Margaret Whitfield (Stern Agee): The mall traffic trends in early August have gotten worse from July, any comment on the current environment?
Matthew K. McCauley: The trends are tough and they continue to be tough. Fortunately we’ve seen an increase in our number of transactions across all brands and we are feeling it.
People are spending less and our strategies have really been about customer acquisition and those are paying off and that is offsetting some of the things that are happening in the mall traffic.
Brian Tunick (J.P. Morgan): With these new bankruptcy and store closing announcements every day, would you consider accelerating maybe your plans?
Matthew K. McCauley: Around the marketing strategies, our promotions are going to be pretty similar to what we did last year. We may run them a little bit longer, we may be a little louder about the events particularly in the malls, in the windows, to drive more traffic.
The only other changes is you will see a shift a little bit less on the direct mail, a little bit more in the magazine because we are seeing really nice returns there, reaching a broad group of customers and it’s less per customer and getting great results there.
Jody Yen (Buckingham Research): How much longer can you keep up the same growth margin performance with slightly negative comps going forward?
Matthew K. McCauley: We see opportunities to expand our margins in a couple of ways around our operating margins improvement really around operational efficiencies in stores in addition to cost of goods reductions.
John Morris (Wachovia Securities): Can you give us a little bit more color on the components contribution to the year-over-year increase in basis points?
Blair W. Lambert: The key items are really product cost reduction is really the driver of the savings. The buying cost leverage was really offset by the negative leverage in occupancy that we have been talking about.
John Morris (Wachovia Securities): On Crazy 8, what kind of new insights have you had in terms of where you want to locate the stores go forward?
Matthew K. McCauley: We are seeing a lot of strength where we already have Gymboree stores so we are happy to see that. Seeing that you can make some money in some of those less expensive locations that are not in the malls, we are happy to see that.
John Morris (Wachovia Securities): Are most of the openings that you are looking at for 2009 in those locations near Gymboree stores?
Matthew K. McCauley: It is going to be a mix but you will see a pretty large percentage of them in malls where Gymboree already exists pretty much because those are great malls.
Lorraine Maikis (Merrill Lynch): Which area do you think has the biggest potential for future savings?
Matthew K. McCauley: It is really both around the cost of goods is certainly big and certainly store payroll is huge. One of your largest investments is store payroll in retail so if you can leverage that a little bit more, those are big dollars.
We have got both of them ahead of us and obviously in the cost of goods reductions you are going to see more modest reductions in Gymboree but we ve still got three other concepts that have store growth that is going to be able to get IMUs up, cost of goods down at the same time that the stores are growing. We also have opportunities to leverage corporate payroll as well.
Jeffrey P. Harris: We just finished the roll out of the new POS system, it is now in all stores. As a result we are seeing some reductions in our repair and maintenance costs.
We have also at the same time have been changing the way we communicate with the store, we have got a significant reduction in communications cost back and forth to the stores and one of our mission impossibles this year was to get our professional fees down and we have seen a terrific reduction in professional fees throughout the organization and we think those will continue as we go into the second half of this year.
Lorraine Maikis (Merrill Lynch): Are you seeing any type of inflationary pressures coming out of your vendors? |
