Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from David Tarantino – Robert W. Baird.
David Tarantino – Robert W. Baird
Could you take us through the thought process on not taking any pricing in the February timeframe? I believe previously you indicated you might take it in that timeframe. Was there something about the test you're running that made you decide not to do it or could you just give us some color on that decision?
G. J. Hart
As we commented the last time we saw you, there's nothing in the test that would tell us not to at this point. We just decided that given all the conditions our there economically, we currently are delaying that decision. We continue to evaluate it, and you will hear from that soon.
Operator
Your next question comes from Jeffrey Farmer – Jefferies & Co.
Jeffrey Farmer – Jefferies & Co.
I'm trying to get a better handle on the model. Based on your guidance for a 2% to 3% commodity deflation, and your decision to hold off on pricing, do you expect your cogs number to potentially approach 35% or even fall below that?
Scott Colosi
I won't give a specific number on the cost of sales but we do expect cost of sales to be down somewhat this year given the 2% to 3% reduction in what we're paying for items.
Jeffrey Farmer – Jefferies & Co.
On labor, it looks like the last couple of years you're seeing about 60 basis points deleveraging each year. Withholding pricing, do you have any opportunities to eventually control or better control that potential sales deleveraging in '09? Any opportunities on the labor line?
Scott Colosi
We have opportunity, but it will be challenging on two fronts. One is like everybody else, we've got the minimum wage increases and the third federal increase coming up in the summer time, and we had a bunch of folks raise their tip and minimum wages here in January, so you're kind of battling that. And not having taken any price increase at this point in time, certainly that's a hurdle for us to cross over.
When and if we do take a price increase, it comes on how much flow through do we get on that. So there are quite a bit of variables on the labor piece. It's probably going to be a challenge for us to hold labor costs flat. I would suspect it would be up a little bit in 2009.
- To read the full transcript on Seeking Alpha, click here »
