Zumiez Inc (ZUMZ) 2012 Q3 法說會逐字稿

Good afternoon ladies and gentlemen, and welcome to the Zumiez Incorporated Fiscal 2012 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference.

Before we begin, I would like to remind everyone of the Company's Safe Harbor language. Today's conference call includes comments concerning Zumiez Inc's business outlook and contains forward-looking statements. These particular forward-looking statements and all other statements that may be made on this call that are not based on historical facts, are subject to risks and uncertainties and actual results may differ materially. Additional information concerning a number of factors that could cause actual results to differ materially than the information that will be discussed, is available in Zumiez's filings with the SEC.

And now I would like to turn the call over to Mr. Rick Brooks, Zumiez's Chief Executive Officer. And you have the floor sir.

Thank you, and welcome everyone. With me today is Chris Work, our Chief Financial Officer, who will review our financial and operating highlights for the third quarter in a few moments. After our prepared remarks, we'll open the call up to your questions.

As we acknowledged in our October sales release, third quarter sales and earnings were below our initial projections. The shortfall in sales came primarily from softness in Europe, which we attribute to unfavorable weather and pressure on consumer spending as a result of difficult macroeconomic conditions. While Blue Tomato's performance was below plan, we are encouraged that the Company was still able to outperform their comparable quarter in the prior year in spite of the tough economic environment. Our teams in Europe and here in the US continue to work on formulating not only a long-term growth vision (inaudible) Blue Tomato business, but in exploring ways we can leverage our combined strengths.

For the quarter, comparable store sales increased 3.7%. This year, the important first six weeks of the quarter, our peak Back-to-School season, performed in line with the upper end of our guidance. However after another good Back-to-School, sales gains were more modest the remainder of the quarter. This was especially true in October, which has always been a transitional month for us and is one of our lowest volume periods of the year.

Turning our focus to November, we experienced variability in sales by region driven in part by warm weather generally, and Hurricane Sandy in the East. For the period, comparable sales decreased 4.2% driven primarily by steep declines in the snow business and in men's footwear. While we're disappointed with our November results, we are encouraged that sales trends improved as the month progressed, and we continue to see positive performance across our men's and juniors apparel categories excluding the impacts of snow related outer wear.

As such, we are staying the course with respect to the key business drivers we've outlined in the past. Higher store productivity, domestic new store growth, greater penetration in e-commerce, and international expansion. Domestically we opened 14 new stores this quarter, working towards our long-term goal of 600 to 700 domestic locations. Through November, we've opened 43 new Zumiez stores in the US.

The third quarter marked the first full Back-to-School for our comp stores in Canada. Although consisting of only a handful of stores, the results have been promising and give us increased faith in our long-term target of 60 to 70 stores in this market.

Our Zumiez.com business continues to strong momentum, and their sales represented approximately 7.8% for domestic business in the quarter. We are excited for the opportunities this channel holds for engaging our online consumer by further involving and extending our exceptional product and service experience to the virtual marketplace.

Let me finish by saying we are confident in the strength of the action sports lifestyle. As evidenced by the growth in our men's and women's apparel, excluding the impacts of the snow related outerwear, as well as the positive comps in our skate hardgoods category throughout this year. While it's apparent we face challenges across our snow business as well as a cyclical decline in the men's footwear business, there remains strength in the brands that we partner with and in our team's ability to execute.

We're dedicated to the core operating philosophies that have provided the map for our past successes, and have us on track to deliver consistent sales and earnings growth over the long-term. Our confidence in the future was affirmed by our Board when it recently gave the Company authorization to repurchase our common stock. With that, I'll pass the call to Chris who will review our financial results for the quarter. Chris?

Thanks Rick, and good afternoon everyone. I will begin by briefly reviewing the third quarter, then I will move onto guidance before wrapping up our prepared remarks.

Net sales for the quarter were up 16.9% to $180 million with Blue Tomato adding $8.1 million to our top line. Excluding the impact of Blue Tomato, our North American net sales were up $17.9 million, or 11.7% over the comparable period last year. The increase in sales was driven by the addition of 48 net new stores since the end of the third quarter last year, and a 3.7% comparable store increase in the quarter on top of a 6% comp increase last year.

In terms of category performance, men's, juniors, footwear, and hard goods comped positive, while accessories and boys comped negative. We continued to see an increase in dollars per transaction this quarter compared with a year ago, driven by higher average unit retail prices. These gains were offset by declines in the number of transactions and the units per transaction. Our domestic e-commerce platform continued its healthy growth pattern with net sales on Zumiez.com up 32.3% in the third quarter compared to the prior year quarter.

For the third quarter, gross profit increased to $67.1 million or 37.3% of sales. Compared to $59.9 million, or 38.9% of sales in the third quarter of last year. The 160 basis point decline was primarily driven by the step up in inventory to estimated fair value as part of the accounting associated with the Blue Tomato acquisition, and by web fulfillment and shipping expenses increasing as a percent to total sales. Excluding the Blue Tomato impact, product margins improved slightly in the quarter.

SG&A expenses for the quarter were $45.7 million or 25.4% of net sales, compared to $37.1 million or 24.1% of net sales in the prior year quarter. Excluding costs recognized in the quarter for contingent future incentive payments and the amortization of intangible assets associated with the Blue Tomato acquisition, as well as exit costs associated with the relocation of our home office, SG&A expenses were 23.7% of net sales reflecting expense leverage on higher net sales in the quarter. Operating profit was $21.4 million or 11.9% of net sales, down from $22.8 million or 14.8% of net sales during the third quarter of last year. We generated net income of $12.7 million or $0.40 per diluted share, compared to $14.1 million or $0.45 per diluted share during the third quarter of 2011.

Let me again lay out the impact of the quarter and to our year-to-date results of certain expenses that should be taken into consideration when looking at our results. One time costs associated with the acquisition of Blue Tomato were $1.4 million in the quarter for the step up in inventory value impacted diluted earnings-per-share by approximately $0.03. Year-to-date, these one time costs totaled $3.3 million impacting diluted earnings-per-share by approximately $0.09, and include $1.9 million in inventory step up, and $1.9 million in acquisition costs that were offset by a $0.5 million foreign currency gain on the transaction.

Costs associated with the acquisition that are considered ongoing charges were $2.6 million in the quarter, impacting diluted earnings-per-share by approximately $0.07. And include $2.0 million of contingent earn-out and $0.6 million of intangible amortization. Year-to-date, these charges were $3.5 million impacting diluted earnings-per-share by approximately $0.09.

In the quarter, we recognized an additional $0.5 million of exit costs associated with the relocation of our web fulfillment center to Edwardsville, Kansas, and our corporate offices to Lynnwood, Washington, impacting diluted earnings-per-share by approximately $0.01. Year-to-date, relocation costs were $2.1 million impacting diluted earnings-per-share by approximately $0.04.

Looking now at our key balance sheet highlights, we ended the quarter with cash and current marketable securities of $98.3 million down from $172.8 million at the end of fiscal 2011. This decline was largely the result of cash paid for the acquisition of Blue Tomato, and capital expenditures offset by cash generated by operations. As of the end of the quarter, we had $1.9 million in outstanding debt acquired from Blue Tomato, and no outstanding balances on our revolving credit facility. Capital expenditures in the quarter were $12.1 million, primarily related to the 16 new stores we opened during the third quarter. Inventory was $109.8 million at October 27, 2012. In North America on a per square foot basis, inventory was down slightly compared to the end of the prior year third quarter.

Now to our November results. Our comparable-store sales decreased 4.2% for the four week period ending November 24, 2012. In the prior year, comparable store sales increased 8.4% for the four week period ending November 26, 2011. Total net sales for the four week period in November 24, 2012 increased 14.4% to $53.7 million, compared to $46.9 million for the prior-year four week period.

On a weekly basis, comps were negative 14.3%, negative 7.4%, positive 3.7%, and negative 1.0% in weeks one through four respectively. Excluding the first 10 days of the period during which Hurricane Sandy and the Presidential Election occurred, we experienced a comp decline of approximately 1% over the same period a year ago. Our comp over the important Black Friday weekend defined as Thursday through Sunday was a positive low single-digit.

The decrease in comparable store sales in the period was attributed to a decrease in comparable store transactions offset by an increase in dollars per transaction. Dollars per transaction were up for the four week period due to an increase in average unit retail, while we experienced flat units per transaction. During the four week period, juniors comped positive, while accessories, footwear, hardgoods, men's, and boys comped negative. Year-to-date 2012 comparable-store sales were 6.7% on top of 8.3% for the same period last year.

Now, let me outline our guidance. As always, in putting forth this guidance, we want to remind everyone of the complexity of estimating sales, product margin, and earnings growth given the variety of factors that impact performance including challenging macroeconomic conditions. For the fourth quarter, we are planning same-store sales to be in the range of a decrease of 3% to 4%, and total sales to be in the range of $218 million to $221 million. Consolidated operating margins to be in the 13.5% to 14.5% range, and diluted earnings-per-share between $0.59 and $0.62.

The fourth quarter guidance assumes a decline in product margin compared to last year, primarily related to a modest decline in our domestic margins as a result of our current sales projections and lower margins experienced for our Blue Tomato business due to their product mix and effects of the inventory step up. We anticipate our fourth quarter costs associated with the acquisition to be approximately $3 million or approximately $0.08 per diluted share, which include $2.1 million of contingent incentive payments, $0.6 million of tangible asset amortization, and $0.3 million of inventory step up. Inclusive of these charges, Blue Tomato is expected to be slightly diluted for the quarter.

With regard to the full year, I'd like to remind everyone there will be an extra week in fiscal 2012 resulting in a 14 week fourth quarter, and a 53 week fiscal year. The extra week will benefit sales and earnings growth in fiscal 2012 by approximately $9 million or $0.05 per diluted share respectively, and will be a detriment to sales and earnings growth rates in fiscal 2013. We have opened 56 new stores in 2012, including 10 in Canada and acquired 8 stores in Europe with no more planned for the year. We expect capital expenditures for the year to be between $42 million and $44 million, and depreciation and amortization of about $23 million.

We anticipate our effective tax rate for the fourth quarter and the year to be higher than our 2011 effective tax rate, primarily resulting from the tax effects of the acquisition of Blue Tomato. And with that, we will now open up the call for some questions.

Thank you very much.

(Operator Instructions)

Sharon Zackfia with William Blair.

Hello, good afternoon. So first question on Blue Tomato, just a clarification on the inventory step up in the quarter if you could actually give us what the dollar amount was. And then, can you give us, obviously if you're expecting Blue Tomato to be dilutive in the fourth quarter I think originally it was supposed to be accretive. Have you lowered your expectations for sales for Blue Tomato going into the holidays?

I'll start, Sharon, with the sales side, that let Chris comment on the step up in basis in Q3. Yes. We have, as you would guess, based upon the Q3 results for Blue Tomato, we have, as we always are in our own business as well I might add, and here in the US, we're constantly re-evaluating the forecast and our plan as we look ahead a quarter. So we have taken down their sales estimate some. I'll be clear though that we're still expecting that they're going to outperform where they were in their prior quarter a year ago. Chris?

Yes. And to get to the first part of your question Sharon, regarding to the inventory step up. We took a charge of about $1.4 million in the third quarter, or about $0.03 per share and we're projecting about $0.3 million of inventory step up to hit in the fourth quarter.

Okay. And then my second question would be on the core Zumiez business, I guess taking that run rate excluding the first 10 days of October where you were down 1%, obviously if you were projecting 3% to 4% for the full quarter you're expecting that to get worse again going forward. So just what your thought process is there going into the heart of the holiday season.

Sharon, as we talk about how we set of those targets, you're right. If you look at that run rate, you would see that that probably would yield a little bit higher result than the range we provided. But again, there's a lot of knowns I would tell you as we go into the quarter, and we want to be appropriately positioned relative to our forecast. So we're cautious. We had a tough winter season a year ago, and if it's tough again we're not quite sure what the reflection of that will be.

Okay. Thank you.

Dorothy Lakner with Caris and Co.

Thanks, and good afternoon everyone. I wondered if you could just give us a little bit of color on -- a little bit more color I guess on Black Friday. How it was different from last year? Particularly in terms of the genders with juniors being positive, but everything else negative. So is there something in particular that would explain that? Just what kind of trends did you see that either surprised you or that were different from what they were a year ago? Thanks.

Sure Dorothy. I'll take a shot at that for you. First to reiterate what Chris said, is that through as we would define that weekend which is now we have to say it's Thursday, starting on Thursday through Sunday, we were up approximately somewhere in the low single digits so we actually comped positive across those four days. We were slightly more promotional, very slightly I would add, more promotional across those days. And we saw an improvement in our business. And I would tell you that we saw that pretty much across most categories, probably with the exception of our snow business. So that's probably as much I can give you relatively speaking. For the month, women's was better. It would have been again sequentially better over that weekend.

Yes. Okay, okay. Great. Thank you.

Pamela Quintiliano with Oppenheimer.

Hello guys. Can you hear me okay? Just one quick housekeeping question. The Black Friday comp was a positive low single digit. What was it last year?

We'd have to get back to you on that, Pam.

Okay. And then just in terms of --

I do remember this now. The Black Friday comp a year ago was generally in line with our overall comp for the period.

Okay. And then just a clarification on the promotional cadence. Obviously in the stores you had that BOGO 50% off all sale. And then the sale on the boards, boots, bindings as well. Was that planned for the whole weekend initially? And reason I ask is actually because when I was in on Black Friday at midnight, the personnel were very excited about it. But they said you have to do it now because we're not going to have it for the rest of the weekend.

So I was very surprised to see it going forward. And then, obviously they're not the ones making the plans so they could have just been misinformed. And then just when we think about the remainder of the holiday season and how aggressively promotional the mall is, even though you guys clearly don't participate in the way more of the what we think of as the typical teen retailers do, is there any difference in the flow of new goods that are coming in or the type of promotional cadence you're going to offer, or anything we should think about that's different this year versus last year to drive traffic?

All right, Pam. Well first, I do want to make sure that we highlight one of your comments, which was we are far less promotional than most of our competitors in the mall environment. And so, and most of what you saw on Black Friday was part of our planned promotion as a lot of what we did on Friday was the same that we did a year ago on Black Friday. There were just a few more categories of product like snow outerwear that was added into the mix.

Okay.

So, and then as we go forward, you're going to see us adjust strategies. We already have adjusted strategies over the last few days as to how we look at what we're going to do. Whether we're going to continue some promotional environments, we're going to take hard marks in some areas. So you'll see us adjust as we go forward throughout the period based upon rates of sales, and upon the actual performance of the Company.

And then --

So I -- so finishing the thought I would tell you that promotionally again you're going to see us respond to the market place. That's the way should think about how we manage our business. We're managed at a very fine level, very detailed level on inventory, and we'll take mark downs as we need to relative to performance of the business.

Now, the product flow side of it again I would tell you it's the same thing. We still have latitude in many categories of business to move orders around, move orders up, push orders out, cancel orders. So again, it's the same thing as I'd characterize for you as we do on promotions as we do with managing the flow of product.

Thank you. And then just the Black Friday promotion, was that all along intended to be the whole weekend?

Yes.

Okay. Thank you so much for the clarification, and good luck with the holiday.

Simeon Siegel with JPMorgan.

Thanks. Sorry. Good afternoon guys. So I was hoping you could talk a little bit more about that core top line, just as you think about the ultimate path back to positive comps. What do think needs to happen to see the transaction number turn positive? Are there any incremental marketing events? Something in your control that you guys can do to drive that traffic? Maybe as you look back on November, was there any strong divergence in those early trends geographically? Anything there would be helpful.

And then just quickly on Blue Tomato, broadly when you look at the de-cel in the sales, it looks like Q1 grew about 40% on that constant currency, and then followed by the 7% in the second quarter. We don't really know the third quarter rate yet. But just when we think about the recent strength, what's the right way to think about that top line going forward? Thanks.

Okay. So in regards to the first part of your question, Simeon, on looking again thinking about the top line and the issue with dropped transactions. I understand why you would ask the question, but we're going to get a gain in any way we can get a gain. And if we drive on AUR, we're going to get it that way. And we're happy with a gain on AUR, I might add.

So I am, as I've said too many over the last few months, not all that concerned about how we think about how we can get the gain. The point is to get again if you can get it. Now, I will tell you that we have a strong history if you look at last year's weekly results you'll see that when shopper's come out around those peak days, we have tended to do well. And as we said in our commentary, relative to the peak back-to-school window, we think we did pretty well. I would anticipate that when we see those peaks hit that we're going to get our fair share of that business in terms of [dying] that top line. And again, I don't care whether we drive it on AUR or we drive it on trip actions, we're going to take it any way we can get it.

Geographic trends, what I would tell you is that as we said and again in the commentary here at the beginning of the call, is warm weather did affect us. And so generally there's not a lot of variation across the country. Pretty much as we said a steep decline in our winter business. It was worse in the northern top, in the northern tier in the West where Winter's more important. And we were stronger a better performer in the southern particularly Texas and the Southeast. So again, it's more tied to our comment regarding weather in terms of the regional performance I'd say than it necessarily is to some trends generally geographic across the Company.

And then lastly on your Blue Tomato question, I think as we came out in June and talked about Blue Tomato and gave you a little bit of background on their operating results, they've been experiencing 30% just under 30% increases in year-over-year sales. And very strong performance. However, as things have slowed down a little bit this year primarily due to weather, but also economic challenges across Europe. Their sales have been impacted by that as well. And we continue to be very optimistic about the long-term focus, but there's no question that Europe has some challenges today.

And so we are encouraged that they are operating in a positive year-over-year on their comps, even though they're not included in our comps at this point. And we'll continue to work with them on the long-term plan. But overall again, when we've said this in the past, we do believe there could be a long-term benefit to us here. As the challenges in Europe is going to lead to more share consolidation. And we believe that we've got some great operators on our team, and they have a really good handle on what's going on in the European marketplace. And we'll continue to grow in this pattern.

Got it. And so Chris, so on the flip side, so the expenses for the contingent payments were at that EUR18.1 in euros I think at the end of last quarter. Does the lighter top line mean that you guys get a little benefit on the contingent side and maybe that number comes in?

Yes, it's certainly something, and when we talked about this when we first set this portion of the expense -- the expense out to you guys is that this is something we have to evaluate each quarter, but this is a long-term metric that is going to be analyzed on our 430 2015 results. So we will continue to look at this on a quarterly basis. And your thought is correct. If they're not able to meet the metrics that we've set out, we will have to make some adjustments there. But this is a long-term goal. And we're still working through that modeling so we've continued to accrue where we think the most likely outcome is at this point.

Got it. All right. Thanks a lot. Good luck for the rest of the holidays guys.

Thank you.

Paul Alexander with Bank of America Merrill Lynch.

Hello. Great. Thanks. Rick, a couple questions ago you said you'd respond to the marketplace just as it evolves. Can you talk about that marketplace? In particular, just the macro environment you're seeing the resilience in your customer. We've seen over the last couple months just kind of shaky traffic in trends across retail. And it's not just only when there's hurricane or warm weather. It just seems to be a worst trend in general. Can you just talk about that? What do you think is happening? Thank you.

Sure Paul. I certainly -- I probably know less about it than those of you that out there looking at multiple retailers in the market more frequently. I'm very focused on what we do. And how we manage in this environment. But it does seem to us that there is, despite the relatively high consumer confidence numbers, it feels to us, and I think the promotional environment in the mall reflects it, that there seems to be a lot of anxiety out in the marketplace.

So relative to how the consumers actually shopping in the mall. So that's kind of how our mindset is, right, as we think about Q4. And I think we are, as we've demonstrated over the years, we are really good at managing our business on a very, very fine level in how we think about taking specific mark downs or moving product through, or adjusting on order. And that strength of our partnership with our brands is another real positive in our ability to maneuver the business. So yes, our general feeling is that it's going to be -- that there seems to be a general level of anxiety out there. Again, I think that's reflected in how promotional a mall is.

And again as we commented earlier, I think as one of the analysts commented, we're far less promotional than most of our competitors on the mall. But we have that ability Paul, both as we work with our branded partners to move things up that are working to push or cancel things that aren't. And to be very, very targeted in how we think about mark downs for new volume. And the last part of that, that I also like to make sure I emphasize, is again the strength of our sales teams. It's one thing that people -- you just can't underestimate. We have great sales people in our stores. And that's a real strength for us in this kind of environment, because when we give them the tools for mark downs, they're very good at moving product.

Thanks. And just to follow-up, you said you were very focused on what you do. And a couple questions ago you said you're seeing a cyclical decline in footwear. Can you just expand on that? What is that cyclical decline? Is it related to innovation, or strength of certain brands, or strength of a trend? Thank you.

Sure. I'm glad to do that Paul. And again, this is our assessment of the market. And I'll remind people that we've been on a run with footwear for a number of years now. Where footwear has been a very strong contributor for us. And specifically to make sure we're clear about this and go back to our comments at the beginning of the call, is we're talking about men's footwear in this conversation. And I think it's become clear, I've read it in many of your notes, that we've seen athletic footwear really start to take off. Both in the sense of athletic shoes, but we're seeing that really calling out basketball and running as categories. And obviously those are areas that we play.

People don't come to us for basketball shoes or for running shoes, they come to us for skate shoes. So I think that we have some challenges there relative to just the cyclical cycle in footwear. I would anticipate that we're probably more likely in the early phases of an athletic footwear trend than the later phases at this point based upon our experience and what we're seeing in the marketplace. So as we think about what we're going to do with footwear going forward, we definitely think we have some opportunities where we know we're missing a few things with some key brands in our current business. We can correct those things as we look into the January and into the Springtime.

But again I would tell you I think that this is a cyclical trend relative to fashion, and what kids are choosing to wear. And athletic footwear is going to be in a stronger cycle. And I think that's going to provide headwinds for us in our men's footwear business.

Okay. Thank you very much.

Richard Jaffe with Stifel Nicholas.

Thanks very much guys, and I'm just wondering if there's further opportunity on the women's side? Not so much on footwear, but on the apparel side. The fashion component of women's seems to be performing very well in other venues, and wondering if that's something you guys would want to press a little bit harder on?

Thanks Richard. We certainly feel there is. As we've talked about here for I think particularly the last few years we've talked a lot about going back three or so years ago when we've changed the leader of our women's team, and brought in new -- I should say brought in new leadership of our women's team. I think, as I've said, I think on one of the previous quarterly calls this year, we feel like I think we've really developed what I believe is probably the most sustainable strategies we've had in our women's area. In a number of years. And that we're executing well against it.

And in terms of what those core strategies are for our women's business. And we think there's some opportunity as we go forward. Now, those will be -- we're going to obviously do whatever we can here in Q4 about that, but we're definitely taking bigger positions relative on our women's business as we look into the first quarter of next year. So yes, the women's team has done a great job. And I guess I'd also like to comment they've done a great job relative to our positioning as an action sports lifestyle brand which is still very, very important for us. And for me to say I think before that we don't want to do things in women's that is in conflict with our fundamental positioning as a lifestyle retailer. So I feel really great about what they've done, and we certainly agree with you that there some opportunity for this -- opportunity in our women's area as we look forward.

Could you put a number on what you think the women's side to could grow to as a percent of total sales or --

I'm not going to get too detailed about that. I would say historically women's as we look back into prior years has been as high as I think 15%, 16% of our mix. So, and obviously we're still below that substantially. So there is an opportunity from an historical perspective to say that we can grow in the business significantly as part of the mix.

Got it. Thanks very much.

Jeff Van Sinderen with B. Riley.

Good afternoon. Maybe you can just talk about -- and I know we've talked about promotions here, but do you think being less promotional than most of your team brethren just generally weighs on you when the environment is promotional, and maybe that it doesn't sort of -- it doesn't let you reflect the true strength of your underlying business? How do you think about that? And then also, did you say merchandise margins on Black Friday weekend were down on slightly higher promotions versus last year? And then for the remainder of Q4 are you planning on being slightly more promotional? And finally how should we think about the snow business going forward?

Okay. Well that's a lot. Let me see, Jeff, if I can get that all in there and Chris will remind me on what I miss. Your first part of your question about our promotional cadence relative to our competitors set, and does that hurt our business? I would tell you it certainly does not on sales, but you know what? If we are a branded -- we are primarily a branded retailer. We don't have the advantage of the vertical guys. We don't have the advantage in their margin.

But they have structure in their business, and you know what? We carry a lot of really unique brands that the idea that we would go $40 off the whole store on brands that are selling at full price today, that's just not what we do. That's not being a good partner for these young brands that really have great brand equity. And we want to be a great partner for our branded partners. So yes, from that perspective it puts us at a discount, particularly perhaps in a gift giving season when it's not our core customer making the buy. And I would probably even say that's more so relative to what the spirit of the Black Friday weekend has become.

What I think is it's also the reason that typically and historically as you get in those days in advance of Christmas, those very, very peak days, very violent peaks in those few days in advance of Christmas, and historically how we do in the days after Christmas when it's our customer that's coming in, I think you see that we do really, really well. For me, that's always a reflection that those really items that kids really want to get, really want to have, that's on their Christmas list are things that we have in our stores.

So I'm willing to trade off, because I would be hurting our brands, Jeff, to take deep, deep mark downs to be competitive with a lot of the other retailers in the mall. And we don't believe that's a good thing for our branded partners, and we don't think in the long-term it's a good thing for our position in the market. So perhaps we do. As you know, we certainly try to capture the value consumer through what we do through bundling on product and by hitting -- trying to hitting the -- trying to hit the right price points. So I'm going to stop at that point and I -- what was next on the question list there? What was next Jeff?

Just asking about merchandise margins on Black Friday weekend. Did you say they were down slightly on slightly higher promotions versus last year?

Actually, we did not say. So but your logic would make sense. I think as you would think about it, if we were slightly more promotional that we would probably slightly expect to see that. But we don't actually say that, and we don't look at that fine. What really matters is where we end up for an entire period, and where we end up over the whole quarter.

Okay. And then how should we think about the snow business going forward?

I'm glad you asked about that Jeff. Snow -- we're having for whatever the reasons, whether it's climate change, whatever reasons, we are definitely -- and I know we're not alone in this, having a very tough snow year again on top of last year's very tough snow year. Now, if it snows big in December in large parts of the country, well, then we're going to see our snow business improve here as we move through the fourth quarter.

But I guess here's where I'm at with snow, is that we have to reassess the amount of risk we take relative to how we manage this business and the rewards relative to the sales results we can drive on a consistent year-over-year basis, relative to the risk we take in -- with inventory. And when I say that, to be clear when we talk about snow business we are talking about both the snow hardgoods side of the business as well as the snow outerwear side of the business. So, I have challenged our teams here over the next few months to really -- and we did this about three years ago, we basically reinvented the way that we sold snow throughout the Company. And we need to do that again with this primary idea that we have to reassess the amount of risk we take relative to inventory.

And in relationship to the amount of reward we potentially have on the sales side relative to how frequently we're seeing good snow years in the business today. So we have challenges around that. There's no doubt about that. And -- but again I have a lot of confidence in our team's ability to execute, to think through these issues. We already have a lot of really interesting ideas about how we might approach it. But we do have to change. And so we'll be talking more about that I think as we get through this season it, and we are in position thinking about how we plan our snow business going forward.

And to be clear, too, I just want -- as we've talked about coming in to this snow season, we all knew that typically one bad snow year like last year leads to two snow years, because there's lots of carryover productivity in the system. Now, as you know, I think we did a pretty good job of managing through that last year. But that's definitely an issue that's out there today. And the longer that there's a lack of cold weather and snow, the bigger those issues become. So those are definitely some challenges for us, and we have to go back to the drawing board on how we think about the risk and reward relationship between inventory and sales in our snow business.

Okay. Thanks for taking my questions, and best of luck for the rest of holiday.

Thank you Jeff.

Dave King with Roth Capital Partners.

thanks. Good afternoon guys. I guess first off, just a follow-up to prior question on footwear. I guess I'm just trying to get a sense, it sounds like you think some of that's because more and more people are moving towards more athletic footwear. I get that. So is it fair to say then rick that that's it's across brands then in terms of skate footwear that you're experiencing this? Or is there anything to read into the specific brands, and whether or not you've got the product right or anything like that?

It's -- there are definitely opportunities on the product side Dave. And I think I mentioned that in a comment earlier. There are some things we missed, which we can correct. And as I said we will correct here over the next starting in January and more so as we work in to Spring. And there's always movement among brand mixes. But it's clear I think, and if you were to look at our mix four years ago on our footwear wall as to where it is today, it's changed significantly. And bigger brands are owning a larger portion of the wall.

And many of the smaller footwear brands are the ones that are really struggling in this environment. So again, we always expect to see movement around brands and velocity of sales relative to brands outperforming other brands. That's a natural thing in our business where we saw a lot of brands. But in general, that's been the trend over the last three and four years.

Okay. That's helpful. And then so then just taking a step back, is there any indication that this trend in call it I guess skate footwear but maybe action sports footwear is a harbinger of things to come for broader action sports? And maybe just -- I just wanted to dig into your comment. I think you said earlier in the call that you had confidence in the strength of action sports lifestyle, and just maybe you could talk a little bit more about where that confidence comes from and as we think about that going forward?

Right. And I'm glad to do that Dave. And I'll start by reiterating a couple of the points we made in our earlier commentary in the beginning of the call. Which is I believe in the lifestyle. the lifestyle has real resonance. And we talked at the beginning of the call, we called out a couple areas that continued to do well. And as we've said, adjusting for snow outerwear, we actually had positive comps in November in our men's and women's business. And for most of this year, that would be -- we could say that's also true.

The other very important point that we made at the top was that our skate hardgoods business has been a positive comping business all year long for us this year. So I think those are indicators that the lifestyle is resonating. What we have in our challenges right now tend to be more around the snow business, and then the cyclical what I consider to be a cyclical fashion trend around footwear. So I'm not seeing fewer people at the skate park. I'm not -- that's not what I'm experiencing or seeing. And I think our skate a business reflects that.

And by the way, and many of you heard us talk over the years about how we expected that our skate business would start to rebound with the shift in demographics with more 12-year-olds entering our marketplace. So we've kind of been seeing that in our experience in our business.

So I'm still confident about where action sports is at. And again, we're still doing well in many parts of our business. And by the way, we're still having a good year in our core business here in the US. So I don't see it that way Dave. That there's some major issue with action sports. I see it as a cyclical issue relative to footwear. And I do see that this snow in general is just a changing business for many reasons, including the fact that it doesn't snow as much.

Yes. Absolutely. And for what it's worth, we're getting rain out here in the West now and so hopefully that does translate to something. But actually a quick follow-up on that, it made me think of, do you think it's -- and then I won't take up any more time, do you think it's fair to say or maybe any comment -- is there any comment you have on is actions ports still as brand focused? Are there any signs on the horizon now that it is becoming more fashion driven at all? And is that something you worry about at all Rick? And then that's --

It's a great question. Thank you Dave. And remember that at the end of last year when we talked about our brand mix and private label penetration, we indicated that private label penetration actually ticked down slightly last year and that brands have been stronger. I will not be surprised that as we complete this year -- and we need to complete the full year to make sure, because fourth quarter is obviously huge for us in terms of overall volume. But I will not be surprised that we find that this year that private label penetration also ticks down and that we're selling more brands rather than our private-label for the year.

All right. Perfect. Thanks so much.

Steph Wissink with Piper Jaffray.

Hello guys. Just a couple of questions for us. Chris, if you could just clarify, I think you went through the weekly cadence of November and the final week if I heard you correctly was down 1%. If you could just help reconcile that relative to the Black Friday weekend being up low single digits, what's the variance there?

Yes. Let me take that Steph. And at the top. And I think again it gets back to the idea that we're not a promotional retailer. And it ties back on the idea because so many people were touting that Black Friday deals in advance of Black Friday and the weekend. And that moved volume from my perspective out of the Sunday, Monday, and Tuesday and Wednesday of that week. And pushed traffic towards the Black Friday weekend itself. So while we were down one overall for that week, as we said we were up in the low single digits for the weekend. You could then infer what those first four days of that week were like.

So which is they were not very good. And that reflects again in my mind that the whole push from a consumer's mentality is not to shop those days if the deals going to get better starting on Thursday and into Friday. And again, I think that for us not being a promotional driven discount driven retailer, that probably has a disproportionate impact on us.

Okay. That's really helpful Rick. So then thinking about that for a second as you plan your business over the next call it four weeks or so, how do you think about then those big traffic weekends to try to capture share without forgoing margin?

And again, I kind of commented earlier on this, Steph. I'm going to come back to it, which is again if you look at our volumes in those peak weeks, typically weeks four and five around December based on how Christmas falls, the immediate days before Christmas and the days after Christmas, we have historically done very, very well in those time periods. And as we get closer to Christmas, what we find from my experience historically is that we do well then because the things that kids really want that are on the parents' shopping list for things that kids really want are things only we have. And that play to our strength and our position in the marketplace. I don't think that's going to change.

And then of course when kids come out post, we have traditionally done very well in those days afterwards. That's because that's actually our shopper now, not a gift are coming out. So I'm going to continue to believe that we're going to have strength around those time periods. I think again as we've talked about our challenges are going to be in these middle weeks where we would expect to be softer. In advance of those weeks four and five, particularly weak five this year and the way the Christmas holiday falls.

And so how we do it then will be what drives our promotional cadence here as we look through these first three weeks of the period. Will be what will determine how aggressive we get from a promotional point of view. And if we're doing pretty well, you might not see much change. If you do, then we'll take the mark downs that we need to take or just our inventory positioning to make sure that we come out of the season in a good inventory position.

Okay. Thanks. And then Rick, if could just talk a little bit about your store growth plans for 2013? I'm assuming you're starting to look at some deals. How are those deals shaping up and what is the plan broadly for the next year? And I just have one more in follow-up after that. Thank you.

Yes. We're not going to actually comment on what we're thinking about. We've said generally that we expect to see 8% to 10% unit growth is what we've been saying. I can tell you that we are working towards those goals, Steph. And that again we'll talk more formally when we come out in March with the year-end results, and talk about more broadly what we're thinking for next year. But at this point we are working towards that goal that we've stated previously of 8% to 10% unit growth. And I will say we still have some openings in that number. We're not locked in and committed fully for those units at this point. But that's typical also for this time of year.

Okay. And then I was struck by something you said earlier Rick about that 12-year-old customer that you're seeing engaging in skate. If you could just pontificate for a bit on that customer. What do you think is going to be important for that teen as they age up through your category over maybe the next five years or so?

Sure. Again, I think we're not going to expect, Steph, any different pattern probably than we've seen as any teen ages through our business. So and again, where the bubble is as you know, we had a huge bubble in the mid-2000s in terms of that group. And skate was big and then we moved into more of a street scape focus. In think as they age through that. So there's a number of phases I think we'll play throughout that life cycle. But the core skate market is really in our mind in our business a 12 to 15-year-old in terms of the marketplace. Now, we have plenty of 16 to 20-year-olds that skate too and older, but the core business the real bubble I think is most true is in that 12 to 15-year-old age group. So we'd expect to see that group will lead the way relative to the hardgoods business and into skate apparel.

Okay. Best of luck, guys. Thank you.

Christian Buss with Credit Suisse.

Yes. I was wondering if you could talk a bit about how you're thinking about the different categories that you've emphasized within the store. And if there are any shifts that you think you need to make or that you're considering making, given what seems to be some challenges in the category as a whole of the action sports category as a whole?

Well again, I'm going to take exception with that Christian. I don't -- we're not -- as I said, I don't think there's something fundamentally wrong with the action sports category as a whole, so I'm not going to buy into the premise of that portion of your question. And no, I don't think that you're going to see us take any different positioning's relative to how we're positioning different categories in the store. We don't currently have plans in that way of thinking about our business. It's more about at this point about relative to managing inventory positions, and whether or not it snows, relative to how we think about hardgoods and outerwear.

That's helpful. And can you talk a bit about your regional merchandising initiatives? Where you are with that and what kind of opportunities you still have there?

Sure. And again, we think as most of you know, we allow a lot of latitudes to our teams across the country in terms of how they think about merchandising their stores. General direction in terms of how we have generally bought it, but there's a lot of fine tuning that goes on between what our buyers do and the latitude we provide our individual store managers to actually present the product in the store. So none of that has really changed.

What we're continuing to work on very aggressively Christian, is our ability to micro-sort stores. And we've talked a lot about that, the new tools we have in place. We have made huge strides over the last three years in implementing the new software tools we have in place for assortment planning. And I get that over the last couple years, the real complexity has been added to that has been the idea of multiple channels of selling and how we think about assortment planning, micro sorting stores relative to the idea of omni channel retail.

So the last couple years, that's provided a whole new way for us to think about micro assortment of stores and how we evaluate what's really selling at a store and what's not, where sales are originated versus where sales are fulfilled, how the interplay works between what we do from a marketing perspective and what happens online for our consumers. So the whole new level of thinking about what we do in terms of the front end of the merchandising, which is really about the detailed level of micro assorting stores. And I will tell you this is going to be an ongoing challenge for us. And I think we're well positioned. We have incredibly powerful tools to dynamically assort stores at very, very detailed levels, which we are doing today. And I think we are going to only get better at it as we move forward.

That's very helpful. And are you thinking on the e-commerce site on the omni channel side maybe is a better way of putting it of making it possible to ship to store to be able to pick up in-store? I know you have to find in-store feature available now.

We have a whole list of activities and things that we are doing to drive omni channel retail Christian. So I'm not going to get into specifics, but I can tell you that we are actively aggressively pursuing the opportunities that are in front of us. We think, as we've said before, this is a key part of our strategy how we're going to integrate all of our channels of business from marketing to the website to our physical stores. The social net channels that we're involved in. And again, I think we're at the very, very early stages of this idea of omni channel retail.

We have a long ways to go I think as this plays out, but I would tell you I think that we are doing well in terms of the kinds of things we're doing here. And I am not sharing all the things we're doing, but we have a clear road map for where we're going with this. And you're going to see us do many, many things here over the next 12 to 24 months as we continue to drive this effort forward.

And I also want to make sure I connect again, I said this earlier in relationship to another question, but I want to make sure I make the point. One of our key advantages in omni channel retail is the strength of our sales teams in our stores. And having real sales people that can drive a sale and giving them more tools to make that sale possible through omni channel is a huge advantage for us, I think, because there are only a few retailers I think in operation today that can really claim to have a true sales force. And we're one of those few. So that's going to be a real advantage over for us over the next 18, 24, 36 months. And as we roll out our game plan, our map for what we're going to do in omni channel retail.

That's great to hear. And then I think I may have missed this, but what was the online growth year-over-year?

It was 32.3%.

Okay. Great. Thank you very much, and best of luck.

Edward Yruma with KeyBanc.

Hello. I just had a quick question. It seems like other retailers are starting to adopt your philosophy of trying to capture these young and emergent brands. Has that environment to capture those trendy brands become more competitive? And have the economics around some of those brands changed? Thank you.

Right. Thanks for the question Ed. Well certainly, everyone's trying to get out there and get the brands that sell. And that's pretty much -- that's kind of what people would want to do is go capture those hot young brands that they believe you can sell. So yes, I would say -- I wouldn't say it's increased. I think our competitors have always tried to do that. And pursue those young brands. It's a question of their degree of success in doing it.

Now, whatever their degree of success is, I'm totally comfortable that again, we do it I think the way we run our business relative to empowering our managers, giving -- we're essentially bringing the independent shop experience into the mall with managers who will talk about owning their stores, and are driving and engaging with customers on the sales floor. Our ability of micro assort stores, and then to take that idea of independent shop and leverage that idea with an omni channel idea is an incredibly powerful thing getting back to the strength of the people that are on our sales teams.

So as brands think about who they want to partner, I can tell you that I still feel very, very comfortable that we're at the top of the list. As young brands come forward and forge their way through the core shop environment, we're the place they come. Because I really believe that we do it right. And we do it in that idea, bringing that independent shop experience into the main stream of the mall. Really empowered employees, great sales teams, brands surrounded by other great brands and then connecting it with the power of a larger retailers through omni channel -- through our omni channel strategies. So yes, it's always been there. And we're always going to fight that battle, but I think we are the choice. And I think experience shows that to be true where young brands want to come to emerge.

Has the willingness of other competitors to discount some of these emerging brands changed the economics behind some of the business that you do? Thanks.

That's a great, great question Ed. And I don't want to comment what our competitors do in terms of discounting the young brands. That conversation needs to take place between our branded partners and their retailers. I just want to make sure that I emphasize the point that that's not what we do. Because we believe that these brands have real strength. We believe in these young brands. We want to do the right thing in supporting them. And the right thing is to reflect the fact they have real equity and real value and pricing power. And we want them as part of their brand positioning through marketing, through distribution, and through great unique product to yield the price that they deserve to get, which is these are full priced brands.

So our position is that to be a good partner as a retailer for these brands, is we need to do what's right for them like they do what's right for us. And so we're -- while other people may choose to discount them, that is not what we're going to do. And I don't think -- it may be to our disadvantage in the short-term, but it's not to our disadvantage the long-term in terms of again being the place that young brands come to be in a quality retail environment.

Got you. Thanks so much.

Andrew Burns with D.A. Davidson.

Thanks. Most of my questions have been answered. Just a quick point of clarification on the snow. Clearly some headwinds in that business weather-related and just the category in general. But that I wasn't clear on whether you thought your assortment was where it's needed to be or if you saw there was a bit of a misstep within your specific assortment, or primarily just headwinds of the category? Thanks.

Thanks Andrew. That's a good question. I'm glad that you asked it so we can make sure we're clear in how we're thinking -- how we're responding to that. I don't have a big issue with our assortment at all. I think our assortment is from the brand selection that we carry through how we locate specific brands and specific markets around the country, again how we micro assort those brands across the country. I don't think we're off in any major way in terms of what we're doing with assortment. These are bigger broader issues with -- in the snow hardgoods business, in our snow business in general.

Okay. Thanks, and good luck in December.

Thank you.

Betty Chen with Wedbush.

Thank you. Good afternoon everyone. I was wondering Rick, as we think about Blue Tomato in Europe, is the weakness in terms of a macro perspective primarily coming from Austria, or are you seeing it in other countries that they sell to online? And then in terms of the business, it looks like on the press release that you had opened several stores in Germany. I was just curious how we should think about store opening plans for Blue Tomato in 2013?

And then my second question is in regard to the cash balance. Really pleased to see the Board had authorized a buyback plan earlier in the quarter. Can you remind us what is the cash balance you'd like to keep on the balance sheet? And then lastly for housekeeping, what is the percentage of footwear sales for -- or men's footwear sales? And also, what is the percentage of snow business in the fourth quarter if we consider hardgoods and outerwear in that category? Thanks.

All right. Thank you Betty. I'll take the first part and let Chris respond to the latter part on the mix within the business. So first, relative to Blue Tomato and your couple questions there, the macro weakness how are we seeing it, we just had a conversation with the Blue Tomato team yesterday. We're generally seeing it starting to filter more broadly across Europe, and I think you're probably most recently may have heard this relative to France itself. But it's generally to the southern tier, but I think we're starting to feel it in some other parts of Europe.

So nothing to be surprised there. And again I want to reemphasize what Chris said in the earlier question regarding our thinking about Blue Tomato. From my perspective, it's a highly fragmented marketplace in Europe. This is actually to our advantage, because the Blue Tomato team, they are great operators at what they do. And they're real leaders in Europe in the action sports marketplace. So this is unfortunately a very tough economic environment, and I think the strong players are going to be the ones that survive and the ones that gain share. And I think we're well positioned in that sense.

So yes, there's short-term issues relative to the macroeconomic environment. It may get worse before it gets better. I don't know. Either way, I think it benefits us in the long-term. We continue to believe that this is a great long-term opportunity to build the kind of action sports retail chain in Europe like we have here in the US, which just simply does not exist there today. And again we think we have the best partner to do that with.

Relative to the store plans for growth in Europe, again, Chris commented on how many stores we've added there this year. We're not going to really comment going forward. That's part of as we've said in at the top of the call in our thinking about developing our five-year long-term plan, and as Chris said we are working closely with the Blue Tomato team and our leadership team here. I'm putting that together. We need a few more months to really lay that out, work through the details. So we're not prepared to really talk about how we might think about that, just like you won't really specifically talk about US store growth at this point in time.

Cash balances and how much -- what is -- how do we think about the balance of cash that we'd like to keep on our balance sheet. I think most management teams are always happy with healthy cash balances on their balance sheet. And what we do, is we periodically, at least annually sometimes more frequently, will work with our Board as our Board challenges us on this question and we lay out for them amongst a set of parameters, what do we need in terms of cash positioning to make sure that we can survive and thrive?

I would say, survive and thrive, and if there was tough economic times here in the US relative to another recession? What cash balance do we need there? How much balance would we need if we saw opportunities in the marketplace for small acquisitions? We look at what that balance may need to be. And we look at just generally what do we need to fund our business relative to CapEx on a typical year? Relative to again how much cash we think we're going to generate.

So all those factors come together and we say, okay, this is where we think the balance should be kind of our minimum threshold. And then the board looks at that and says, do we feel comfortable then that we have excess cash that we should be looking at ways to return that value to shareholders? We go to that process, as I said, at least annually sometimes more often depending on where at. And that's an ongoing process. So it's not like I have a number that I pull out and say this is it, because I think it's dynamic and it's changing all the time. But it's an ongoing process, and our Board is really leading the way on that in terms of how we use cash relative to delivering value for our shareholders. Chris, do you want to comment on the rest?

And your question around snow penetration within the fourth quarter, it has been as high as 20% in a really good snow year. And dipped down into mid-teens even low teens in bad snow years. So 2011, as we mentioned, was a tougher snow year and would have been on the lower side there. But it can get up to 20%. And then on the footwear side of things, we don't necessarily breakout the men's and women's breakout, but footwear in 2011 was about 24% of sales.

And men's is by far the largest part of that Betty.

Thank you so much, and best of luck.

Jennifer Black with Jennifer Black and Associates.

Good afternoon. You did a great job with your limited edition collaboration with Super and Stussy. And I know you sold out really quick. And I just wondered if you could expand your limited edition merchandise, obviously it would be on an ongoing basis and it would have to change, but is that something that you could do to spark interest and drive traffic? And then I have a follow-up.

Great. Well thank you Jennifer for the question. And first, I'm always appreciative and I should have known you would be on top of looking at what we're trying to do there and we did it for a lot of reasons. Again, we look at these opportunities because we do want to provide uniqueness for our customer.

And I think the way they did that through the combination of some really great brands and the black and gold theme was pretty creative. I think we have a lot of fun with it, and we're able to not only do it by presented by what we do in stores but again present it through all the social networks and social channels that we're using. Our brands got behind it and again we really appreciate their support in helping us carry forward an idea like this.

And yes, we hoped that it would drive traffic. I don't think it's necessarily an important traffic driver on a Black Friday weekend. It's obviously not. Relative to what's going on and what the consumer is that's out there for Black Friday. But you're going to see us, I think you're probably aware that we have a series that is coming up over the next few weekends. Themed events, a unique product to us. And I think you'll see us continue to periodically do this as we look out through the next year, based upon our success over the next few weekends.

Well that's great to hear. And then my second question is, I just wondered if you had an outlook on gift cards, and just I guess from a big picture perspective?

Yes gift cards as you would expect are incredibly important in this time of year. And we do measure on a regular basis during the days between Thanksgiving and the 24th of December, exactly how we're doing at every location in gift card sales. As we would, not actually sales as you know, but for reporting purposes we'll evaluate that in terms of trying to incent and measure how our teams are doing. So we have a big gift card business. And a very successful one. I would expect that our history will say that again based upon demand for the kind of products we're selling that we'll be able to have another good year with gift cards. And that is, we have a very, very high redemption rate in the first 30 days for the gift card, it's actually a very, very high redemption rate in the first 10 days post Christmas.

So much higher than what you read our redemption rates are much higher than what you read for a typical retailer for gift cards, which again speaks -- that is something we do measure. We actually look at redemption rates day by day following December 25th. Because what were looking to see, again we're using it as a measure of how quickly consumers want spend their money in our stores. So we're looking at that on a regular basis each year to see if we se any change in the patterns. I can tell you the last few years they've been very consistent.

Great. Thank you, and good luck.

Thank you.

Linda Tsai with ITG.

Yes, hello. Over the next five weeks, will you offer more compelling value packages? I think in the past the holiday shopper has responded well to these, if it tends to be a gift giver like the mom who more attuned to value?

Yes. Linda, we're always looking for opportunities to do -- provide value in a way that makes sense relative to the selling season. So in a gift giving environment, yes we will try to look at how we would bundle packages together, so an obvious one would be snow jackets and snow pants for example. In terms of how we price that package. But also, we look at the sales process in the holiday season much, much different than we look at the sales process in for example in Back-to-School season.

So the Back-to-School season our bundling strategies are built around outfit building. And that clearly does not work as well in a gift giving environment where it tends to be a more item driven environment. So you'll see us yes, we'll have those programs out there but you'll see us much more focused on how do we do it on trying to put like items together that make sense to put together in terms of providing a value for the consumer.

And then I just had another two follow-ups. I was little unclear on what you said earlier, is your private label going to make a high or low percentage of overall sales this year? And then what was the driver behind that?

Again, to be clear I did say I said I wouldn't be surprised that private label. I don't know where it's going to end up at this point, because fourth quarter is such a significant component of our overall sales. Last year though, private label mix or private label declined relative to our total sales by a small amount. It wasn't a huge decline, but it did decline as a percent of our total business. And my comment was I would be surprised as we complete this year that we would see that same trend this year.

The reason for that, and again I think it's a really great thing, the reason for that is the power of the young brands that we're selling. And our customer simply is choosing to buy the branded item. And we're going to go where the customer takes us. And I think that's a great thing from my perspective, if they want to by the logo of the hot brand, we're happy to sell them that logo of a hot brand. So it's a reflection of the nature of what the consumer wants to buy. And in this case, they're buying a bit more last year, and it may turn out again this year that they're buying a bit more of the branded mix relative to our private label.

And then my final question is, have you actually expanded your snow business across your store base? Or was that just a function of the store that I visited, maybe that was just the result of micro merchandising?

That would be a result of micro merchandising, because we actually did the opposite this year. We contracted the snow business across our store base. And there are fewer -- we actually have fewer stores this year selling snow hardgoods than we did at this time a year ago. Now, what you saw there is a really good thing, and I'm glad you noticed it Linda, is that this is a clear example of how we do micro assort stores. And our team looks very carefully at this and says, if the store performed this way last year then we ought to think about changing their mix to reflect, particularly as we think about omni channel sales, change their mix to reflect what we think that store can now sell and has demonstrated they can perform. So what you saw was an example of micro assorting of stores. But in aggregate, we have fewer stores with snow hardgoods this year.

So it's more concentrated in a smaller group of stores?

Correct.

Got it. Thanks and good luck.

Sharon Zackfia with William Blair.

Hello. Just a quick follow-up. I think if you take out all of the charges in the fourth quarter you're looking for operating margin to be down around 100 basis points, which is probably a little bit better than I would expect on a negative comp. So is there anything kind of unusual going on there in terms of incentive accrual reversals, or anything we should think about?

Again I'll let Chris talk about this Sharon. The only place I'll start with it is that there is a benefit from the 53rd week relative to some leveraging of expenses in January, because rent's read over that cycle. Chris, do you want to take it from there?

Yes, definitely. Obviously on a negative comp as well, there will be some levers that we have you look at in the business and incentive comp is one of them. And there's a couple other areas as well that we have funded based on results. So we'll look at those overall. And but on a negative comp, and in each kind of data point along the model, the expense structure will change slightly.

But to be clear, do you have an incentive comp reversal modeled into guidance or not?

I think that's a good assumption. Yes.

All right. Thank you.

Steph Wissink with Piper J affray.

Hello. Just a real quick follow-up Rick on the store managers and in some of the turnover, if you could just give us an update on some of the staff? I'm curious how you're communicating with them through what is what more of a competitive environment to you to build and retain kind of that culture that you've worked so hard to build?

Yes. Well again, I feel very good Sharon, about how we're positioned with our store management teams. Again, we invest both in each other very greatly and the commitment of what we expect from our store teams in particular our managers. And the training that we provide to them. So typically, we only look at turnover levels really on a full-year basis. So I'm not going to comment on any turnovers. Although I don't expect any significant historical differences at this point in what I would look at for our store manager turnover. And you know what? Yes.

We are very good about communicating about where we're at, what our challenges are, and what we're going to do. This is an environment culturally that expects that. That we'll have an open and honest dialogue about where we're at, and how we think about things, and the challenges, and how we think about driving volume. And we certainly ask our store managers what they think about how we can improve the performance. So fundamentally though, there's nothing that's different in what we're doing relative to how we think about our store managers. Nor do I believe as we get through this end of the year will we see any fundamental difference in turnover rates.

Okay. Great. Thank you.

Ladies and gentlemen, since there are no further questions in queue, I'd now like to turn the call over to Mr. Rick Brooks for closing remarks.

Thank you Jeff. And again we really appreciate everyone's time and questions today. Some really good I thought, questions in terms of the business. And again I appreciate your interest. And we're going to look forward to hopefully a successful holiday season as we move through this fourth quarter. And of talking with you again in March when we talk about our full-year results. So thank you everybody, and have a great holiday season.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.