Glenn Murphy: The best brand in the world has more work to do. But we have a very good foundation that is established and the fact is that the team has been there for two years. And then you have these other metrics I referred to that we look at.
The agency we used, which is Crispin, did some very strong testing. It resonated very well. It is one data point. When the campaign hits we continue to get the messaging out, using this marketing vehicle to talk about what makes Old Navy special fun, fashion and family.
Janet Kloppenburg (JJK Research): Are you comfortable with your inventory in relation with your sales or top line?
Sabrina Simmons: We are very comfortable with our inventory. Inventory is obviously a very key lever in our business.
We anchor our buys on our current traffic because we view that as a proxy for customer demand. And more or less that has served us well.
The other really important metric that we monitor when we think of our inventory buys are obviously our inventory turn. So, we would want to either buy up would be that our turns were speeding up a lot or signs that we are buying too much ahead of demand would be our turns slowing down.
So at this point we feel really comfortable because turns are holding fairly steady.
The other important metric is cost sales at reg because we definitely want to walk that tightrope where we are giving our customers an opportunity, especially in a recessionary environment, to buy value oriented, to offer promos, but we do not want to start to deteriorate too much our cost sales at reg.
We watch markdown margins because if we are carrying too much inventory that is where we have seen historically that your margins really get whacked. And our markdown margins were actually one of the levers that really enabled us to deliver these healthy merchandise margins, so we are comfortable.
Janet Kloppenburg (JJK Research): What do you mean by that, that the margin you made on markdown was a healthy one therefore it is not so bad to have some markdowns around?
Sabrina Simmons: Well, certainly in retail it is not bad to have some markdowns around. What is important is that we balance our cost sales at reg, which we also want to be healthy.
We want to do a healthy amount at regular price, but when we do go to markdown we want to make sure our markdown margins are healthy.
And in 2008 they grew, they were healthy and they were a driver to our year-over-year improvement in merchandise margin.
Janet Kloppenburg (JJK Research): Why did you make the decision to invest in Old Navy when it might be early as opposed to Gap, where there has been a solid team in place for two years and you have seen some measurable success?
Glenn Murphy: Assuming that we are going to be in the value pressure we are under right now we believe that our outlet business should be called upon during these times to go out and compete on behalf of the company.
That is the reason why we have multi-dimensional brands inside the and we are not talking about hundreds of millions of dollars here in this first half but we would feel that we are not taking advantage of the opportunity in the marketplace right now.
Old Navy was in a place that we were not happy about 12 and 9 months ago. There has certainly been a big swing to the product we see today that is very much appropriate.
We have been getting some reads and January was one of those difficult months, but we did the best we could; we came up with a very good marketing message. And it is the brand that we have to reinvigorate first.
That does not mean Gap is not getting any marketing; it is just not getting a fully integrated campaign. And a lot of people measure marketing by television, so possibly Gap will go back to television?
We feel that the media and the mediums they are using right now to communicate their message is appropriate for that brand.
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