Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from the line of Ashwin Shirvaikar with Citigroup.
Ashwin Shirvaikar - Citigroup
Thank you. I don’t think the cautionary outlook should take anything away from your performance, so congratulations on the quarter. The question I have is the new sales success that you had, what kind of clients are buying in this environment? And you did mention that the push back against signing longer term contracts, does that mean that you are now signing shorter term contracts, maybe more towards the three-year timeframe as opposed to five?
Ronald D. Croatti
I’ll take that one. About 8% of our business comes from the trades and constructions, or what I would call the SICs 15, 16, 17, when you wind them up. That’s where we are seeing the reductions and the cut-backs and the financial issues more than anything. I think where we are seeing where we are getting our new accounts and we are getting a little push-back on the contracts is on the smaller accounts because of the business uncertainty. And it’s a variety of sectors but it’s certainly -- we’re not writing much business out of that trades and construction, or construction support. It’s really -- you know, we’re still writing business in the other areas, you know, auto repair and healthcare and wholesale. Does that help you at all?
Ashwin Shirvaikar - Citigroup
That does help. How about the length of contract? Is that --
Ronald D. Croatti
Well, we’ve always pushed for a five-year contract. The only thing I could tell you is we’ve tried to work -- when I get the numbers up here, it’s -- we’re probably running at an average of about 4.6, 4.7 and that’s slipped down to about 4.5, so we are taking a few more three-year contracts.
Ashwin Shirvaikar - Citigroup
Got it. In terms of stock room efficiency, clearly you mentioned merchandise costs going down. How much can you push the stock room efficiency lever?
Ronald D. Croatti
The merchandise is affected as we lose more business and we get the reductions, hopefully we get paid for those clothes or we get the clothes back. If we get those clothes back, we recycle them and that helps lower our merchandise costs. And then when things pick up, we’ll have to basically put new garments in and it will just reverse the other way, so how bad will the economy go -- I mean, you can call that one as well as I. Hopefully it doesn’t go too bad and it stops at about 5% on the unemployment level. But that’s really what it amounts to. We get the clothes back. We reuse them for our existing customers.
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