Question-and-Answer Session
Operator
(Operator Instructions) Your first call comes from Ralph Jean – Wachovia.
Ralph E. Jean – Wachovia Securities
It’s really unusual to get retail operating margin expansion on a -8 comp especially 120 basis points and you leveraged your direct business on down sales and your own allocated overhead was down as a percent of sales, so was it all gross margin or can you identify and quantify any permanent expense reductions?
Dennis Highby
In regard to retail operating margins being up 120 basis points, the biggest contributor was higher gross margins and also just the improvement in labor as a percent of sales. The direct operating margins being up 50 basis points, again it was higher gross margins and improvement in equipment and software expense related to the Internet.
Ralph W. Castner
Ralph, we’re very focused on improving retail profitability. We’re pleased with the gross margin expansion that we saw this year. We have been working hard to reduce SG&A at the store level and we saw a nice improvement there from reduced SG&A at the store level. As you pointed out, we were also successful in lowering our corporate overhead by 43 basis points and that was primarily a result of leverage in salary and wages, incentive compensation depreciation. We believe we had improvement both on the gross margin line and the SG&A line and we’re pleased with that.
Ralph E. Jean – Wachovia Securities
Do you have the ability to look at credit card transactions and determine by zip code how far the average customer is driving and how much has that dropped over the last couple of quarters if you are able to measure that?
Dennis Highby
Ralph, if we have that information, I don’t think I look at it regularly.
Patrick A. Snyder
Actually on the retail side of the business we’re seeing some of our customers coming from as far as an hour away from the stores and we think that’s been increasing recently.
Operator
Your next question comes from Rick Nelson – Stephen’s.
Rick Nelson – Stephen’s Incorporated
Can you remind of why you thought the first quarter on a compare was going to be so difficult and you posted some pretty nice growth over and above what was supposed to be the toughest quarter of the year?
Dennis Highby
Just looking at toward the end of the fourth quarter it was tough out there. Again even in the spring our comp store sales were down 8.4%. We’ve been able to improve other parts of our business to significantly show improvements.
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