Question-and-Answer Session
Operator
(Operator Instructions) We’ll go first to John Shanley with Susquehanna Financial.
John Shanley – Susquehanna Financial
Jim, the 15% increase in inventory, can you give us an idea of what components of the business that inventory is heavily concentrated in and how much of it may be dated inventory versus current season goods?
Jim Gulmi
The increase is primarily in Journeys and Hat World. I’ll start with Hat World, from the standpoint of dated the fashion risk there is not as great as it might be in some of the other businesses and Bob might want to talk about that some in a minute. We feel definitely there is value; there is no risk from the standpoint of obsolescence or fashion. In the case of Journeys we looked at the Journeys inventory very closely at year end and we feel very comfortable that what we have on hand that we will be able to sell in the first half of the year without taking any meaningful mark downs we think we’ve got the inventory valued properly and we don’t feel like we have much inventory risk going forward because we’ve looked at it, we feel we can sell it though in the first half and we’ve been pretty conservative we think in our year end inventory reserves.
Bob Dennis
On Hat World what we have done is right size the fashion Major League Baseball, the Hip Hop inspired inventory and that is not bigger than we want it to be. It is much more in stock hats and as you know we can manage our inventories down on stock hats with just receipts.
Jim Gulmi
Another point is that you also have to remember that our square footage is up 11%. I know sales and inventories are the key metric here but also we’ve got more stores, more square footage and we obviously need more inventory in those stores or they look empty. Some of that is square footage growth but we do have more inventory than we need but we do believe we can right size in the first half of the year.
John Shanley – Susquehanna Financial
Can you comment on whether or not the company has set up any reserves for any pending litigation coming up down the road? Are there any special provisions that you’ve made for litigation expenses?
Hal Pennington
No we haven’t. We will have to address that when it happens. There is not reserve that is set up for it.
- To read the full transcript on Seeking Alpha, click here »
