Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Budd Bugatch from Raymond James.
Analyst for Budd Bugatch - Raymond James
This is actually TJ calling in for Budd who’s traveling right now. First I’d like to turn to the cost equation. Clarence went through a number of details on the specific items that you guys were looking to maybe assess. I was just wondering if you might quantify of that one-third of the variable cost, realistically, what can we expect that could be trimmed out of that as far as the quantification?
Dennis L. Fink
The main thing I just wanted to do was point out that how these costs move up and down in relation to sales volume, but in the shorter term period, of course it’s hard to cut a lot out of fixed costs, but in the longer term you right size to the appropriate level and the answer is it just depends on how slow sales are and how much we can push out of the staffing and the whole scale of operations. We did cut costs as we mentioned in the press release and as Clarence confirmed, we got about $8 million out of SG&A versus the prior year and then we did have the sort of one time item.
Actually it was on the stores that had been closed in prior years reserving for possible sub-lease income issues and that was about a $1 million charge that we took in the quarter, so that increased our SG&A and that should not be a recurring type of expense. But the answer is we just have to push and we can’t really quantify it ahead of time very well. You can see that we have squeezed quite a bit out of the costs. The one that’s the easiest to pick on and the one that you have to be the most careful about is of course advertising. That runs 6% to 7% of sales.
As I said, it’s mostly discretionary, so you have to decide really how much effort in media spending you’re going to put forward and it does have an impact on sales itself because the less you spend the less tension you draw and awareness you create so we’ve been cutting back in that area and we just have to make that judgment three or four months at a time.
Analyst for Budd Bugatch - Raymond James
- To read the full transcript on Seeking Alpha, click here »
