Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Paul Lejuez – Credit Suisse.
Paul Lejuez – Credit Suisse
You said that you pushed off some of your refreshes in to 2010 so how do we think about future cash backs? Is this $30 million a level of cap ex that you can maintain over time or will that need to pick up at some point or else you risk stores getting run down at that $30 million level?
Michael L. Harry
Our cap ex number is going to be subject to change as we go through this environment. If we experience a 2009 that is as bad or worse than 2008, what we would be doing is continuing to negotiate with landlords to defer refresh projects even further than what we have so far. So, I wouldn’t suggest that maybe $30 million is the exact amount of cap ex to think about every year but maybe a $50 million number might be a good center of gravity for now understanding that we will be making adjustments depending on what the environment shows us as we finish the year.
Paul Lejuez – Credit Suisse
As you think about inventory do you think for the full year ’09 is that a source or use of cash? It seems like you might not be able to go lower per square foot but you are closing stores so I’m just wondering how you’re thinking about that on the cash flow statements?
Michael L. Harry
Well, I think if you track our inventory as we go through the year we will keep it down per square foot consistent to where it is now. Depending on exact timing of receipt close and other adjustments we might make it might move a few percentage points one way or another at a given quarter but we expect to maintain significantly reduced inventory levels throughout the year until we see some kind of change in the average sales trend.
If were to see an improvement, naturally we might ease up a little bit and chase some business but for the time being I would expect that we will maintain levels that are consistent with what you see and what we just announced.
Paul Lejuez – Credit Suisse
Even once you get to the fourth quarter though?
Michael L. Harry
Yes, because if you think about third and fourth quarter we had way too much inventory, I mean that’s really what damaged our merchandise margins in the back half of the year. In the fourth quarter in particular more than anything is we just had way too much inventory and had to promote our way out of it. We have considerable room to maintain significantly reduced inventories and still have a very good amount of inventory in the stores.
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