Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from William Armstrong – C. L. King & Associates, Inc.
William Armstrong – C. L. King & Associates, Inc.
I see gross margin was down in Q4 due to markdowns on seasonal. You did have I believe a lower seasonal inventories going in to the holidays so was it an issue of still having too much in there or was this really just unavoidable?
Darrell Webb
It was still an issue of having too much in the sales environment for last year. None of us could have anticipated how tough that holiday season would be so while we bought down double digit in terms of cost going in to the season, it wasn’t enough and we had to take deeper markdowns to sell through.
William Armstrong – C. L. King & Associates, Inc.
How do you feel about your inventories right now going in to the spring especially regarding seasonal categories?
Darrell Webb
We feel very good about our current inventory positions and our sell through on spring seasons is actually in very good shape right now.
William Armstrong – C. L. King & Associates, Inc.
Regarding your guidance, I know you don’t give quarterly but maybe just a little bit of color, I mean are we assuming maybe the first half is going to be worse than the second half in terms of comps and other metrics?
James Kerr
Like you said Bill, we’re not going to give specifics by quarter. We’ll update the full year guidance after each quarter. But, as we look at how the year may play out as we’ve said in our core sewing and craft businesses remain fairly stable. The seasonal business was tough so as we get in to next year we would assume the sewing and craft businesses hopefully will remain fairly stable throughout the year and seasonal businesses we’ll actually plan down. In terms of the overall economy, as Darrell said we didn’t plan for any significant improvements in the economy. We’re taking a conservative approach on the sales side in to our buys.
William Armstrong – C. L. King & Associates, Inc.
Then last question, you mentioned in Asia you’re now actually seeing product cost deflation, the opposite of the situation you had last year. What sort of percentage deflation rates are we seeing?
Darrell Webb
Last year on one of the conference calls we discussed high single digit inflation occurring through most of a year ago and I would say that we’re seeing at least that same level on the downside this year.
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