Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Mark Miller - William Blair
Mark Miller - William Blair
As you’re working with your suppliers for next year, can you share with us the puts and takes that you see on the cost of goods. I understand the mix and the readers growing faster, that obviously helps, but what are the other impacts as we might see it in 2009 on gross margin?
Alec Taylor
I was in Asia last week and Bob [Grow] who handles a good bit of our sourcing in the optical area is just back this morning. I checked with him again before this call, because I said what I heard last week when I was with the suppliers was they were happy to have the business and the pressures that we had seen for price increases were subsiding fairly quickly.
Bob confirmed, he spent time at factories last week after I parted company with him, and said, no that’s exactly what he’s hearing so I think we’re in better shape then we were a year ago as far as the pressure on margins and cost of goods in particular. I would expect that 2009 that I’m not ready to make a call of improving gross margins, but I certainly feel comfortable in saying that we should be able to hold gross margin, fuel cost coming down, freight is a big piece of the component in margin.
I think I spoke in the last call and talked about how they’ve been one of the real challenges this year as our cost per piece had gone up, shipping cost per piece from about $0.04 per piece to $0.05 per piece.
I’m hoping that maybe next year if fuel rates continue to moderate maybe we can bring that back down. So I would say that net net we are feeling pretty good, fairly bullish about cost of goods for 2009 with respect to our principal product lines.
Mark Miller - William Blair
Can you remind us how FX plays into that equation, from what I recall on the gross margin side it may not be that big of an impact, but can you confirm that and then also should we think about an FX impact on 2009 relative to where we were before as being approximately $3 million year-to-year or taking same impact you see for the fourth quarter rolling it through the next three quarters of 2009 then?
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