La-Z-Boy Incorporated (LZB) Q1 2016 Earnings Report, Transcript and Summary

Greetings, and welcome to the La-Z-Boy Incorporated First Quarter Fiscal 2016 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kathy Liebmann, Director of Investor Relations and Corporate Communications for La-Z-Boy. Please go ahead.

Thank you, Kevin. Good morning and thank you for joining us to discuss our fiscal 2016 first quarter results. With us today are Kurt Darrow, La-Z-Boy's Chairman, President and Chief Executive Officer; and Mike Riccio, our Chief Financial Officer. Kurt will begin today's call and then Mike will speak about the financials before turning the call back to Kurt for his concluding remarks. We will then open the call to questions. A telephone replay of the call will be available for one week beginning this afternoon. Slides will accompany this presentation and are available for viewing through our webcast link. These regular quarterly investor conference calls are one of La-Z-Boy's primary vehicles to communicate with investors about the company's current operations and future prospects. We will make forward-looking statements during this call, so I will repeat our usual Safe Harbor remark. While these statements reflect the best judgment of management at the present time, they are subject to numerous future risks and uncertainties as detailed in our SEC filings, and they may differ materially from actual results due to a wide range of factors. We undertake no obligation to update any forward-looking statements made during this call. And with that, let me turn over the call to Kurt Darrow, La-Z-Boy's Chairman, President, and Chief Executive Officer.

Thank you, Kathy, and good morning, everyone. Yesterday afternoon, we reported our fiscal 2016 first quarter results. It was a good quarter with increases in sales, profitability, earnings per share and same-store sales at the La-Z-Boy Furniture Galleries network. In particular, we are very pleased with the performance of our company-owned retail segment which earned $4.4 million more than it did in last year's first quarter and posted 5.5% operating margin. Additionally, [even there was a] [ph] $0.04 per share benefit from two items our earnings for the quarter were solid and Mike will address these in more detail in a few minutes. Before I get into a discussion of the three operating segments, I would like to take a moment to highlight our various growth initiatives and provide a framework for how we think about the business and its growth and profitability potential. We have four growth plans that are running concurrently. The first and largest initiative is our 4-4-5 store build-out strategy that we have talked a lot about. For those of you who may be new to our story, 4-4-5 is the moniker for having 400 La-Z-Boy Furniture Galleries stores throughout North America, averaging $4 million in revenue per store with a build-out taking place over a five-year period. We have just started year-three of the plan and are well on our way to achieving many of the objectives associated with it. Our second growth strategy is focused on acquiring La-Z-Boy Furniture Galleries stores from independent dealers upon their retirement which will bolster the size of the company-owned retail base of stores. As we have talked about in the past, sales through the company owned La-Z-Boy Furniture Galleries stores provide the company with the greatest level of profitability as we realize the benefit of a stack margin where we can earn a profit on both the wholesale and retail side of the business. As our retail segment grows, this model will enhance the earnings power of the company. I will talk in more detail about this in a few moments when I discuss our retail segment. The third initiative is to grow our other distribution channels, meaning those beyond the La-Z-Boy Furniture Galleries stores. Although much of our focus has been on branded distribution, we have some $700 million in wholesale sales across the balance of the La-Z-Boy business and with our other brands outside of the store system. These other distribution outlets include some of the largest furniture dealers in the country as well as many small mom-and-pop stores. Today we sell all of our brands, La-Z-Boy, England, American Drew, Hammary and Kincaid to about 4,500 doors beyond the La-Z-Boy Furniture Galleries network of stores and many of our customers are expanding their footprint. For example, Art Van Furniture has opened a number of new stores in Chicago over the past two years and as they open new locations our business with them increases. Many similar opportunities exist with our overall customer base. And our fourth growth opportunity is to expand our share in the stationary upholstery market. While we do have the largest market share in the recliner segment of the market it is the smallest part of the overall upholstery industry. The stationary sofa piece of the market however compromises the largest part and we had a relatively small share in that category leaving us with a great potential to leverage our brand strength, our great new product offerings and our vast distribution to penetrate this piece of the market in a more significant way. We believe all four of these strategies will drive growth and profitability for the company long-term. Now let me turn to a brief discussion of our three business segments. First, upholstery, for the quarter sales in the upholstery segment increased 3.7% to $272 million versus last year's first quarter and we achieved a 9% operating margin an increase from 8.4% in the comparable quarter last year. During the period increased volume leveraged the fixed cost structure of our brands. We also benefited from supply chain efficiencies which is a key focus for us and a favorable change in product mix including Power which has been a fast growing category. Written same-store sales for the La-Z-Boy Furniture Galleries system increased 5.3% for the quarter and we were pleased with our result. As same-store sales pace in the mid single digit range for the remainder of the year we should reach the $4 million target we have set for the average revenue per store in our 4-4-5 strategy. With respect to our store build-out program during the quarter the network opened two stores and remodeled one. We ended the period with 327 La-Z-Boy Furniture Galleries stores with 64 in the new concept design. For the year we expect to complete 35 to 40 projects including new stores, remodels, and relocations and plan to end fiscal 2016 with 17 net new stores or 342. As I discussed a moment ago we are very focused on our opportunity in the stationary upholstery market and enjoyed success over the past couple of years growing our stationary business at about twice the rate of our overall business. In addition to our popular Urban Attitudes collection we will continue to introduce new entrée and stationary product to appeal to a wider demographic and increase our market share in this large category. We are also moving closer to the early fall launch of our new web and e-commerce technology platform and expect it to provide a best-in-class digital experience making it easier for consumers to be inspired and informed about our products and shop in the manner that best suits their needs. Traffic to our site continues to increase and there is much anecdotal evidence that consumers are spending a lot of time researching the frames and fabric selections before they come to either the La-Z-Boy Furniture Galleries store or to one of our other distribution outlets. And when they visit a store they have the opportunity to broaden their experience by seeing the frames and fabric in person and testing out the feel of our furniture before making their final selections. In June we completed the implementation of our ERP system at our La-Z-Boy branded facilities when we finished with our Dayton, Tennessee plant. Throughout the remainder of fiscal 2016 we will be working on the sales order management component of the ERP system. Now let me spend a few moments on casegoods. Our transition to a pure import model is delivering results in the casegoods business. For the quarter we improved our operating margin to 7.2% from 5.3% in last year's first quarter on lower sales. By ceasing production at our Hudson, North Carolina facility, narrowing our portfolio of brands and changing our product offering to include more transitional collections, we believe the business will perform more consistently in the future. With regards to sales to clients for the quarter our new transitional collections have sold better than anticipated which created a temporary shortfall in supply. Additionally, last year's first quarter included $2.1 million of sales in our hospitality line, a business that we exited last fall. Now moving on to retail. We are pleased with the way our company-owned retail business is growing and performing. For the quarter sales increased 18.9% versus last year's first quarter, we posted an operating margin of 5.5% as I mentioned in my opening remarks. This marks the $4.4 million increase in operating income compared to the prior year first quarter. On a core basis stores delivered sales for this segment increased 7.2%. I would like to take a moment and provide some perspective on our base of stores. When the company first became involved in store ownership back in the early 2000s for the most part we were acquiring stores with issues that needed to be addressed and fixed. Although markets we acquired were large and vibrant many of the stores themselves were in poor locations, were old and tired or there simply were enough stores in the various markets to capture a share of the voice and to leverage the fixed cost structure associated with those markets. As we discussed in the past we spent a lot of time working to improve the performance of these stores and have made significant headway till to-day. Today however, the composition of our store base is very different. Over the last several years the stores the company has opened in dark markets including Pittsburgh, Southeast Michigan and Minneapolis and the stores acquired from the independent La-Z-Boy Furniture Galleries' dealers have changed the overall complexion of our portfolio as these stores are performing at a much higher rate than the stores we purchased a decade ago. Back then we acquired stores to protect our market and distribution. Today our acquisitions are more strategic and the stores added to the company-owned retail segment are accretive and are contributing to the overall performance of the segment. Early in the second quarter we acquired two stores in Wisconsin and have signed an agreement to acquire two stores in the Carolinas from an independent dealer in September. As we move forward we plan to acquire additional stores from independent La-Z-Boy Furniture Galleries' dealers and believe that when we are done with our 4-4-5 build-out strategy, the company's ownership of the entire network will increase to between 40% and 50% based on new stores and acquisitions. And as we mentioned earlier, as the size of our company-owned retail business increases we will enjoy the benefit of the blended wholesale retain margin that's inherent in our model. I'll now turn things over to Mike to speak about our financial performance. Michael?

Thank you, Kurt. Consolidated sales for the fiscal 2016 first quarter were $341 million up 4.4% compared with last year's first quarter of $327 million For the quarter consolidated operating income increased 21% to $20 million compared with $16.5 million in the fiscal 2015 first quarter with the consolidated operating margin increasing to 5.8% from 5%. The company reported net income from continuing operations attributable to La-Z-Boy Incorporated of $13.7 million or $0.27 per diluted share compared with last year's first-quarter net income of $10.6 million or $0.20 per diluted share. Our consolidated gross margin improved 2.3 percentage points in the quarter compared with last year's first quarter. In addition to higher unit volume and supply-chain efficiencies driving the margin in our wholesale upholstery segment we recorded a 0.5 percentage point benefit related to legal settlements and cost of sales. The casegoods in retail segments also contributed to our gross margin increase. Selling, general and administrative expenses for the quarter as a percentage of sales increased 1.5 percentage points versus last year's comparable period. Our warranty expense was 0.5 percentage points higher in this year's first quarter mainly due to a favorable pool adjustment in last year's first quarter. Additionally, professional fees were 0.3 percentage points higher in this year's quarter primarily due to the investments we are making in the business for technology including our website and e-commerce platform as well as the ERP system. We also had higher costs related to our new world headquarters resulting in 0.4 percentage point increase in SG&A as a percent of sales during the quarter. In addition, because of the higher weighting of our retail segment, both our over gross margin and SG&A as a percent of sales increase during the period. Our corporate and other operating loss was $3.2 million higher in the first quarter of fiscal 2016 compared with last year's quarter primarily due to higher depreciation related to our new world headquarters and expenses related to the startup of our new global trading company in Hong Kong, each of which amounted to $0.8 million. We also had other income of $2 million during the first quarter as a result of higher foreign currency exchange rates versus those in last year's first quarter as well as gains on the sales of investments. Now let me turn to the balance sheet. For the quarter we generated $1.5 million in cash from operating activities. We ended this period with $80 million in cash and cash equivalents, $37 million in investments to enhance returns on our cash and $10 million in restricted cash. During the quarter we spent $9 million to purchase 342,000 shares of stock and have 5.4 million shares available for purchase in our program. Based on cash flows, stock market conditions and other uses for cash, including making investments in the business to drive growth will be opportunistic with respect to our share purchase program. During the first quarter we had $6.5 million in capital expenditures and expect our CapEx for the full fiscal 2016 year to be in the $30 million to $35 million range. And lastly our effective tax rate for continuing operations for the quarter was 35.9% compared with 35.3% for the first quarter of fiscal 2015. Our effective tax rate varies from the 35% statutory rate primarily due to state taxes less the benefit of U.S. manufacturing deduction and foreign earnings in jurisdictions with lower tax rates in the U.S. For the full year 35% to 36% is a good range to use for modeling purposes. Before I turn the call back to Kurt, I'd like to review some numbers related to our company-owned retail segment to help with your understanding of the segment's economic value and your modeling. When we open a new store we tend to lease the store and put as many costs in the lease as possible. As a note, approximately 75% of the operating lease obligations outlined in our filings relate to our retail segment. So when we open a store typically it costs us about $400,000 to $600,000 of capital plus the inventory of about $300,000, so let's say an average $800,000 in total. We also have about $200,000 to $250,000 in opening expenses which we have referred to as new store drag in the 90-day period surrounding a store opening. These costs are for technology, advertising, training, salaries, et cetera before we even deliver a piece of furniture. Our stores typically hit maturity midway through the second year of operating and from that point generate an average of about $250,000 in annual operating profit. As we have opened up more of the new concept stores we have seen the sales and profit number trending up. On average if you just look at the four walls of the retail operation and exclude the advertising and the distribution charges profit would increase by $300,000 to $400,000 per store. Also it is important to note that without our stores it is not reasonable to believe we could replace the distribution and that would hurt the wholesale business. Additionally, we have a unique model in that our retail operation allows the benefit from a blended margin associated with our integrated retail model. And finally the markets in which the company does operate in tend to be more expensive and it is difficult to find independent operators with the capital investment in these markets. And now I'll turn the call back to Kurt for his concluding remarks.

Thank you, Mike. As we move throughout fiscal 2016 we are optimistic about our positioning in the marketplace and prospects for driving profitable growth through our four initiatives outlined at the onset of the call. We are working on all aspects of the business, increasing our overall sales, strengthening our integrated retail platform and growing our market share in various categories all while working to gain further efficiencies throughout our operating platform. We will continue to make strategic investments in the business to deliver growth and are confident we will enhance our returns to shareholders throughout the year. We thank you for being on our call this morning and I'll turn things back to Kathy to have the Q&A started.

Thank you, Kurt. We will be conduction a Q&A period now. Kevin, please review the instructions for getting into the queue to ask questions.

Certainly. [Operator Instructions] Our first question today is coming from Budd Bugatch from Raymond James. Please proceed with your question.

Good morning Kurt, Mike and Kathy. This is Bobby filling in for Budd. Congrats on a very good quarter and Mike thank you for the additional detail on the retail segment, very helpful.

You are welcome.

First question from me is maybe just a little bit more color on the hospitality revenue, is there any – how much more revenue should we kind of account for in our models that you guys are going to lap that's not repeating going forward?

So Bobby, we have another million dollars in the second quarter that will be anniversary-ing and then there is a little bit of trail off. But the only quarter left that has any significance is next quarter at about $1 million or $1.2 million.

All right, thank you. It is perfect. And then maybe, is the out of stock items corrected and is that back in stock and shipping well now?

We believe as we move through the quarter we will get caught up on the outages and be in a great service position as we head into the October market.

Okay, perfect. And then on the new e-commerce platform and the website, is there update on kind of the timeline of that launch?

Well that is going to be early fall, say maybe mid September or just, with these kind of things we want everything to be perfect. When you go live you don’t want to have any hiccups. So majority of the work is completed. We're just doing a lot of testing, a lot of sampling, and a lot of stress testing on the site so that we're positive that we don’t have any hiccups when it is launched. So it is not like our old site, it is terrible. So we're just being cautious and patient to make sure when we do launch everything is running as designed and so I think you'll see something at the latest probably at the end of September.

Understandable, I appreciate the color. And then lastly from me may be just some additional color on gross margin, even excluding a legal benefit I think it’s probably the highest first quarter gross margin in some time, so I was just hoping to get may be a little bit more color about the moving parts and how much runway is kind of left there in that expansion?

Well, there is a number of moving parts there, Bobby, one that we might keep reminding people is as retail becomes a larger part of our business, its implications on both the gross margin and SG&A because it’s so different than the wholesale business, will have an impact on that. Number two, we particularly had a solid quarter with our power business and our motion sofa growth which have higher dollar gross margins and the balance of our business, and finally not only in the La-Z-Boy stores that the company owns, but across our network we’re seeing higher sales in our in-home design business and also in our custom business, both of which carry a higher gross margin.

I appreciate the color and best of luck through the remaining of the year.

Thanks Bobby.

Thank you. Our next question today is coming from Josh Borstein from Longbow Research. Please proceed with your question.

Hi, good morning guys. This is actually Evan here on for Josh this morning.

Hello.

Hi, I was just hoping to get maybe a little bit more color if you could on the Retail segment. I guess when you just talk about the consumer, how do you kind of feel about where the consumer is going into the second quarter? We obviously saw some impressive numbers there. I mean is that - what you think was driving that, is that more La-Z-Boy initiatives or the macro environment improving or maybe a little of both?

My initial reaction to your question would be both. I think our team executed very well this quarter. It was nice to see a seasonally low quarter give us this kind of results, but I also think the customer is in a good place. We're seeing her more willing to trade up, we’re seeing her willing to buy multiple pieces. So I think the economic environment right now for furniture is fairly positive and we’re doing all we can to take advantage of that. So I would probably balance the two between great execution and a pretty stable environment.

Okay. Great, thanks for that. And I guess just with respect to raw materials, I think you guys said the last quarter that you didn’t see any changes, you weren’t expecting any changes from fiscal 2015, is that still how we should kind of think about it?

Yes, I think that our – we don’t have a line of sight all the way through our whole fiscal year. We have a pretty good knowledge of what is going to happen between now and December. But our bias today is that compared to last year, our raw materials will be flat or perhaps slightly down as the commodity market has changed quite a bit in the last couple of years.

Okay. Great thanks guys and good luck on the rest of the year.

Thank you.

Thank you. [Operator Instructions] Our next question today is coming from John Baugh from Stifel. Please proceed with your question.

Good morning and thank you for taking my questions. Congrats on a good quarter. I was wondering on the retail commentary you gave that was very helpful. As I recall we had all of this drag in the first quarter a year ago and my suspicion is that has got lot to do with why the margins are much better. But my question is, so now that we've lapped that are we in a position where not only are we comparing against the drag, but the stores you have opened are actually going to contribute even maybe a little bit more to retail margin or how do we think about retail margin moving forward in terms of store opening drag versus lapping the prior year? Thank you.

So in our plan that we've talked about with everyone, I think we, the company is going to open seven of the 17 new stores this year and that would be fairly consistent with what we did the previous year, John. It may not add up exactly quarter-to-quarter, but on a yearly basis there should be not any differential in drag year-to-year with our new store openings.

Okay. And then will there be any compensation issues to call out, I know from time to time, the way stock comp and other [indiscernible] there are issues in terms of timing, any abnormalities there?

John, it's pretty much going to be depending on how we match up against our plan, how we match up against growth this year. So if we start hitting our stride and our plan like we expected and I would assume that our compensation would go up, but we should be earning the compensation through additional margin and additional earnings. So I don’t know how it will affect the overall conversion, but it should not affect our overall margin improvements over the course of the year.

Okay, that’s helpful. And then on the casegoods, I know it’s small and the margin performance was pretty good in light of the sales. That number on the revenue front has just dropped consistently for I don’t know maybe a decade now and yet you are achieving the import model positive EBIT number, decent EBIT number. I guess by question is, I know there is some level of fixed cost there, and can we sustain roughly mid single digit EBIT margin in that business even if revenues there continued to decline or is there some point of no return where you’re going to make a tougher decision there because you can’t cover fixed cost? Thanks.

Well, I think our number one target is to not continue to have our revenues decline. And there are two situations this quarter where the hospitality business and being out of stock, but it is our expectation in the second half of the year that we start to see a sales increase. We've been making all the changes to the product lines. As I mentioned earlier, we were too skewed to the traditional side of the business for too long and frankly the transitional groups that were out of stock are selling at a pretty good rate. So we believe that we can grow this business again and we believe we can make the kind of margins that an import model should do. So we're again making sure that we get the right products, get it in stock and start to increase our sales in the casegoods segment.

Thank you. And then last question is just on the stationary, motion power commentary, it has been your goal to grow stationary and yet high class problem to have power moving motion. Any more color you can give us on stationary side, how it is doing may be on an absolute basis, and what is your plan will it be to check, continue to try to drive that mix of your business up over time?

So we mentioned on the call John, that we have been growing our stationary business which includes not just sofas, but stationary sectionals and occasional chairs. We've been growing that at double the rate of the company and continue to do that. But the biggest opportunity for us because I think we've got the product and certainly we've got the distributions with a vast array of dealers we have, but it is continuing to convince the customer, once he is looking for sofa to get La-Z-Boy on her shopping list. And in the 5.5 years we’ve been with Brooke her doing the commercial for us, she has never once talked about the La-Z-Boy recliner. All she has talked about is all the other things that we make and all the other services be provide and the styling that we have. And so just continuing and that’s why we’re investing in the website and that’s why we keep doing our branding commercials is to get awareness from consumers that we make more than recliners. So that is the biggest funnel we have to open up to help that business grow and we’re coming up with trade ways so how to do that all the time.

Great, thanks for taking my questions and good luck.

Thanks John.

Thank you. Our next question today is coming from Matt McCall from BB&T Capital Markets. Please proceed with your question.

This is Reuben in for Matt. Good morning everyone.

Good morning.

I just wanted to hit on the contribution margin in the quarter, if you take out the 50 basis point legal benefit it was about 15% and I know you hit on some of the gross margin items can you talk about some of the SG&A items in the quarter? I know there was the warranty headwind, then you got IT expenses in that and then you had headquarters, can you talk about where that contribution margin can go for the balance of the year may be which of those items are not going to be recurring?

Well, I'll have Mike give you a little more color on the specifics, but I just want to remind everybody, we've talked about our contribution margin on an annual basis and the fact that we are in a seasonally slow quarter and shutdown for a week at our plants in the first quarter, we will most likely never convert at the higher rate that we think we can on an annual basis in the first quarter. So that’s the biggest driver of the differential here Q1 to the rest of the year. And Mike can you give any specifics?

No and I think as we’re talking about compensation, the one thing that I did not mention is, we do have some component of our compensation that is based on the stock price and although it is not a margin number some of the other ones, the stock price did drop in the first quarter and so far the first couple of weeks of this quarter it has gone back up again. So there will be some drag on that if the stock price continues to increase. But again, we should be able to earn our way into that as well, but every quarter, we seem to have some anomaly last year that will come in this year and we will continue to have that throughout the year as we had some adjustments in some quarters that we outlined in our comments. But we expect to convert on an annual basis in the range that we’ve always talked about, but it is hard in any given quarter to hit each number that we want to.

Okay. Thank you. And then you guys outlined the growth opportunities outside of 4-4-5, can you discuss maybe which are those three is the biggest or has the most potential to drive earnings and maybe the timing of each of those opportunities?

No because, for a number of different elements of our strategy, we don’t control how many new stores are independent furniture retailers open and we don’t control how many new placements they give us on their floors. The purpose of talking about that is, I think we push so hard on 4-4-5 that people thought that was the only growth engine we have. And it’s not and as the industry continues to do well and with our products across North American 4,500 doors there is lot more opportunity than just what the stores provide us. But we have the most influence over the stores and can be more predictive about what they do. I would say in the short term, the acquisitions of the retiring dealers and I want to be sure everybody understands, all these acquisitions we’re making with retiring dealers are all very amicable, lot of them have worked 35, 40 years in the business. They don’t have any children coming up and it is a logical move for them to want to sell to us and that’s happening. So probably the most immediate one that would be beneficial to us would be the continued acquisition of independent dealers.

Okay, great. And then one more if I could, the same-store sales number in the quarter was more in line with what you talked about on a year-to-date basis in Q4. Can you talk about the progression month-to-month or is it still choppy and has your outlook changed at all?

No, we would be – our outlook for the year is if we could stay at the mid single digits for the balance of the year, we would think that was a solid year at 4%, 5%, 6% same-store sales growth. As we mentioned in June, May was a very good month and the next two months were not quite as good, but they were all positive and near the mid single digit range but certainly May was the best month of the quarter for us.

Okay. All right, great. Thanks for taking my questions.

Okay, thank you Reuben.

Thank you. Our next question today is coming from Kristine Koerber from Barrington Research Associates. Please proceed with your question.

Good morning. A few questions, first I just was wondering how much more old products you still have to clear out as far as the casegoods goes?

We don’t have a lot Kristine, we are always discontinuing old groups, introducing new groups and that is a part of being in that business. But we sold through all the youth business, that youth product that we had and then the product that we were manufacturing at Hudson that we didn’t transfer to China, we sold through most of that. So, not having a lot of that left is also one of the things that is benefiting our margins.

Okay. That is helpful and then can you talk about trends in international markets, what you are seeing overseas?

Well, it would be hard to talk because of the varying degree of volatility around the world, but the strength of the U.S. dollar is challenging in a lot of the other markets that we’re in to the degree in some places they had to raise prices as much as 25%, 30%. And that doesn’t bode well if it stays that way for a long time, but I don’t have specifics by country to comment on, but the dollar probably is right now the biggest - having the biggest effect on our international business.

Okay. And then I believe you are going to air two new commercials this summer, have they aired and if so what is the response then?

So, we typically heavy up on our commercials the two weeks prior to Labor Day and we are just coming up on those on that date and we’re and you will see a lot more television advertising on La-Z-Boy heading into Labor Day.

Are those, will they be aired nationally?

Yes.

Okay and then lastly, I believe you’re testing a smaller store in the Baltimore area, how is that going?

So, close. We are testing a new store in Logan Circle in DC about three or four blocks from the Capitol and my best information right now it's going to open for us in late October. So it's not open yet, but we are doing one. We’re very excited about it. We think we can learn a lot from it, but we may have some more detail for you on it at the next call.

And what’s the – can you remind me of the square footage of that store?

I think the square footage is probably around 4000 feet, may be a little larger, may be a little smaller. It will have a totally different design. It will have a look and feel of what we’re doing in the new concept stores on a much different basis and the product selection obviously will be geared for the urban markets and a selection of what we think is right for that area displayed in the store.

Okay, great. Thank you.

Thank you.

Thank you. We reached the end of our question and answer session. I’d like to turn the floor back over to management for any further or closing comments.

Thank you everyone for participating on the call this morning. If you have follow up questions, you can contact me later today and we will schedule some time. Have a great day. Bye-bye.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.