Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Matt Fassler – Goldman Sachs.
Matt Fassler – Goldman Sachs
Two questions if I could, the first relates to the promotional tenure of the business, it sounds like you continued to promote to drive business. If you could talk about the consumer’s need for promotions in order to buy and how you would consider the promotional tenure in the second quarter compared to the prior quarter?
Edward W. Stack
I think it’s still the consumer is still looking for a value out there. We tried to provide the customer with what they were looking for. But, a big part of the margin rate deterioration was the clearance activity at Golf Galaxy as we’re getting rid of a significant amount of old stale inventory from the previous team that was running Golf Galaxy.
Matt Fassler – Goldman Sachs
How did the margin decline at the core Dicks store, I guess the merchandise margin declined comparing the second quarter from the first?
Edward W. Stack
Relatively the same.
Matt Fassler – Goldman Sachs
My second question relates to real estate, it sounds like the incremental expansion is taking out existing competitive capacity that’s come on the market. As you think about conventional growth how are you contemplating traditional store openings now that development in new power centers has moderated? Can you also comment on what you are seeing in terms of the economic equation as you look at rents versus landlord subsidies for your new stores?
Edward W. Stack
What’s happening out there right now is we’ve got a blend of new development and existing real estate. We think the new development piece is going to continue to be difficult. As far as rents, we’re finding that rents are coming down but then on the flip side of that we’ve got rents coming down but there are also landlords seem to be having a bit less capital to invest and we’re being very judicious on how we approach this.
Matt Fassler – Goldman Sachs
Is that I guess leading to more upfront investment in new stores and less on the back end from rent or are you simply changing store design in any way to accommodate I guess the smaller subsidies that are available?
Edward W. Stack
We’re not changing the store design and we think there could be some difficulty getting landlord allowances but as we take a look at this we’re getting meaningfully lower rent numbers with us putting some investments in. So, there are no differences on the back end, we may have to put a little bit more money in upfront than we have in the past but the rent savings, if you will, will be immediate.
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