Barnes & Noble Education, Inc. (BNED) Q1 2020 Earnings Report, Transcript and Summary

Good morning. My name is Jody, and I will be your conference operator today. At this time, I would like to welcome everyone to the Barnes & Noble Education Fiscal 2020 First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session [Operator Instructions]. Thank you.Tom Donahue, CFO, you may begin your conference.

Good morning. And welcome to our fiscal 2020 first quarter earnings call. Joining us today are Mike Huseby, CEO and Chairman; Barry Brover, EVP of Operations; Kanuj Malhotra, President of Digital Students Solutions; Lisa Malat, Chief Operating Officer, Barnes & Noble College; as well as other members of our senior management team.Before we begin, I would remind you that the statements we will make on today's call are covered by the Safe Harbor disclaimer contained in our press release and public documents. The contents of this call are for the property of Barnes & Noble Education, and are not for rebroadcast or used by any other party without the prior written consent of Barnes & Noble Education.During this call, we will be making forward-looking statements with predictions, projections and other statements about future events. These statements are based upon current expectations and assumptions that are subject to risks and uncertainties, including those contained in our press release and public filings with the Securities and Exchange Commission. The company disclaims any obligation to update any forward-looking statements that may be made or discussed during this call.At this time, I'll turn the call over to Mike Huseby.

Thanks, Tom. Good morning, everyone and thank you for joining us today. Our fiscal 2020 first quarter results were consistent with our expectations for this quarter, a seasonally low sales activity for BNED. We continue to make important strides in our areas of strategic focus for the company. For example, we are investing and growing our bartleby learn digital study product. We're driving net new business wins in retail and we're strengthening our retail segment through important initiatives in both our general merchandise and course materials business.First, I will discuss the performance of bartleby in our DSS segment, which continue to build momentum as we improve and refine our offerings, invest in new solutions and leverage our unmatched insights in the student preferences and course materials consumption. It's been barely a year since our new digital study product bartleby learn soft launched, and we've accomplished a great deal in that time.Our product team has made continued enhancements to bartleby learn to ensure it is best serving students by providing them with academic assistance available anytime and anywhere. We continue to grow the number of titles and subjects covered on bartleby learn, and to increase the number of step-by-step solutions available in our content library. In this fall semester, we are approaching approximately 2 million solutions available for students, up from more than 1 million solutions we offered at the end of our last fiscal year just in April.With our first in footprint bartleby sales push in the spring, we acquired approximately 50,000 subscribers. Leveraging what we learned during the spring rush, we have now improved our sales strategies, enhanced bookseller training, increased in-store marketing and continue to incentivize our field sales force. Our thousands of student booksellers are hard at work offering this product to students to supplement their classroom learning and ensure as they're equipped for success.In addition to enhancements to the bartleby learn product, we also recently soft launched a new bartleby offering, branded bartleby write. Our goal is to provide an innovative suite of digital products and services that support the learning ecosystem and provide students with the tools they need to succeed, both in and out of the classroom. Bartleby learn marked the first offering in our planned suite of services. And just a few weeks ago, we launched the bartleby write as bartleby learn's companion.Bartleby write was developed on a foundation of a writing product we acquired through Student Brands in August 2018. Our teams have been working diligently to grow and enhance the offering into a best in class writing product. Bartleby write allows students to check grammar, detect plagiarism and receive an AI generated preliminary score, so they know if their paper may benefit from improvement before they submit it. We believe bartleby write solves multiple pain points for an even larger addressable market of students. We're excited to grow our suite of services and look forward to adding active bartleby users.Moving now to our retail segment and specifically new bookstore business. After just one quarter with our new go to market strategy and unified sales team in place, we've already started to post positive results. Currently, we have contracts to open in fiscal year '20, approximately $78 million of new business gross sales or $39 million net after store closings. This includes both full service and virtual store models. Of this $39 million, approximately $21 million is attributable to our virtual stores, demonstrating the strong value of the virtual operating capabilities provided to BNED by MBS.Our ability to adapt to the different needs of current and prospective partners is critical. The complexities of our industry are becoming increasingly challenging for institutions to manage on their own. That gives us the unique advantage to deliver the physical, virtual or custom store solutions best suited for them. A great example of the value we offer our college partners is our new BNC Adoption & Insights portal, or AIP.AIP is our innovative new platform for faculty and academic leadership to submit and monitor course material adoptions, enhanced affordability and drive student success. This platform has helped us win new accounts and to retain existing ones. AIP is now live at our first wave of schools, and we will continue to implement this platform for current and new partners on a rolling basis throughout this fiscal year. We're very excited about AIP, and think this is a significant differentiator for BNC in the marketplace. As we increase the penetration of digital packages and pricing models, the AIP platform coupled with our efforts to integrate it into the learning management systems and the student information systems of our campus partners, will be a critical tool that will make our relationships with campus partners even more valuable and therefore more sticky.We're seeing positive trends in our general merchandise business with comp GM sales increasing 4.9%. This increase was driven by strong consumer response to our enhanced product assortments in the apparel category and strong trends in our graduation business. While we are already successfully driving growth in general merchandise sales, we also have the opportunity and plans to significantly increase the growth rate of this high margin business.We're implementing key strategic initiatives, supported by targeted investments to accelerate our comp store and new store sales growth in our general merchandise business. Our goal is to provide customers with the best-in-class shopping experience, no matter which channel they shop through. Within our e-commerce offering, we have been focused on an important initiative to significantly expand our online product assortment. This quarter, we added new vendors and products that are available online only and therefore do not require stores to carry the inventory. This direct ship capability allows us to increase the product volume and assortment available to our customers without increasing inventory costs.We've also begun a key strategic initiative to greatly improve our e-commerce shopping and fulfillment experience with the design and development of a new next gen e-commerce platform, which we expect to invest in primarily during this fiscal year. This new platform will provide an improved customer experience and is expected to significantly benefit our general merchandise growth beginning next year. In fiscal 2019, our online GM sales grew 5.6%. We believe we should be able to grow this business at a much higher rate beginning next fiscal year with the experience that will be offered by our new e-commerce platform.In our physical stores, our competitive advantage lies in our location in the heart of campus. We remain a trusted source for all things college, as students and their families look to the campus store for everything they need for social and academic success. As discussed during our fiscal 2019 year-end earnings call, we are reimagining our brick and mortar space to create dynamic highly curated concept shops that are driving traffic and increase sales to our stores. After seeing positive sales trends from last quarter's pilot concept shops in four stores, we've now expanded across 70 locations with over 200 shops. The concept stores will change 4 times throughout the academic year, focusing on touch-points such as tailgating, holiday and graduation, including a dedicated champion shop with products found only on Barnes & Noble college campuses.Additionally, we're partnering with exciting brands that our students are not currently used to seeing in our stores, including AT&T and Urban Outfitters to be a part of the enhanced in-store experience. In two of our stores, we are piloting AT&T lounges where students can study, relax and interact with AT&T products. In August, we also launched an initial 10 UO on Campus concept shops in partnership with Urban Outfitters. These shops offer students Urban Outfitters' home décor and trend products right in the center of the campus store.We are encouraged by the very positive response from students as we bring a highly relevant gen-z brand right to the heart of campus. As retailers and brands are findings ways to edge closer to college campuses, our location on campus work as a powerful media channel. With over 67 million annual visitors to our e-commerce site and foot traffic across our 777 physical campus stores, including students parent and alumni, we offer a way for brands to meaningfully connect with the college audience by leveraging our physical and digital footprint. We currently partner with over 50 brands in this capacity and continue to grow this unique area of our business.Moving to course materials. Course material sales were down 11% on a comp basis for the quarter, driven by trends we have seen in previous quarters, including lower enrollments, lower average selling prices and students buying fewer course materials. To mitigate these trends, we have put a strong focus on programs such as inclusive access, which drive penetration in sell through rates and benefit the BNED, publishers and the institutions we serve. Inclusive access models, including our BNC FirstDay platform, continue to increase in popularity as institutions looks for ways to drive affordability and access on their campuses. In fact, the number of institutions using BNC FirstDay has grown more than 60% in the past year and inclusive access revenue has increased 46% year-over-year.To ensure we are offering our current and future partners with strongest possible inclusive access platform, we recently announced a new exclusive agreement with our long-standing partner, VitalSource. Under the agreement, VitalSource's technology will power the BNC FirstDay inclusive access platform, bringing together VitalSource's advanced technology and BNC's unparalleled campus and publisher relationships. Transitioning our platform to VitalSource's state-of-the-art technology allows us to accelerate and optimize BNC FirstDay implementations and focus even more BNED resources on our core strength, providing exceptional service and support to students, faculty, academic leaders and administration.This agreement drives cost savings related to development and maintenance of our platform technology, and will enhance value for our partners by offering new functionality and expanded content offerings. We're very excited about this partnership and we look forward to driving BNC FirstDay adoptions at an accelerated rate as we begin this transition in the coming months.So the first quarter is a relatively low sales activity for BNED, we have used this time to make important progress in enhancing our offerings and strengthening our value for the students, faculty and institutions we serve. We're taking important steps to actively manage and restructure our cost elements in response to the changing industry environment, and we continue to allocate capital and manage our cost structure to maintain an acceptable level of short-term profitability and strong free cash flow. Entering the Fall Rush, we are confident in our ability to drive sales, while delivering the exceptional service we are known for.We continue to make important investments for the sustainable long-term growth of BNED and expect to begin recognizing the results of these investments throughout this year and into fiscal 2021. All of our team members have been working tirelessly to execute our initiatives to make both our current Fall Rush and BNED's future as successful as possible. We've asked much of our people and I would like to thank all of them for their continued hard work and dedication to the success of our company, as well as the success of the students, faculty and institutions we serve.I'll now turn it over to Tom for the financial review.

Thank you, Mike. Please note that the first quarter ended on July 27, 2019 consisted of 13 weeks. All comparisons will be for the first quarter of fiscal 2019 unless otherwise noted. During the fourth quarter of fiscal 2019, we realigned our business and sales organization into the following three reportable segments: retail, wholesale and DSS. The retail segment combines the operations of the former BNC segment with the MBS direct virtual bookstore operations. The wholesale segment is comprised of the MBS wholesale business, and the DSS segment remains unchanged.On April 28, 2019, the first day of the first quarter of fiscal 2020. We adopted ASC 842 leases. In connection with the adoption of this accounting guidance, we recorded $277 million of operating lease right of use assets and a $294.7 million operating lease liability. As of the end of this fiscal first quarter, our balance sheet includes $314.4 million operating lease right of use asset and $337.7 million operating lease liability.Total sales for the quarter were $319.7 million compared with $337.5 million in the prior year. This decrease of $17.8 million or 5.3% was comprised of $12.4 million decrease from the retail segment, a $17.6 million decrease from the wholesale segment and $0.3 million decrease from the DSS segment, partially offset by lower sales eliminations of $12.5 million.Comparable store sales in the retail segment decreased 3.5% for the quarter as compared to a decrease of 2.5% in the prior year period. Comparable course material sales for the quarter decreased 11% as compared to a prior year decrease of 4.7%. Course material sales continued to be impacted by lower average selling prices of course materials, enrollment declines and student purchases from publishers directly and other online providers.General merchandise comparable store sales for the quarter increased by 4.9% compared with 1% increase in the prior year, driven by strong school spirit clothing and accessory sales, as well as graduation product sales. Net sales for the wholesale segment were $72.3 million, a decrease of $17.6 million or 19.6% as compared to the prior year period. This decrease is primarily due to a shift in buying patterns, a decrease in supply and a decrease in customer demand, including our own retail segment. DSS sales were $5.4 million in the quarter, a decrease of $0.3 million or 5.3% as compared to the prior year period. DSS sales were down primarily due to lower subscriptions of student brands, partially offset by growth in certain foreign-language properties and increases in bartleby's subscription sales.Sales eliminations were $32.7 million, a decrease of $12.5 million as compared to the prior year period. These sales eliminations represent the elimination of wholesale sales and fulfillment service fees to retail, and the elimination of retail commissions earned from wholesale. The consolidated gross margin rate for the quarter was 22.4%, up from 19.7% in the prior year period. This is primarily attributable to lower contract costs related to contract renewals and new store contracts, as well as a favorable sales mix of a higher margin general merchandise sale.Selling and administrative expenses in the first quarter decreased by $1.4 million or 1.5% compared to the prior year period. The decrease in the retail segment of $1.4 million for the quarter was primarily the result of decreases in physical store payroll and operating expenses, a decrease in LoudCloud digital operations, a decrease in the virtual store payroll and operating expenses and a decrease in the corporate payroll and infrastructure. Wholesale expenses decreased in the first quarter by $0.9 million, primarily due to lower payroll expenses and operating expenses. DSS selling and administrative expenses increased in the quarter by $1.3 million, primarily due to ongoing costs associated with the development of bartleby, as well as cost related to student brands and other digital offerings.Corporate services in the quarter decreased by $0.5 million as a result of lower bonus and operating expenses, partially offset by higher stock based compensation expense. Our cash balance at the end of the quarter was $8.2 million, a decrease of $5.1 million compared to $13.3 million in the prior year period. There were $174.1 million in outstanding borrowings compared to $230.2 million in outstanding borrowings in the prior year period. The $56.1 million decrease at the end of the quarter is primarily attributable to improved free cash flow.Our current and projected liquidity remains strong, despite declining sales trends in physical course material and the significant investments we are making in strategic change initiatives. In fiscal 2020, we expect the average debt to be approximately $100 million with peak borrowings of approximately $200 million, which we would expect to fully repay during our Fall Rush, and then incur additional borrowings until the end of the fiscal year, a similar pattern to fiscal 2019.CapEx for the quarter was $8.3 million compared with $8.2 million in the prior year, a slight increase was due to our continued investment in digital. Currently, our retail segment operates 1,491 college, university and K-12 schoolbook stores, comprised of 777 physical bookstores in our e-commerce sites, as well as 714 virtual bookstores. As of today, we have contracts to open an additional seven stores in fiscal '20 with three additional known closings. This will bring our total physical and virtual store count to 1,495 locations net of closed stores.For fiscal 2020, we expect consolidated adjusted EBITDA to be between $90 million and $100 million. As previously mentioned, due to the continued investment in digital, capital expenditures are expected to increase from the fiscal 2019 level by approximately $10 million, and are expected to be in the range of $50 million and $60 million. We expect free cash flow to be between $25 million and $40 million as compared to the $39.7 million in fiscal year 2019. Please note we do define free cash flow with adjusted EBITDA less capital expenditures, cash interest and cash taxes.With that, we'll open the call for questions. Operator, please provide instructions for those interested in asking the questions.

Certainly [Operator Instructions]. And our first question comes from the line of Ryan McDonald of Needham. Please go ahead, your line is open.

Just wanted to start out, I guess on the bartleby business and the bartleby write product that you're soft launching. Can you talk about plans for the pricing strategy around that? And then you called it a companion product to bartleby learn. Is there any chance to bundle this at all, moving forward?

Ryan, it's Kanuj. I'll start with the bundling concept. It's too early to tell. We first want to get a better understanding of the student demand, student reaction to the product experience and what is solving from a need state. But it certainly does present opportunities to bundle it, as you suggest, with the Learn product. So we're early days -- we'll be able to better understand once we get through some of those initial demand with the Fall Rush period.

Got it. And I guess just follow up...

It's priced, just to be clear, it's priced at $9.99 like Learn. There's no bundles currently.

And then in terms of the back to school season, obviously, we're very early days in it. But can you kind of talk about some of the strategies or any promotional activity you put in place to sort of continue to drive adoption for bartleby among students and maybe how you are feeling just at the beginning of this Fall Rush?

This is Kanuj again. I guess the first thing I'd say is we're very excited because it's the first time we've really been in a position to promote the product during a fall season with as much content as we have. And we're excited about what we think we can do with this new cohort of freshmen and incoming first year students. So we've continued to take the lessons that we learned from last spring and refine what we do in terms of training for our booksellers. The entire store is oriented around the booksellers and the aisle as well point of sale. So it's really just learning from where we are and ascending that hierarchy in getting more efficient in the selling and marketing techniques.If we go to any of the stores, I think we've improved our signage, our communication of the product benefits and there's a ton more content in the products. Outside the four walls of the campus, we're also expanding our social influencer strategy and brand ambassadors on the campuses we serve, as well as campuses that we don't have actual physical footprint as well. So we're very excited about where we may be at the end of the fall. It's too early to comment we’re smack dab in the middle of back-to-school rush. So we'll know more in a few weeks.

And shifting to the BNC business. Great to see some additional net new store openings expected for this year. Can you talk about the impact that adoption and insight is really having on driving net new store wins, and perhaps how it's impacting discussions around renewals with existing university partners?

This is Lisa Malat. I mean certainly course material affordability is number one on the minds of many of the -- many or most of the schools we are speaking with. So just the visibility into the savings for the students to be able to get the faculty that transparency into what the options are and to be able to give the administration visibility into how they're succeeding against their own affordability goals has been -- had been very, very well received by the colleges and universities we are speaking with.

One other comment on that. This is Mike, Ryan. You may have seen the press recently, Onondaga College -- Community College up in upstate New York. The AIP, that portal and what it can do for administrations really get, as Lisa says, better transparency into curriculum and adoptions and the timing of adoptions and then managing adoptions is really important for managing that kind of a program. And Onondaga, which we call first day complete, which is the first institution where we really delivered courseware completely through tuition one price that's the same for all students, basically. We can talk more about that. But the AIP will give a tool to the administration so that we can intelligently cost out and price at the right time the courseware, so that we're able to offer and get those reduced discounts to students making it transparent through tuition, et cetera. So it's important for a lot of reasons but it's really important to our digital packaging and pricing strategy and being able to implement it.

And then just last one from me is around the FirstDay and VitalSource announcement. How long do you expect this transition to take for FirstDay on to VitalSource and any expected disruption to, I guess, existing FirstDay users at all? Thanks.

We've already started the teams working together, that agreement was announced I think last week, but that -- efforts started early. They have an ongoing relationship. For example, we have a new sizable state college system, Ivy Tech that we took on that was already VitalSource customer. And so we're working on that to keep VitalSource in and insert us at the right points because under this agreement, we will own the customer, we will own the building, what we're -- as we said taking advantage of is VitalSource's technology.This makes it a lot more seamless for us to sell inclusive access interacting with the publishers, basically have now Red Shelf and in VitalSouce two primary inclusive access systems that publishers want to interact with. So it's kind of a standard technology of sorts for the publishers to use, making it easier and faster to ingest digital content. Timing is, as you said, we're doing it already. We'll start rolling it out within this fiscal year in the next fiscal year, it'll scale. The teams know each other well. We already have a relationship. We buy our e-book content from VitalSource. They've been a great partner. So we expect the integration to go well. We don't expect them to disrupt any of our current inclusive access programs.

The next question comes from the line of Alex Fuhrman of Craig-Hallum Capital. Please go ahead, your line is open.

I wanted to ask just a little bit more on the digital services and bartleby in particular. Sounds like you're having some good success marketing that on campuses and signing students up. What is your expectation that this could really start to become a revenue grower for the company? Just looking obviously you've got other assets in that DSS segment, but it has been down revenue year-over-year for a couple of quarters, with the strong rush year? Is it your expectation that the tide is starting to turn there? Just wondering how we should think about that product and services as part of your go forward here?

Without giving any specific guidance on revenue from bartleby subscribers, I think we're expecting the results to exceed what we did in spring. Obvious -- maybe not, obviously, but we are. And so it gets to your definition of what you think is meaningful. Obviously, it's a very high margin product. So we expect it to start having an impact on the margin of DSS this year and the revenue of DSS this year. But really, really growing with the scale of the product as the product improves, introducing bartleby write will help it. We don't really want to forecast what impact on revenue and margin means at this point in time. We're really, as Kanuj said at the first point where we're able to market bartleby to get with a really good, strong competitive product bartleby ;earn. And we're encouraged by the initial results, but we'll hold off on calling the ball on that one, Alex. So we get through the rush in the next -- as Kanuj said, several weeks to six weeks, really.

I mean, the reason we're putting this kind of money and effort into it is, we do expect it to scale and we do expect in our next two to three year plan, let alone our long term plans, this would be a huge contributor to the actual growth of the cash flow of the company.

Now, that is definitely helpful. And then also wanted to ask about some of these new partnerships that you're doing in your bookstore locations. You mentioned some partnerships you're testing out with AT&T and Urban Outfitters. Certainly, that sounds like a huge opportunity just given your strategic locations right on college campuses. It seems like there'd certainly be a lot of opportunities for partnerships like this. My questions here are, I'm trying to understand, is the initial agreements with AT&T and Urban Outfitters one that you would initially expect these stores to become more profitable or is it really more of a test and learn? And then curious what the reaction has been from your university partners as you think about maybe doing more of these partnerships? And do you specifically need universities to approve these? Or is it more or less within your contractual rights to bring in someone like that into your store?

Now, there's a lot of questions in there, Alex. We can just try to unbundle that a little bit, I'll take. This as Mike, I'll do a general answer and then Lisa Malat, who's done a great job of driving this -- these kinds of relationships can give more detail. First off, yes, we do discuss these kinds of arrangements with our university partners in advance. We do share the benefits with them. Our mutual objective with our university partners is to bring services to students that benefit them. And clearly, brands like Urban Outfitters, AT&T who are trying to reach this demographic offer the outstanding services that they offer, in some cases at discounted prices, in some cases just bringing, for example, Urban Outfitters, as we've done into the 10 stores to -- as an initial, as you call it, expanded test really generates a lot of buzz, associates best with a hot brand for our students and drives more traffic into our stores. So that's a big advantage. Lisa and I were just on at one of the stores in Delaware last week with Urban Outfitters founder and CEO. And I think they're very excited about it as well.With respect to the deals themselves and how they're structured, they're individually structured and they're different in terms of the expectations of what they will bring to both parties. They obviously bring exposure to coveted demographic of 6 million students, 5 million in the physical stores that we serve are very sought after demographic by these organizations. And we're a very effective way to reach them. We've talked about target in the past and Urban Outfitters is a great example of how we can also utilize our store space in a different way. Lisa and her team have done a great job of doing with the concept stores is now expanded, as we said to 200 shops, I'll let you fill in.

I mean, just going back to your question about, how do we discuss this with partner, with these colleges, universities? I will tell you that, a lot of the conversations we're having right now with colleges and universities, as we have to talk about new business opportunities is around relevancy. So many of the schools out there, even those that have really well done in retail spaces are asking the question, we're educators, we're not retailers. How can you help us drive traffic? How can you help us be more relevant to our students? How can you create these community hubs on campus, that's going to really add value and energy to our mission.

Well, thanks everyone. That's really helpful and I wish you all the best of luck with the rest of the Fall Rush season.

[Operator Instructions] Your next question comes from the line of Greg Pendy of Sidoti. Please go ahead, your line is open.

Can you just give us a little bit of color on the trends you saw, I guess, in summer classes where they're down year-over-year. I know we're starting to anniversary some pretty weak trends. And then what we should be thinking about in Fall Rush as just enrollment trends go?

Hi Greg, it's Barry Brover. The summer has consistently been slower year-over-year as far as course offerings by colleges and universities, as they cut back and better manage. So obviously, textbook is a smaller part of the summer session. During the summer, it's a lot about prep football and our GM sales, which is a high percentage of the summer business and you can see the strong comp growth there. As we go into the fall semester at this point, we're excited about where we're positioned, our FirstDay products, our FirstDay adoptions and a lot of the major initiatives to grow our textbook business, as well as our GM business are in place. We're in the middle of the season right now. So hard to comment on where the fall will end up, but we're certainly excited about how well we are positioned.

And then can you just give us a little bit of color on just the bump up in the SG&A cost for the digital business? Some of that head count that's going to continue throughout the year or is that -- was that a lot of, I guess just spend, that should fall back down throughout the year?

No, it's definitely headcount related as well. We will expect to add moderately to that. But it's really building out product, marketing and development competency in terms of the digital team related to bartleby principally. Some of it is bartleby write product, but it's principally bartleby learn.

And then just one final one, I guess, just with the FirstDay initiative. Is that going to replace a lot of the -- I guess, communicating the message of price matching? Are you going to be talking about sort of both fronts going forward into the Fall Rush?

Yes. Our objective is to present all affordable solutions, solutions that help with the affordability objective. Price matching is one. It's not mutually exclusive from inclusive access or any other program that we put in to help individual schools or more broadly achieve that affordability option. One of the things about inclusive access is that you do have substantial discounts to the students that are realized primarily digital for how the courseware is bundled. Price matching is really a competitive response to various other -- to competitors we have such as Amazon, where we'll match their prices and that type of thing. So they're a little different in their orientation. They're all aimed at trying to provide the most affordable courseware to students, but inclusive access is something we're driving towards with publishers and schools to try to change a model for delivery, primarily digital, whereas price matching is primarily related to the physical.

Are you price match on the virtual stores as well, or is that just in the physical stores?

We price match on all of our stores where we decide that it makes sense to do so, physical or virtual.

And there are no further questions at this time. I turn the call back over to Tom Donohue for closing remarks.

Thank you. And thanks for joining today's call. Please note that our next scheduled financial release will be our fiscal 2020 second quarter earnings on or about December 5th. Thank you.

This concludes today's conference call. You may now disconnect.