Carol B. Tome: Nothing that is material.
Matthew Fassler (Goldman Sachs): You spoke about where you are going to focus your work in the existing DCs. What was it that you saw that led you to slow down the rollout?
Frank Blake: When we opened the Dallas RDC, we saw that that had some significant operational issues in terms of what we had planned. And then we go back and you look at our pilot project in Braselton, the rollout in Chicago and Dallas, and you go gee, there are some significant process improvements that it would be good to make.
And to be candid, we had a lot of discussion about that amongst our senior leadership team and the advantage of a rollout like this in my view is we have got three RDCs up. It’s kind of a perfect time to have that pause, get things really the way you want them before you continue the rollout.
We are trying to do in a very short period of time what other retailers would take 2X or 3X the amount of time to do. The more you can replicate what you are doing and not have to make improvements on the run, the better off we think we will be in the rollout and the easier the integration with the store side of this and the merchandising side.
Matthew Fassler (Goldman Sachs): Are there any financial consequences, positive or negative, in the short-run from the changing of timing here?
Carol B. Tome:] Not included in the guidance that we have given. Clearly we have secured some real estate that we are not optimizing. It is empty right now but that’s factored into the guidance that we gave.
Colin McGranahan (Sanford C. Bernstein): On market share, do you think that was just a function of some of the promotions that were run in the space?
Frank Blake: One of the things the merchandising team are doing is really putting some discipline around driving to every day compelling value propositions, trying to pull ourselves off of a lot of the promotional activity that we were doing.
And that is going to drive some short-term fluctuations in share but we think the long-term direction is right. Versus some of our competitors, we look obviously at there are differences by quarter and we are particularly pleased in the second quarter, if you kind of look at historically where we have been in the second quarter, we think we have picked up ground from where we have typically been.
Colin McGranahan (Sanford C. Bernstein): How did you possibly get a $200 million cash payment out of Citi at this point, did you shop that competitively?
Carol B. Tome: We did not shop it competitively but we utilized a third-party advisor who is an expert in this field to assure that the terms and conditions of our agreement are market or better.
We really had the benefit of an open book with Citi over the past five years, which allowed us to mutually come to agreements that work really well for both of us.
Michael Lasser (Lehman Brothers): As part of the new credit agreement, will any of the terms for new or existing cardholders be changed such that the availability of consumer credit under your private label program will be reduced next year?
Carol B. Tome: Not per the terms of our new agreement but I will tell you that this year, we have made some changes. This year, we reduced the credit line to the amount of the outstanding because we thought that was prudent in the current environment.
Further, we saw significant erosion in FICO scores and Citi pulls a credit report every month. There was significant erosion. There were some credit line reductions. But the more important aspect of all of this is that we approve 68% of all credit card applications, so that continues to show us that the portfolio is robust.
Michael Lasser (Lehman Brothers): Can you quantify in any way what sort of impact the change in terms or the change in philosophy might have had on either the sales result or the portfolio?
Carol B. Tome: We do not think the change in terms has had a material impact to the portfolio other than it helps a bit on the profitability side. We are being more selective in the type of promotions that we offer.
Our everyday value proposition is if you use our private label credit card and you spend $299 on the card, it’s no interest, no payments for six months. From time to time, we offer 12 months no interest, no payment programs and we have cut back on those programs a little bit.
David Strasser (Banc of America Securities): On lumber, is there anything you are seeing from a demand standpoint that would be driving that?
|
