Saks Earnings Call Insights: Ready-to-Wear, Targeted Marketing
Michelle Clark – Morgan Stanley: Can you guys discuss the sales slowdown in women’s ready to wear in a little bit more detail? It specifically – you had mentioned that it had slowed in the back half of last year, how much of a further slowdown do we see? Ron, you had mentioned that it was largely a fashion issue. How do we know that it’s a fashion issue and not attributable to weakening of the higher end consumer?
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Ronald L. Frasch – President and Chief Merchandising Officer: We clearly see it as a fashion issue principally because where we have very fashionable trending product in designer is actually performing well. With where the business has slowed down is as I have stated on more classic, perhaps more single use of products and that’s been the tough area throughout women’s apparel. But where there is fashion and where there is emotion and where there is color and print, our business actually has been quite good. We just don’t have enough of it.
Stephen I. Sadove – Chairman and CEO: Yes. I think what you are seeing is an evolution and the shifting of the buys. You are going to continue to see that going into the fall season. Clearly we’ve been impacted, several of these classic brands are big brands so that we have to be careful as we evolve the mix of product and there’s only so fast you are going to be able to move some of that. But I don’t think it’s been a fundamental slowdown at all in the higher end consumer. I think that we feel healthy about the trends, the growth is solid. I mean if I look at the comp trends they are a certainly slower than they were in 2011 when we were looking at 10% growth in the first quarter of, we were looking at going from the 10% growth annually in 2011 into the 5% range. So while still very healthy I think you’re off of a bigger comp in your little bit slower growth, but it’s relatively consistent with what we’ve been seeing overall I think it’s still a very healthy luxury consumer.
Michelle Clark – Morgan Stanley: My second question is on full price selling, that helped drive the gross margin increase in the quarter. Can you tell us what is full price selling today as a percent of sales. How does that compare historically are we at peak, and then how much higher do you think that can go?
Stephen I. Sadove – Chairman and CEO: I think there’s still substantial opportunity for improved full price selling especially as we deal with the assortments in terms of continuing to improve the assortments. We don’t break out specific numbers on full price selling, but I would tell you that they are at a very healthy good level and at the highest levels that we’ve been seeing.
Michelle Clark – Morgan Stanley: Then my last question on Project Evolution what do you see there as the bigger opportunity. Is it sales or margins and then how much improvement do you see in each of those over monthly year period.
Stephen I. Sadove – Chairman and CEO: I think it’s a combination of both. As we get one more and more into this and it’s fixing the foundational systems of this company. It’s getting the we call the merchant tools it’s having order management system that’s more robust all of these are going to help both, the efficiency and effectiveness of the inventory. Right now we don’t have the ability to move inventory around across the channels, we’re not shipping from stores today there was article in the Wall Street Journal on, the Macy’s will be up to 292 or whatever stores by the end of the year shipping from the stores we’ll have that capability sometime probably next year. But we don’t have it today I think that it’s going to be better uses of inventories is going to allow us to have better full-price selling and so that’s going to be a margin impact. I think that as we have more of what the customer wants at full-price, that’s going to be a revenue impact as well. So I think it’s both and we think there’s quite a bit of room to run on both of them.
Paul Swinand – Morningstar: I guess when I’m looking at the gross margin and obviously some improvement in the first quarter with some puts and takes in the second quarter, and I think about the 8% operating margin and then even the potential of getting towards double digits, where is the additional opportunity over the longer term? Is it more just to continue the full-price selling or do you actually have that more of a mix shift to more high-margin categories?
Stephen I. Sadove – Chairman and CEO: No. I think it’s going to be a combination of continued top line growth and we think that you are going to be able to have outsized growth on a continuous basis. It’s going to be continued gross margin rate improvement and that’s going to be through targeted marketing. I think this whole notion of use of technology in terms of the inventory sharing, omni-channel retailing, the consumer analytics and insights is going to be allowing us to be much more targeted in our promotions and that’s going to, we believe, lead towards higher gross margin. The hold and flow that Ron mentioned is going to lead towards higher gross margin opportunity as we have more in the way of differentiated product and areas like own brand offer the opportunity for higher gross margin and added in assortments the brand matrix offers opportunities, so all of these are going to drive gross margin. We believe that over time, costs are going to increase at a lower rate than sales, so you have the opportunity to leverage the SG&A base and the combination of those three we believe will take us to that 8% operating margin.
Paul Swinand – Morningstar: Just to be clear on the technology side, if you had to balance it, is it more the analytics, targeting people with high margin product or is it just – is it more on balance not taking the mark downs because you had the wrong product?
Stephen I. Sadove – Chairman and CEO: It’s more of the latter, it’s not – from a markup perspective our categories, the margin structure, good, better, best, let’s say is not that different. It’s really more about getting the right product to the right individual and then doing a much better job of full price selling.