Fourth quarter 2011 vs Fourth quarter 2010
Kimberly Greenberger – Morgan Stanley: Can you remind us how fourth quarter last year played out? Are you up against more difficult comparisons of the quarter here in November? We want to put the quarter-to-date trends into perspective.
And on the inventory side, I was impressed that you were able to go in and cancel some of your fourth quarter deliveries as the third quarter progressed. Can you step back and remind us, what kind of flexibility do you have in your supply chain and what is your ability, how many weeks out to cancel orders if the business doesn’t come through as you expect?
David F. Dyer – President and CEO responded: Our supply chain when we are creating our own goods, start with design and trend about a year out. As we get into it, we certainly are committing at least six months out, but within that commitment there is some flexibility as we would have piece goods in production that perhaps we can pull the trigger on as we get closer in.
Pretty much by the time you get 90-days out, you’re committed. We had to go back and look at our inventories going forward in a period where they hadn’t entered production, and that we reacted to.
Now that caused a little – obviously more inventory than we wanted in the third quarter. We’re based on what I saw for the spring season and what I saw with the momentum in the second quarter.
Would I do it again? The answer is yes and I probably would have taken the same educated risk again because it’s certainly look like that that’s the way our business was playing out, but the fact that we took it. It didn’t happen.
We reacted, we corrected. That’s what I feel very, very proud about our Chico’s brand and the teams that they reacted to this. They reacted not only to inventory, they reacted to expenses, they reacted to selling cost, totally they were able to revise our plans and I think get things much more in level. Bob, you have the quarters from the last year. You want to comment?
Robert C. Atkinson – VP, IR responded: For Chico’s FAS, including direct-to-consumer, November was the best month for fourth quarter 2010. I am sure in part helped by the Chico’s incremental TV campaign prior to Thanksgiving.
December got tougher, weather I am sure played a role there. January got a little better for the company, but again weather certainly played a role in terms of the early spring assortment.
Stacy Pak – Barclays Capital asked: Is there a particular area of weakness in Chico’s sales or was it sort of across-the-board? Where is the inventory risk at Chico’s? I’m a little bit surprised to hear you had planned the second half like the first half given the macro, and so Dave fundamentally, can you talk about how you will approach inventories going forward? Do you buy up to the comps? How do you sort of reduce that kind of risk? Then I didn’t hear a whole lot on Q4 marketing plans which I would love to hear about.
David F. Dyer – President and CEO responded: You may be surprised–but I certainly wasn’t–with the momentum that we had in our business, and understanding that we had been quite successful in taking market share.
I think we approached the fall season as I said internally, we were going to have one foot on the accelerator and one foot on the brake; the accelerator was inventory and the brake is when we didn’t see the momentum as we started cutting back.
You have to be aggressive to opportunity, and I felt that we had an opportunity and I took it.
We’ll move forward and hopefully it will increase market share. We can use the inventory to drive sales and I think the Missy sector has been a little tough. Certainly that’s where the Chico’s brand plays.
When you get into White House, it’s a little different story, a younger customer . Certainly those sales have been very, very robust. Inventory management, inventory is something that we spend a lot of time on. The whole inventory function reports into finance.