Question-and-Answer Session
Operator
Thank you. The question and answer session will be conducted electronically. If you would like to ask a question today, please press *1 on your touchtone telephone. If you are joining us on a phone that has a mute function, please make sure that the mute function is turned off to allow your signal to reach our equipment. Once again, if you’d like to ask a question today, please press *1 on your touchtone telephone. We’ll hear first from Trevor Hamilton of Peninsula Capital.
Mike Osborne – Unknown Firm
Hi Neil, it’s Mike Osborne.
Neil S. Fiske
Hi Mike.
Mike Osborne – Unknown Firm
Hi. I have a couple of questions, one on the cost side and one on the sales side. On the cost side, you mentioned your goal is to take $30 million out of overhead, $30 million from what number – there was a lot of some one-time stuff in there with the termination of the former CEO and that kind of stuff, what’s the kind of run rate baseline that we should be starting from as we think about taking $30 million out of – that’s the cost question – and then the sales question is; can you talk over the next 2 or 3 quarters specifically – you spent a lot of time on costs and restructure on this call, but can you talk about what you’re going to do to drive the sales line because at some point it seems like you can cut, but you have got to grow to the top line to get to prosperity here?
Neil S. Fiske
Okay, let me get both of those questions. First, on the cost side, just to be clear about a couple of things, when we say that $25 to $30 million cut, we’re taking out all the non-recurring things from both this year and last year so that it will be a true apples-to-apples kind of cut in the cost structure, and the vast majority of that $25 to $30 million cut will show up in the SG&A expense, and the only other apples-to-apples thing to bear in mind is we’ll do it on a 52-week to 52-week comparison – that’s because we have an extra week in this fiscal year compared to last year, so on a true 52-week to 52-week comparison, you’ll see the $25 to $30 million production flow through to the SG&A line. With regard to the question on growth, we completely agree; part of this in a turnaround is – you stage out various initiatives to have impact over a sustained period of time given the product development cycles in the parallel which are typically about a year, that we’ve merchandize changes that we’ll start to see as a result of our new direction. We’ll show up a little bit in the summer because we could have some minor impact on that when I came in, more in the fall, but I think particularly we’ll be set up well for the holiday season, and obviously, the first thing that drives the business is great product, and I wish we could change it faster than that but that’s just the reality of the product development cycle. The second level that we have is our marketing, and our primary marketing vehicle is our catalogue. We put out 80 million catalogues a year, and I think we’ll just see over the course of the summer and fall season is a fresher, more up-to-date look to the Eddie Bauer brand, more consistent with our positioning as an active outdoor lifestyle brand, and we would hope that those changes and elevation of marketing will also start to drive the path line, and I think when we put all those together given the timely impact, marketing, and product together, you are going to be looking at the fall season to see the changes in top line of a dramatic sort. So, does that answer your question?
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