Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of Neely Tamminga with Piper Jaffray.
Neely Tamminga – Piper Jaffray
My congrats to Tom as well as my best wishes to Brian as well. I think it’ll be clearly a very seamless transition. Tom, in terms of Cache Luxe, how should we be thinking about that in this oncoming year? Is this a division that’s performing to your expectations or is this something that you could maybe see come under review or just repurposing of your real estate?
Thomas E. Reinckens
I think Cache Luxe is not performing to the level that we expected it to perform. We actually closed two Cache Luxe stores in January. We’re going to take a wait-and-see approach. We’re trying some new things at Luxe. We’ve reorganized and have a different eye on the mindset of purchasing for Luxe and we have some other things that we’re going to try throughout this year. But clearly this will be a make or break year for Cache Luxe and we’ll see how it goes. Right now we have no plans to do anything other than that.
Neely Tamminga – Piper Jaffray
Can you help us understand the impact then on the panel? Is it something that’s still weighing on your panel by a $0.05, $0.10? I think Lillie at its probably worst performance was closer to $0.12 to $0.14. I’m just wondering how much of a drag it’s going –
Thomas E. Reinckens
It’s not anywhere near $0.05 but it’s not positive. It’s below that.
Neely Tamminga – Piper Jaffray
Then in terms of opportunities, as we look at the quarter and I appreciate obviously the – it’s tough to give guidance in this sort of environment right now but I mean clearly you’re on track I think for Q1. Just wondering in terms of as we look through each of the quarters this year which quarter do you think or maybe one or two quarters do you think are the key quarters of opportunity particularly with respect to markdown rate comparisons? Is it really about the first half, is it the second half or is what we just saw in the fourth quarter really the big quarter of opportunity in terms of improvement on the markdown rates?
Thomas E. Reinckens
Clearly I think when you look at our inventory levels and we really took hard markdowns and deep markdowns to clean out a lot of inventory and reduce our first door inventories by over 20% on a unit basis, on a retail basis as well as the [inaudible] basis, our backrooms are empty. I think our opportunities really have to turn the inventory faster. We need to be more current with markdowns. Just for instance last week we took a markdown on some of the early Cache Tee’z that we bought in on selected styles and that’s going to be the cadence that we follow throughout the year to try to be more timely on markdowns. What I will tell you is that I think with our strategies of trying to increase our market share, increase our sales per square foot, particularly in the opening price point arena, I think we have an opportunity that our first markdown will be cheaper in a sense that it, you still have to do your normal markdowns, but we’ll be able to clear those goods faster. We also believe that our opportunities are probably greater in the first half from a standpoint of earnings and that’s because we’re up against some weakness, particularly stronger weakness in our sportswear arena last year. You may remember our trend of long over skinny did not really pan out to the degree it should have and that really hurt us from a standpoint on possibility with higher markdowns. So saying that I think our best opportunity right now as I see it is in the first half but certainly I think with the initiatives we discussed earlier that we have a significant opportunity in the second half because we’re not up against bigger overstated inventories or higher inventory levels as we were in 2007.
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