Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Michelle Tan – Goldman Sachs
Michelle Tan – Goldman Sachs
I was wondering if you could give us a little more clarity on the outlook with respect to sales trends. I think you mentioned in line with the current level, is that thinking about 2Q trends that we saw or something that you’re seeing in the business today? Also, just clarity on gross margin, I know you mentioned the merchandise margin would get a benefit but any kind of indication of directionally are you expecting gross margin to be up in third quarter?
Joan Hilson
We look at the third quarter guidance we expect modest improvement in comp based on current trends. Within gross margin we are seeing higher markdowns in certain underperforming categories, Jim mentioned knits. We would expect in the guidance given we expect to see that continue unless the sales trends shift. Remember also when we’re thinking about gross margin that within rent we need a mid single digit comp to leverage. The comments in the prepared remarks really speak to the back half of the year and we really see the up side for merchandise margin to occur in the fourth quarter. This has to come from top line sales and real acceptance of our assortment.
Operator
Your next question comes from Adrienne Tennant – FBR
Adrienne Tennant – FBR
On the fall product, how much impact did Roger have and particularly what areas was it visual product, how much impact on the product. When should we see the impact that you want us to see in fall as we go into holiday is it late October, early November?
Jim O’Donnell
Roger has had a minimum impact for the back to school collection and he has been very actively involved in our holiday collection which you’ll see towards the end of October. He is actively involved in our spring collection for 2010. Areas of concentration as I mentioned earlier in the prepared statements, is in the area of knits. Our denim teams as exemplified by our results thus far and we anticipate those to continue are well in place. I’ve had him focus his efforts in knits but also in woven categories because it seems like right now for fall and holiday that there will be a very strong woven trend. Roger has been immersed in it to a great degree.
- To read the full transcript on Seeking Alpha, click here »
