Question-and-Answer Session
Our first question comes from the line of David Berman with Berman Capital. Go ahead.
David Berman – Berman Capital
It is great control of the cash and inventory control. I have two quick questions. The first is, with the music appearing to be back on track and gaining momentum, have the integral results to rethink your results in some of the other categories of the business?
Would you like me to ask the second question now or later?
Elizabeth McLaughlin
I will answer the first question now, David.
David Berman – Berman Capital
Oh, ok, thank you.
Elizabeth McLaughlin
You know, it is interesting because music has grown and we are very happy with how fast we have been able to turn the music business, especially since there is so much chatter out in the marketplace about music being tough. We are looking at the other categories. We certainly have looked at the fashion categories and some of the accessory categories and there has been some shift as we’ve planned for a leaner inventory in those areas as we support music.
I think as music continues to gain momentum, we will probably see a little bit more shifting. You know, we have a small store, averaging 1,800 square feet and most of the buyers know they have to earn their spot on the floor, so if music continues to ramp up at this pace, I think we’ll continue to see more of a mixed shift toward the music areas.
David Berman – Berman Capital
Ok, good. Then the second question: the holiday season seems like it’s going to be a bit promotional as you can see what’s being done out there. I am just curious if you feel like your margin assumptions that you have given for your guidance is conservative enough and what do you think you may have to do promotionally to drive the traffic for the business? Thank you very much.
James McGinty
Well, I think in terms of the level of conservatism of the merchandise margins, we feel good about our plan. We feel good about the inventory control process that’s been put in place and our ability to control the level of promotional activities in the store, so we feel like based on that low to mid-single digit comp decline that we should be able to achieve those types of margins.
Elizabeth McLaughlin
You know, that being said, David, I think it’s going to be a very competitive holiday season and the last time we had this type of calendar with 2001 (that was post 911) so I think it’s apples-to-oranges, even when you look at the last time this calendar happened.
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