Lauren Levitan (Cowen and Company): You mentioned that for both Urban and for Anthropologie there were a handful of stores that were not comp-positive. Are you seeing cannibalization as you had additional stores in existing markets or is there any regional pockets of weakness that are worth calling out?
Glen Senik: I would say in our total store base, I am aware of cannibalization in one instance so that is not something that we see. We just do not have enough stores in our base to see it and we are disciplined in terms of the way we locate stores to avoid it. In terms of geographical difference, I almost am hesitant to even share the total numbers with you because I think they are meaningless. When I deep-dive and look at the granular information to the extent that we have an issue is usually there was construction in front of the store, or we had turnover at a store management level, unless there is significant weather nuances by region we do not see differences in our regional performance. With 10% comps to have 86%, 87% of your store base positive is typical and when you look at the 13% or 14% of the stores that were not positive, nine out of 10 times it is going to relate back to management.
Liz Pierce (Roth Capital): Are all the different branded partners going to be relatively small and are they little boutiques that will appear on a continuous basis?
Ted Marlow: Relatively small but developments that take place on an ongoing basis with the partners that we are doing business with. The other thing that was not part of the commentary, by and large the majority of those are handled across the company on an all-store basis so it is not just a handful of stores that will be involved in those collections and the initiative.
Crystal Kallik (DA Davidson & Company): The web business continues to expand. How do you think about the long-term operating margin expansion there as you continue to leverage your expenses?
Glen Senik: The margin in all three direct businesses was better than the margin for the company in whole so it is a business that we are excited about gaining penetration on. Internally we like to say it is advertising that we make money on so we are bullish on the business.
Crystal Kallik (DA Davidson & Company): Are there any thought as far as how far can a direct business model operating margin expand?
Glen Senik: There is a lot of thought about it but I am not prepared to talk about it on the conference call but we do think that the direct business can be significantly more profitable than the bricks-and-mortar business.
Dana Telsey (Telsey Advisory Group): Can you talk about the gross margin opportunities given the impressive increases you saw this quarter, as you bring in more private label product and expectations there?
Glen Senik: We still believe that there is initial margin opportunity and we have been talking about somewhere in the neighborhood of 200 bits of IMU opportunity for the last several years. We have achieved that and we are still talking about that level of opportunity, so that is number one. Markdown opportunity, we had a dramatic reduction in markdowns this quarter relative to last but there is way we can go in reducing markdowns. The whole CTM initiative is all about getting the right product in the right place at the right time. It is about buying less up front, allocating less up front, delaying decisions until the last possible moment so that we can have the highest percentage of regular price sales as possible. We have made good progress but we have a lot of headroom to go.
Kimberly Greenberger (Citigroup Global Markets): Anthropologie anniversary is starting in the second quarter and how do you think about anniversarying those strong numbers last year?
Glen Senik: I want to reiterate that the total company’s averaged nine comp over the last five years, Anthropologie 10 comp over the last five years so this is not the first time that Anthropologie has come up against difficult comparisons. It goes back to what I said earlier, we look at every single lever in the business so first and foremost the merchants, I tend to look at merchandise first. I dissect every category we are in and we cull what is not productive and we try to add inventory to areas or categories that are productive and that is an iterative involved process. We look at the way we flow inventory. Did we miss receipts in a given week? Did we flow too many receipts in a given week? We are constantly improving the way we allocate product. We have spoken about this before, we are attributed down to a finite level so we can literally not only allocate size selling by location but color selling, style selling and so on and we are constantly getting better at that. We try to get better at the way we market the brand. We try to get better at the outfits that we put on the forms. At the way we merchandise the store from front to back. We have learned a lot about selling in the store. Now we have an Anthropologie stylist in about 25 stores and that is doing well. The CRM initiative, we have 400,000 names, that is from zero six months ago. We are starting to communicate to those customers and we will learn, as we do that, we will learn about what they value and what incents them to buy. It is not just one lever. I think relying on one lever would be a dangerous thing. It is looking at every single lever in the business and having entrepreneurs who are responsible for each of those levers y own that business and continual, and it is all about continual improvement.
Marni Shapiro (The Retail Tracker): How do you attack Free People and Leifsdottir in an environment where you own a brand that is doing well when so many others are not?
Glen Senik: We are in 1,700 doors in Free People and that number has not changed much in the last several years and we are in four majors at Free People and that number has not changed much. I mentioned on the last call that virtually 100% of the increase in Free People has come from improvements in productivity in existing accounts. That is something important to us. We believe that scarcity is a good thing when it comes to distribution. Certainly at Leifsdottir I said previously that we will not distribute Leifsdottir in more than 100 doors initially and that is the case.
Richard Jaffe (Stifel Nicolaus): Are there any private label brands or home brands to be developed inside the Urban store?
Ted Marlow: We have a couple of projects going on with members of our design staff that could have legs beyond simply retail; it is product that we will be delivering in the back half of the year. We are desirous as well as we go forward in the out months and this is physical 2010 so calendar 2009 projects, we are desirous as well to get our toe in the water on opportunities on the wholesale side of things. We are planting a few seeds to learn from that as we go forward through the balance of this year. In addition to that, on the private branded product that we are working on, the group has done good work around developing brand profile for all of the development that is taking place within the division, collateral packages for trim and labeling on that product has been taken care of and it will start to appear at point-of-sale in the stores. We plan on that particular element in our business increasing and becoming even more productive as we go forward.
Holly Guthrie (Janney Montgomery Scott): You called out accessories as being an important part of the first quarter business. What percent of your sales accessories was across all the brands and compare that to last year’s first quarter?
Glen Senik: In terms of gross margin it differs by brand. At Anthropologie the gross margin across merchandise categories are relatively equal. At Urban the accessory margins are higher than the women’s margin. At Free People they are lower than the women’s margins. I would say for the total company it is neutral and I do not think if you are trying to model gross margin that is where you want to go.
Betty Chen (Wedbush Morgan Securities): Can you talk more about the CTM program?
Glen Senik: I do not want to go into too much detail on the CTM because a lot of it is competitive information that I would not want to share in this venue. The goal is to compress the product line so that we can get the right product in the right place at the right time. When you look at the inventory reductions both at Anthropologie and especially at Urban, what you are seeing is in part due to the improvements we have made with our sourcing. I spoke on the last conference call about a key item at Anthropologie that unexpectedly came in and sold 40% or 45% in the first week and I congratulated Barbara Roseus and her team for literally getting the brand back in inventory in two-and-a-half weeks. When you have that flexibility or reaction time, it has a profound impact on the open to buy. I would not say that we are early stages in CTM, I would say that we are 40%, 45% of the way through. We have made a lot of progress in the last 18 months. We started, we identified this several years back and we started working on it as a group about 18 months ago and I am pleased with where we are in our status. We are in the midst of a software initiative.
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