Operator: Thank you for joining us for the Aeropostale Conference Call to Review Fourth 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.
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; Emilia Fabricant; EVP of the Aeropostale Brand; and Marc Miller, our Chief Financial Officer. We issued a press release earlier this afternoon announcing our fourth quarter and fiscal 2012 financial results. A copy of the release can be found on our corporate website.
Before we begin, I'd 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 to reflect subsequent events or circumstances. Listeners of this call are referred to those 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. Last year, we spoke to you about four strategic initiatives that will lay the foundation for improvement of our overall business and brand positioning, offering team’s relevant fashion for the dynamic and fast changing lifestyle, communicating our brand message through fashion differentiated marketing campaigns that evoke an emotional connection with the team, building a best-in-class infrastructure to increase speed to market and developing our future growth drivers to build a global multi-brand business platform.
While we have not reached the level of performance we strive for, I believe we made progress in each of these key areas in 2012. Just as important, I believe that we have the right strategies in place to improve the trajectory of our business going forward.
Emilia, Marc and I look forward to sharing these strategies with you today.
First, let me take you through our most recent results. As many of you saw today, we reported adjusted fourth quarter results, which were in line with our previously issued guidance. During the quarter, we experienced a strong start to the holiday season, but trends decelerated as the quarter progressed.
We are seeing a continuation of these weaker trends in the first quarter, similar to what many other retailers are experiencing. Despite macroeconomic challenges, we know that Aeropostale must achieve greater results.
Last year, we made progress against our four strategic initiatives. First, we integrated more relevant fashion into our assortment, testing our brand parameters and setting the foundation to build on emerging trends and trending classifications. We highlighted this fashion through our nationwide marketing campaign with brand ambassador Chloe Grace Moretz.
To further enhance our brand projection, we opened our innovative and exciting Aeropostale studio concept store. To support our key initiatives and realize efficiencies across the chain, we made substantial investments in processes and technology. We also made advancements within each of our growth platforms, PS, e-commerce, international and recently acquired e-tailer GoJane.
While we recognize our accomplishments, we have a lot of work ahead of us. Our most important initiative is the evolution and transformation of our product. Last year, the teams did a nice job of integrating some compelling fashion into our assortment. However, we still have significant opportunity to develop our fashion offering by curating collections that have a distinct arrow point of view.
To lead this very important initiative, over the past few months, we’ve made invests in talent with the addition of Emilia Fabricant; a new Head of Aeropostale Design, Susan Martin; and a new Head of Aeropostale Women’s merchandising (Nancy Czar).
As we move into 2013, we will build on the progress we’ve made last year and broadened our initiatives centered around our four strategic initiatives; product, brand projection, process, and growth. Emilia will discuss product and process in a moment, but first, let me discuss brand projection.
In order to continue to be relevant to today's teen, we need to create authentic and emotional marketing campaigns that deliver a cohesive brand and product projection. Moving into the remainder of the year, we will be more directive and clear about who we are and what we stand for. There will be a 360 degree approach to marketing, meaning consistency in brand messaging across all customer touch points, in our stores, online and through social media.
We will continue to balance all of this with staying true to our DNA of highlighting great fashion at an incredible value. To support this effort, we are in the process of engaging a preeminent branding firm to help us articulate and crystallize our brand message to our consumer. Our most important initiative however, is the evolution and transformation of our product and the process that supports that transformation.
I'll turn it over to Emilia, who will take us through this.
Emilia Fabricant - EVP, Aeropostale Brand: Thank you, Tom. I'm very excited to be here today to share with you our merchandising strategies for 2013. One of the key strengths of the Aeropostale business is that the team has done a great job in maintaining a leading market share position in core basics.
While core basics for our heritage product will continue to be an important part of our business, we know that we have the opportunity to gain a greater share of the girls' closet. As Tom has said earlier, last year the team integrated some great fashion into our assortment.
This year we are taking it to the next level by transforming our business into a true lifestyle brand. We are beginning to build curated head to toe collection to meet her various moods and activity. We know that she wants complete outfits that are relevant when she's lounging around, going to school or (out with friends) on a Friday night.
We will do this not only by infusing more fashion into our mix but through balancing our tops and bottoms ratio, creating brand extension and expanding into new categories. Staring with a (small) segment of summer product, you will see a noticeable change in the trim, the finishing and the authenticity of our product.
Additionally, we will project this lifestyle approach in our stores, making strong and cohesive statements at the front door, throughout the selling floor and in our marketing. To support this move to more fashion, we will further enhance our processes and invest in technology.
The key here is to build flexibility, increase speed to market and localized assortment. Moving through the year, we will leave a low double-digit percentage open to buy and work with our vendors to create greater flexibility and scale in our sourcing model. While we already have chase capabilities today, our goal is to be able to chase almost every classification within 20 to 120 days. We will also reduce the number of overall floor sets for basics and post fashion into the store more frequently.
Our design and production teams will also start using the PLM tool to create cross-functional efficiencies and accelerate timelines. At the store level, we will have greater opportunity to distort our assortment by store profile based on the appetite for fashion in each of these stores. We have already started to distort our assortments through smaller pre-packs and will further improve localization through the implementation of our assortment planning tool later this year.
I speak on behalf of the entire production development team when I tell you that we're excited about the direction we're heading. We all understand that it may take some time for this change to register in the minds of our teen customer; however, we believe that we absolutely have the right strategy to improve the trajectory of our business.
I'll now turn the call over to Marc who will discuss our financials and our profitability initiatives.
Marc D. Miller - EVP and CFO: Thank you, Emilia. Total net sales for the quarter were down 1% versus last year, reflecting an average square footage increase of 4%, the impact of the additional week in the quarter, which accounted for 3%, offset by a negative 8% comp, which includes our e-commerce channel. Including our e-commerce channel, our guys business was down 4%, and our girls business was down 10% for the quarter. Our comp for the quarter was driven by a 5% increase in units per transaction, offset by a 7% decrease in average unit retail and a 6% decline in transactions.
During the quarter, we opened three Aeropostale stores and one P.S. store and closed 11 Aeropostale stores, ending the quarter with 984 Aeropostale and 100 P.S. stores.
Gross margins for the quarter were 19.8% versus 24.3% last year. Gross margins for the fourth quarter includes store asset impairment charges of $32.6 million related to the write-down of assets in 119 stores.
On an adjusted basis, excluding the impairment charges, gross margins for the quarter were 24.0% versus 26.1% last year. The 210 basis point decrease was driven by 70 basis points of lower merchandise margins and 140 basis points from the deleveraging of occupancy, depreciation, and distribution and transportation costs.
SG&A for the quarter was 19.9% of sales versus 19.2% last year. The 70 basis point increase was driven primarily by deleverage from store line expenses, deleverage from previously announced planned marketing investments and deleverage from e-commerce transaction related expenses. These were partially offset by lower corporate related expenses, driven by incentive compensation and lower store transaction related expenses.
Our tax rate for the quarter was 40.8% versus 35.9% last year on an adjusted basis. This resulted in a net loss of approximately $0.7 million or $0.01 per diluted share. On an adjusted basis, net income for the quarter was $19.1 million or $0.24 per diluted share.
Our balance sheet continues to remain very strong. We entered the quarter with cash and cash equivalents of approximately $232 million versus $224 million last year and no debt. We currently have approximately $104 million of buyback availability remaining under our share repurchase program. Program to date we have returned over $1 billion to shareholders in the form of 16 million shares repurchased.
Inventory at the end of the quarter was $155 million, down 5% in total or down 9% on a retail per square foot basis. Our capital expenditures for the quarter were $17 million and depreciation and amortization was $19 million.
I will now discuss our guidance outlook. As Tom mentioned earlier, similar to many of other retailers, we've been experiencing challenging macroeconomic headwinds and its impact on customer traffic into the first quarter. Additionally, based on the sales shortfall in the fourth quarter versus plan, we are planning increased promotional activity compared to the first quarter last year to clear through inventories, as a result, we expect pressure on both our sales and gross margin lines and we are initiating guidance at a loss of $0.15 to $0.20 per share. This guidance assumes a share count of 78.7 million and a tax rate of 40.5%.
Looking to 2013, we plan to open approximately 14 Aeropostale stores and approximately 60 P.S. stores. We also plan to remodel approximately 30 Aeropostale stores into our new studio store concept. Additionally, in an ongoing effort to optimize our real estate portfolio, we have identified up to 100 locations for store closure over the next several years.
Of these, we plan to close approximately 15 to 20 Aeropostale stores in 2013 on top of the 20 Aeropostale stores we closed in 2012.
Accordingly for 2013, we expect low to mid-single-digit square footage growth. We expect capital expenditures of approximately $89 million as we invest in store growth and remodels and depreciation of approximately $66 million. The tax rate will be approximately 40.5% for the full year.
Before turning the call over to Tom, I’d like to make a brief comment about our cost structure. While our cost structure is one of the leanest in the industry, we’re looking at every discretionary expense across the organization and leveraging our shared services model to realize opportunities for profit improvement.
Now, I will turn the call over to Tom for closing remarks.
Thomas P. Johnson - CEO: Thank you, Marc. While we are all intensely focused on turning around the core Aeropostale business and managing our cost structure, we must also keep our eyes towards the future. I'm proud of the progress we've made in developing our future growth drivers. P.S. continues to build brand momentum and resonate with the customer.
Last year, we achieved productivity levels that exceeded many of our competitors in a very short period of time. We’re excited to grow the square footage this year, and we continue to believe that over time P.S. can become a 500 plus store chain. On international front, over the past 12 months we signed deals in the Philippines, Panama, Colombia and Mexico.
International licensing revenues are becoming a meaningful part of the profitability with very little financial risk to us. We expect international licensing’s to contribute at least $0.07 per share for fiscal 2013 and is expected to triple by 2015.
Our e-commerce business also continued to post double-digit growth last year. Over time, we believe the e-commerce business can be $0.5 billion business. We will achieve this through product extensions, continued website enhancements, new platforms such as mobile and international shipping and the further development of both P.S. and GoJane.
We are excited about our growth vehicles and the larger impact that they would have on our business over the next few years. While we face near-term challenges, including macroeconomic headwinds, I believe that we have the right strategies and the right teams improve our business.
Before I turn the call over to Q&A, there were two things that I’d like to touch upon. First, I’d like to thank the entire organization for their hard work and commitment in 2012 and their renewed determination in 2013. As many of you may know, we were once again recognized as One of Fortune 100’s Top Companies to Work For. I’m very proud of the special distinction, particularly in the time of such sector-wide volatility. Second, as many of you know, Michael Cunningham, Aeropostale’s President will be retiring at the end of this month. Michael has been an incredible partner and friend for many, many years. He's helped Aeropostale become one of the most highly recognized and productive brands in retail and he did it with passion and a lot of humor. From all of us, Michael who we know you're listening, we thank you for everything that you've done for Aeropostale.
Operator, we're now ready to take questions.
Operator: Betty Chen, Wedbush Morgan Securities.
Betty Chen - Wedbush Morgan Securities: Good luck with your retirement Michael, if you’re listening. I was wondering Emilia, if you can talk a little bit about the merchandising strategies that you alluded to earlier and I wanted to just confirm the timing, if we heard you correctly. Did you say that we could start to notice some changes around trim finishes et cetera, around back-to-school in time for the back-to-school selling season or how should we think about the timing of that. Then related to that at that point in time is there any sort of sense you can give us in terms of the mix of core basics which remains very important to the business versus fashion which seems to be a big opportunity for the Company?
Emilia Fabricant - EVP, Aeropostale Brand: I do believe that you’ll start to see some change in summer, the teams worked very hard to chasing fashion trends that we’re seeing happen today, but their full eyes won't be until the back half of the year. Today we are chasing whatever we can as far as that sellers and trends to maximize the business and drive our fashion trend. As far as the mix core basics versus fashion that's really subjective to what's happening on a month-to-month basis, we are focused on updating our core and raising the profitability and making it more relevant to team. We are reducing over the next two quarters, the core basics penetrations by 26% and investing into fashion basics and fashion.
Betty Chen - Wedbush Morgan Securities: Emilia, can I follow-up on that for a quick moment. In terms of product that you’re chasing into is there anything you can share with us in terms of call-outs that's working well right now?
Emilia Fabricant - EVP, Aeropostale Brand: I'm not going to get into specifics, but we are definitely seeing an acceleration in the woven trend.
Operator: Adrienne Tennant, Janney Capital Markets.
Adrienne Tennant - Janney Montgomery Scott: My one question is it's really – if you can give us any color on sort of the sales momentum that goes along with the guidance, I was just wondering, if you look at a two-year stack, your comps get significantly harder in Q1, so sort of imply negative, sort of mid-to-high teen, and I was wondering if because you're being more promotional, we should expect an acceleration in the two-year stack trend?
Marc D. Miller - EVP and CFO: Sure, Adrienne. It's Marc. As it relates to comps, clearly the Q1 guidance assumes negative comps. In fact, the comp assumption that's built into the guidance is down double-digits and you are correct in pointing out that last year, Q1 were the best comps of the year. I am not going to forecast comps going forward other than to say as you see the impact of the merchandising initiatives that Emilia described, we do see the opportunity for AUR expansion and in that sense, that component of comps, we should see some improvement in.
Operator: Lindsay Drucker Mann, Goldman Sachs.
Lindsay Drucker Mann - Goldman, Sachs & Co.: Just two quick questions. First of all, can you talk about the investment in your remodels and the kind of return that you would expect to see and are all of these remodels similar to the prototype of your new store in the New York area? Then also, can you help us understand what your AUCs were in the quarter and what your expectation is for the next couple of quarters?
Marc D. Miller - EVP and CFO: This is Marc, I'll take that. In terms of the remodels, as you know we did our first remodel at the Roosevelt Field store on Long Island and the 30 remodels that we spoke to for this upcoming year are in a very similar format. We are value engineering some of the aspects of this store remodel, but for all intents the look and feel of the store will be very similar to that first one. The cost of those remodels are slightly north of what our last store model – our lifestyle store model was like, but we have internal investment hurdle rates that are in the high teens and we will monitor the progress of these stores against those hurdle rates as we make decisions to roll them out on a broader scale going forward. Second question was on average unit cost. We do have the benefit of lower average unit costs for Q1 versus LY. For 2Q and beyond on like-for-like items, we see costs being flat to slightly down over Q2 and Q3, which is what we placed so far. However, due to a mix shift, we do expect to see slight increase in average unit cost as we invest in some of the fashion categories that Emilia spoke to.
Operator: Janet Kloppenburg, JJK Research.
Janet Kloppenburg - JJK Research: I'd like to add my congratulations to Michael Cunningham for giving us all so much helpful to the last several years. Thank you so much Michael. I wanted to ask just two questions, Emilia, how are you. I am wondering – I am assuming that fashion becomes a bigger part of the mix and core basics become the smaller part. The concern I have there is how does Aeropostale distinguish itself as a fashion brand, because it's been so long associated with the Aero logo and as that becomes a smaller part of the business, how do you create that unique identity of Aeropostale. Just for Marc, I'm a little confused on the inventory, your inventory at year end, I think you said was down high single-digits per foot which is better than I expected, and yet it sounds like you have some carryover product into the first quarter, so I would have thought that would've been washed out, so thanks for clarifying that for me.
Emilia Fabricant - EVP, Aeropostale Brand: Alright, well, as far as our logo and fashion mix, the first thing I want to say about the logo and the core business is we do believe it'll continue to be a big part of our business as far as important. The problem is, we need to innovate it, and we need to update it so it's relevant to the teenager. So that is an evolution that we are seeing and as well as rightsizing logo, we see localization as an opportunity and (pulsing) it in the right stores and capitalizing on the stores that actually do sell it very well as well as the fashion part, so it's really a two pronged approach.
Thomas P. Johnson - CEO: Jennet, just to piggyback on that, this is Tom, how are you Jennet, good to hear your voice. Really it's about – all of our market research showed that the customer comes to us for basics and the incredible quality and value and what they continuously ask for us is that fashion. So we know that (pulsing) that fashion is as we did last year, it did resonated and did connect with that customer. Emilia is dead on, we have to just do it in a more cohesive curated fashion and we know we can do that. The second piece to it is really about the projection of the brand and often times during the many years that we put the large signs up, it's all have been about the promotion in the price. At this point, we really have to balance the -- really the emotional part of that promotion and that's how we're going to get that girl back in the store. So besides the product, we've got to project a better balance of promotion and emotion.
Marc D. Miller - EVP and CFO: Then finally Janet on the question about year-ending inventories; dollars per square foot were down 9% at the end of Q4, but we did have costing benefit year-over-year in that. So that meant units were flattish to slightly down within that number and clearly based on the comp trends that we're speaking to for Q1, that rate of unit growth was north of where our traffic trends are, which cause a need for increased promotions into Q1.
Operator: Lorraine Hutchinson, Bank of America-Merrill Lynch.
Lorraine Hutchinson - Bank of America Merrill Lynch: It seems as though you're really accelerating the P.S. rollout and I was just hoping for an update on that business. Did it breakeven last year and do you expect it to be profitable this year and how are the returns on that capital looking?
Thomas P. Johnson - CEO: Hi, Lorraine this is Tom. I can give you some color on the brand. We really very proud of the way the brand represents really the great new kids brand out there. Customer has connected with the brand in a deep way. We've added quite a bit of fashion, the fashion quotient continues to build and the couple of specific things that we've done in the business beside to adding fashion, we've created a just better zone which is kind of our answer to everyday low price which continues to grow. The boys business has been very strong for us overall. We’ve added four to six and the loyalty program, all of those things have really helped us gain traction with this young brand. So we're very encouraged how the brand is behaving. The productivity of the stores is very strong as we commented on in the upfront remarks as far as return rates are concerned.
Marc D. Miller - EVP and CFO: On breakeven, in 2012 we did not break even. As we said, we needed 100 stores to operate on a full year before we would approach breakeven for the chain. We said last year just directionally it was worth a couple of cents drag on earnings each quarter. This year, as we look forward to the rollout of the 60 new stores, we do believe we can achieve breakevens for that division for the year. Clearly, the new stores that we’re opening we believe will exceed our internal hurdles rates on returns on invested capital.
Operator: Marni Shapiro, The Retail Tracker.
Marni Shapiro - The Retail Tracker: Congrats to Mike. Welcome Emilia. Congrats on your new store prototype. I think it is beautiful. So Emilia if I can since we have you on the call could ask you a couple of quick questions. You have been here now a little while, can you talk a little bit about the sourcing partners that you found as you came into Aeropostale and how you feel about the partners today and are there opportunities to add partners as you shift from what were your core basics into fashion and – or even work with the partners that you have in a different manner, maybe shift them into fashion alongside you guys?
Emilia Fabricant - EVP, Aeropostale Brand: Well, I have to tell you that one of our key strategies is (speed) to market and we have been working very closely with our vendors to achieve that; not only that, but the authenticity of our fashion. I'm very excited with what the vendors have been able to achieve. So we are working with both our current vendors and we brought on new expertise as well and as we expand in additional category and they are a key part of our speed to market strategy and our momentum is definitely growing.
Operator: Kimberly Greenberger, Morgan Stanley.
Jay Sole - Morgan Stanley: This is Jay Sole for Kimberly. I got a question. When I see – you guys talked about how your 2013 strategy was to control inventory and drive comp through higher EUR and Marc, I think you mentioned it on an earlier answer to a question. Have you been able to see this strategy take hold? What have you experienced thus far in Q1 that maybe has changed your plan or recommitted you to the plan?
Marc D. Miller - EVP and CFO: The answer that we were playing defense as we went into Q1, just because the rate of sales in Q4 where the buys are so large and the comp decline was negative eight in total, we just weren't able to liquidate fast enough to get out of all the inventory that we wanted to, to end cleanly at the end of the quarter, which created an overhang into Q1. As we think about forward buys though, we bought down our Q1 and Q2 down mid-single digits, which is part of that inventory discipline that we spoke to at ICR. As we look at the back half of the year, we see the potential to bring down buys potentially even more than that mid-single digit rate, but importantly, as we place those inventory buys more conservatively, what Emilia spoke to upfront is the open to buy and keeping open to buy in that low double-digit percent range. So we have more flexibility built in the supply chain than ever before, the test read and react to fashion. So as we placed those conservative buys, there is still room in there to chase trends. As one of the benefits of some of the inventory discipline from the lower Q1 buys, so far in our girls segment, on full-price merchandise, we have seen that AUR expansion within the first quarter. So as we look into Q1 and beyond, our plan is very much the same; maintain tight inventory discipline; keep the buys down on a unit level; chase, read and react and we believe that will be a strategy that will raise AUR for the year.
Operator: Jennifer Davis, Lazard Capital Markets.
Jennifer Davis - Lazard Capital Markets: Actually, I have a clarification first and I am sorry if I missed it. Did you state the online sales increase without GoJane?
Marc D. Miller - EVP and CFO: No, we just provided a consolidated e-com growth number, which was plus 16% for the quarter and plus 19% of the year. Just to be clear that GoJane was from about mid-November on, but we saw that in our sales.
Jennifer Davis - Lazard Capital Markets: Then my question is for Emilia since you're on. The items like the lace back tee, I think you have -- I don't know how many colors you had in the store, maybe six or so. Should we think about that kind of as a strategy as that is what I would call, I guess a fashion basic, which I think is a good strategy and a right strategy for Aero. It's kind of a replacement from the logo type of business, and it's still, I think, appropriate for the customer, but I assume, since you kind of buy it relatively deep and buy it across a number of colors, you still get a good price on it. So, I was just wondering if the margins on that kind of item are similar to the logos because you do get good -- you at least did get very good buys on the logos because of the volume. So anyway, I'm just kind of trying to get an understanding of that. Then kind of a follow-up on that is, about a couple weeks ago, we saw, you've replaced that whole kind of runway graphic tee presentation with these kind of lace back tees and other items similar to that, but then more recently we saw some more graphic tees come back in and I was just kind of curious about that, because I kind of liked the direction you are headed, so just curious?
Emilia Fabricant - EVP, Aeropostale Brand: First of all, fashion basis is definitely a key point to our strategy and I'm not going to get specific to the gross margin, but we are doing what the team has done an excellent job of doing, is testing and reacting. So, we can capitalize on these fashion basics. As far as the graphic tees, I'm not sure what you are referring to. They are down; we are continuing with the fashion basics, the fashion strategy and you'll see more of that come in. So, what you are seeing today in the T-shirt fashion basics and more or so in the fashion will continue to grow through the quarters.
Operator: Randal Konik, Jefferies & Co.
Randal Konik - Jefferies & Co.: Can we just talk about the real estate here? I think you just talked about identifying 100 stores. Why not get more aggressive here and really look to pair back the real estate profile here. Is there any more in-depth metrics you can share with us on what's losing money, what's not losing money geographically, A, B, C malls. Just very curious here in terms of the real estate strategy and how we can maybe get the business to improve the returns on capital et cetera. So, can you just give a little more color there?
Marc D. Miller - EVP and CFO: Randy, I’ll start with just a little more color about the store closing and then Tom may speak to some of the regional and A, B, C type breakouts. As we identified, we see the opportunity of up to 100 stores, which is up to 10% of our store base. That's a significant number and it represents the overwhelming majority of stores that lose money. The ones that are not included, that are loss store today, are ones that we have very specific reasons to believe that there's room for comp and margin growth in those locations. We do a thorough analysis and this is the result of many months of looking critically at our real estate and what we've seen is that, while we have those loss stores and absolutely believe it's the right thing to do, to look at closing, those 100s of stores, there are economics around when to optimize the timing of those store closings. So we will – just like last year, we closed 20 stores, we spoke to closing 15 to 20 this year and as we look to the out years, you can expect to see similar levels. As far as the composition of the stores that we look at to close, as you can well imagine, it's mostly around stores that do low volume. Generally speaking, the doors that do the lower volume are in the C locations in addition to some of the selected lifestyle centers that do not have the teen traffic that we need to do the business off of. So typically the A doors are the ones that perform the best and they are the ones that we continue to maintain mostly opened.
Operator: Lee Giordano, Imperial Capital.
Lee Giordano - Imperial Capital, LLC: Can you talk some more about the marketing plan and what you are going to doing the increased traffic and elevate the brand messaging this year?
Thomas P. Johnson - CEO: Surely. We – one of the comments I made earlier is that we know we've been very successful with pulsing pricing promotion at the front door and that's very effective for mom more so than the teen and we know that through the market research that teen wants authentic compelling marketing that just connects with them. So we’re looking at 360 degree look at our marketing attack. It’s not only at the store level, at the front door and the in-store experience, it’s online and it’s in our social media. So we know that we have to be more complete in the way that we communicate to this teen. We have to amplify our fashion message and really take a hard look at the product, items, categories that we know we need to take a stand for and we’re really excited about what you’ll see for summer. We feel that the photo shoot really evokes quite a bit more motion for us and we’re looking forward to showing some great stuff for fall and holiday as well.
Operator: Dorothy Lakner, Topeka Capital Markets.
Dorothy Lakner - Topeka Capital Markets: Just a follow-up with Emilia on – one, just a little bit more color on the timing of the change we should see in the fashion composition. I know you said there will be a small amount for summer, but is it going to be full-blown for back-to-school or should we really be looking at holiday for the kind of complete impact of what you want to show? Then just in regards to that what we should be seeing as we look through the stores in terms of the fewer floor sets, which I think you said were just basics, if I'm not mistaken. So what’s the timing there, I mean should we see that right away?
Emilia Fabricant - EVP, Aeropostale Brand: So first on the fashion, I would say every month from April on you will see an incremental change and the majority of the change will start happening in the back-to-school timeframe, but we are continuing to evolve and chasing the business as we have learn more about the customer and their reactions to our fashion and the fashion trends, we continue to evolve. As far as the fewer floor sets, you will start seeing that change in fall, and it's really more about spending core basics. We will reduce that amount and actually we’re increasing the fashion basic and fashion flow. It is a balance between the two.
Operator: Eric Beder, Brean Murray, Carret & Co.
Eric Beder - Brean Murray, Carret & Co.: Could you talk about the – you have used Chloe Moretz as one of your celebrities. You have done this historically before, how to kind of the celebrity endorsements flow into your longer-term marketing plan? I know historically you have taken a celebrity for only a year or two. How do you think that based in terms of the marketing business?
Thomas P. Johnson - CEO: This is Tom. We felt good about the initial buzz that we got off of Chloe. It definitely got quite a bit of attention. We think that it resonated with a subset of the customers. We think overall we really wanted to shift the campaign back to be a little more authentic and emotional. That's where we’re headed back to, but I think Chloe was very good for us and its right for the time.
Operator: Stephanie Wissink, Piper Jaffray & Co.
Stephanie Wissink - Piper Jaffray & Co: Just one quick one for us on the international market, if you could just give us some sense of the scale and the contribution? I know you have quantified the EPS potential. But just thinking about the overall scale of that business, if you were to gross it up to retail, and then any markets that you are looking at here in 2013 opportunistically?
Marc D. Miller - EVP and CFO: Sure, it is Marc. I will take that. We finished last year with 30 licensed stores in seven countries and as we look to 2013 we see the opportunity to extent into 12 countries this year and with the store count that's almost triple where we ended last year. So pretty close to 90 stores. Tom alluded to some of the deals we had signed, we'll be opening this year in the Philippines and Panama, Colombia and in Mexico and we will have hopefully at least one more market beyond that. Overall, Tom did quantify the EPS impact at approximately $0.07 for this year with the opportunity to triple it over the next three years and we just see as we add new licenses are continuing to add territories at the rate of three to four per year. This is a business that will grow exponentially over time.
Operator: Jeff Black, Avondale Partners.
Jeff Black - Avondale Partners: I guess I'm just confused on the trajectory like everyone else. I mean, it seems like, I hear you on the macro and I hear you on the tough environment, but what we saw in February that came in the stores on clearance and now that clearance is 30 off, and you're telling us April is that – what kind of degree of newness are we having overdeveloped what we've got here and I guess, it just gets to what gives us confidence that this works and turn the switch into 2Q?
Marc D. Miller - EVP and CFO: Jeff, let me tackle that one. In terms of the cadence of business in Q1, February was clearly a month where we were working through Q4 overhang and as we work through that overhang, the prices that we needed to get out of that merchandise, a year-over-year was significantly lower on clearance than they were in prior year. So, we had a bigger drag on both AUR as well as merchandise margins to clear out of that Q4 overhang. As we're looking into the back half of March and into April, we definitely see ourselves in a cleaner inventory position, and that's where we're starting to see some of the traction on AUR as we're selling more full price. I believe I mentioned earlier that a girl's full price selling AUR is higher this year versus (LY). So, as we start to see the impact, as Emilia spoke to, over the next few quarters, where we're bringing in the fashions, transitioning that assortments and, in addition, making some of the other merchandising initiatives that she spoke to, such as the increasing the bottoms penetration, extending into new product classifications as well as the fashion, we see the opportunity for both AUR and merchandise margin improvement. The last point on that is one additional benefit we'll have, especially as we approach the back half of the year, is through assortment planning. Emilia mentioned in her upfront remarks that we are going to have the ability to deliver more localized assortments than we ever have before. So whether that means getting fashion product to the stores that can handle that fashion product while preserving those stores that tend to sell more (corn) logo, that's an incremental capability year-over-year, so when you combine all those factors together, we do see the opportunity for both AUR and margin expansion as we progress through the year.
Operator: Richard Jaffe, Stifel Nicolaus.
Richard Jaffe - Stifel Nicolaus & Company, Inc.: Just to follow-up on the balance between core basics and then fashion, I'm wondering where average unit retails will go for each of the two categories or how the balance will shake out. Presumably, the fashion is going to have at the higher average unit retail. Could you help us understand that?
Thomas P. Johnson - CEO: Richard from a composition, while we won't be specific about particular segments, we think we have opportunities to raise AUR on both core as well as fashion. The drivers are obviously as fashion becomes a bigger penetration to the mix, those fashion items do carry a higher AUR. The second piece, which Emilia spoke to as well, is that on core, as we create freshness in that core and some level of differentiation from the (tables) that we previously offered, we do think there is opportunity to get out of the commoditized part of core and grow AUR in that segment as well.
Operator: John Kernan, Cowen and Company.
John Kernan - Cowen and Company: Just a little bit more detail on PS. Is there a meaningful difference between the merchandize margin you are earning at P.S. and the merchandize margin you are currently earning in the core Aero business?
Thomas P. Johnson - CEO: No, John. The margin structure is similar with P.S. to Aero, it's slightly lower at this point because of the scale of how we buy for P.S., but as P.S. gained scale, we look to those margins to come up over time.
Operator: Dana Telsey, Telsey Advisory Group.
Janine Stichter - Telsey Advisory Group: It's Janine Stichter in for Dana. I was wondering if you could talk a little bit more about e-commerce and what strategies you are using to drive that business and then any early learnings you’ve had from GoJane acquisition?
Emilia Fabricant - EVP, Aeropostale Brand: As far as e-commerce, you may have noticed over the last year, there has been several initiatives, we have brought in fashion shoe, we have extended sizes. We will continue to bring these product extensions in web exclusives that will help us expand the business.
Thomas P. Johnson - CEO: As far as GoJane is concerned, very excited to continue the momentum that the brand already has, being a very successful e-retailer and certainly leverage the expertise in the new category for us, which is footwear, so more to come and we know that the show business could be very strong. The last piece on e-commerce, beyond all of the product opportunities that Emilia just spoke to, from a platform, we are investing heavily in mobile, it's becoming an increasingly important part of our traffic pattern. In fact, Q4 it accounted for over a third of our traffic from mobile, so we are investing a lot of infrastructure to make sure we're optimized across mobile platforms.
Operator: Linda Tsai, ITG.
Linda Tsai - ITG: Yes, how do you feel about P.S. business in terms of the balance between core and fashion, are you planning to increase the amount of fashion you carry there as well?
Thomas P. Johnson - CEO: Linda, this is Tom. We feel very good about what the teams have done so far and the balance between the fashion and core. The interesting thing there is that that young customer has a ferocious appetite for fashion. So we will continue to flex the fashion muscle over there and more to come, but we're pretty excited about the balance right now.
Operator: Howard Tubin, RBC Capital Markets.
Howard Tubin - RBC Capital Markets: Any regional differences currently in performance you should share with us right now in the first quarter?
Emilia Fabricant - EVP, Aeropostale Brand: Well, we continued to see the south and the west have incrementally better results.
Operator: Edward Yruma, KeyBanc Capital Markets.
Edward Yruma - KeyBanc Capital Markets: Just a quick question, I'm sorry if you already mentioned, on the store impairment charges, does this indicate then that these stores are kind of negative on a four-wall cash basis and that there is no likelihood that they will a turn? Is that included within that 100 store kind of 100 store analysis that you’ve done?
Marc D. Miller - EVP and CFO: Edward, the store impairment includes both full impairments, in which case as you point out, the negative operating cash flows that I projected would never cover the value of the assets that are on the books, as well as partial impairments, in which case we do see cash flows turning positive over time, but the reality is they may not cover the full value of the assets that are on the books. Clearly, as we speak to an opportunity to close up to 100 that is a subset of the stores that we have included in this impairment charge.
Operator: I would now like to turn the floor back over to management for their closing comments.
Thomas P. Johnson - CEO: Thank you all very much for your continued support. We look forward to speaking to you in a couple of months and we definitely will send Michael your well wishes. Take care.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.