Question-and-Answer Session
Operator
Your first question comes from Jeff Stein - Soleil Securities.
Jeff Stein - Soleil Securities
It looks to me like on a pro forma basis; you are still going to be doing about 20% of your total revenues in products sales. So, the question is what do you do about that and do you have any strategies in mind to try to stem the sales weakness you are seeing particularly in light of a fact that it looks like you’re abandoning your efforts to develop your own product line through the Intelligent Nutrients joint venture?
Paul Finkelstein
Jeff, it is probably going to be more affordable stuff. Our private label business is up 9% this year and that is a $40 million business. So, it’s a question of mix, the higher price categories are going to suffer, but there is no empirical evidence at this point in time that there has been a permanent shift; there is just not enough time, Jeff.
I eluded on my conference call speech, the fact that the higher price service concepts are doing just fine in Europe and not fine here. There is no rationale for it other than it’s just too early to make a definitive decision. We have some numbers from the target, which show that they aren’t necessarily going into lower price goods at this point in time.
So, it’s totally too early to tell. I think the most important thing we can do is to make sure that our combo tickets increase. Fewer than 10% of our service customers buy product at the time of a transaction and this is something we’re focusing on big time, and we’re getting some good results with respect to it, but it will take time.
Randy Pearce
Paul maybe just to add to that, obviously, we do not experience the same level of impact on product sales in our traditional salon concepts, when compared to Trade Secret. Trade Secret has very much a fixed cost infrastructure associated with the rents and utilities and the payrolls they pay their associates.
In a salon environment, it’s more of an add-on sale and as Paul said, we’re focusing on increasing combo tickets. So, the issue we have to address is the decline in product sales in our traditional salon concepts, but it’s not going to adversely impact our P&L to the extent the trade has recently done.
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