Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Unidentified Analyst with Susquehanna Financial Group.
Unidentified Analyst – Susquehanna Financial Group
David, just on the first quarter, can you quantify possibly on the margin – just the sales came in at the low end of your guidance. Just a break out on the gross margin how much was merchandise margin improvement and how much was from foreign exchange? If you could give any color that would be helpful.
David Weinberg
To break it down as best we can, domestic wholesale remained relatively flat year-over-year so the big increase had to come from our international subsidiaries. The differential in foreign exchange was probably about 15% for the year but their margins were up over 100 basis points. It’s mostly from product in Europe and obviously it’s the shift as well. We came in significantly stronger in our subsidiary business than our distributor business and obviously slightly higher at retail simply because of the new stores and that was both because of those fluctuations brought the whole margin up. We had no deterioration in domestic wholesale nor our international distributors so it’s just a plus from the increased percentage of our subsidiaries.
Unidentified Analyst – Susquehanna Financial Group
As you in the past when you guys have looked at your second quarter there’s always been an incremental shift to some degree for back to school between Q2 and Q3, what are retailers telling you right now in terms of how that may or may not unfold given the environment at this point? Have you factored that into your thought process in regard to the guidance?
David Weinberg
Well we obviously took it into our thought process. It’s a very difficult conversation to have with retailers because they don’t understand the distinction. It’s to them whether they take it the last week in June or the first week of July is unofficial. It doesn’t change anything, it just changes for us. We have taken into account that most retailers have told us they wanted closer to need, so we’ve shipped it as much as we could from June to July. Basically what you see in these projections is a very solid international performance and a projected decrease in domestic wholesale giving us that net number for the quarter.
Unidentified Analyst – Susquehanna Financial Group
And how about company on retail? Is the comp trend more than likely to continue to trend negative at this point?
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