Question-and-Answer Session
Operator
(Operator instructions) Our first question is with Jeff Stein with Stein Research. Please go ahead.
Jeff Stein – Stein Research
It is Stein (inaudible).
Paul Finkelstein
We know the name Jeff.
Jeff Stein – Stein Research
Okay. First of all the CapEx and acquisition budget, why not cut it more, you know, it seems that we’re heard from other companies that are making very dramatic reductions in their CapEx budgets and some of those companies aren’t facing the covenant issues that Regis has. Why not a more dramatic reduction? Why not wait until the real estate environment settles and perhaps you can even get better deals and buy these guys even cheaper.
Paul Finkelstein
Jeff we have cut everything we have possibly could. A lot of it has already been frontloaded and spent. Of the $100 CapEx budget $55 million is maintenance CapEx and we have deferred as much as we possibly can or limited as much as we possibly can. Likewise we front load our acquisitions. So, we made every possible cut that we could make in order to (inaudible) cash.
Jeff Stein – Stein Research
Okay. Your Trade Secret conversion, it sounds that kind of the initial batch has not gone as well as you expected and I am wondering why not just stop the conversion process until you feel like you got the model right before spending money that might not – made not necessarily payback for you.
Paul Finkelstein
Right, number one, this is – we’re not implementing a conversion. We’re implementing a transformation. We did make a mistake with respect to underestimating the consumer franchise created by the Trade Secret brand. It does make sense to add assortments. And many of those assortments are doing just fine. Our problem is not with the added assortments. Our problem is more so with the fact that the super premium categories of taking a hit, and frankly without some of the added assortments we would have had more of a problem. Also Jeff there is a learning curve issue. There is no like company and it is going to take us a while and we and our investors, I think, have to be patient. It will take time especially in this economic environment where we’re seeing less traffic in the malls than we have ever seen. It is just going to have to take some time. And investment decisions really shouldn’t be made in great times or awful times and believe me we understand the urgency of it and we will but we’re going to want to do it right. You know, this is nothing. Our current situation has very little to do with what occurred in 1990 and 1991, and we were really (inaudible). On a worst case scenario and we have already had some conversations with our banks, we’ll have some higher interest costs in the event that we have covenant issues, but if we effect these plans and comps come in less than 2% negative of the covenant issues will not be an issue.
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