Foot Locker Inc FL
Q4 2012 Earnings Call Transcript
Transcript Call Date 03/08/2013

Operator: Good morning ladies and gentlemen, and welcome to the Fourth Quarter 2012 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

This conference call may contain forward-looking statements that reflect management's current views of future events and financial performance. These forward-looking statements are based on many assumptions and factors, including the effects of currency fluctuations, customer preferences, economic and market conditions worldwide, and other risks and uncertainties described in the Company's press release and SEC filings.

We refer you to Foot Locker Incorporated's most recently filed Form 10-K or Form 10-Q for a complete description of these factors. Any changes in such assumptions or factors could produce significantly different results and actual results may differ materially from those contained in the forward-looking statements.

If you have not received yesterday's release, it is available on the Internet at or Please note that this conference is being recorded.

I will now turn the call over to John Maurer; Vice President, Treasurer and Investor Relations. Mr. Maurer, you may begin.

John A. Maurer - VP, Treasurer and IR: Thank you and good morning. I'd like to welcome everyone to Foot Locker Inc. fourth quarter and full year earnings conference call. Here with me this morning are Lauren Peter, Executive Vice President and Chief Financial Officer; Dick Johnson, Executive Vice President and Chief Operating Officer; and Ken Hicks, Chairman and Chief Executive Officer.

Lauren will first provide you with the details of our fourth quarter and full year results that we announced earlier this morning and then later she will review some of our key financial assumptions going into 2013.

In between Ken and Dick will review some of our key accomplishments in the first year, working towards our updated long-range plan and describe some of the exciting new store formats and other investments that are part of the increased capital expenditure program that we announced in February.

Let me start by setting the framework for today's discussion. Earlier this morning, we reported that Foot Locker produced earnings of $104 million in the fourth quarter or $0.68 per share, a 28% increase over the $0.53 per share that we earned in Q4 last year. As noted in the release these GAAP results in 2012 included negative impact of $0.05 per share for an impairment charge related to our CCS business.

On a non-GAAP basis without that charge our earnings per share were $0.73 in the fourth quarter.

Figures I just mentioned are based on a 14-week quarter in 2012 compared to the usual 13-week period and the annual figures we reported are based on a 53-week year.

The 53rd week added $14 million after-tax or $0.09 per share to our quarterly and annual results in 2012

The non-GAAP EPS figure of $0.64 that we included in our press release this morning excludes the 53rd week and the CCS impairment charges. This amount compares most closely to the non-GAAP results of $0.55 that we reported in Q4 of last year. Both the years are based on 13 weeks and exclude one-time impairment charges.

Unless otherwise specified, ratios and margins that we discussed during this call will be based on the results, excluding the 53rd week, since this approach provides the best basis for comparison to both last year and the upcoming year. References to comp sales are for the 13 or 52-week period ended January 26, whereas references to total sales refer to the entire 14 or 53-week period ended February 2, 2013.

Before I turn the call over to Lauren, I will call out our strong full year EPS results. On a GAAP basis, we earned a record $2.58 per share in 2012. On a non-GAAP basis, excluding the 53rd week, the CCS impairment and the one-time tax benefits we called out in previous quarters, we earned $2.47 per share. This was an increase of 36% over last year's record-breaking performance of $1.82 per share, calculated on a comparable non-GAAP basis. As we head into and through 2013, it is against this non-GAAP EPS figure of $2.47 and the quarters which made it up that we will most frequently make comparisons.

Now here is Lauren to give you more of the detail.

Lauren B. Peters - EVP and CFO: Thank you, John, and welcome to you all. I'm pleased you could join us this morning as we discuss Foot Locker's 2012 results and our outlook for 2013. The fourth quarter of 2012 marked yet another very strong performance for Foot Locker.

Starting with sales, we produced a strong comparable store sales gain of 7.9% in the fourth quarter, bringing our full year comp sales gain to 9.4% and our two-year stacked comp gain to just under 20%. In total, sales have increased more than 20% over the last two years to $6.2 billion. We have now surpassed almost all of the long-term financial goals we laid out at the beginning of 2010 and we're making good progress towards the elevated goals we set for ourselves a year ago. The one original goal we're still working towards is inventory turns. We've improved turns substantially, but we are not yet to a 3 times turn.

Turning to the Q4 details; we had solid gains in all families of business, with both footwear and apparel up high single-digits. Within footwear, our basketball business was exceptionally strong, with a comp gain of more than 20%. We led off the quarter with a very strong Black Friday week, and I do mean week since we delivered exciting new premium product in the days leading up to Thanksgiving as well of the days afterward. It turns out that a lot of our customers wanted to wear their new kicks to events with family and friends on Thanksgiving Day itself.

The rest of the holiday season was also strong in basketball, with big gains in Jordan, marquee player shoes and Classics. Meanwhile our running business in the U.S. remained solid with a low single-digit gain for the quarter. Lightweight running performed well, particularly the Free Flex and Dual Fusion from Nike. Technical running fueled by ASICS, Mizuno, Brooks and Nike also posted solid gains.

With basketball being the primary driver in the quarter, it is no surprise that with our U.S. businesses that again led the way in top line performance. Our direct-to-customer segment was up 18.2%, but Eastbay's sales up in the low teens. And our site up more than 40% among the store divisions Kids Foot Locker was once again the top performer, with a gain of almost 20%.

Champs Sports also had another double digit comp gain in the quarter. The Foot Locker division in the U.S. produced a comp gain in the high single digits, while Footaction was up mid-single-digits.

Foot Locker Europe posted a flat comp during the quarter with basketball styles up significantly. Some of our customers in Europe continue to shift from running to basketball silhouettes.

The division with the most challenging sales result was Lady Foot Locker, which had a high single-digit comp loss. As we transition our merchandise assortments to target the athletically active performance oriented women in her 20s and 30s we have produced gains in apparel and a light weight technical and performance footwear.

However, these gains are not yet offsetting the loss in certain classic and lifestyle shoes and opening price point apparel.

Ken will speak more to our efforts in this area in a few minutes. Rounding out our sales results by division our other international teams performed well. With both Foot Locker Canada and Foot Locker Asia Pacific producing mid-single-digit comp increases for the quarter.

Our comp cadence was as follows, November was up low double digits, December was up high single-digit, and January was up mid-single-digits. Like many other retailers, the end of January including the 53rd week was softer as compared to the rest of the quarter. We believe that we were impacted by the same factors that others have called out before us such as the initial pains felt by many of our customers from the payroll tax increase, delayed tax refund checks, shifts in the timing of product launches and maybe even some less favorable weather compared to last year. Going against very strong one year and two years stacked comp, we started February 2013 with comp sales that were up low single digits and the strongest gain, approximately 20% coming from our Direct-to-Customer segment. Our store divisions excluding Lady Foot Locker were collectively up low single digits. Of note within that performance, Foot Locker Europe was also up low single digits. Lady Foot Locker sales were down double-digits.

Turning to margins, we picked up 90 basis points on a 14 week basis to bring our Q4 gross margin rate to 32.9% from 32% last year. The 53rd week contributed 50 basis points to that gain. So on a comparable 13-week basis, gross margin improved 40 basis point to 32.4%, with leverage of our fixed occupancy and buyers expense adding 50 basis points, partially offset by a 10 basis point decline due to lower net shipping revenue. Our merchandise margins were flat in the quarter, but the lower initial market percent offset by a lower markdown rate. Apparel margins improved over last year while footwear margins were essentially flat. However, we still have further progress to make before we can declare that we have consistently lifted our apparel margins higher than footwear. Our SG&A rate decreased in the quarter from 21.6% to 21.4% on a comparable 13-week basis with the extra week providing an additional 20 basis points of leverage for a reported SG&A rate of 21.2%.

Expense dollars increased 7.7% on a 13-week basis with the biggest increases coming in store wages and marketing. Depreciation and amortization expense ticked up to $30 million from $28 million reflecting the increased levels of capital spending over the last couple of years.

We have made the strategic decision to focus our future efforts in the skate category on our core online business. But we believe we have the scale and expertise to be successful. As John mentioned, we did incur CCS related impairment charge of $12 million pre-tax in the fourth quarter or $0.05 per share after-tax. Approximately $7 million of this charge came from reducing the carrying value of the CCS trade names. The remainder of the impairment charge was due to writing-off the value of CCS store-related PP&E.

We will operate the banner as a digital-only business, and so we intend to close the 22 CCS stores in the current quarter due to their ongoing underperformance. This decision will result in an additional charge in the first quarter of 2013 for such cost as exiting leases and severance. Our current estimate is that this charge will be about $0.01 per share in Q1.

Our tax rate for the fourth quarter came in at 34%, somewhere below our usual run rate of 37%. The difference is primarily due to one-time adjustments in various jurisdictions such an as amendment to certain tax (indiscernible) that allowed us to claim approximately $2 million in reference from prior years.

It all added up to a record fourth quarter net income of $104 million or $0.68 per share on a GAAP basis. The $0.64 per share we earned in the quarter on a non-GAAP basis, in other words excluding the CCS impairment and the 53rd week is a $0.09 or 16% improvement on last year's equivalent non-GAAP EPS figure of $0.55.

For the year, we earned a record $397 million or $2.58 per share on a GAAP basis. On a non-GAAP basis, we earned $380 million, an impressive 35% increase over last year's non-GAAP equivalent of $281 million, which had been the most profitable year in our history as an athletic company.

The power of our earnings translated into an even stronger balance sheet. With operating cash flow $416 million in 2012, we ended the year with $928 million of cash and short-term investments, an increase of $77 million from a year ago. This financial strength enabled us to announce last month three elevated capital deployment strategies beginning in 2013. First, our Board increased our quarterly dividend by 11% from $0.18 per share to $0.20 per share equivalent to an annualized rate of $0.80 per share. This is the third straight year with a similar dividend increase.

Second, the Board of Directors approved a new three-year $600 million share repurchase program extending through January 2016. This new program replaced the Company's previous $400 million under which the Company spent a $129 million in 2012.

Finally, the Company announced a significant increase to our capital expenditure program for 2013, from a $163 million in 2012 to $220 million this year. Dick will detail these investments in just a moment.

Another investment we made at the end of last year was in positioning our inventory for the important February selling season. At year-end, inventory was up 9%, about the same as sales. However, much of this increase came during the 53rd week when we brought in fresh merchandise to support February sales.

Comparing our inventory level at year-end to where we were at the end of week one 2012, it's just the equivalent week in terms of sales flow, our inventory was essentially flat year-over-year. In other words, the increase in inventory at year-end was entirely planned to support sales and does not represent to change in our objective of growing inventory at roughly half the pace of our sales increases.

We ended the year with 3,335 stores, a decrease of 34 from the beginning of the year. 44 or roughly half of the 85 new stores we opened were in Europe, but roughly half of the 119 stores we closed were domestic Foot Lockers. Many of these closed stores were being used as clearance outlets, and with fresh or more productive inventory, we can operate with fewer clearance stores. We also closed 29 Lady Foot Locker stores.

With that recap of 2012, let me now turn the call over to Ken and Dick to describe how we achieved these results and review some of the exciting investment opportunities we see in our business. Before we get to your questions, I'll jump back in to discuss our annual and quarterly expectations for 2013, which got a little tricky with the 53rd week in 2012. Ken?

Kenneth C. Hicks - Chairman, President and CEO: Thank you, Lauren. I want to start by acknowledging the tremendous success of the entire team at Foot Locker ion 2012. In 2011, we set several financial and operational records for our Company, including earning at unprecedented $1.82 per share. With the momentum we've built from executing our strategic initiatives in 2012, we were able to surpass that record by 36%, achieving non-GAAP earnings of $2.47 per share.

At $6.2 billion, we also reached the highest sales in our history as an athletic company. We had a record for sales per square foot at $443, our gross margin rate hit a new high, our EBIT dollars and margin rate at 9.9% were the best ever, conversion rates and sales per payroll hour were also the best ever. Our EPS was the highest ever and our return on invested capital hit 14.2%, making it the first of our current long-term goals that we have achieved.

It is an impressive list of accomplishments, and I want to thank the team at Foot Locker for their focus and dedication to executing our six primary strategies, which led to these excellent results.

First, we kept a clear customer focused. We developed product offerings that reflected the point of view of the core customer for each of our banners. And we created store and online environments that enhanced these offerings. We told powerful marketing stories such as the Foot Locker approved campaign and the We Know Game campaign at Champs Sports, which definitely resonated with each of their target customers. The overall result was that we strengthened our leading position in basketball the hottest category in our industry while also maintaining strong running and casual businesses.

Second we made our stores and digital sites exciting places to shop and buy by delivering compelling product stories and strengthening the messaging by being consistent between the stores and online. We also created strong events such as the Hottest Month Ever and the Week of Greatness that provided a more consistent sales performance throughout the year.

We also developed or tested new store formats for Champs, Foot Locker, Lady Foot Locker and Kids Foot Locker and we created an exciting brand new banner 602. We used new tools in our stores to increase productivity and customer engagement and we invested in improving our associate selling skills. We provided excellent service in our digital channels, including easy navigation, timely shipping, helpful call center responses and again, good customer engagement features.

Third, we delivered growth in most of our high potential business segments, apparel comps were up double digits in 2012 driven by compelling assortments that targeted each banner's core customer. We effectively leveraged team additions capabilities working with the brands to create test and rollout a tremendous amount of Graphic and Attitude t-shirts that our customers enjoyed hooking up with their footwear.

The strength of our kids' business was exceptional and it wasn't just the high-teens comp in kids' Foot Locker. We also delivered double-digit comp sales in almost every other format and region where we sell kids' products, including a 40% plus gain in digital sales of kids' product. We used the GO BIG marketing campaign for our kids' Foot Locker business and it was a good description of what happened to our results.

We believe that we have an opportunity to grow our women's business significantly over the next few years, and 2012 was a year of clarifying and refocusing our women's business across all of our banners. The sales results for Lady Foot Locker were not positive for the year, but we focused on improving the productivity of the overall women's business by closing underperforming Lady Foot Locker stores and refining our assortments across all of our banners. As a result, we did manage a flat sales performance overall in women's, led once again by strong sales in our digital channels.

Fourth, we expanded both our digital and store brands. Our sales increases were very strong all year, running up more than 40%. We increased the coordination across digital and store organizations, upgraded all of our mobile and online sites, and enhanced our customer engagement features. We stated that our goal is for individual sales to reach 10% of each banner's total sales. Although we still have a distance to go to reach this goal, we made significant progress in each of our banners. Our direct-to-customer sales in total constituted 9.9% of our total sales. This includes our biggest online banner, which was up low double digits for the year.

In Europe, we added a net 34 stores augmenting our presence in our current markets especially in malls and expanding an underpenetrated countries. We also extended our business to a total of eight countries. We expanded to 65 the number of footlockers and include a House of Hoops with a target of adding a hundred more over the next few years. The productivity of these stores increases significantly with the addition of House of Hoops and we are exploring other vendor partnerships to test similar ideas such as the Adidas collective shops we recently opened in Footaction and the Nike Yardline in Champs Sports.

Even with all these accomplishments we've recognized that many opportunities still lie ahead of us to increase our productivity further and give our industry-leading retail team even better tools to deliver exciting experiences and product to our customers.

Let me introduce Dick Johnson, our Chief Operating Officer to tell you about the investments we planned to make in 2013. Dick?

Richard A. Johnson - EVP and COO: Thanks Ken, and good morning, all. As Lauren mentioned, last month we announced plans to invest aggressively in these opportunities elevating our capital expenditure program to $220 million in 2013. This is an increase of approximately $60 million over 2012.

Let me describe some of the dynamics of this plan. First, the amount of capital allocated to new stores and relocations is fairly similar year-over-year. We intend to continue building our presence in Europe with 30 to 35 of the 73 new stores plan for 2013 targeted for Western Europe. The division with the next biggest new store allocation is Kids Foot Locker in all of our markets with just under 20 new stores planned. By far the biggest factor in the year-over-year increase in capital is due to doubling the spend on store remodels.

The development of the new format in Champs Sports started back in 2011 and we experienced significant upside to the productivity in the 11 test stores that we opened in 2012. We plan to invest significantly more dollars in store remodelings in 2013 and we will have touch more than 15% of the Champs fleet by the end of 2013.

Foot Locker also experienced very strong sales lifts in doors where we tested our new format, which we call Willowbrook, after the mall in New Jersey where we put one of the first prototype stores. In 2013, we plan to remodel close to 10% of the Foot Locker fleet to the new model. We will also be remodeling more Kids Foot Locker stores in 2013, based on the positive results in our 12 test stores. Between these divisions we will be almost tripling the number of significant remodel projects we undertake in 2013 to well over 200. We believe this strikes a prudent balance between capturing the potential sales lift as quickly as possible and being sure of properly executing the projects. All of these projects generated investment returns significantly in excess of our hurdle rates which are 13% IRR over the life of the project and an 11% ROIC at the end of the third year. Along the way, we have learned many lessons from testing the new formats in many different markets and different store configurations. So, we expect to make the rollouts even more productive. We are still in the prototype development and testing phase in our women's business. The 602 and newly designed Lady Foot Locker stores are performing better than the rest of the chain, but this does not yet prove the case for a larger rollout.

We opened four new test 602 stores during the second half of 2013, as we adjust the formula before committing to a rollout we are actually spending less capital this year on our women's business. Another area with a significant increase in capital spending in 2013 is information technology. Within this category, the biggest single investment is for our new merchandise allocation system, which underwent a successful proof of concept last year.

In 2013, we plan to invest in material design and testing of this very robust and sophisticated software. Full rollout is not expected until 2014. To maximize the potential of this investment, it is absolutely critical to develop the tool properly for our business. Once in place, we believe this system can be a key factor in further enhancing our inventory productivity by delivering the rights, the right product, in the right store, at the right time, in the right size and in the right quantity.

Also within technology we have allocated capital to operating our warehouse management systems in Europe and the U.S., rolling out our time and attendance system to the rest of the globe and implementing various other projects to improve the in-store experience or reduced cost in our administrative processes.

Finally, we continue to invest significant incremental capital in our digital businesses, both mobile and online in order to drive the exceptional performance, we have come to expect from our team at

Let me now turn the call back over to Lauren so that you can put all of these initiatives in the financial context of what we expect for 2013.

Lauren B. Peters - EVP and CFO: Thanks Dick. With another exciting year ahead of us, and let me offer some insight into how we currently see it shaping up. First, we expect to deliver another double-digit percentage annual profit increase for 2013, driven by a mid-single-digit comp sales gain. That profit increase is based off of the 2012 non-GAAP earnings per share figure of $2.47 that we discussed earlier.

We are planning comparable store sales to be fairly steady around mid-single-digits throughout the year. We use the Standard National Retail Federation 4-5-4 Calendar, and the 53rd week of 2012 shift the weeks to keep them comparable year-over-year for that comp store sales statistic.

For your own modeling purposes, please note that reported annual and quarterly sales and profits are not shifted. As a result, there will be a significant variation in total sales and profit sales by quarter.

For example, starting with the first quarter, we give up a high volume first week of February and gained the lower volume first week of May. Historically, the first week of February generates about $20 million more in sales than the first week in May.

By contrast, the second quarter loses the lower volume week in May I just mentioned and kicks up a higher volume back-to-school week in August. As a result, we believe this will add about $40 million to sales in Q2. The opposite happens in the third quarter as we trade that back-to-school week in August for a relatively light week at the end of October. We expect this to negatively impact sales by $40 million.

Finally the shift caused by the 53rd week in 2012 is not expected to have a significant impact on the fourth quarter of the last week of October and the last week of January are planned similarly. Turning to margins we are planning for a flat to slightly positive gross margin results in 2013.

We expect that downward pressure on our initial markup rate should be less intense this year than it was in 2012, but it remains a factor in merchandise margins. We plan to offset the impact of the lower IMU by decreasing our markdown rate through the application of our business intelligence tool and continuing our merchandised initiative both internally and with our vendors, among other strategies.

Our planned mid-single-digit comp increase should also provide the opportunity to leverage our fixed cost for the full-year, both within gross margin and SG&A.

With the sales shift that I just described however, the first and third quarters will have relatively less leverage benefit and the second quarter will have relatively more. Specifically in terms of SG&A we intend to sustain our investment in marketing campaigns to help drive traffic into our stores as the proportion of sales, marketing, expense in 2013 is expected to be similar to 2012. The other major expense lines are also expected to be similar in 2013 as a proportion of sales compared to 2012.

Some of you have asked about the impact on SG&A of the additional capital projects we are undertaking. We will add some staff and some expense in certain areas such as our real estate construction department, but because they are dedicated to specific capital projects, their salaries are mostly capitalized as part of the CapEx total of $220 million.

To round out the rest of the income statement; depreciation and amortization is planned to trend up to approximately $122 million in 2013 as a result of the investments we are making. Interest expense is expected to be about flat with 2012 at $5 million. We are planning our tax rate at 37%, and we are assuming FX rates to be slightly less favorable than last year with euro around $1.25.

In addition to the 73 new stores that Dick mentioned we expect to open in 2013, we plan to close approximately 88 as we continue to address low performance stores and improve our key productivity measures.

With that review of 2013, let me turn the call back over to Ken to wrap up before we get to your questions. Ken?

Kenneth C. Hicks - Chairman, President and CEO: Thanks Lauren. As we said, we set many records in 2012 with our financial and operational performance. Last year started off with an absolutely terrific February and despite the economic and fiscal challenges we're facing this year, I'm pleased to say that we successfully beat that performance this February with a low single-digit comp gain.

The comp comparisons do get a little bit easier going forward, and although as early our March sales are off to a solid start, up high-single-digits. We were planning an even stronger start to the year and we are monitoring some of the economic factors that we believe impacted business at the end of January and the beginning of February. We'll make adjustments as necessary, but our inventory is fresh and the product pipeline in basketball, running, classics and apparel is strong. With exciting young players like Kevin Durant coming to the fore and innovative products like the Nike Flyknit and Adidas Boost ready to hit the market in a much bigger way.

It is a long year and we have a lot of hard work to do to deliver on the numbers that Lauren just described. However, our plans are in place, our initiatives are underway and we have established our long-term goals in order to measure our progress. We have our core values to guide us along the way. We're done shaking each other hands in celebration of last year and the entire team at Foot Locker is now focused and optimistic about our ability to deliver another record year in 2013.

Thank you. Let's turn the call over to questions now please.

Transcript Call Date 03/08/2013

Operator: Michael Binetti, UBS.

Michael Binetti - UBS: Just a quick clarification Ken. I think we got the March and the February number in there. Can you just tell us where the quarter to-date is on comps right now?

Kenneth C. Hicks - Chairman, President and CEO: We did not say that, but the quarter up right now is in the low singles. We recognized we only have a couple of days of March in the whole month of February.

Michael Binetti - UBS: With basketball up 20% plus in the quarter, I am trying to figure out where some of the headwinds that brought the core Foot Locker chain down to comps at about high-single-digits. Could you comment on some of the offsets there?

Kenneth C. Hicks - Chairman, President and CEO: Running as we said is not up to that level and some of the classics did not performed at a stronger level.

Michael Binetti - UBS: So, you are rebooting a little bit on the women side, you've got some new test stores of SIX-02 but I think I'd say even with that negative high-single-digit decline at Lady Foot Locker wasn't up to where you thought it would be at this point after all the stores you closed over the years in the lady business. Can you give us kind of an update on what's going on there and it seemed what is causing perhaps the deceleration even at this point and maybe little bit on how you think about what gives you confidence and the opportunity to grow that significantly over the next few years?

Kenneth C. Hicks - Chairman, President and CEO: We obviously would like for the women's business to be stronger. The challenges that we have in women is the Lady Foot Locker business is that we changed that customer and you guys have heard me say before when you fire a customer, they know immediately and it takes a while to bring a customer in. Our overall women's business as we said was flat, so we are able to make up that loss with the fashion customer in our other chains like Foot Locker and Champs. In Lady as we move to a more active customer, a little bit older 25 to 35, that's taking time. We also are going through a transition in the apparel area where we have sold a lot of cotton by the pound and now we're focusing on higher quality from both the brands on our own private Actra label.

Operator: Kate McShane, Citi.

Kate McShane - Citi: Within your guidance, I wondered if you could give us any indication of what your ASP outlook is for the year.

Lauren B. Peters - EVP and CFO: ASPs have been favorable and we'd expect that that would continue to help support that mid-single-digit comp gain guidance that we gave. With a value that we are putting into product and what we're offering the customer is supporting that, and the other thing that's contributing to that is our shifts in apparel as we moved that business to a branded product away from that cotton by the pound that Ken mentioned.

Kate McShane - Citi: I know its early days, but wondered if you had seen any change in the running category momentum since the new Flyknit product has come out?

Richard A. Johnson - EVP and COO: Well, we've got Flyknit featured in our run stores. We expect a bigger batch of Flyknit to be in our stores in April and May. So, we expect to see some very positive movement with that.

Kate McShane - Citi: And then my last question is just on Europe. Ken, can you walk us through a little bit what you're seeing in Europe? How – I know the comps are low single-digits. Maybe how the environment has changed this past quarter versus the quarter before?

Kenneth C. Hicks - Chairman, President and CEO: We're seeing similar things what we have seen in Europe from the point that the Northern Europe, and particularly, Germany continues to be strong. Southern Europe has its challenges. But what we think is that it's reached a level. That's a maintainable level. We also have worked hard on our assortments there. We've put in a stronger basketball and performance and running position and those have worked well for us. So, we're seeing the product mix help us. We are strengthening our position in the markets that are not as impacted by some of the things going on, and even in those markets we see kind of a settling out of the business.

Operator: Robby Ohmes, Bank of America Merrill Lynch.

Robby Ohmes - Bank of America Merrill Lynch: A couple of quick follow-up questions. One of them was just, given the slow start to February that you've seen and sounds like March has gotten a little better, but has the competitive environment changed at all, or is there any competitors that might have too much inventory? Have you seen any promotional activity kicking up this spring? And then I have a few follow-ups as well.

Kenneth C. Hicks - Chairman, President and CEO: No, we have not seen. I think everybody has done a pretty good job managing their inventory, and at this point we knew it wouldn't be great with some of the shifts and some of the things that happened, and as we look to the pick-up, hopefully that will help clear through some of the inventory. But at this point we haven't seen anybody taking any special action.

Robby Ohmes - Bank of America Merrill Lynch: And then on the Lady Foot Locker commentary, can you just help us understand your view of the timeline of firing the customer and then rehiring or hiring, I guess, the new one? When do you think the transition could even out and you could start to see Lady at least get to flattish comps.

Kenneth C. Hicks - Chairman, President and CEO: My expression would be it can start any time, but I know it takes a while and I think we are starting to see, and starting to hear anecdotally some very good things. We're looking at different markets and different stores and seeing some nice pickups our technical running business actually is very, very good. The branded apparel business is very good, but it is trying to offset a lot of four for 20 t-shirts that we used to sell. So as these elements should start to continue to pick up and we anniversary some of the promotional elements and fashion elements we have, we think, we will start to see, we should see the business start to improve and I think that will be, as we move into the summer season and into the fall. We'll start to have that customer will find us and you know we will benefit. It takes a while to bring in a new customer, particularly when she's not used to shopping with you. The thing that's been fortunate is that the fashion customer has moved frequently to the Foot Locker and Champs and I think you know the thing there that we're seeing is she was probably shopping in both places anyway. So it didn't take her a long time to learn. But we are working and I think as we anniversary in the summer and moving into the fall, we'll start to see some benefit.

Robby Ohmes - Bank of America Merrill Lynch: Quick question you called out Nike few times. Can you remind us what your strategy is with Under Armour, how many doors you have Under Armour apparel? And also, what you see on the Under Armour footwear side right now and how you're thinking about it for fall this year?

Kenneth C. Hicks - Chairman, President and CEO: Under Armour is an important part of our strategy both in apparel and shoes, and I think that we will continue to build and work with them. We're one of their focal points with the shoe business running and basketball. I'll let Dick talk about the number of doors, but it is clearly pretty widely distributed throughout the chain.

Richard A. Johnson - EVP and COO: Yeah, from a apparel point of view, we've got good representation in both Champs and Foot Locker in North America and U.S., and on the footwear side, a few – a little, slightly fewer doors than the apparel, but when you're adding the cleated product that they sell out at Eastbay and we have a strong representation with Under Armour footwear across the chains.

Operator: Taposh Bari, Goldman Sachs.

Taposh Bari - Goldman Sachs: Ken, I want to ask you a question that I just can't get enough of from investors and that's around the perceived product cyclicality, perceive being the magic, but the product cyclicality of this business. So before you got to Foot Locker, this is a business that's averaged mid-single digit operating margins, modest comp growth, which bears the question as we anniversary some of these impressive numbers, it's all about what have you done for me lately, right. So I guess the question is what's different in the business today versus the 2000s. Do you think this is a cyclical business product wise or not and if not, if you could just kind plead the case?

Kenneth C. Hicks - Chairman, President and CEO: Well, I think two parts to the question, the first part is on cyclicality, and there are cycles to any business, but I think one of the things we are benefiting from is a trend versus a cycle. There is a trend to people wearing more athletic shoes and apparel. I don't know what you are wearing today, but if you had your choice you'd be like me wearing sneakers. And more and more people do that and that helps the business. We are in a strong cycle because of the newness and what's been introduced and from what we've seen in the pipeline and what – for example Kate talked about new product Flyknit, Boost. Color is unbelievable and that's selling. That is building the cycle and supporting the stronger upward trend that we have. With regard to margins, we have done our margins almost entirely on our back. We haven't gone to vendors and asked for money or anything and we continue to work with them to make sure that we have the right product at the right time at the right place in the right quantities. Our teams are working hard with the vendors on flow that has allowed us to be smarter about the inventories, so we don't have to mark as many things down. We also are working hard with different systems, business intelligence systems and planning systems to do a better job and we think our allocation system will help us there, which will reduce markdowns and increase the amount of full price selling. The other thing that I think that we are seeing is, this is a market where because of the trend that's occurred, we've been more rational and people aren't having to cut. Our vendors worked very, very hard to make sure that their product is competitive but at the same time they have – we are not competing against the whole world, we have a certain product, we have high quality, high performance product and that's what the customer wants and it has allowed us to capture the pricing that we've been able to capture. And the other thing with regard to margins is the importance of productivity. It is one of the reasons why we continue to push on things that will improve the current stores rather than open a lot more stores because as you open and expand stores the productivity declines, the profitability declines. We are able at $440 plus a foot to be much more productive and deliver better experience to our customers and better profits to us and better sales to the industry.

Taposh Bari - Goldman Sachs: If I could just ask a second question. I know you announced the dividend increase and the increased share buyback authorization a couple of weeks ago. What's the Board's general philosophy towards share buyback? The pattern has been about $350 million of free cash flow, it seems like about a third of that has been spent on dividend and other third on buybacks. You are, obviously, increasing your CapEx budget this year but you are sitting on about $1 billion of cash, no debt if you exclude operating leases up 20% of your market cap. Is there any desire to maybe get more aggressive there?

Kenneth C. Hicks - Chairman, President and CEO: I want to talk to your banker if you can exclude the rent that you pay as not being dead, that's – I like that banker. We have opportunities and we feel making good strides and increasing the dividend. We've done a three years in a row that 10% about level. We have an active buyback program and the Boards views, we evaluate that on an ongoing basis, but we feel it's important that we use that as one of the tools to have to return value to the shareholders. We also are putting in a number of programs, and as Dick said, we're seeing how they perform and the rollout, so that it doesn't hurt the overall business. If we can do it faster and more of them, next year we can step that up and get even more of the chain at the high performance level. So, having that ability is very important, and the flexibility to be able to improve our overall performance and productivity; to improve our profitability.

Operator: Camilo Lyon, Canaccord Genuity.

Camilo Lyon - Canaccord Genuity: Ken, I was hoping you could talk maybe a little bit about the more details around what you are seeing from the comp of the store models by banner. Give us maybe a little bit more detail around that, and how we should think about how those stores are comping versus those untouched stores?

Kenneth C. Hicks - Chairman, President and CEO: Well, we have stated in the past that the remodels have performed very well. But one of the reasons why you do test and have them in various parts of the country is when you do first to your prototype it gets a lot of attention and we want to make sure that it's real. So, we spread them out. We have continued to see sales and profitability above the Company average. They exceed the hurdles that Dick talked about in his presentation and make it very attractive for us to be as aggressive that we are when you talk about 15% of the Champs chain and 10% of the Foot Locker chain in a year with the number of stores we have. That's – we'll be now reasonably aggressive, and I think we've demonstrated that we will wait until we see something good. We've tested, and see if it's good, we'll move on it. So, we're not giving the specifics because I think as it expands it probably won't be quite as good as the test stores, but even if it's not quite as good, we will more than clear our hurdles.

Camilo Lyon - Canaccord Genuity: Would you care to talk about the directionality of those improvements over the untouched stores, meaning, are they 70% above the chain average or 30% above the average; any kind of approximation would be incredibly helpful?

Kenneth C. Hicks - Chairman, President and CEO: No.

Camilo Lyon - Canaccord Genuity: And then with regards to the apparel margins, I think Lauren you said that apparel margins were continuing to trend upward, where footwear margins looked like they were flat in the quarter, if I'm not mistaken.

Lauren B. Peters - EVP and CFO: (I thought) you got that right.

Camilo Lyon - Canaccord Genuity: What inhibits apparel margins from helping drive continued merchandise margin or merchandise margin expansion above what you guys are planning in 2013?

Lauren B. Peters - EVP and CFO: There's nothing that should prevent it. If we can continue to deliver improved apparel margins and it should be significantly higher in branded apparels and branded footwear, we think it's got upside to our margins in the long-term, but you got to get the offering right. You got get the apparel match to the footwear and you have to really create an apparel offering that the customer knows you for.

Richard A. Johnson - EVP and COO: There's a couple of things that are occurring, that we're working on. One is you have the issue with the level of private-label our private-label because we shifted from promotional to more performance in the case of women's and more fashion in the case of say for example Champs sports gear. We've had a drop and we haven't built that back up yet. We are now starting to build back our private-label and that will provide upward margins. The second thing I think is as we improve our planning and allocation because one of the challenges that we have in apparel is the level of markdowns and that brings us from having the wrong colors or sizes or whatever and so as we continue to improve that and as one of the things that we feel the new system will help us with in getting the allocation and it's not just the wrong size. It's making sure in some markets, bright colors sell better than dark colors or a team or a player. Season right, taking markdowns at the right time, those things will help us a lot and we are still getting better at it and it's great thing about retail is it's a business where you get to practice, and you have to practice and we are still improving our abilities in the apparel getting up to the level we have in shoes.

Camilo Lyon - Canaccord Genuity: Just one (sound) question on that topic. What type of margin improvement from apparel is embedded in the guidance?

Lauren B. Peters - EVP and CFO: I can't split out for you that way, but we do believe that we've got, as we said, opportunity in (margins) through leveraging the fixed cost, and we are looking at the merchandised margins, (a little) planning flat to slightly positive with that IMU pressure that we talked about being offset by lower markdowns.

Camilo Lyon - Canaccord Genuity: So it sounds like there's some embedded expectation of improvement in apparel, but given the way you just said prior to that, there's definitely room for upside from that perspective from that category?

Lauren B. Peters - EVP and CFO: That's right. Yeah, it (can) happen overnight and we think it's got long-term opportunity for us.

Camilo Lyon - Canaccord Genuity: And then just lastly on the components of the comp in the quarter, I think it'd be helpful if you are able to parse out ticket traffic conversion, particularly as regard towards the end of the year maybe how that could have been impacted by some of the macro pressures that you discussed earlier.

Lauren B. Peters - EVP and CFO: Well, I can't break all of those out for you by month, but I could tell you, as we said, ASPs were up; traffic up. That would have had some variance as you got into late January, and conversion is up, and that conversion was up consistently throughout the quarter.

Camilo Lyon - Canaccord Genuity: So it really was the traffic that seem to have caused a lot of the variation like it has for a lot of other retailers?

Lauren B. Peters - EVP and CFO: Well, it certainly was a factor.

Operator: Chris Svezia, Susquehanna Financial Group.

Chris Svezia - Susquehanna Financial Group: Just for Europe, what's your thought process in terms of the comp progression for 2013? You referenced mid-single-digits for the total Company and the margin progression for Europe. Given that you have some margin pressure there, you do have some apparel issues there, just sort of how we think about Europe as 2013 plays out?

Kenneth C. Hicks - Chairman, President and CEO: We know it's a challenging environment. We're pleased with where they are now, but I will tell you that our plan is low-single-digits right now.

Chris Svezia - Susquehanna Financial Group: Would you expect the margin profile to be better in Europe year-over-year?

Lauren B. Peters - EVP and CFO: Margins in Europe continue to be stronger than domestic, so that hasn't changed. Year-over-year, yeah slight pickup.

Chris Svezia - Susquehanna Financial Group: Then Lauren for you, just on the comment on the double-digit earnings growth for the year, any – as you parcel that out by quarter, just given the nuances in terms of the timing of sales and the weak shift, are there certain quarters where you couldn't attain double-digit earnings growth or is it pretty consistent?

Lauren B. Peters - EVP and CFO: Follow that logic that we laid out for the sales channels that we got with the shift. So, first quarter, third quarter double-digit would be aggressive. Second quarter, fourth quarter definitely you are going to see that benefit.

Chris Svezia - Susquehanna Financial Group: Then last question I have is just on the new stores, the remodels, are you guys anticipating any benefit in '13 either from – I don't know if those new stores are now in your comp base or you take them out of the comp and are titled as new stores. But are you anticipating any benefit in '13 front-end, whether comp or margin is that in your thought process at all?

Kenneth C. Hicks - Chairman, President and CEO: You are saying the remodels?

Chris Svezia - Susquehanna Financial Group: Right. In other words, the remodels, the stores that are in the Willowbrook Mall, the Foot Locker, right now and specifically the Champs 10%, 15% you plan on doing. Is any of that in '13 number in terms of what you are seeing?

Richard A. Johnson - EVP and COO: We built our plant around the expectation of these remodels performing – Ken mentioned that they outperformed the fleet. So, yes, it has been included in our plan.

Chris Svezia - Susquehanna Financial Group: Dick, are they in the comp or…?

Richard A. Johnson - EVP and COO: They are comp stores, yes.

Operator: Sam Poser, Sterne Agee.

Sam Poser - Sterne Agee: Can we talk a little bit about the SIX-02 concept. You are going to open up a few new ones kind of like they are going to might vary from the original. Can you talk about what you've seen is good, what you see that maybe challenging there and sort of where that is on the continuum of sorting out what really is going to work for lady?

Kenneth C. Hicks - Chairman, President and CEO: We've gotten very good feedback on the stores, one of the stores is doing phenomenal, one is doing what we thought and one is not doing quite so well. So, that's why we run test to get a more consistent read. But in all of them the customer reaction has been strong. The things that we are looking at and trying to understand is how we can make sure that we better show the brands that we have get more credit for the strong shoe position we have, make sure that we are able to provide an environment that the customer feels excited about and comes back to. So, we are talking about making – doing some things to make it friendlier. So, we are not looking at changing wholesale changes to the format. It's gotten some good reaction and we know that it can work. Now we are at a position where we want to make some adjustments and then test and see how those work and make a determination how fast we could expand it.

Sam Poser - Sterne Agee: Then can you give us an idea – I mean you might have said it by week in starting sort of like by week of how the comps were in like week 50th – in the last week of January, how they rolled through to today just to see the – how the effect of the tax refunds are maybe evolving here?

Kenneth C. Hicks - Chairman, President and CEO: What we've said was that the end of January was tough. February was also – start of February was tough, got better and that March is up high-single digits, so that kind of the transition.

Sam Poser - Sterne Agee: Were you up, I mean, could you assume that you are up in that high-single digits of the last week of February as well and the front half was pretty – the first week was pretty terrible?

Kenneth C. Hicks - Chairman, President and CEO: We're not by week given…

Sam Poser - Sterne Agee: This is just an exceptional time because of this – this strictly is tax refund, that's why I am asking the question.

Kenneth C. Hicks - Chairman, President and CEO: February got better as we went through the month and it ended up in the low, high-single digits. But it did improve and we really – March is all of five days old. So we fortunately have seen some nice results, but that's why I say, it'd be probably later in the month before we get a real good feel for all of the things that are happening.

Sam Poser - Sterne Agee: And then lastly – thank you for that. Lastly, there's been a lot of conversation out there about the running business. I mean, you saw low single-digit increase in the running business. When you're looking at the year going forward and thinking about that business, can you give us some color on that?

Richard A. Johnson - EVP and COO: I think the running business is a good business and it will perform in the low to mid-single-digits, which based upon the size of that business is pretty good. We don't see that being as explosive as basketball, but as some new ideas like Flyknit, like Boost, like what people like Under Armour doing, the continuation of the strength of Lightweight from people like Nike, the technical people continue to do well, and with Mizuno and Brooks and ASICS, all of which are very strong for us. We think it's a good solid business with good solid growth. We'd like to see grow at the chain.

Sam Poser - Sterne Agee: I guess that's what everybody else (indiscernible).

Kenneth C. Hicks - Chairman, President and CEO: I don't see it. Some people have got some concerns about that. I don't see the concerns about the running business that other people do. I think it's a good solid business. It's not – we would all like to have businesses that are up in the double-digits. But what makes the world work and go are those businesses that perform solidly on a consistent basis.

Operator: Paul Trussell, Deutsche Bank.

Paul Trussell - Deutsche Bank: Just a few follow-ups on the remodels. Lauren could you speak or Dick or Ken could you speak to the timing of the remodels in the system investments this year. Just so we can have a better idea about SG&A spend throughout the year. Second could you just speak to the expectation, kind of going forward, should we think about 200 remodels or so a year. Completing (15%) of Champs again in 2014 for example. And then just lastly is the amount of investment this year relatively fixed and therefore if there is upside to the topline will we be able to see that flow through to the bottom? Thanks.

Lauren B. Peters - EVP and CFO: The first question was about the timing of the construction project. SKU that if you will to the first half of the year it would be much of the activity happens in Q2 fair amount of that happens in Q1, but Q2 would be the highest point of it. You want to get the work done before your into back-to-school season and certainly you are not going to be in there in holiday so that’s why it's first half. The payment, follow that cadence, paying as you go through but you are making your last payments at the end of that. The allocation technology investment that would be something that is more ratable over the year it's not that that’s fixed in one quarter figure. Your second question was around whether or not that we could continue with this and elevated capital program. Well, yes, if these continue to deliver as we have seen in the testing, and expect them to deliver as we roll out absolutely, which gets back to our earlier conversation about maintaining our flexibility with our balance sheet to be able to do that, and we see that we could. And then your third question again if you could repeat that?

Paul Trussell - Deutsche Bank: Just wondering if your investments this year are relatively fixed in regards to the ability for additional upside from a top-line standpoint to flow through to bottom line?

Lauren B. Peters - EVP and CFO: Is your question could we do more projects this year than what we've laid out?

Paul Trussell - Deutsche Bank: Yes. Would you flex higher if the remodels that you roll out 1Q, 2Q, would you potentially flex that higher their other projects that are being considered to maybe add towards the end of the year. Just anything in regards to – plus just looking at your SG&A spend this year as kind of planned. In other words, on a mid-single digit comp, what is SG&A dollars expected to rise for the full year?

Lauren B. Peters - EVP and CFO: Okay. So to answer the question about the projects, no, I wouldn't see us putting more in than we've already described the $220 million, because as you can imagine that takes a lot of planning on the part of construction team and the leasing team to accomplish all of that. But, yes, we expect as we said to get leverage out of a mid-single digit comp on the SG&A. So, yeah, we planned the expenses and as we – you see further upside to sales, if we see that, yeah, you would expect to get greater leverage because we're not going to be plowing in more dollars into SG&A. So we've established operating plan inclusive of marketing plans as we said are flat as a rate of sales year-over-year. So, yeah, if there's upside to mid-single-digit, you'd get greater flow-through.

Operator: John Zolidis, Buckingham Research

John Zolidis - Buckingham Research: I know we're running long, so I'll keep this quick. One, I wonder if you could talk a little bit about why Kids is so strong; and then secondly, are you guiding to operating margin expansion '13 ex the items in the 53rd week, just a little confused about how we get to double-digit earnings growth and the mid-single-digit comps taking into account the other color you've given us on gross margin and SG&A?

Lauren B. Peters - EVP and CFO: Yeah, I can take how you model. Yes, off of the non-GAAP number of $2.47, that's how we're modeling that. So that's ex the 53rd week and it's the ex the impairment.

John Zolidis - Buckingham Research: So you are expecting operating margin expansion?

Lauren B. Peters - EVP and CFO: Yes.

Richard A. Johnson - EVP and COO: In our Kids business across all of the banners that sell Kids just continues to be strong. A couple of key items; I mean, there's great takedown product, all the exciting things that Ken talked about from color to technology to marquee player shoes in takedown formats, are working well; and importantly in our Kids Foot Locker chain we've expanded our apparel significantly. We've moved into a brand of representation of apparel there that's very strong. So I think the ability to hook up t-shirts, fleece pieces shorts with the sneakers to accessorize it appropriately, especially in the Kids Foot Locker stores and across the other banners, just a strength of Kids Footwear right now from a matching big brother or dad's footwear is really very strong.

Kenneth C. Hicks - Chairman, President and CEO: The other thing and it goes to my comment about the trend. I don't know how many people on the call have kids. I am buying a lot of penny loafers and Oxfords for your kids any more. In fact, Easter is a good time for us because instead of buying the kid a pair of black dress shoes that they can wear to church the parent say what the heck you are into them I'll buy him a nice pair of sneakers and they will wear a nice pair of sneakers to church and then they can wear them beyond the one day. So, it is definitely a trend and all of those kids wearing sneakers all the time are growing up and they will be used to them and they will see no sins in wearing uncomfortable brown shoes as they get older.

Operator: Seth Sigman, Credit Suisse.

Seth Sigman - Credit Suisse: Just to clarify on the merchandise margin. Ken, given the drivers you talked about plus Europe now improving which was the headwind last year. Can you maybe quantify what's embedded for merchandise margins in that flat to slightly positive margin guidance for the year?

Kenneth C. Hicks - Chairman, President and CEO: Modest basis point improvement. As we said, we've got IMU pressure which we think we can offset. We don't face and now moving off of merchandise margin on to total gross margin, we don't see the decline in net shipping revenue going away, so that's still a headwinds. But we do still believe on mid-single-digit that we get leverage out of the fixed costs.

Seth Sigman - Credit Suisse: And maybe just shifting to some of the online investments that you talked about for 2013. I mean can you maybe just elaborate on that or there are any major changes plan that we should be watching for or kind of just view them as minor enhancements for the year ahead?

Kenneth C. Hicks - Chairman, President and CEO: Well, we continue to update the site and make it more engaging place to shop. We are also working hard on things like online reserve and store inventory lookup for the customer buy online, pay in store, all sorts of different mechanisms that connect the stores and the online giving our associates tools in their hands, where they can test and communicate with the customer. But the real thing is when you look at the content its involved and working with the vendors and working with the stores that there's tremendous content that gets the people to the site to learn about what KD were last night, or see how I compared against the latest kids of on the combine to understand, when the launch is and some of the marketing efforts that we're doing. We're working on a consolidated database between all of our locations. So, we know, we understand that customer can really be smart when we communicate with them, and the whole big data thing that you've read so much about recently. That gives us a terrific position with the customer and communicating with them. So, there's no, you're not going to look and see, it's a whole different site. What's you are going to see is an evolution of things that engage that customer and allow us to better communicate and serve them.

Operator: Omar Saad, ISI Group.

Omar Saad - ISI Group: I wanted to follow-up on the IMU expectations. I know there have been a little bit more pressure from that front in 2012 and it sounds you're expecting that to ease a little bit. Can you just talk about some of the drivers behind the IMU pressure you saw in '12 and where is specifically you see some expectations of that easing a little bit in 2013 and then I have one follow-up question.

Kenneth C. Hicks - Chairman, President and CEO: Well, that the pressures where that the costs were rising for a number of reasons, and they were rising faster in some degree than the retails. The pressure on the cost have mitigated somewhat they are still there, but they've mitigated. And we continue to work and anticipate those with the vendors and have, I'd say, what can we price the shoe at and still make sure we get the volume from it. So, it's the pressure is the continued rise of the cost of the product and making sure that we don't put the product out of the price range of the customer.

Omar Saad - ISI Group: Then Ken on a related topic, how do you think about pricing has been a little bit of the sales driver last few years. What kind of, if you could look across the chain on average, what your price increases, ranges have been last year versus what you're expecting this year and going forward?

Kenneth C. Hicks - Chairman, President and CEO: We haven’t put out the percentage, but a low-single-digit percentage price increase is one that the customer has shown the ability to absorb and allows us the ability to absorb the cost increases. So the customer says when a (indiscernible) goes up significantly the volume drops it's economics 101. When it goes up modestly the customer continues to buy it. You also have to understand whether it's new shoe and you've changed the features versus whether it's just I am raising the price on the shoe that's been there a long time, and so those are things that we work very closely with the vendors with and think through what makes sense.

Lauren B. Peters - EVP and CFO: Our ASP is increasing our, there's couple of factors that are involved in that, we are doing more full priced selling, you got higher average selling price. And the fact that our apparel businesses has become more branded and last multiunit T-shirts that has raised prices in apparel and as that becomes a bigger part of our business that contributes higher ASP.

Operator: Eric Tracy, Janney Capital Markets.

Eric Tracy - Janney Capital Markets: I guess, you noticed it's been asked a few different ways, but I am going to try again here in terms of possibly getting a quantification of what's embedded in the mid-single-digit this year. What type of comp lift you expect from the remodels. Is that possible to get at that?

Richard A. Johnson - EVP and COO: They will grow faster than a store. Remember (mids) a reasonable range. They will grow faster than the store, but it is 10% and 15% of a portion of the chain and it also is only part of the year. So you take a 10% to 15% of a portion for part of the year, it is not a huge number this year. As we continue to grow and expand it, it becomes a much bigger factor. But this year it's a law of mathematics. When you look that, multiply it 10% times, a fraction times a fraction.

Lauren B. Peters - EVP and CFO: And it's a reality that the project takes time, so there'll be some period of time, days while the store…

Kenneth C. Hicks - Chairman, President and CEO: Yes, some of those stores – this is exactly right, particularly with the Champ stores, the stores are closed. So we lose sales for those days that it's closed.

Eric Tracy - Janney Capital Markets: Then, Ken, I guess a broader more strategic question, given the perceived cyclicality of a product pipeline in the business and the beliefs in the market, right or wrong of this has been a great comp story in driving structural margin in return, how do you think about, again, just strategically starting to shift more towards a unit growth. And obviously, Europe is probably would be going to be the driver of that, is there an ability to accelerate that, exploit a little bit of the market dislocation over there, just start to transition into some actual unit growth?

Kenneth C. Hicks - Chairman, President and CEO: Yeah, we think that Europe is a place that would provide significant unit growth and that's why we're expanding there. We also think that some of our banners provide an opportunity where we pull back on, for example, in the Kids business that's our second area for unit growth. We also look as we get the women's business and understand that what format works best for that that we can turn around and start growing those units. So, you got those three different things coupled with the significantly improved productivity that we would want to get over time from some of the actions that we're taking that there's continued opportunity for growth.

John A. Maurer - VP, Treasurer and IR: That's all we have time for today. Thank you again for participating on the call and we look forward to giving you an update on our next call which is tentatively scheduled for May 24. Thank you and good bye.

Operator: Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.