Jeff Black (Lehman Brothers): Could you just frame up the expense opportunities you see over the next couple of years?
Kent Kleeberger: The biggest opportunity we have is in the margin category. We can cut expenses and we can set goals to trim SG&A 10 or 20 basis points a year but in my estimation the real opportunity is margin. It really goes into various buckets. The first bucket that comes to mind is the ability to do direct imports. The direct import portion of our business is under penetrated.
We have an inordinate amount of our deliveries to the distribution center facilitated via air versus ocean and that is really more complicated because it involves the product calendar and being disciplined holding to go, no go dates in terms of when we cut goods.
In addition to doing direct importing there’s also an opportunity to do direct sourcing but that also requires some investment in terms of opening up a footprint if you will overseas in order to potentially go to direct to factories an bypass some of the middle men, not eliminate them but to bypass some of that business as well as doing a better job in terms of managing our piece goods and as the quality opportunities to address issues over there as opposed to when they hit our DC over here.
Adrienne Tennant (Friedman Billings Ramsey): Can you talk about the bonus guarantees and have you seen any field organization turnover as a result of that?
Scott Edmonds: On the bonus side, as business really fell off the cliff last fall we stepped in and guaranteed stores and district managers and regional managers bonus dollars if you will.
We took that away from them during the quarter and started setting more realistic store plans so that they could actually get the plan and get back into the bonus. We are very careful at this point to weigh the unintended consequences anytime we deal with field payroll issues.
We are in the middle of working on the new bonus structure. The field organization is highly involved with that from store manager position, district managers, regional managers and vice presidents together with the pay group and we have yet to roll the new bonus plan out but when we do we will also test is in certain districts and regions before we roll it out chain wide so that we do not deal with unintended consequences as we did when we dealt with the hourly salary change two Decembers ago.
Barbara Wyckoff (Buckingham Research Group): Comment on the performance at Travellers and Accessories?
Michele Cloutier: On accessories, the new merchant started approximately four months ago. Has extensive background both in accessories and apparel. The real issue for me on the accessory business is we are still in search of a new head of product development.
That is the critical open job at this point on that business. We are going to continue to leverage our vendor base which provides exceptional design work for us and we are going to really reach out for them to leverage that expertise in the interim until we find this new lead of the product team at accessories.
Under Travelers the issue is this, the mix of the business has really impacted our business. What we learned in the Travelers focus groups as well as what product we have seen sell we have remixed our business for third quarter to invest and we are re-looking at color.
Any place in the business that’s at basic business like black Travelers has been significantly impacted. You can get fabric at a lot of different price points at a lot of different places.
We have to provide products she does not already have and that she can not get anywhere else. We have committed to remixing the business in the third quarter and fourth quarter again we are going to learn as we get into the categories but based on what we are hearing and seeing looks promising.
The business continues to be diminished but there is still a loyal following albeit a smaller base but there is still a loyal following that we have to capture.
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