Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from John Zolidis – Buckingham Research
John Zolidis – Buckingham Research
A clarification on the guidance, the original guidance did anticipate I believe some loss in receivables or revenues from Value City related to a potential bankruptcy. What I’m wondering is in the revised guidance what is the incremental loss that’s been now factored in with respect to Value City?
In addition to that you did keep your full year comp guidance in tact, however, with only one quarter left to go it could be that you’re expecting the fourth quarter to be weaker now than you previously did. I was wondering if you could comment on the extent to which changes in your assumptions for fourth quarter sales trends affected your full year guidance change.
Doug Probst
On the guidance, yes we did contemplate at the beginning of the year and as the year progressed that we would not be receiving the Value City payment in full. In fact, there is still a range of what we expect to collect from them. The bankruptcy court is going to have a say in that. We are collecting some fees from them on a weekly basis.
We don’t know how long they will continue to operate or need our services. There is still a range involved with the Value City. As the year progressed we got more realistic as to the prospects of them filing bankruptcy and we continue to evaluate what that risk was. There was a range with that.
The other components of our range also considered the severance charges we mentioned and also the performance of the business in general. Throughout the first three quarters the DSW store business has been stronger from a margin perspective but the reduction in guidance is purely an expense driven adjustment. Yes, there are some additions so far and there is some additional risk in the fourth quarter as we look at the landscape for retail spending.
We’re not the only ones that are looking at the fourth quarter and seeing a potential downturn. We’re a few weeks into it; obviously a big week coming now and we just see the consumer confidence being weaker and some potential lower spending as well. All that’s baked into the expectations for the balance of the year. The comp range, it may be a little weaker but that’s again built into our range. I hope that answers your question.
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