Q2 2019 Earnings Call
Good afternoon, and welcome to shoe Carnivals second quarter fiscal 2018 earnings Conference call. Today's conference is being recorded and is also being broadcast via webcast any reproduction or rebroadcast of any portion of this call is expressly prohibited.
Managements remarks may contain forward looking statements that involve a number of risk factors. These risk factors could cause the companys actual results to be materially different from those projected in such statements.
Forward looking statements should be considered in conjunction with discussion of risk factors included in the company's FCC filings and todays earnings press release.
Investors are cautioned not to place undue reliance on these forward looking statements, which speak only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward looking statements that are discussed on today's conference call or contained in today's press release to reflect future events or developments I'll now turn the call over to Mr. Cliff Sifford, President and Chief Executive Officer of shoe Carnival for opening comments Mr. Sifford you may begin.
Thank you and welcome to shoe Carnivals second quarter 2019 earnings conference call.
Joining me on the call today is Kerry Jackson Senior Executive Vice President Chief operating and financial Officer.
On today's call I'll provide a brief overview of our second quarter operating highlights and self result, as well as review our fiscal 2019 outlet Terry will discuss the financial results in more detail then we'll open up the call to take your questions.
I am pleased to report comparable store sales for the quarter increased 1.4% on top of the 6.7% increase we had for the second quarter last year.
This increase was driven by athletics earlier in the quarter and non athletic as the quarter progressed to a warmer dryer seasonal weather pattern.
This demonstrates the strength of our model, which offers a broad assortment of footwear for any occasion, where season for the entire family. I'm also pleased to tell you that our back to school season is progressing nicely with August sales up 3.5% through yesterday. This increase is being driven through both ticket athletic and non athletic product categories.
I believe that shoe Carnival is a shoe store of choice store critical few shopping periods, our customers Trust us to have a broad assortment of the best brands and the latest trends. In addition, I am pleased with the very early results related to the initial implementation of our CRM program.
I'll speak to this in more detail in a few minutes.
Traffic than ever transaction for the quarter declined low single digits, while conversion increased low single digits average units per transaction action work down slightly we ended the quarter with inventory up 2.3% on a per store basis as we prepared for both the back to school selling period and early delivery of fall product.
Merchandise margins were flat to last year, Biviano increased 60 basis points as a percentage of sales and SGN they decreased by 80 basis points.
As a result operating income increased about 20 basis points.
EPS for the quarter was 80 cents per diluted share an increase of 5.3% compared to second quarter last year.
Focusing on the second quarter comparable store sales body apartment womens non athletic was up low single digits on a comparable basis, we were particularly pleased with the performance of women's dress shoes as sport casual both of which produced mid single digit increases over a comparable basis.
Additionally, sandals were up low single digits and with the wet and cold start to the second quarter, we experienced high single digit comp store growth in women's boots.
The men's non athletic Department continued its strong performance posting a low single digit comparable store sales increase.
Our broad selection of a great brands of shoes, and boots for any occasion make shoe carnival a destination for men shoes.
The children Shoe Department posted a low single digit increase for the quarter on a comparable basis. We produced mid single digit increase in non athletic driven primarily by our seasonal categories Childrens athletic produced a low single digit increase on a comparable basis, we continue to see a shift away from function and more towards fashion and childrens athletic footwear.
Adult athletic was down slightly on a comparable basis here, just like children's aesthetic theres been a shift from performance categories to more casual categories.
Now to update you on the progress on our CRM initiative.
We are happy with the continued progress on the CRM implementation. We're also pleased with the early results.
Sales to ship perks members for the second quarter were up 5.5% versus last year. This is compared to our 1.4% comparable store sales increase we achieved for the quarter.
Gold membership for the year has grown 44% versus last year. This is a key point because the gold members average order value of $17 higher than the average order value of our non gold members segmenting, a marketing to members across channels with messaging targeted to specific customers has contributed to this growth.
Additionally, we expect that as we continue to implement our CRM capabilities will continue to grow our active shopper file and convert additional members to gold status.
We have confidence that shoe carnival continue to earn the loyalty of new customers searching for a large collection of footwear for the entire family family at a compelling value.
As we move forward, we expect our CRM system to be fully implemented by the end of the fiscal year through improved customer analytics will expand our reach to new customers and new and existing markets that closely match the profile of our most loyal customers.
As a reminder, this fiscal year, we proactively made the strategic decision to slow store growth as we build our CRM capabilities.
Our CRM analysts have begun to provide useful data to both our merchants and our real estate team.
With the cell site, we fully expect to continue to drive profitable sales growth and our comp stores and once again begin to expand our brick and mortar footprint beginning of fiscal 2020 .
For the second quarter, we ended with 393 stores in 35 States and Puerto Rico.
During the quarter, we closed two stores and have no new store openings for the remainder of the year, There's one new store plan and two additional store closures.
Finally, I'd like to give you an update on our financial expectations for fiscal 2019.
As I've said earlier back to school has gotten off to a good start with August sales month to date up 3.5% versus same time period last year.
Comparable store sales for the past two years in August have increased 7% and 6.5% respectively.
This August will represent the 17th consecutive year with positive comparable store growth for the month.
Happy to share that our August comparable store sales increase is being driven across all channels and all major product categories, I am, especially pleased with the increase in traffic our brick and mortar stores are experiencing.
Our customers count on us for an unparalleled shopping experience.
Shoe Carnival combines a phone store environment with the latest brand trends in key styles at a compelling value.
Based on our performance year to date, we feel comfortable maintaining the high end of our annual diluted earnings per share guidance of $2.83 and raising the lower end of the range to $2 of 77 cents. This compares to diluted earnings per share of $2.45 in the prior fiscal year.
With the first half of the year complete we are refining our net sales estimates, while maintaining our comparable store guidance for the year of a low single digit increase total sales for the full fiscal year are expected to be under a range of a billion $28 million to a billion $33 million that concludes my overview I'd now like to turn the call over to Carrie. Thank you cliff.
Our net sales for the second quarter ended August Threerd 2019 of $260.2 million were essentially consistent with the prior year second quarter.
Our comparable store sales increase of 1.4% contributed 3.6 million to net sales.
And $1.2 billion was attributable to the three new stores opened since the beginning of the second quarter fiscal 2018.
These increases were offset by a loss on sales of $3.7 million for the 15 stores closed over the same period.
And a loss on sales of $1.2 million, a trivial to other non comp stores relating primarily to hurricane impacted stores.
Our gross profit margin for the quarter was 30.6% compared to 31.2% in the second quarter last year.
Our merchandise margin was flat for the quarter, while buying distribution and occupancy expenses increased 60 basis points as a percentage of net sales.
The increase in buying distribution and marketing expenses as a percent of net sales was primarily a result of lower occupancy expense in Q2 of last year.
This was due primarily to a 1 million dollar lease termination benefit in that prior year quarter for two stores in Puerto Rico, where the landlord could not make contractually required repairs within the allotted time.
Also contributing to the de leveraging of expenses was a slight decline in sales for Q2 against higher expenses.
As to expenses decreased $2.4 million in the second quarter of fiscal 2000 $19 million to $66.4 million.
As a percentage of net sales these expenses decreased to 24.8% compared to 25.6% in the second quarter of fiscal 2018.
The decline in our SGN expense in Q2 was due to lower equity and incentive compensation.
In Q2 last year, we tripled our quarterly earnings, resulting in an increase in incentive and equity compensation expense of $4.8 million.
More moderate increase in Q2 earnings this year, resulting in a $3.9 million reduction in incentive and equity compensation expense as compared to the prior year period.
Other significant changes and yesterday for the second quarter fiscal 2019 included a $1.2 million decrease in depreciation expense.
And is your point 8 billion decrease in expense for stores that have closed or are closing net of new store expenses.
These decreases were offset by a $1.6 million increase in payroll expense.
And 1.4 million dollar increase in advertising expense.
The effective income tax rate for the second quarter fiscal 2019, with 24.5% compared to 21.6% for the same period last year.
For the full year of fiscal 2019.
We expect our tax rate to be approximately 21% compared to 24.3% last year.
The reduction in the annual tax rate. This year was a result of a $1.9 billion tax benefit related to vesting of equity based compensation and Q1 this year.
Net income for the second quarter was even with last year and $11.8 million or earnings per diluted share for Q2 increased four cents to 80 cents per diluted share.
Weighted average diluted shares outstanding for Q2, this year decreased 4.1%.
Now turning to our cash position and information affecting cash flow.
Depreciation expense was 4.1 billion in the second quarter depreciation expense is projected to be approximately $16 million for the full fiscal year.
Capital expenditures for fiscal 2019, including actual expenditures during the first half of the year are expected to be between 21 and $22 million.
With approximately 16 million to be used for new stores relocations, Remodels and the purchase of our corporate headquarters.
The remaining capital expenditures are expected to be incurred for various other store improvements normal asset replacement activities and continued investment in technology.
Similar to Q2 last year, we did not repurchase any of our common stock during the second quarter. This year. We continued to expect diluted weighted average shares outstanding for the fiscal year to be approximately 14.7 million shares. We currently have 36 million remaining under available under $50 million share repurchase authorization.
My final comment today will focus on adding a little color on our earnings expectations for the third quarter. This year.
At the high end of our annual earnings guidance, we expect Q3 comparable store sales to increase low single digits.
Our merchandise margin is expected to be flat to slightly up.
Buying distribution occupancy expense should leveraged moderately due to lower distribution costs.
And this DNA is expected to be flat to slightly up as a percentage of sales.
This concludes our financial review now I'd like to open up the call for questions.
If he would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again that is star one if youd like to ask a question and we'll pause for a brief moment to allow everyone an opportunity to signal for questions.
Hi.
And we'll take our first question from Mitch Kummetz with pivotal research. Please go ahead Sir.
Hi, guys. Thanks for taking my questions.
Cliff could you elaborate a little bit on the athletic business and sounds like for the quarter was maybe better early than late and add just a little counterintuitive to me just given your biggest athletic vendor was flowing a lot of.
New product late in the quarter and also you made some comments about you know there is a shift athletic to more casual.
Which again seems to kind of go against.
What I would think would be the benefit of that vendor flowing in that newer products. So just a little more color on athletic I think would be helpful. Thanks.
Yes, no no no problem Mitch.
You are right that the largest athletic vendor does flow in new product as we as we went through the quarter of that that most of that product came in towards the tail end of the quarter. So it doesn't have a major effect on the.
As a whole in the second quarter and I talk about the.
I think you know what I'm talking about when mentioned casual athletic has been.
A major.
The major contributor for the quarter, everyone knows what's going on with the skate.
Category right now.
And then and then we're here to go he will add to it so I will add this said.
As we moved into back to school.
We we saw increases.
Happened I mentioned this in my prepared remarks throughout all product candidate most major product categories.
And very happy with that so they are getting a lot of.
Given a lot of.
Sales from.
Women's canvas product womens.
Ms canvas product.
Skate and out of the regular what you would consider to be.
True athletic product.
Okay. That's helpful and then.
Kerry on the.
On the sales guys you've taken on the sales guide for the year.
No change in the comp outlook it looks like you're closing fewer stores. So is that is the reason the sales guide comes down because you're now not expecting a lot of volume from liquidating those stores that really.
The difference on the sales guys.
No the difference really came out at the first half.
When.
Now that we've actually gone through it and we can adjust to actual.
The annual guidance, we had at the beginning of the year against where we are mid year.
Which is why we adjusted the earnings or the sales down on that but we still feel confident in our earnings expectations. As we were able to make adjustments throughout the year to compensate for lower sales than we originally expected.
And then maybe lastly, cliff on on Payless.
Yes, I think I think that's the thinking going into the quarter with sort of net neutral for the quarter or maybe a little bit of a drag early but then a benefit late I was hoping you maybe speak to kind of what you saw in those stores that overlap with payables in the quarter.
Yes, we have not seen a lot of change in those stores from a an overall they come pretty close to what the company comp. Gen. Remember there are a lot of issues that were liquidated early in the quarter through.
Through at least through the first half of June and that that.
That took up a lot of these.
A lot of the open to buy customers open to buy so to speak and.
I think we'll see the benefit of Payless going away as we move through that.
Third quarter.
Okay, Alright, thanks, guys.
And our next question comes from Sam Poser.
Please go ahead Sir.
Good afternoon can you just tell us what you're what years.
Comps like what you were up again by month and.
Last year in the first in the second quarter, and then what you're up against by month, you mentioned, 7.5% in August .
Of 18 can you just tell us what September October look like.
Yes, Karen is getting that for you now Sam.
We had as you'll remember we had a strong second quarter last year.
Sam last year the.
The second quarter and it was started in may up in the low teens.
And then June was up high singles and then July was down low singles.
And then September October .
August September October .
August we've talked about is it was up 6.5% last year and then we then we saw both September and October being up low singles.
And then so so when you think about no payless and your overall product mix.
How.
How how do you view do you view Q3, being a better like a bigger number than Q4 as far as a comp increase.
Is that I mean is that how we should think about it or do you think they're looking you know fairly.
Lines as far as you know the comp increase given given the good start.
I think they look fairly aligned given the even given the good start.
As we move through.
Third quarter and fourth quarter.
And I assume based on the start that you have and no pay less that you would anticipate the back half of the comp and in Q3 and Q4 to be better than the comp in Q2.
Yes, there is correct. That's a fair I think thats a fair statement.
And then in you know.
Your sandal business was a little different than than than somebody else recently could you talk to us about what kind of things worked in sandals.
You know, what what type of product work and maybe didn't work.
And you're saying, okay, well, we had a.
No.
It wasn't surprising we mentioned that in the last call that we thought we were going to get a comp store growth out of sandals. So we weren't surprised by that but we did.
We did see continuing improvement and put that sandals as we moved through the quarter and wedges as we move through the quarter low wedges as we move through so I'm happy that let know were up low single so I can't tell you we blew the.
Blow the doors off but I was happy I'm very happy with the fact that sandals comped positive in this in the second quarter, but I mean that was probably the story of like mid single digits down at the beginning and then better than mid single digit that's exactly back Dan that's exactly what happened is that the we started the quarter down and we have faith that that that as we move through the quarter, we'll see increases and we did and by the way I just want to.
Reiterate that we saw those increases our margin for the quarter and sandals improved over last year.
Hello, and welcome to the fact that we were clearing through.
I know that you don't like talking about brands, but can I mean, one of the big brands and one of your biggest brands was Nike and you talked about you know there's been a lot of talk in the athletic space about the improvement of the Nike product for your channel.
Can you sort of.
Give us some idea of how that's shaping up and.
And how you see that.
You know how you see that overall sort of through the balance of the year, maybe even next year now that you've seen.
Product and then lastly, you haven't mentioned the tariffs at all.
Could you give us some view of sort of any impact of the tariffs that you built into your guidance or how you're thinking about all that thank you.
All right.
I'm going to live with my commitment not to talk about brands.
On the call so I'm going to skip that question.
I will tell you that as I said on the last call.
And I still believe that is that the product has gotten better as we've moved through the second half of the year and we expect that to continue to.
We all the product we've seen as we move through the rest of the year, we are happy with and that's the extent of which I'm going to talk about brands from a tariff standpoint.
We.
We don't Ics, we built whatever tariffs, we felt were going to hit us.
Into our guidance. However, we don't believe that were going to.
About 10% of the product that we're importing on our own will be affected by the non when tariffs. So very small portion as you know we only.
Still about 20% of our women's business and about.
About 30% less than that about 10% of our kids business, our our direct imports.
Kids has driven so strong by athletic so a very small percentage of our receipts for September are going to be affected the rest for the 12 15.
Tariffs, we have a range to have most of that product the vast majority of that product deliver prior to 12 15, So we don't see.
Any in the very very little impact to our margin for this year and tariffs Sam.
And what about what about the brands I mean, and how they're handling it and how you may be seeing pricing for next year I heard one of the largest variance.
One of the large accounts and not very supported that that they that we've already started to hear that there's some price increases going on in kids.
I can tell you that as of today, we have not seen any price increases and kids or in adults.
Thank you very much and continued success.
All right. Thank you.
And our next question comes from Kristen So with Wedbush. Please go ahead.
Oh, good afternoon gentlemen.
So I want to go.
To the revenue outlook carried could you just walk through that one more time, what is changed in your view to kind of walk back a little bit but revenue outlook is he there just I don't know just a little more color about why that change you saw relative to your plan that change that revenue outlook.
Well it was primarily just truing up our expectations to.
The first and second quarter actual results. If you remember in Q1, we talked about we had a difficult February andr in our comps were down high single digits.
We were expecting a little bit of a rebound and why we didnt true up or.
Our sales effect.
At that point in time, when we announced our Q1.
It appears that whatever happened in February .
Never rebounded honestly, if you remember we came back with a decent Easter.
Company on on a combined March April together was a.
Hi, low single digits, which was comparable to last year.
So that effect, we ended up train that up we also had a.
Little bit difficulty hearing his mother day area.
In may and that those two.
Factors were the primary factors are truing up what our original expectations in the first half were two what we now expect.
We really have not adjusted our second quarter outlook from what we originally expected for the year. This was just truing up to actual.
Okay.
Okay got it.
That's helpful and then just.
I want to go to your what's your guidance that you've given kind of that.
Preliminary walk through here for the third quarter.
Based on rough math and imply call late.
At the upper end of the range somewhere in the 12 to 14 cents for the fourth quarter, maybe just walk through some of your thought process is to sort of the acceleration or that material improvement in earnings for that period, just remind us what some of the puts or takes maybe closing fewer stores less liquidation sales just sort of thought process to kind of to kind of get to that number.
Well.
If you really look at it is going to be an increase in sales.
We are and you're really talking about the fourth quarter I think you're seeing right right.
Right a slight.
Decline in the gross profit margin.
And we will leverage your expenses fairly significantly because we won't have.
As larger.
<unk> expense for incentive and equity compensation similar what we saw in Q2, we are going to see a savings in our overall as DNA.
I would expect to see less SGN, a expense for the quarter and fourth quarter this year versus fourth quarter last year.
That would lead you to the increase on a year over year basis.
Got it okay, and I want to go back to.
I want to go back just a tough comp drivers for a moment.
I know you don't want to.
No you don't want to talk about brands. So let me ask it this way could you get sort of a sleep 0.5% comp in August .
Without your largest brand comping positive.
[laughter].
That is that's good that's good.
Terrific, Chris that is a terrific question, which I'm not going to see that.
[laughter] [laughter] [laughter].
Hey, Tom you, Andrew I'm sorry.
I must have not heard your question what was your.
I when I said I wasn't going to answer the question what did you ask.
Oh, you're not going to answer my question I, even if I ask it that way it if I answered that it really goes against my policy to talking about brands and.
Were up.
The story of the day as it were up 3.5% for the month of August and and and to me that all is driven by the fact that our merchants have done an incredible job of delivering great product to our stores are our stores have done a terrific job of selling that product and and I'm.
I, just don't want to get involved in and talking about individual brands and so.
I'd like to leave it at that.
Okay I tried.
I want to ask you about boots.
Since.
I guess, a couple of months ago versus today.
Any change in your thought process about the fashion the patients as it plays out into the back half of the year.
I, we actually feel pretty good about the business as it plays out in the second half and I believe we will see a strong.
Booty component early and.
I really don't want to talk too much about the way of the types of products I think we'll sell in the fourth quarter.
From a from a.
Just from a competitive environment standpoint, but.
We feel pretty good about boots.
Okay do you feel better than good call it three months ago.
No just three months ago I didn't see the entire selection since that time.
The buyers have walked both karl enough through that.
Program, we've taken on we know what the.
The advertising cadence is we know so yes, I feel better today about our food.
Opportunity than I did three months ago.
Hey, Lukas a more educated on it than I was three months ago.
Well, that's that's good to know that you're you're better educated on [laughter].
[laughter] last thing I'd add just on the buyback. So carried just give me or your thought process on how you. Initially had said you bought back what you thought you would add back in the first quarter.
For the for that period or there are some logic about that the planning of the buyback and you had done more than you thought or plan to earlier.
Well just thoughts why didn't buy back stock here was just the inventory commitments for back to school excedrin.
Just any color you can add about how we should think about for the balance of the year I know you throughout 14.7 million shares spot.
Just on any thoughts around would be helpful.
So we wanted to help you understand where we had so were maintaining our thought.
Where we're going to end the year with diluted average shares outstanding so that hasn't changed we didn't buy any shares in Q2 last year is it.
Either.
We really have two factors when do we feel that there is.
Value in our stock that we'd want to buy it back and secondly, we'd monitor when we always do it only through excess cash.
Q2, because we are building up our inventories at the end of Q2, we always had the highest typically always had the highest inventory levels of the year. So we're building our for inventories throughout the quarter, which is it takes a lot of capital commitment typically that the lowest.
Free cash.
Available during the quarter so so.
Those are the factors that we play into what we decide to do buyback or not.
Okay. So on the balance of the year the outlook, you're just assuming no additional share repurchase is though should the opportunity present itself you would obviously be more aggressive and banks.
That's fair no. We actually just we get we get very cash flow rich at back to school because August is such a large quarter, we liquidate those inventories and we don't have as large a large inventory build throughout the rest of the year. So we have factored in purchases in our guidance.
Through in the second half.
Okay. Okay. So I see is less of an issue of free cash flow being an issue that would restrict what quarter we buyback.
But it'd be dependent on the price and if it if it represented a value.
Okay.
Okay. That's all I have thank you very much.
Thank you.
And as a reminder, if you would like to ask a question that is star one on your telephone keypad well take our next question from Greg Pendy with Sidoti.
Please go ahead Sir.
Hi, guys. Thanks for taking my question I, just wanted to dig into the trimmed store closure count and if you can kind of give us any color on maybe what what was behind that was that lease operating more attractive lease opportunities. He said earlier you completed your CRM project kind of any insights there was it just kind of reduced competition, just any color on what kind of.
Brought that down a bit.
Well, where we always work with our landlords and we look at the current the most recent trends with the store and if a store is improving and we can get some.
Relief on the cost structure, we can exit we can extend stores.
Two into future periods and that's what that's basically what we did we were able to find.
Have a store to meet metrics that would.
Meet our criteria for keeping it and maybe extending a year or two while while it continues to see if we can continue that positive sales trend we saw prior to the extension.
Okay. That's helpful. And then just on that subject just one final one are you still planning to pivot to net store growth in the following year.
Yes, we are it's going to be.
A very moderate next door growth based on our outlook.
Now that outlook could change as weve with the economy right now the big talk in.
All the financial press as a recession, if we say recessionary environment, where we saw the consumer pull back we would we would adjust our thought processes going forward on that.
In fact my slowdown.
At the mast sourcing might open and it may require us to increase the number of stores we closed.
So it's hard to predict at this point in time, but.
We are.
In line with what we said previously in previous quarters that we see small net store growth.
Got it that's helpful. Thanks, a lot.
Thank you.
And we will take a follow up question from Sam Poser with Susquehanna. Please go ahead.
Hi, guys I just wanted to follow up on Chris' question, Let me rephrase. It can you hit a three and a half comp in the quarter without athletic being up.
As a whole because the biggest chunk of business.
Okay.
It's over 50% of question.
So can you do that can 50, 54% of your business be down.
And you still be Comping, a three and a half is that reasonable given the trends.
That.
It's reasonable to assume that we have the athletic or coming down.
We would have tough time, hitting a three and a half.
And since this unknown vendor is the largest part of athletic it would be unlikely that that business is down to get you to the three and a half comp if we follow the logic.
And my follow up you need to.
You made a comment and then let it.
You need to have positive comps in athletic supposed to 3.5% Uh huh.
Okay. Thank you and then and then Kerry you just due to the store question. If you if there if if this chatter about a recession is true wouldn't that also lower the <unk>.
Theoretically lower the rents and lower the leases and give you sort of a big opportunity to step in an open stores for when the dust settles and too.
Renegotiate leases to better rates that could keep more stores open now that you're doing all this now with the CRM and all this other stuff rolling out that should make your business more efficient sort of in the.
Larger picture.
Well, Sam that's a very logical.
Way of looking at it what we've seen in the past is that didn't actually happen that way.
Prior to the last recession, we had that same thought process that we would we would be a lot of opportunity per store growth because there would be more boxes available their brands would be much more cost effective what in practice. We saw is that the landlords had so many retailers coming back to them asking for rent relief that it really hard and that the negotiation and that it unless you had a lease event, where you could actually say I'm going to.
Kick out of this lease or I'm not going to renew it they wouldn't even talk to so they were having to prioritize who they talk to so we're going in where we won't go into any type of.
You know tough retail environment or economic environment with that thought process again, if it turns out to be different this time, we could reevaluate but.
Based on past history, those opportunities aren't available.
And what percent of your store base is on leasing would be on lease expiration and kick outs next year.
You know up until recently, we have been a fairly ratable grower.
On a year over year basis, so, 10% or greater for our leases would come up each year.
And Sam I think you can tell by the fact that the each year. The past two years, we've lowered the expectation of the number of stores.
That we were going to exit and that is due to several reasons one is to increasing sales and that the stores begin to perform too.
We were able to get better deals through the landlord and thus the stores became more profitable for us. So we continue we work on that.
Almost every day so it.
And that's the reason why the.
The expectation of the store closures have continually going down.
I understand I mean, I guess the question is though that we've.
You've got no more pay less which is a whole ton stores, then and you have your CRM and your communication, which which apparently is improving and making more gold.
Gold customers and so on and you know your net opening next year as I mean, it's not going to be very much. So why you don't give sort of the offset of pay less and the internal improvements why would.
I mean, I don't even I mean, why would you go from you know small net openings to net closings.
In a situation like that when you take into account.
Those other factors or is this just.
You're being prudent in the way you're asking the question just in case, you got to net closings next year.
Well theres, a significant amount of time for us to evaluate that.
From what you're saying about the CR coming online getting the usage of it understanding how much of a benefit that's going to be how immediate that's going to be.
We typically don't.
Said the out year goals at this stage.
Beyond what we have visibility on and right now thats, what we have visibility on there may be greater opportunity and we could capitalize on but at this point in time, we don't see that.
One thing we should say audio was that.
We're not going to be going into it.
Any new markets, which will so for the next several years or more we have opportunities to backfill the markets, we have to make them more productive where we already have brand awareness or where we can continue to build additional brand awareness. So that would be the prudent way for us to grow and by that by itself will limit opportunities.
Do you have any leases signed for next year, yet or is that all work in progress.
For these new locations.
We have several that if they're not signed their near.
They are they're near so I couldn't say for sure.
And I assume that that's more stores whatever our near as more stores than you are planning to open this year.
Based on what Youve gone based on your current number that is that right.
Yeah, our our belief we only believe opened one store this year.
Thank you guys again appreciate it.
Thank you Sam.
[noise].
And it appears that is all the time, we have for question and answers for today Mr. Sifford I would like to turn the conference back to you for any additional or closing remarks.
Thank you.
And thank you for joining us today, and we hope you have a very enjoyable labor day weekend, and we look forward to talking to you about our third quarter results in November .
And this does conclude today's call. Thank you so much for your participation you may now disconnect.