributions to these record results.

Total sales during the period advanced by $63.9 million.

This was driven by four major factors: New and non-comparable store sales accounted for $33.1 million or 52% of the total sales increase.

Since the beginning of last year's second quarter and through the second quarter of this year, the Company has opened a total of 36 new stores, a 31% increase in the number of stores open for business.

Broken out by brand, Urban Outfitters, Anthropologie, and Free People have opened 18, 16, and 2 new stores in that period, respectively.

The Company still anticipates opening a total of 30 to 32 new stores in the current fiscal year. 12 of those new store have been open to date.

Total comparable store sales, the second factor, grew by 10% during the second quarter.

By brand, comps were up by 13, 6 and 36% for the Urban, Anthropologie and Free People brands, respectively.

Comparable store sales were above plan for the entire period with July increases greater than either May or June.

The apparel and accessory categories were the strongest performers of the Urban and Free People brands, while the accessory and home categories produced the best comps at the Anthropologie brand.

Sales gain at comparable stores were driven by 16.75% increase in the average unit retail price while the total number of transactions was essentially flat and the number of items sold per transaction registered a slight -- very slight decline.

Gains in total comparable store sales resulted in a $15.5 million increase in quarterly revenues or 24% of the total sales increase.

The third factor driving sales was a star [ph] 54% increase in direct-to-consumer sales.

The direct businesses at the Urban and Anthropologie brands benefited from a 25 and 17% increase in catalog circulation, respectively.

Total average [inaudible] value increased by almost 10% and unique visit to the Company's web sites jumped by 64%.

The direct sales gains came despite two weeks during the quarter when sales were significantly depressed because the call center and fulfillment operations moved to a new facility in South Carolina.

This new building affords us three times the space allocated to these two functions previously and the equipment is significantly better as well.

With some minor exceptions, the transition was seemless and the facility is now fully operational.

Over the next six months as the new new management system is installed and implemented in the new facility center, we expect to achieve significant productivity gains.

More importantly, we believe that once the WMS is implement, that system in combination with the new facility and better equipment will give us the infrastructure to comfortably accommodate continued growth in the direct business for the next five years, even if it comes -- even if it continues to grow at its current rapid rate.

The final factor of pushing sales higher was an 84% spike in Free People wholesale revenues.

This growth was due to an 86% increase in the average order size, led by the growth in department store orders.

Both the average price point and the number of reorders were essentially flat during the period.

And improved product offering and a better sales effort sparked higher demand.

At quarter's end, fall and holiday regular-priced bookings continued to be ahead of the prior year as well.

In keeping with our stated goals, we once again successfully grew our operating profits at a rate faster than our sales growth.

This quarter's total operating margins exceeded 19.5% of net sales, an increase of 151 basis points over the prior year period.

Margins as a percent of net sales grew due to a 101-basis-point improvement in initial merchandise margins and merchandise markdown and obsolescent expenses.

A 55-basis point improvement in store payroll and other store-related costs and 46% basis point leverage in fixed corporate expenses.

These improvements were more than -- these improvements more than offset the deleveraging effects of occupancy expenses created by the recent interpretation of lease accounting rules and the higher merchandise handling cost incurred as a result of the previously mentioned fulfillment and call center moves.

As of July 31, total company inventories grew by $41.7 million.

Most of this inventory was acquired to stock new retail stores.

Total comparable store inventories grew by 22% when calculated on a dollar basis and by 10% on a unit basis.

By brand, comp store sales inventory grew faster at Anthropologie than at Urban and was actually down in Free People.

Additional inventory investments were made in the Anthropologie accessories and home categories.

These investments helped to drive comp store sales during the period.

Inventory levels at all three brands remained well-controlled on a week to supply basis.

Total markdowns as a percent of sales during the quarter dropped by 15 basis points and the quantity of comp store clearance merchandise on hand at the end of of the period in both units and dollars was down significantly in all three brands.

Net income for the three months ended July 31st grew by 49% year-over-year to $30.6 million.

On a rate basis, earnings grew by 280 basis points over the previous year, and reached 12% of net sales.

For the quarter, profitability in all three brands and all three distribution channels were up significantly compared to the same period last year.

Total earnings per diluted share jumped from $0.25 in the second quarter of last year to a record $0.36 this year.

So to summarize our accomplishments during the second quarter of fiscal year 2006, the Company grew total sales by 34% to a record $253 million, delivered a total comp store sales increase of 10%, produced operating profit margins in excess of 19.5%, grew total earnings by 49% to a record $0.36 per diluted share, continued to grow earnings significantly faster than sales, grew sales in the direct-to-consumer channels by -- of distribution by 54%, increased wholesale sales by 84%, and successfully moved the call center and fulfillment operations to a larger, better-equipped facility with minimal impact on the operating brands.

As we look to the future, our future continues to hold tremendous opportunity.

We are well-diversified by brand and by mode of distribution.

We believe that all three of our brands are at an early stage of growth and that each one has multiple means to grow its revenues over the near- and longer-term.

All three brands hold a strong position in the marketplace.

The brand teams possess the talent and creativity to produce a shop experience both in the products offered for sale and the environments holding those products that is differentiated and emotionally compelling.

This, we believe, is the Company's primary competitive advantage and what allow us to produce results like those delivered in this past quarter.

Over many quarters, including the one just ended, we've achieved our oft-stated goal to deliver a compound annual sales growth in excess of 20% and earnings growth in excess of the sales growth.

We are optimistic about our ability to continue to produce this level of growth.

We are encouraged by the initial customer response to our fall fashion assortments.

Sales both in stores and through the direct channels are running significantly above our plans.

We are pleased with our accomplishments in the second quarter of fiscal year 2006.

And we are confident that we continue to take advantage of the opportunities before us to deliver solid financial results in the quarters ahead.

And that concludes my prepared remarks, and I would now take questions.

[OPERATOR INSTRUCTIONS].

Jeff Black, Lehman Brothers.

Yes.

Thanks very much.

Good afternoon.

On the inventories, it sounded like you guys were planning for a slight decline in inventory units in the first-quarter call, and I was wondering if we can just have a little more color in helping us understand where the unit build diverged from the -- what sounds like original plants?

I am not sure we were planning for units to decrease.

Much of the increase in the comp store inventory occurred as I suggested in the Anthropologie accessory and home areas, so I will ask Glen to talk about the inventory and -- and the weakened supply.

Jeff, as Dick said, a good proportion of the Anthropologie increase is in the home area.

In the Women's area, we were most focus and weeks of supply and we try to keep it around 10 weeks.

And in fact, that's -- that's what it's been trending.

What I would say is that we are, as Dick mentioned in the the release, significantly more converted than we were a year ago.

Our clearance is in the high -- it is lower in the high double-digit percentile at quarter end than a year ago.

So it sounds to us like you -- most of this was accounted for by bringing stuff in early or adding to new categories?

Is that the take-away?

Well, in Anthropologie, as Dick said, the home business is really leading the strength in the Company right now.

As you know, home -- as everyone knows home turns substantially slower than the Women's business does.

In the Women's business, Anthropologie converted significantly earlier this year than last.

A much higher percentage of our sales in July came from fall than a year to ago.

We have a -- an extremely significant decrease in clearance inventory at quarter end from a year ago.

So, yes, we advanced the receipt of fall

Lauren Levitan, SG Cowen.

Hi, Lauren.

Good morning.

How are you?

Well, thank you.

Good.

I wanted to talk to you about the composition of the comp growth.

I know you said that transactions were flat.

I was hoping you could give us a sense of if that varied much and if the average transaction size varied much across the brand.

And since we have seen that the comps over the last couple of quarters have been driven by more transaction increases, I'm just curious if you could give us some sense of what you'd think -- how you feel about the sustainability of these price increase -- well, the higher price point that your customers are clearly absorbing and demanding.

So maybe just a little bit more of a conversation by brand on the transactions versus the -- the average unit retail increases.

Thanks very much.

Well, the number of transactions versus AUR was basically even at Anthropologie in their comps, and at Urban, it was almost entirely driven by increases in AUR.

So that sort of breaks it out for you.

We don't seem to be having any resistance in Urban to -- slightly higher price point.

It was planned.

We -- we certainly did it purposefully, and the customers are acting very positively.

It's not just in one category.

It's a number of categories, including Apparel and Accessories.

So, we feel very comfortable with it.

We -- we -- as you remember, Lauren, last year, had a significant growth in the number of transactions, and -- to the degree that we felt that a continued increase of that type in the number of transactions wasn't sustainable, meaning that we really couldn't process people through many of our stores fast enough to have that kind of increase.

So we purposely raised the price points and the customers responded very well.

Adrienne Tennant, Wedbush.

Good morning.

Sorry about my voice.

And congratulations on the good second quarter.

Thank you very much, Adrienne.

Just -- my one questions is really focused on -- well, kind of two parts.

Inventory plans for the second half.

And then just secondly, just what -- what are you seeing kind of on the denim landscape?

I know you don't have as much exposure as some of your competitors, but we've started to see a little bit of discounting at the Urban Outfitters brand, so if you could speak a little to that?

Thank you.

I'll just speak very briefly and let Ted take it as to the denim.

As I mentioned in the call, and I think Glen just talked about it is that at all of our brands, the amount of markdowns that were taken and -- and the obsolete merchandise at the end of the quarter is -- is decreased.

And while we always mark some things down depending on the rate of sale, and there -- I'm sure are some denim items that are marked down, this wouldn't be unusual and we dont' think that there's any large issue.

We obviously think there's going to be a lot of discounting of denim in the back-to-school period, but it just really hasn't hurt our sales, and we don't think it's going to be a large factor going forward.

Okay.

Great.

Do you want to add anything to that?

The only -- the only piece that I would touch on there, Adrienne, is in regard to the Urban business, to place the denim question into context, that business is done in bottoms, needless to say, in Men's and Women's and our bottoms business for the first half of the year was significantly ahead of plan.

Denim was a smaller piece of the penetration by plan, and we feel like we have a good handle on the best way to handle that particular category in our bottoms mix as we go into the back half.

We're optimistic that our strength in bottoms will continue through the back half, but both Men's and Women's categories bottoms have been treating us pretty well thus far this year

Barbara Wyckoff, Buckingham Research.

Hi, everyone.

Good quarter.

Hey, Barbara, how are you?

Hi.

Good.

Is it safe to assume that the margins in the stores -- the three stores are better than those in wholesale and direct?

And how should he be looking at that?

You're talking about Free People?

Free People versus Anthro -- I'm putting Free People stores versus -- along with the other stores versus the margins in direct versus the margins in the wholesale business.

Pure wholesale.

Well, the margins at the Free People retail stores are much higher than any of the other businesses, and -- as you would expect, because we're basically wholesaling to ourselves.

Now, I guess we could -- we could -- we can't count it twice, John and Bob have kept me from doing that for a number of years, but we count it at the retail side, and their margins are very nice.

The margins in the Free People stores are significantly better than wholesale and they're significantly better than the direct businesses as well.

If that answers your question.

And Free People is -- is ahead of Urban and Anthropologie as well?

At the retail level.

At retail.

Okay.

Because they have a higher penetration of owned product.

Right, right, right.

The other question I guess is for John is how is the store openings going to fall out for the next two quarters by division?

Actually -- grab that real quickly here.

Our target would be to open somewhere around 14 stores in -- in Q3 and probably another -- say, 10 -- 9 to -- 9 to 11 in Q4.

Now, some of that is variable because a lot of the store openings could happen right around the date of the quarter, so it could easily flow from one quarter to another.

Dana Telsey, Bear Stearns.

Good morning, everyone.

And congratulations.

Thanks, Dana, how are you?

Good.

How are you?

Excellent.

Can you talk a little bit about the high volume store initiatives?

What changes have been made?

What have you been seeing and what other changes are being made and the financial impact?

And as you look at -- as you look at your systems initiatives, how are you doing on timeline for product development and point-of-sale systems?

And lastly, tax rate for the balance of the year?

Thank you.

Okay, Dana, thanks.

I am going to ask Glen and Ted to talk about the high-volume store initiatives.

Glen?

Dana, we're doing well with the high-volume store initiatives.

I think I mentioned earlier that we're -- we've redesigned cash wraps, we've redesigned fitting rooms, we've changed processes and I think those -- the wait lines at the dressing rooms and the cash wraps are considerably lower and the productivity continues to improve.

Anthropologie will be opening its third New York store sometime in the first half of next year, and I think you'll see hopefully the best of class enhancements in this particular site.

Ted?

Dana, some of the things that Glen touched on in regard to processing and -- as well, customer service and fitting room environments.

We have invested in additional fitting rooms in stores that are part of our initiative.

We have invested as well in additional processing at point of sale in those stores.

We also have looked at processing goods in and out of the store and realizing a bit more efficiency there.

I would also throw in that the stores that are part of high-volume initiative in Urban all well exceeded the overall comp performance of -- of the Company in the first half of the year.

So we -- we're getting very nice traction on this initiative.

Dana, I would say that -- on the Urban side, the increase in the average unit retail price really helped, and while we don't normally consider that as one the high -- high-volume initiatives, it really helped tremendously in those high volume stores.

There's -- there's little price resistance in most of those stores.

And I think that helped drive the business.

Now was there another part of to your question?

Oh, tax rates.

Dana, the tax rate issue will -- hasn't really changed in the first half, because we just opened the -- the call center DC in South Carolina where we have a tax benefit, and we have not moved the Anthropologie offices yet.

So once that is done, we would expect the full-year tax rate to be down around 39%.

And how did the International stores do and what percent of the sales are they?

I don't have the sales breakouts but the International stores now are profitable.

They reached profitability for the first time last year.

They look like they're going to be nicely profitable this year, and we are continuing to expand that.

As a matter of fact today we should be opening our store in Birmingham, UK.

It's about 4% of sales, Dana.

4% of sales currently, Dana.

Holly Guthrie, Morgan Keegan.

Thank you.

Good morning, and I'll add my congratulations.

And by the way, the stores do look good for fall.

I was wondering if you could talk about the impact of some of the new fashion trends we've been seeing, layering, a lot of new accessories, trends, maybe some shifting in fabrics for the bottoms business and how that would impact your average transaction value going forward?

Well, I'll take first stab at it, then I'll let the real merchants take over, Holly.

The accessories area has been one of the -- one the better and stronger areas in the business.

There is certainly a -- a shift toward more accessorizing and many of the classifications in that division are -- are up substantially.

So you're -- you've rightfully identified the fact that accessories is a growing business.

I think we identified that fairly early on.

Accessories in the Urban side is one of the things that was responsible for the increase in average -- the average retail value, and as you know, Anthropologie delivered an entire Catalog devoted to accessories and that was successful, and will be repeated.

But I will ask both Glen and Ted to talk about their individual brands.

Holly, as you know, we don't really talk about fashion in season.

Suffice it to say that there's -- there's a whole lot of trend.

There's a whole lot of change.

And with respect to the AURs, at Anthro with the increased home penetration, the average ticket in home is about half that of women's and accessories.

So actually there's -- there have been AUR increases at the category level at Anthro, but in total it's been flat because of the penetration mix.

Ted?

The only thing I would add, Holly, is it would really be tied to the strength of femininity in fashion right now.

And as we came into the first half of the year, we really put some numbers in place to distort that we felt the opportunity that -- that was that existed in women's apparel, women's accessory.

The penetration of apparel and accessories was up about 3 to 5 points in the Urban business through the first half of the year, and as you know that carries a higher margin rate along with it.

In regard to the individual trends driving that, I reserve comment

Liz Pierce, Sanders Morris Harris.

Thank you.

Good morning and congratulations.

Hello, Liz, how are you?

I'm fine, thanks.

Actually if both Glen and Ted perhaps would speak to their thoughts about holiday for home.

I know you're not going to give -- into detail, but as you reflect on how the brands did last year and just kind of any -- many big-picture comments in positioning for this year?

Thanks.

Liz, what I'll say is the home business at Anthro led the way in the comps and it's gotten stronger -- I mean, literally every week it's continuing to build.

As we were looking at the -- the second quarter, we noticed for the first time that we had gotten simultaneously -- simultaneous press in some tier A publications.

For example, in this month's "Elle" we have two skirts and a sofa.

And I think it really speaks to the fact that we're -- we're targeting the same customer across all categories now, and we're getting recognized for that.

So we've continued a strong focus on gifts.

The gift catalog last year was very successful.

I think we have some exciting tricks up our sleeves for this year.

We've -- we've got window and presentations and marketing materials and training seminars and so on, all that support a gift distortion which is certainly friendly to the home business.

And, Glen, you -- correct me if I'm wrong, you set right after Thanksgiving?

It'll actually be -- it'll start the setup around Halloween and it'll peak in Thanksgiving.

Okay.

Thanks.

In the Urban business as we know we made some changes on our staffing line up in home in the first half of the year.

I actually just left a assortment review on home to come to the conference call reviewing fourth-quarter flow.

I think that, although it's on a very short turn-around time frame, I think that we're making good headway with the group that we have in place, and I feel that Home categories as opposed to gift and novelty categories will become more important for us as we go through the back half of this year, more particularly in the fourth quarter, and I would expect that to continue as we transition into next year.

Gift and novelty has always been a very healthy business for us.

Where we've needed to make some headway is in pure home-related product.

Christine Chen, Pacific Growth Equities.

Congratulations on a good quarter, guys.

Thank you.

Wondering when will the next accessories catalog at Anthropologie drop?

It actually is out now.

The circulation is 700,000.

The first drop is 500, and then we drop a month later 200.

So you should have it by the end of the week.

And what was it when you dropped it before, if you could remind me?

It was roughly half of that, 300.

And do you see a direct correlation in when the catalog drops and ordering from that, or people going into stores to see what accessories you have in the stores?

Well, obviously there's a -- a very direct correlation in the direct business.

In the retail business, as we've mentioned before without the upgrade to the POS system, we don't have hard data, but we certainly have a lot of anecdotal data.

I see customers come in with the catalog with pages turned down and so on.

So I absolutely expect to see a lift in the retail business, and it's been a strong area.

The accessory business has been a strong area of focus.

[OPERATOR INSTRUCTIONS].

Neely Tamminga, Piper Jaffray.

Hi, Neely.

Hey, Dick.

Congrats on a great job, you guys.

Thank you.

Phenomenal performance.

I just have a question here for Ted.

At this point, on Urban, looking at the early fall catalog, very pleased with the updates, even though it was very strong last year.

Felt it was very strong this year as well.

It appears that you're using about two times the amount of pictured models.

Is this a -- a strategy on your part?

Is this something that you've been doing all year long?

Is -- can you give us a sense of kind of where you're taking the direction of the catalog itself?

And then as it relates to home, obviously there's fewer pages dedicated to home and maybe that's more reflective of the transition in management there, but there also seems to be deemphasis of soft goods.

Can you just give us a sense again for the home strategy there?

One more question Neely on your question regarding models?

You -- you have two times the amount of pictured models in outfits and wardrobes, and -- this year versus last year in the early fall category.

I'm just wondering if this is part of a decided strategy on your part and if you've been doing this, and have you seen improvements from that?

In regard to the -- the early Fall category which you're referencing, the main approach to -- we took to that book was really looking at a change of format, and if that resulted in more product on models versus previously in a different field, and -- and the way the book came across to you, perhaps that is -- is the reason there.

I wouldn't say that is necessarily that there was a -- any kind of overt strategy on change of depiction of merchandise.

In regard to the penetration of each individual business in the book.

What we find is -- is that through past experience, most of the shopping that takes place, catalog-related comes back to the business through the web site, and we have taken really kind of a point of view of looking at the catalog as a stronger marketing piece to drive traffic to the web site, and thus, more depiction in the real core of the business which is women's, women's accessories and men's product.

Overall at this point in the first half of the year, the home piece of the business accounts for less than 20% of the business.

So we doled out the space in the catalog accordingly.

I think, Neely, the important consideration is that the -- the Urban Catalog has dropped and is doing quite well.

And so the results are -- are very positive.

Great, Dick.

And just as a quick follow-up.

Obviously you made a change here at home.

Can you give us a sense over the last, maybe three to six months, some of the other changes you've made in key -- or additions in key management positions?

At Urban.

At Urban or the corporate or Anthro.

Do you want to go first?

At Urban, we made a change in our Home division.

We've done some restructuring in the field to accommodate the growth in store count.

We are currently operating with two regionals in the field, which this time last year we had zero regionals in the field, and we've increased the district count so that we are able to manage the store count more effectively.

Those are the primary changes that have taken place within the Urban business -- oh, yeah, sorry about that.

One other thing Dick just reminded me of.

With Chris DeWitt moving into the Managing Director role in Free People -- as you know, Chris was over the Urban direct business.

We appointed a new lead, a new Managing Director over Urban direct, that's Julie Bornstein [ph].

She joined us in the month of June from Nordstrom direct.

A very strong background in the direct side the business and optimistic about the contribution she'll make.

Glen, do you want to talk about Anthropologie?

Yes.

At Anthro, in the store's organization, similar to Ted, we continue to build the infrastructure in the home office.

But really just one significant addition, and that is our head of planning and allocation.

A very senior executive who joined us about six weeks ago and she has hit the ground running and been terrific support to the merchant group.

And at the corporate level, late last year, we hired Calvin Hollinger who came from The Gap to be our Chief Information Officer and several weeks ago ween added a fellow by the name of David Zeal [ph], who is our Chief Development Officer overseeing all of the construction and fiscal plan activities.

So we think both of those additions are going to be very positive to the business going forward.

David Turner, BB&T.

Thanks.

I was curious about the pricing dynamic between the mall and non -- non-mall stores.

Is it the smaller footprint allowing even greater price increases at the mall stores?

And I guess, tied into that, are the balance of the store openings this year going to be skewed heavily one way or the other?

Thanks.

Ted, do you want to take that?

I assume you are talking about Urban.

In regard to the Urban business and mall location, we experienced -- based on the way traffic flow occurs mall versus street, whether it's weather-related, holiday-related, free time or time on in regard to school, different traffic flow.

The productivity on our mall unit is a little -- running a little better than balance of company.

In regard to what we're realizing in transaction in mall, I can't give you that just off the top of my head.

But the -- more importantly to me is really what we're achieving productivity-wise on by store location and we look at that on a very regular basis and we are exceeding what we're achieving in balance of company, and as a result, we're certainly achieving where we had the business planned.

The other piece -- the question regarding mall -- oh, balance of -- balance of the year.

For the balance of the year at Urban, we plan to open, I think, probably around 10 locations.

I would say -- again, this is off the top of my head.

That'll probably break down to about 6 and 4, mall-to-street.

I think that's a pretty close number.

Sure.

Thank you.

[OPERATOR INSTRUCTIONS].

At this time, we have no further questions.

I would like to turn it back over to you, Mr. Hayne.

Okay.

Thank you very much.

I will go over one item that I forget to answer from Dana Telsey.

She asked about where we were on our -- on our initiatives.

I'd just like to point out the planning and allocation initiatives.

The allocation portion of that is basically complete in all brands.

The Urban chain is now working on -- is up and actively using the planning module, and Anthropologie will use the chain planning module starting in spring of 2006.

As to the product development and management module, we are currently using this, and we have been for now about four months.

It is working well.

We are using a -- testing and using some enhancements to the web PDM system.

The POS hardware should begin to be installed in Anthropologie in Q3, and we're working on the software part of that, and that will be installed sometime in Q4 -- Q1 of next year and as was mentioned before, the warehouse management system.

We are working on installing that as we speak.

We hope to have the software development done in August.

We will then have a pilot program where the first week in September, we will make a decision whether we're going to implement that before holiday or after holiday.

So that's -- that's the update on our initiatives, and I thank you all very much for joining the conference call.

Thank you.

That concludes today's teleconference.

You may now disconnect.