Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Jeffrey S. Stein - Soleil Group.
Jeffrey S. Stein - Soleil Group
Darrell I’ve got a question for you regarding the guidance. I guess my question is this. It looks like if you meet your 2% to 3.5% guidance for the year, you’re still probably at the low end looking for positive comps in the back half of the year, and you’re indicating that you expect gross margins to be up for the year. And when you put that into a model, it would suggest you’re looking at up earnings in the back half of the year yet your $0.95 to $1.05 suggests down earnings in the back half of the year. I’m wondering if you could just kind of reconcile that for me.
Darrell Webb
As we run the numbers Jeff the full-year guidance does imply that we expect the second half to be a little weaker than the first half, certainly for sales. At this point in time we do expect that the sales will be positive in the second half but the weight of our seasonal business does concern us a little bit since that’s been a soft area for us in terms of sales. But when we put the numbers together it does imply that earnings could be down slightly in the second half although we have room for upside as well. We’re just really counting on the consumer spending environment to dictate what the second half looks like.
James Kerr
I think the other impact will be depending on what the comp store sales increase. That’ll have an impact on our SG&A leverage.
Jeffrey S. Stein - Soleil Group
Has your leverage point changed for the back half of the year? It sounded to me like you have some more point of sale expenses you’re going to bear in Q3? Is that enough to raise the leverage point considerably so that perhaps on a 2% or 3% comp you’re not going to be able to leverage your expenses?
James Kerr
What we’ve said in the past is around a 2.5% to 3% comp is what we need to leverage expenses. We’ve been able to find expense savings that have helped us get better leverage than that but going forward I think that’s a good benchmark for us. The incremental costs related to the POS rollout would be on top of that so it would make it tougher to get leverage at that level of comp sales for Q3.
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