Operator: Thank you for joining us for the Aeropostale Conference Call to review the First Quarter 2012 Financial Results. At this time, all parties are in a listen-only mode. Following the management presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference call is being recorded.
I would now like to introduce, Ken Ohashi, the Company's Vice President of Investor and Media Relations. Thank you, Sir. You may begin.
Kenneth Ohashi - VP, Investor and Media Relations: Thank you all for joining us this afternoon. With me here today are Tom Johnson, our Chief Executive Officer; Michael Cunningham, our President, and Marc Miller, our Chief Financial Officer. We issued a press release earlier this afternoon announcing our first quarter fiscal 2012 results. A copy of the release can be found on our corporate website.
Before we begin, I would like to remind you that during this earnings conference call, certain statements and responses to questions may contain forward-looking information, such as forecast of future performance. Forward-looking information and statements involve known and unknown risks and uncertainties which may cause our actual results to differ materially from our forecasted results. Those risks are described in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, all of which have been filed with the SEC and are available on our website. We undertake no obligation to update or revise any forward-looking statements reflect subsequent events or circumstances. Listeners of this call are referred to those SEC filings.
Before I turn the call over to Tom, I would like to ask everyone to limit themselves to one question during our Q&A session to allow everyone a chance to speak. Once we've gone through a round of questions, we'll go back and you may queue up again at that time.
I would now like to turn the call over to Tom.
Thomas P. Johnson - CEO: Thank you, Ken. Good afternoon, everyone, and thank you for joining us today. I'd like to take you through some of our highlights from the first quarter and turn the call over to Marc who will take us through the financials.
During the first quarter, we experienced a significant improvement in trend over the holiday selling season and made progress on our key initiatives we outlined on our last conference call. These key initiatives included integrating fresh and new fashion into our assortment, projecting a stronger lifestyle message and developing our future growth drivers. For the quarter, our comparable sales including e-commerce improved 2%.
Additionally, our average unit retail and sales per transaction were both positive for the quarter. We achieved net earnings of $0.13 per share, ahead of our initial guidance of $0.08 to $0.10 per share and in line with our most recent guidance of $0.12 to $0.13 per share.
From a product perspective, I continued to be proud of our team's accomplishments. They did an outstanding job of translating current fashion trends with the D&A of the Aeropostale brand.
Our girl customer responded positively to strong statements in color as well as new silhouettes and fabrics. We also experienced success in trending categories such as skirts, dresses, wovens and accessories.
Our guy customer responded positively to our broaden men's assortment as well as newness in details and graphics. To augment our merchandising efforts, our visual, marketing and store teams did an exceptional job of communicating and projecting our fashion message to the customer.
We created excitement in our stores by highlighting trend-right looks with a focus on head to toe outfitting. We balanced the strong presentation in our volume-driving classifications. As we discussed on our last call, we will continue to find new and innovative ways to connect with our consumer.
We are very excited to announce that we surpassed the 7 million fan mark on Facebook last week. This milestone achievement represents one of the largest fan bases in all of retail on Facebook. During the quarter we also completed our Teens for Jeans campaign with our partner DoSomething.org. With the help of over 12,000 schools, 125,000 teens and celebrity icons in just one month we collected over 1 million pairs of jeans for those in need.
Regarding our future growth drivers, we continue to experience strong momentum in our e-commerce business with a 32% increase in sales versus last year. PS also continued its momentum. The team has been successful, broadening our assortments by adding fashion, additional sizes and licensed product.
In addition to refining the real estate strategy and creating exciting marketing campaigns. On an international front, we opened our first store in Turkey this month and we're pleased with the launch of the Aeropostale brand in this new market. This marks our 17th international store across the Middle East, Singapore and now Turkey.
We are also excited to announce that we have signed a deal to open 10 to 15 stores in the Philippines over the next five years with the first store slated to open in early 2013. While I'm pleased with the potential progress we are making in the business. We are early in the cycle of executing our key initiatives. Moving forward, we will continue to refine our fashion offering and deliver the right depth and breadth of fashion in our assortment.
I'm very confident in the team's ability to deliver on our strategic initiatives over the remainder of the year. I would now like to turn the call over to Mark, who will take us through the financials.
Marc D. Miller - CFO: Thank you, Tom. Total net sales for the quarter were up 6% versus last year, reflecting an average square footage increase of 5% and a 2% comp includes our e-commerce channel.
Including our e-commerce channel, our guys business was up 5% for the quarter, while girls was flat. Our comps for the quarter were driven by a 3% increase in units per transaction, a 1% increase in average unit retail, and partially offset by a 1% decline in transactions. During the quarter, we opened three Aeropostale and 10 P.S. from Aeropostale stores and closed three Aero stores and in the quarter with 986 Aero and 81 P.S. stores.
Gross margins for the quarter were 28.0% versus 29.1% last year. The 110 basis point decrease was driven primarily by 160 basis points of lower merchandise margins, mostly due to product cost increases. This is partially offset by the leveraging of depreciation and buying costs.
SG&A for the quarter was 24.6% of sales which was 23.2% last year. The 140 basis point increase was driven primarily by deleverage from corporate expenses as well as deleverage from e-comm transaction related expenses due to growth in that business and deleverage from marketing expenses due to planned brand investments that we discussed last quarter.
Our tax rate for the quarter was 36.0% versus 40.5% last year and is expected to normalize to approximately 39.5% for the remainder of the year. This resulted in net income of $10.6 million, or $0.13 per diluted share.
Cash and cash equivalents at the close of the quarter were $203 million versus $139 million last year. We currently have approximately $145 million of buyback availability remaining under our share repurchase program. Program to-date, we've returned over $1 billion to shareholders in the form of 57 million shares repurchased.
Inventory at the end of the quarter was $175 million, up 23% in total or 16% on a retail per square foot basis, which reflects accelerated receipts due to a shift in the timing of summer floor-sets. As of May 12, 2012, inventory levels versus last year decreased 2% on a retail per square foot basis. Our capital expenditures for the quarter were $18 million and depreciation and amortization was $15 million.
I will now discuss our guidance outlook. While we continue to make progress against our strategic initiatives, uncertainty remain surrounding macroeconomic conditions in the overall promotional environment, particularly as we enter the key back-to-school selling season. Accordingly, we are providing second quarter guidance in the range of $0.03 to $0.05 per share. This guidance assumes a shares count of 82.4 million and an effective tax rate of approximately 39.5%.
Now I will turn the call over to Tom for closing remarks.
Thomas P. Johnson - CEO: Thank you, Marc. We're making progress against our key initiatives everyday and we have a solid foundation to improve our performance, including a highly respected and recognized brand in nimble and flexible operating model, a strong financial infrastructure and we have an inclusive and spirited culture spanning the entire organization.
I want to thank the entire Aeropostale team for their continued passion for the business and their drive and commitment for success.
Operator, we are now ready to take some questions.
Operator: Betty Chen, Wedbush Morgan Securities.
Betty Chen - Wedbush Morgan Securities: Congratulations on a great quarter. I was wondering if you can speak to the inventory position. In the first quarter we had seen some stock outs of select key items that may have constrained comps and maybe further accelerated some of the progress in the quarter. Now, that we're coming out with a slightly healthier position and I know some of it's for earlier timing of receipt, how should we think about the ability to better support sales and margins in the second quarter? Also, what should we expect in terms of Q2 and inventory and your philosophy in terms of second half inventory buys as well?
Thomas P. Johnson - CEO: Sure, Betty. Hi, it's Tom. I'll take the first part, which is really inventory position upfront and stock outs. We definitely saw nice reaction to the fashion that we integrated. We're early in the phase of, as you guys know, integrating the fashion into our mix and the buys were a little bit tighter in some cases, as you know fashion, your buy tight and then we chase. So we've been fortune and excited about chasing some of those fashion as we're bringing them back in for summer and we're actually back into position in some cases and where we oversold, we definitely left a little bit of sales on the table. But as we move into the fall into holiday season, we definitely up those buys for us.
Michael J. Cunningham - President: Yeah, Betty, this is Mike. With regards to inventory (within) Q2, we don't give specific guidance. But that being said we don't anticipate any significant shifts like we had at end of Q1 for the floor-set. But as Tom mentioned, we continue to plan our initial buys conservative than we've gone back in a re-audit for those items that are tracking well with the customer. So that's basically where we are at with inventory.
Operator: Adrienne Tennant, Janney Montgomery Scott.
Adrienne Tennant - Janney Montgomery Scott: My question is on averaging the cost, if you can just help us – I think you had said mid single-digits in the first quarter. Should we assume that that's sort of – and then I think you had also said negative mid-single in the third quarter. Should we assume the second quarter flattish? Then you're probably through some of your buys for holiday fourth quarter, if you can help us out there. Then I know you don't talk too much the forward inventory, but I really am just trying to get a feel for unit inventory for the fall season, even directionally if you can just tell us if you expect your units to be flat, up or slightly down and what percentage of the inventory can you chase within season?
Thomas P. Johnson - CEO: Multiple-pronged question. We'll attempt to answer them all. With regards to our closing, for the first quarter our average in the close were up in the low single-digit range. Now it's on top of a mid single-digit increase in our first quarter 2011. As we progress through the year, the closing declines and provides us with a tailwind and it ranges from low single-digits through mid single-digits between quarters two, three and quarter four we're firming up, that's probably a little bit better than Q3. With regards to inventory units, again, we said we tend to buying tight, we'll see how fashion, how the others products are tracking and then we'll go back in and re-order it. It really depends upon what the item is, what our timeframe is and where we are during the season. So there is no set formula we can stratify at this point.
Operator: Janet Kloppenburg, JJK Research.
Janet Kloppenburg - JJK Research: Couple of questions on the (indiscernible) from the second quarter last year when your gross margin was down 1,500 basis points and given what Michael just said about AUC, maybe you could help us understand that a little bit better. Also Michael, in the first quarter SG&A was up roughly 12%. Should we be planning that rate of increase every quarter higher, lower and what will be the leverage point on that SG&A, the comp (levels) which point on that SG&A rate going forward?
Marc D. Miller - CFO: Janet, it's Marc. I'll take those. Starting with Q2 gross margin recovery, as Michael said, our cost will be down low single-digits, and last year we were anniversarying a very high level of liquidation as we were moving through some carryover inventory. So clearly we see and the guidance contemplates gross margin expansion for the quarter based on those two factors alone. From an SG&A standpoint, the Q1 deleverage of 140 basis points which was tied to a number of planned investments in marketing, in systems, in people as well as return to normalized incentive comp is something that we expect to continue throughout the year. In fact, in Q2 we expect actually to have higher deleverage than we achieved in Q1, and part of that's tied to the fact that last year Q2 we're anniversary some costs accrual reversals. So expect the rate to peak SG&A deleverage the peak in Q2 and then for the remainder of the year to be somewhat in line with what we experienced in Q1 and in terms of comps necessary to leverage SG&A obviously, that varies by quarter. We don't give any specifics there, but we do contemplate this as a year of SG&A deleverage.
Operator: Jeff Klinefelter, Piper Jeffrey.
Jeff Klinefelter - Piper Jeffrey: I just wanted to follow-up a little bit on some of the product trends, Tom and really on sort of basics fashion, some of the pricing trends that you're seeing or that you're maybe responding to, reacting to and planning to into the second quarter. How you think about your second half business opportunities between the basics, and some of the fashion, given what's going on with color? Just kind of following up on some of those prior comments.
Thomas P. Johnson - CEO: Sue. As you know – I mean as we said in the initial comments, the reaction to the fashion was very strong and the right balance for us is really iterative, and as we move through the process and understand the ferocious appetite for our teen customer with fashion, we will change that through the course of the year. One on demand and how she buys and part of it will be focused circling back-to-school with potential little bit more basic-driven, because it's more of a need base period. Then during holiday, it's kind of bifurcated for us. The front part of the holiday season is generally little bit more basic-driven and the second part holiday is much more individual-driven so there would be more fashion. But one thing for sure that we will be experiencing increased fashion as we go through the balance of the year.
Operator: Brian Tunick, JPMorgan.
Brian Tunick - JPMorgan: I guess sort of following up on that, but I was trying to get it maybe sort of your commentary on the basic side of the business, putting the fashion side for a second. Just sort of understanding, I mean what do you guys – or have seen on the AURs on the basics business, and how do you think you compete better, if Hollister is able to hold price? I mean what do you think happens on the basic side of business as we move through the year, and what are you doing differently about them?
Thomas P. Johnson - CEO: Sure, Brian. As we increase the fashion, we know that we'll have to make some adjustments on the overall buy. The basics is still going to be the cornerstone of our business. Our core product offering has obviously been very strong for us. There is more competition in that space. We will continue to tweak the buy and make some adjustments in the core products, obviously protecting the core and at the same time being able to flex the core to fashion ratio to be more appropriate than we were in the spring.
Operator: Lorraine Hutchinson, Bank of America Merrill Lynch.
Lorraine Hutchinson - Bank of America Merrill Lynch: As you move into the back half and you start to anniversary some of the product cost increases, what are your thoughts around pricing and how should we expect AUR to trend in 3Q and 4Q?
Michael J. Cunningham - President: We're really not targeting the pricing to the averaging of costs. So, we're targeting the pricing with regards to the rate demand that we're seeing, we're planning for and we believe we have some opportunities compared to the decreases in AUR that we saw last year. So if you can do the math, obviously that would give some gross margin potential for us in the back half of the year.
Operator: Edward Yruma, KeyBanc Capital Markets.
Edward Yruma - KeyBanc Capital Markets: I know you guys mentioned you have $140 million left on your share repurchase authorization and you purchased a lot of shares back in 2010 and pulled back in '11. How should we think about minimum cash balances and your (open and) significant share buybacks this year?
Marc D. Miller - CFO: It's Marc. The share buybacks as you pointed out, we were conservative in 2011 and we've been conservative so far year-to-date on share buybacks. As we look to build to – a target of about 10% of sales is the cash cushion that we think we need to operate through the various working capital cycles. So, as we get back to that cash position, particularly towards the back half of the year, we will look opportunistically to buy back stock as we will continue the policy that we've always had which is to return the excess cash to shareholders in the form of stock buybacks and you can start to look for that in the back half of the year.
Operator: Anna Andreeva, FBR Capital Markets & Co.
Anna Andreeva - FBR Capital Markets & Co.: I wanted to follow-up just on the fashion penetration versus basics and just kind of thinking about the real estate portfolio. Just how do you think about how fashion is doing and how you're allocating to fashion across some of your better stores, across A malls and maybe contrast how fashion is doing at some of the lower tier stores and again, how are you allocating at lower tier stores versus some of the better malls?
Thomas P. Johnson - CEO: Sure, as we read and react to product in terms of re-order, we read and react to the stores as well. Interestingly, the delta in our comps between A, B, and C is a fairly tight range, so we know that the fashion and core are resonating in all different store types. As you continue to learn more about how fashion checks, we just adjusted as the dynamic system, so adjusted just up and down, but we have distorted some fashion and some key doors across the country and we've been very pleased with the overall result. So we'll continue to test that and see how high we can bring that product in the better doors.
Operator: Randy Konik, Jefferies & Company.
Randy Konik - Jefferies & Company: Can you just talk about what's (get to like) the cash flow generation of the business, and think about if you assume – well, first one I just, if you think about where, where should we be thinking about long-term structural operating margins for the company? Obviously they peaked at 17, they have troughed at 5. Should we be thinking of 10, 12, 9, can we get a little sense there? Marc, can you really – can we talk about where you think minimal free cash flow generation is for the business right now?
Marc D. Miller - CFO: Yeah, Randy, on the long-term structural margins, I mean it's certainly premature to put a number out there, so what we can recover to. This is a gross margin expansion story and our ability to get back to closer to historic levels will be based on our ability to expand gross margins. We think we have that opportunity, one step of that will certainly be just to lower our product costs versus LY. The second stage relates to kind of as we inject more fashion into the assortment being able to determine and identify the right breadth and depth of that fashion and what the margin architecture is for that fashion merchandise. From a free cash flow perspective, again, we don't give full year forward guidance. We do see this as an opportunity this year to increase our free cash flows over LY but we can't be more specific about that at this time.
Operator: Evren Kopelman, Wells Fargo Securities.
Evren Kopelman - Wells Fargo Securities: Congratulations on the improvement. I had a question on the e-commerce growth. It accelerated significantly this quarter. If you can talk about maybe what drove that and should we expect that pace to continue for the rest of the year.
Marc D. Miller - CFO: Sure. Evren, it's Marc. I'll take that. The growth that we achieved in Q1 we're pleased with. E-comm benefited from very strong traffic trends as some of the investments that we've made in various marketing traffic drivers paid off. There was another factor that did play into our Q1 sales growth, which was the liquidation of some of the heavier e-comm inventory levels that we had coming out of Q4. Q4 as we mentioned on the last call, we were disappointed with growth in that channel for that quarter. Overall, we do see positive trends continuing to be e-commerce channel as some of the investments we've been making pay off, but we do expect it to moderate somewhat from what you saw in Q1.
Operator: Jaime Katz, Morningstar.
Jaime Katz - Morningstar: Can you guys talk a little bit about marketing and research that you guys are doing either in the stores or on the e-commerce channel to reach a broader audience?
Thomas P. Johnson - CEO: Sure, Jaime, it's Tom. We have always felt very good about our internal marketing and as we move into the back half of this year, as you saw with a little incremental spend, we're excited about some of the things that we're doing externally. I'm not going to get into specifics for competitive reasons, but we know that we need to – we've always been very strong at communicating promotion and we know that we need to project more of a lifestyle, more branded and more branding image. So the bottom line for us is that we want to put more emotion in our promotions. So we're very excited about some things that are coming forward into the fall and going at the holiday.
Marc D. Miller - CFO: Then from an e-commerce perspective, I mean there is a lot we're doing to reach out to our customer base. One of the biggest initiatives which Tom mentioned earlier goes to our Facebook and our presence on Facebook. We've achieved over 7 million fans to that site and we see it as a primary opportunity to engage with our fan base and we've been doing all kind of innovative things with respect to getting product reads from our consumers, from the perspective of different polls and just getting a better feel for that demographic and their interests and incorporating on to all aspects of our marketing. We've also been investing, as I mentioned earlier, in marking channels to drive growth and some of those including page search and affiliates have really been paying off so far this year.
Operator: Dana Telsey, Telsey Advisory Group.
Dana Telsey - Telsey Advisory Group: Can you talk a little bit about as you evolve fashion penetration to a higher percentage, how do you see the mix of promotions and margin evolving with the new focus of the business?
Thomas P. Johnson - CEO: Sure, Dana. It all depends on demand and what we have experienced in – albeit a short amount of time, specifically in Q1 with our more fashion initiative that we've experienced higher AURs in the fashion. So against some of the core business and we've had some pressure on core. So we know that demand and how it changes through the course of the back half of the year will be a process, an iterative process for us. But we're very pleased with the AUR structure that the fashion is bringing to us so far.
Operator: Marni Shapiro, The Retail Tracker.
Marni Shapiro - The Retail Tracker: Congratulations. The stores look fantastic. First, one housekeeping question; if you could just talk a little bit about bonus accrual in the back half of the year versus last year? Then anything you can give us on the marketing side on P.S.? I'm just curious, as we go to back-to-school, it feels like the brand is on a roll and there would be a peak period for that brand especially.
Marc D. Miller - CFO: Sure, Marni, I'll take the first part on bonus accruals and last year with the performance that we delivered is basically accruals were relatively zero is a little bit in Q4, but so basically, anything this year where it's normalized plan levels will represent a step up in overall bonuses. It will most dramatic, as I mentioned earlier in Q2, just due to the reversal last year but you're going to see that consistently through Q3 and Q4 assuming we had plan.
Thomas P. Johnson - CEO: Marni, it's Tom. We've tried a few things in marketing externally with P.S. We've been pleased with the overall reaction and response, and we'll do some more of that in the fall for back-to-school. You're right, we feel really great about the positioning of the brand and really the way the fashion is resonating for our young customer. So thanks for noticing.
Operator: Dorothy Lakner, Caris & Company.
Dorothy Lakner - Caris & Company: Just wondering a couple of questions here. One, how high or where do you want to push the fashion to? Is that something you know at this point? Are you just kind of feeling your way? I mean, relative to where you were last time you were in a big fashion cycle, was that too high? So how are you feeling about that now? Secondly, could you just give us an update on systems initiatives? Then lastly, kind of a housekeeping question, how are you thinking or how should we think about the 53rd week this year?
Thomas P. Johnson - CEO: I'll take the first one, Dorothy, how high. It's early in the cycle for us and definitely it's the fashion cycle out there for everybody, color was explosive during the course of the first quarter and we're sure that that's going to continue. It'd be very pervasive to the balance of this year. So it's very exciting for apparel retail. We think it's a great time, obviously, for us in our fashion initiative, but it's a read and react, and as we – as I said earlier, it's very iterative. We always want to be based in core product because we know that that mitigates risk and at the same time we definitely understand that our teen customer has been looking for more fashion for us and we've given it to her. So we're very excited about the prospects for the future. As far as systems as concerned…
Michael J. Cunningham - President: Sure. This is Mike. We have a number of technology initiatives that we are both piloting and rolling out this year and I think we talked probably about most of them. They are also included in the CapEx investments that Marc had talked to you, but some of the things we are doing, we're rolling out traffic counters. Throughout the entire chain they will be complete by the middle of summer time. We found that that really helps us, really focus on conversion and gives tool to our district manages, store managers to drive customer convergence. So we are excited about that. We are excited about some pilots we are doing. We are piloting some mobile POS, starting off with the gift cards. So doing a few source with that in June to see how that works out. We are actually starting to rollout wireless within the stores to be used primarily for operational reasons, doing some price pickups, receipts and transfers, so that will help with operational efficiencies as we roll that out. We talked about our PLM, the Product Lifecycle Management, which we're piloting in summertime and we hope that goes well and if so we expect to rollout that chain in 2013 and we're also piloting as well – so we're planning again in the summer timeframe and again as the pilot goes well, we would roll that out to the chain in 2013. (Further additional) when we talked about was the second phase of our workforce management system, which we are very excited about our goals to rollout to the chain later this year. That really does two things for us. It provides a forecasting tool for our sales trends going forward for the stores and then on top of that it's something it's called a business demand tool, which basically allows the stores to marry up their sales forecast with a scheduling tool to align it with when the traffic comes in to really optimize that scheduling. That should give us some both top line benefits as well labor efficiencies as we roll it out and get used to that throughout the chain.
Thomas P. Johnson - CEO: Then finally, Dorothy, on the 53rd week question, we expect the extra week to be immaterial to our overall financial results. Clearly, there is extra sales from 53rd week, but there are extra expenses that go along with it as well. So we don't see a major impact.
Operator: Kimberly Greenberger, Morgan Stanley, Inc.
Kimberly Greenberger - Morgan Stanley: Tom, I'm wondering if you can talk about the transition that your business seems to be going through between just a destination for basics and a destination for, say, basics and fashion. How can you forecast at the front end the amount of inventory you should be reducing in the basic inventory program and how much you should be increasing in fashion? Within any given season, how quickly can you respond to adjust that balance?
Thomas P. Johnson - CEO: Sure. As you said it's a transition, we're early in our cycle for adding the fashion on to our selling floor. We're very encouraged with the initial reads. Retail has a history of overreactions, and many retailers out there overreact to certain things. That's one other things we're very careful and thoughtful about. So as I mentioned earlier, we've definitely been grounded in (core) and basic and logo product. We'll still have that on our selling floor, but we're not going to overreact. I think that that's the biggest challenge. We know that it's part – it has a lot to do with the projection of the brand, and as you guys have seen and we appreciate the notes back from you about your response to the product and the same thing is happening with our consumers. So we will continue to amp-up the fashion (portion) and it will change from season-to-season, but it's still very early in the season and in our initiative. Lastly, we know that retailers have been – the history of retailer, like I said, is one of overreaction. So we want continue to make sequential, very strong thoughtful progress.
Operator: Robin Murchison, Sun Trust Robinson Humphrey.
Robin Murchison - Sun Trust Robinson Humphrey: Good luck. I'd love to see some bonus accruals. This is for Marc. Did your inventory growth normalized about a mid single-digit increase as of May '12?
Marc D. Miller - CFO: Well, what we said in the upfront remarks was that inventory was down 2% as of mid March on a retail per square foot basis, and there is a mix in their – of dollars in the cost which has been shifting from being up to down. So it's not that different from the negative (two) number that we post overall.
Operator: Eric Beder, Brean Murray, Carret & Co.
Eric Beder - Brean Murray, Carret & Co.: Congratulations a nice start to the year. Could you talk about P.S. chain? In terms of both, how you want to evolve the licensed product? Are these openings that you're doing – this is still your big opening driver, are they meeting your expectations to kind of go where you want to go and taking this chain kind of next level?
Michael J. Cunningham - President: Sure, it is Mike. I'll just give a recap on P.S. As we talked about on last couple of calls, we initially set out the P.S. chain to be – takedown of the Aero product back 2009 and that Aero product was primarily logo driven, heavy core based. Last year when (indiscernible) you realized that the kids business particularly in our P.S. brand is in much more fashion. So working with that, it is our merchandising. They focused on getting the fashion into the store and developing the production of that fashion, leading the way and actually setting sort of the pace for ourselves to do the same thing with the visual impacts of fashion. So I think that's done very well for us. In addition to that, the team implemented the additions of the four to six additional sizing in the store. We did that in the fourth quarter last year and that has generated some nice increases in our top line sales. We talked about we keep increasing the fashion and keep increasing that fashion projection and look at the store. The current license program we have with model are obviously resonating very well. There was a lot of commercial awareness, the mall we put out for the movie, and obviously we had great designs by our design team and have resonating to check very well with customers. We also are looking at additional licensing programs. We didn't disclose any yet, but we're fine tuning and very choosy in what we want to do, we have the (complemented) brand and something that's going to get the kids excited as they get into the store. On top of that, we also talked last year that we started to refine our real estate strategy. We're basically tweaking the size of our boxes and then focusing on those A and B malls that we feel are really catered to our target demographic. So those stores are growing and again, the additional sizes and fashion are helping the top line of the business. So we're excited to see our chain grow and this year we will end with about 100 stores. Lot of our work from all teams involve with all those initiatives and we keep managing everyday both managing the fashion as well as focusing on it's a very competitive channel, and there is couple of questions about core product and commodity product. So we are very focused on managing our promotions and pricing importantly.
Operator: John Kernan, Cowen and Company.
John Kernan - Cowen and Company: Wonder if you could talk about how you are seeing the promotional environment evolve into the second quarter, particularly with your two main competitors, have you seen any – it seems like it is becoming more rational, but I just wanted to see if you could add your thoughts about that.
Thomas P. Johnson - CEO: John, did you say more irrational or rational.
John Kernan - Cowen and Company: More rational, it seems like it is becoming more rational.
Thomas P. Johnson - CEO: It has clearly since the fourth quarter, the promotional activities has come down quite nicely. I think that the fact of some folks have a little bit too much inventory in the channel, obviously, and we lived through them during the good portion of last year. For us, it's what we are seeing is a little bit pressure of pressure more in the core areas of our business and that's probably where most of the competition and pressure that we see as a brand and as business. That's why we know that increasing our fashion quotient is very good for us and very healthy for us. It's resonating with our customers. So directionally feel very good.
Operator: Howard Tubin, RBC Capital Markets.
Howard Tubin - RBC Capital Markets: As you skew the mix back to offering a little bit more fashion, do you think you are attracting maybe slightly older customer and maybe more towards the older in your demographic?
Thomas P. Johnson - CEO: Sure, Howard, it's Tom. It's interesting. There is no data that supports that at all just yet. We're excited because the comp performance as I mentioned earlier has traded in the A, B and C range. That's more of demographic. That really hasn't shifted a whole lot since last year as well and we feel good about that as well. But we've been focused forever on the 14, 17-year-old girl and guy, and specifically a 15-year-old, so we haven't changed our model. If the younger girl gets older faster and her appetite for fashion and she's just a much faster adopter of fashion, so we absolutely believe the strategy is right and we're focused on the 14 to 17-year-old.
Operator: Linda Tsai, IT Group.
Linda Tsai - Investment Technology Group, Inc.: Can you talk about increasing the amount of fashion in certain higher volumes stores? Can you give us some more detail on that, and maybe how the performance of those stores were relative to your expectations?
Thomas P. Johnson - CEO: Sure. Linda, it's early. I mean it's very early in the cycle for us. As I mentioned Q1 is clearly the smallest quarter. We'll see (indiscernible) give you a little bit more color as we get into Q2 at the end of the next quarterly call, we're excited about that. But we do recognize the fact that stores don't all behave exactly the same and we respond to their – terrific allocation team very focused on optimizing the right assortment for our stores across the thousand stores.
Operator: Roxanne Meyer, UBS.
Roxanne Meyer - UBS: You mentioned many category that have been received well in the fashion. I'm just curious where you're getting the most material traction where if you start investing more materially, you can start to move the needle. Then also how do you think about just in general the margins on your fashion product relative to your basics?
Thomas P. Johnson - CEO: Sure, Roxanne. It's Tom. As we always say, it's all about women's knits and for us it's been about women's tops and we've tried new silhouettes, new fabrics and it's resonating. So that's the big one. Other areas as I mentioned, which is terrific as it add dimension to our assortment, is really skirts and dresses and even in the woven categories. We've had some really nice reaction to that fashion area, but it's about women's tops at the end of the day. That's why we're very encouraged about the Q2, Q3 and Q4 because that dimension for us is moving away from just the jersey knit graphic t-shirt and into other silhouettes and fabrications on the girl side is, we think is just a – will be home run for us.
Operator: Thank you. Mr. Johnson, I would now like to turn the floor back over to you for closing comments.
Thomas P. Johnson - CEO: Sure. Thank you, Operator, and thank you all for being on the call today. Our teams are working very hard. We feel great about the job that they're doing across the board. We really are excited about our initiatives for this year. We know we've a lot of opportunity and we really appreciate your support and thank you for joining us today on the call. Look forward to speaking to you next quarter.
Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.