Good morning, and welcome to The Children’s Place Fourth Quarter and Full Year 2020 Earnings Conference Call. On the call today are Jane Elfers, President and Chief Executive Officer; Mike Scarpa, Chief Financial Officer; and Rob Helm, Senior Vice President, Finance.

The Children’s Place issued its fourth quarter and full year 2020 earnings press release earlier this morning, a copy of the release and presentation materials for today’s call have been posted to the Investor Relations section of the company’s website. This call is being recorded.

If you object to our recording of this call, please disconnect at this time.

[Operator Instructions] Before we begin, I would like to remind participants that any forward-looking statements made today are subject to the Safe Harbor statements found in this morning’s press release as well as in the company’s SEC filings, including the risk factors section of the company’s Annual Report on Form 10-K for its most recent fiscal year.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. The company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof.

After the prepared remarks, we will open the call up to your questions. We ask that each of you limit yourself to one question so that everyone will have an opportunity. It is now my pleasure to turn the floor over to Jane Elfers..

one, our store closures; and two, occupancy cost reductions. Both of these initiatives rely on our multiyear strategic focus on lease term flexibility, and both of these initiatives will be key contributors to our accelerated operating margin goals. First, store closures. Prior to the pandemic, we were closing approximately 40 to 60 stores a year.

We are now planning to close 300 stores in less than two years, which accelerated our store closure plans by approximately five years. Again, due to our strategic foresight, we had positioned our real estate portfolio with maximum flexibility.

So when the pandemic hit and we saw the unprecedented acceleration in our digital sales and the rapid deceleration of our stores channel, we were able to quickly formulate a plan to close 300 stores in less than 20 months without financial penalty. I would also remind you that our fleet optimization strategy has been in place since 2013.

And for the better part of the past decade, we have stayed true to our original strategy. We have not veered back and forth between a store opening and a store closing strategy, rather we have been consistent, and that consistency is paying off. As we mentioned on the last call, our transfer rate is running at 30% versus 20% ending full year 2019.

We performed significant analysis to arrive at our transfer rate. When done properly, historical transfer rate is a fixed number. It is not a range. It is the result of thousands of key inputs. And within that transfer number, a portion is calculated as transfer to stores, and a portion is calculated as transferred to e-commerce.

Our 2020 transfer rate breaks out into 52% to remaining stores and 48% to our digital channel. Transfer rate is a critical measurement of the success of our digital transformation initiative as it measures our ability to retain, transfer and convert our store-only customers as we continue to rightsize our brick-and-mortar fleet.

Our omni customer spends three times more than our non-omni customers, and we anticipate that our transfer rate will continue to increase as we close more stores and as the remaining stores’ productivity increases in the post-COVID environment.

To provide some revenue context, the 300 stores we are closing by the end of 2021 represented approximately $217 million in store sales in 2019.

Factoring in our transfer rate of 30%, we expect a consolidated sales loss of approximately $190 million after the completion of our accelerated store closure plan or only slightly less than 10% of our consolidated 2019 net sales while reducing our physical store fleet by approximately 30% since 2019.

We expect these accelerated closures will be accretive to our operating profit and margin. Moving on to occupancy reductions. We have an extensive real estate portfolio with more than 200 landlords. Our multiyear strategic focus on our lease portfolio positioned us with ultimate flexibility at the onset of the pandemic.

With average lease terms of less than two years and several hundred lease actions available to us, this strategic setup allowed us to select our go-forward landlords wisely and to strategically negotiate for rent abatements for 2020 and/or rent reductions on these lease actions.

This work represents a decrease in our occupancy expense for these lease actions and as a component of our accelerated operating margin expansion strategy.

And lastly, as we discussed earlier, an important component of our accelerated operating margin strategy is the market share opportunity afforded to us due to the unprecedented number of competitor bankruptcies, forced liquidations and forced store closures that occurred in 2020 with more disruption anticipated in 2021.

This condensed disruption provides us the additional opportunity to avoid costly multiyear competitor liquidation and store closure events. Another important benefit of the accelerated shift in competitor dynamics is the opportunity to increase merchandise margins in both our stores and digital channels by selectively pulling back on promotions.

Competitor closures, coupled with our strategic sourcing abilities and disciplined inventory management, should help us achieve higher merchandise margins in both our digital and store channels. In the past 12 months, the world has forever changed, but the consistent execution of our long-term strategic plan has prepared us for this change.

We believe that the combination of our consistently strong product offering, the resurrection of Gymboree and the other market share opportunities and strategies we have in place to continue to combat sustained birth rate declines; the significantly reduced competitor base, which accelerates market share and merchandise margin opportunities; the five-year acceleration of our store closure initiative, resulting in a more profitable fleet and positioning us with less than 25% of our revenue coming from traditional malls at the end of 2021; and the five-year acceleration of our digital transformation, resulting in an approximately 50% steady-state digital penetration that strategically maps back directly to our core customer, a digitally savvy millennial mom with the even more digitally savvy Gen Z mom to be right behind her, all of these strategies work together to provide a strong path to accelerated operating margin expansion and share gains.

I would like to close with a paragraph from our March 16, 2020, earnings release one year ago, and I quote, "While we are in an uncertain period, the underlying fundamentals of our business are strong.

We are confident that our management team will continue to focus on and execute against our key strategic growth initiatives, uniquely positioning us to continue to capture profitable market share, generate strong cash flow, increased returns on our invested capital and create value for our shareholders in the years ahead." March 16, 2020, seems like a lifetime ago, but those words are as true now as they were a year ago.

To date, we have managed through this pandemic at a very high level and successfully avoided the fate of so many other retailers. We are a stronger company today, and we are better prepared for the future due to the consistent execution of our strategic plans and the tireless efforts of this management team and all of our associates.

We remain confident in our strategic plan, and we look forward to continuing to deliver for our shareholders. Before I turn it over to Mike to discuss fourth quarter, I know all of you saw our release in early February regarding Mike’s decision to retire from The Children’s Place after almost nine years with the company.

I know how much all of you have appreciated your interactions with Mike, and we have been fortunate to have Mike on our team as a key driver of our transformation from a North American brick-and-mortar retailer into the digital-first global company we are today.

We are also fortunate that our strong focus on leadership development and succession planning has enabled us to promote Rob Helm as our next CFO. A capable and engaged leader, Rob has been with TCP since 2016, taking on roles of increasing responsibility.

Rob has been deeply and actively engaged with me in navigating the company through the pandemic over the past year, and I anticipate a smooth transition to the CFO role for Rob. We wish Mike the very best in his retirement and thank him for his dedicated service.

Mike?.

one, the impact of our permanent store closures inclusive of the 33 doors we closed at the end of fiscal 2019 and the 118 doors that we closed in the first three quarters of fiscal 2020; two, the negative impact of the government-mandated COVID-19 temporary closures in Canada, with two thirds of our fleet closed for half the quarter; and three, the negative impact of an approximately 15% reduction in mall operating hours as mandated by our mall landlords.

Our dress up sales were at an historic low, however, this was partially offset by strong customer acceptance and sell through on the balance of our casual apparel and sleepwear. Adjusted gross margin. Adjusted gross margin decreased 210 basis points to 30.4% of net sales.

The gross margin decrease was the result of the increased penetration of our e-commerce business, which operates at a lower gross margin, inclusive of incremental freight surcharges and additional costs resulting from actions taken to mitigate capacity constraints with our major carriers, including higher levels of ship from store than originally anticipated, and a $14 million holiday dress up product donation to delivering good.

This was partially offset by lower occupancy costs due to rent abatements of approximately $13 million and lease negotiations and higher merchandise margins in both our stores and digital channels. Adjusted SG&A. Adjusted SG&A was approximately $103 million versus $113 million last year, and leverage 30 basis points to 21.7% of net sales.

The 30 basis point leverage was a result of a reduction in store expenses resulting from our permanent store closures, as well as the strategic reduction in overall operating expenses associated with actions taken in response to the COVID-19 pandemic, partially offset by higher incentive compensation accruals. Adjusted operating income.

Adjusted operating income for the quarter was $26 million versus adjusted operating income of $35 million last year and deleveraged 140 basis points to 5.5% of sales. Our interest expense for the quarter was $4 million versus $2 million last year.

The increase in interest expense reflects a higher debt balance and the higher interest rate associated with our term loan. Our adjusted tax rate in the quarter was 32% versus 17% last year. Moving on to the balance sheet. Our cash and short-term investments ended the quarter at $64 million, flat to Q3 cash levels.

We ended the quarter with $170 million outstanding on our revolving credit facility, down $9 million versus our Q3 level. We ended the quarter with total inventory up 19% versus last year.

The entire increase in our inventory versus last year is comprised of the same back-to-school basics we have been carrying since June due to the lack of a back-to-school catalyst. We expect our inventory levels will revert to historic norms after the majority of students returned to 100% in-person learning.

Our seasonal carryover inventories are down approximately 30%. Moving on to cash flow and liquidity. We generated approximately $15 million in cash flow from operations as compared to $77 million in cash generated in Q4 last year.

We remain confident that between our cash position and our credit facility, we have the necessary liquidity to support our operations. Capital expenditures in Q4 were approximately $7 million. And now, I’ll turn it over to Rob to provide an update on our fleet optimization metrics and some thoughts on 2021..

Thanks, Mike and good morning, everyone. During the fourth quarter, we finalized 2020 occupancy negotiations with our key go-forward landlords. We secured rent abatements for 2020 with a portion reflected in our Q4 2020 results and a similar amount to be recognized in our Q1 2021 results.

We also negotiated rent reductions on the lease actions we had available to us. We permanently closed 60 stores in the quarter, which brings our total store closures to 178 for 2020.

We are now targeting 122 store closures for fiscal 2021, including approximately 25 during the first quarter and approximately 97 by the end of fiscal 2021, which will bring our total store closures to our previously announced target of 300 stores.

While we are not providing EPS guidance for full year 2021 due to the continued uncertainty regarding the pandemic, we want to provide you with our current thinking regarding Q1 as well as some thoughts on full year 2021. Starting with Q1.

While we anticipate that total net sales will be higher in Q1 this year versus last year as we anniversary the complete closure of our store fleet for approximately half of the quarter, we anticipate that total net sales will be lower than historical Q1 levels due to the lack of an Easter catalyst, which historically accounts for approximately one third of our business in the first quarter; the impact of the 178 permanent store closures over the past 12 months; and the 25 stores we expect to permanently close this quarter; the impact of the continuing pandemic disruption on our retail stores, including government-mandated temporary store closures in Canada, that impacted two thirds of our Canadian stores for 60% of February; and the negative impact of an approximately 20% reduction in operating hours during Q1 in our mall stores as mandated by our landlords.

and lastly, the impact of product delays resulting from port congestion. Taking into account these multiple headwinds, we anticipate net sales for Q1 of approximately $330 million.

We anticipate that gross margin will be significantly higher than last year due to our expectation that the majority of our stores will be open for the entire quarter versus significant pandemic-driven closures last year, the impact of lower occupancy costs including recognition of the remaining 2020 abatements and merchandise margin expansion.

However, we anticipate our Q1 gross margin will remain slightly lower than our historical Q1 gross margin levels due to the impact of the increased penetration of our e-commerce business, which operates at a lower gross margin, and the deleverage of fixed costs due to lower sales.

SG&A is planned to be in the range of $100 million to $105 million, which is higher than last year due to the anniversarying of the COVID-19 closures. However, we expect SG&A to leverage the last year due to the structural cost reductions we put in place during the pandemic. Moving on to full year 2021.

While we do not have visibility as to when the pandemic will subside, we think it is fair to assume that our top line will continue to be pressured versus historical levels until the vaccine is widely distributed, the vast majority of schools revert to full-time in-person learning, and extended families once again gather together to celebrate the important occasions and milestones in their children’s lives.

We expect a significant increase in store sales for the first half of 2021 as we anniversary the temporary store closures during Q1 and Q2 2020. For the second half of the year, we expect store sales to remain flat to 2020 levels as increased store productivity will be offset by the impact of our permanent store closures over the previous 12 months.

We are planning to close 122 stores during fiscal 2021 and expect to enter fiscal 2022 with 75% of our total revenues generated outside of traditional malls.

We anticipate digital sales will represent approximately 50% of our total consolidated sales for fiscal 2021, which puts our steady-state digital revenue penetration significantly ahead of our competition, supported by our digital investments, increased transfer rate and fleet optimization initiatives.

The pandemic-driven disruption in the global supply chain is impacting our receipt timing, and we anticipate that this will continue through the first half of 2021. We are well positioned for back-to-school school since the majority of our key back-to-school inventory has been in place since last June.

We are also experiencing increased costs for inbound freight due to equipment and container shortages. While material input costs are also rising, we have been able to mitigate these increased costs to date with our 2021 AUC projected to be down low single digits through our back-to-school placements.

We expect our full year tax rate to be in the range of 26%. We are planning to return to operating cash flows for fiscal 2021.

However, we expect operating cash flow generation to be slightly lower than historical levels due to the repayment of suspended 2020 rents, net of abatements, as well as other changes in working capital, partially offset by a tax refund in the range of $40 million to be received as part of the benefits provided under the CARES Act.

As a reminder, our term loan provides us with the opportunity to use a significant portion of this refund to pay down the term loan without penalty. Lastly, we are planning for capital expenditures in the range of $50 million, with the majority allocated to digital and supply chain fulfillment initiatives.

At this point, we will open the call to your questions..

[Operator Instructions] Our first question comes from the line of Dana Telsey of Telsey Advisory Group..

Good morning, everyone and nice to see the progress.

As you think about the headwinds from port congestion, any more color in terms of what you’re seeing there, either in terms of cost, how long it goes on? And then, Jane, with digital sales and the new customers that you gathered, the market share opportunities out there, do you see that accelerating as we get through the – get to the second half of 2021, leading you to an even higher state of revenues in 2022? How are you thinking about it? Thank you..

Thanks, Dana. First of all, as far as port congestion is concerned, everyone is talking about it, and everyone’s experiencing it. The positives from our side is that we have, over the past decade, had a strategy in place to get ourselves reduced in Asia, and that’s where you’re seeing most of this disruption come from.

And also, you’re hearing a lot about the West Coast ports, and we don’t go through the West Coast ports. So, those two help to mitigate. I would just give you, as an example, really where we’re seeing the congestion is on our summer delivery.

And at a high level, I would tell you, 40% of our summer delivery is running approximately two to three weeks late. From a back-to-school point of view, definitely a negative turned into a positive. We’ve been carrying that back-to-school inventory since last June.

And the great news is it’s in our inventory, so we’re not going to have to pay up to get it here. And we’re not going to have any worries that it’s going to be late. So that’s really the good news for us. As far as your question about digital sales and market share, we picked up a lot of customers in 2020, and we talked about it.

We picked up 1.9 million customers last year. And so when you think about what our focus is going to be on in 2021, it’s always been on acquisition, but certainly, our focus is going to be on retaining those new customers. When you think about it, the good news is, is that we’re so far ahead of our digital penetration goals.

We spoke about being at a 50% steady state, which I think puts us squarely in a leadership position in kids retail. Our digital and our omni customers spend more than our store customers, and they’re a more productive customer. So, we can really focus on retaining these new digital customers.

It really puts less pressure on the acquisition number particularly with this sudden drop in birth rates. So that’s really a big positive for us. And as far as market share gains, I think Rob said it well in his prepared remarks. We think that kids is going to continue to be under pressure until the vast majority go back to school and holidays resume.

And we’re very hopeful that with the pandemic and the vaccine rollout, a lot of talk about early summer, most people who want to be vaccinated could be vaccinated. We’re really hoping that we can look for a more normalized back-to-school period.

And I think if we get a normalized back-to-school, certainly, we’re going to be an outsized beneficiary of a normalized back-to-school. And we’re also going to be an outsized beneficiary if the holidays start to come back. So, those two things will certainly be share gains for us and revenue gains.

I wouldn’t – I’m not going to say I’m going to get back to 2019 levels in 2022. But what I will tell you is I don’t need to get back to 2019 revenue levels to get back to historical levels of operating margin..

Your next question comes from the line of Jay Sole of UBS..

Great. Thanks so much. My question is just about the margins, because the margins were stronger than expected in the quarter.

But can you maybe highlight or maybe delineate what the impact of the surcharges were in the e-commerce business, some of the issues on Canada, the deleverage on those store costs, promotions, maybe COVID costs for operating stores to deal with some of the requirements to keep the stores clean this time during the pandemic? If you could just help understand those headwinds a little bit better, that would be super helpful..

Sure, Jay. Obviously, there’s a number of moving parts around the 210 basis point reduction in gross margin in the quarter. I think the first that we should highlight is the penetration of digital, which had another outstanding quarter, growing 38% and increasing its penetration from 30% in the fourth quarter last year to 46% this year.

Along with the normal headwinds associated with the increase in digital penetration and its impact on the overall freight and logistics expense, as you mentioned, we experienced the freight surcharges and capacity constraints imposed by our major carriers. Also, we saw higher demand than what we had anticipated in our digital world.

So we increased our ship-from-store activities from roughly a planned 8% to about 15%, which also had an impact on our costs. When you look at all these factors combined, we anticipate that it equates to roughly a 400 basis point hit to our gross margins.

Another big factor obviously was the demand for dressy product and the fact that it was at an all-time low. We had obviously significantly cut the buy of the dress product when we placed our holiday orders. But obviously, the demand was even lower than what we had expected.

We ended up donating about three million units or at about $14 million at cost to Delivering Good to support families in need. We spoke about fleet optimization. We were able to negotiate abatements for the time our stores were closed, and we recorded $13 million in abatement in the quarter, which basically offset the holiday dressing donation.

As Rob mentioned, we’ll be recording a similar amount of abatement in Q1. And then fourth, from a merchandise margin perspective, we saw increases in both stores and digital channels, with AURs up mid-single digits in our store channel and up high-teens in digital. And this approximated a roughly 200 basis point increase in gross margin.

Finally, as you look at the deleverage of fixed expenses as a result of lower sales and the liquidation of the 60 stores, they were basically offset by rent reductions on lease events that we had available to us. So all in all, that equates to about a 200 basis point hit..

Your next question comes from the line of Jim Chartier of Monness, Crespi, and Hardt..

Hi, good morning. Thanks for taking my questions. Jane, you mentioned getting back to historical margins, kind of a wide range there. I think you were just under 10% in 2017 and then 6% in 2019.

So, what do you guys consider kind of a normal historical margin range? And then what’s the time frame for getting back there?.

Hey, Jim. This is Rob. So, in terms of operating margin, I would say that historical range is more of the 7% to 8% range.

I think Jane mentioned earlier in the call, the good news about what we’ve done this year and the increase in the penetration of our e-commerce business is that we don’t need to drive historical sales levels to be able to drive back to historical operating margin levels.

The higher digital penetration, which is our highest margin contributor as a business, is going to help drive that higher operating margin.

Second, from a fleet optimization perspective and lease negotiation perspective, the work that we did to remove the underperforming stores from our fleet and the stores that we’re going to close next year as well as positively negotiate on the lease actions available to us will help drive the productivity of our stores business higher.

Third, we see a lot of potential in the Gymboree brand and that launch. And we didn’t really have an opportunity to launch it in the way that it deserved to be into the pandemic. So, we think that will help drive operating margin back to historical levels.

And lastly, there’s been a significant amount of progress around SG&A, strategic cost reductions across all corporate areas and streamlining our organization as we move forward as a digital-first retailer.

So, I think all four of those combined will get us back to historical operating margins sooner rather than later even without a return to historical sales levels..

Your next question comes from the line of Susan Anderson of B. Riley..

Hi, good morning. Nice job in the quarter. And Mike, let me add my congrats on your retirement.

I guess, Jane, just in terms of the Gymboree brand, I’m curious if you’re doing anything new or different with that brand versus when you first acquired it in terms of product and merchandising or any learnings that you’ve received since you’ve had the brand, I think, for about a year now.

And then also, I’m curious, have you gone a little bit more casual with that brand during the pandemic? Or are you sticking with its kind of historical dressy look? Thanks..

70 e-com; 30 stores. So, we’re happy that we started aggressive, and we’ve become even more aggressive on that. So we pared back some of the stores that we opened with. We opened with an original 220 stores, and we’ve pared that back about 50 stores from when we launched pre-pandemic.

So, we feel really good about what’s happening there from a digital point of view. To answer your on dressy versus casual, we’ve made significant changes during the pandemic based on what mom was buying and based on the lack of holidays, so we were able to make some nice changes in Gymboree for Q4.

And certainly, we’re able to make some nice changes in the current business as we pretty much knew Easter was to be tough, so we placed dressy for this quarter down as well. I do think, however, that the true DNA of Gymboree is holidays.

And I think that, that is something that if you look across the expand of kids retailers, there really are very, very few retailers and hardly any strong retailers that offer expanded or extensive dressy presentations. So I think that, that really is a white space out there.

And so we don’t really have an intention of dialing back dressy in Gymboree as a strategy go forward. It was a strategy built around the pandemic, a short-term strategy. But longer term, we think that that’s one of the big positives of buying Gymboree, that it gives us kind of cornering the market on that business.

There’s really no one who can produce that product. And as we’ve said, moms are pretty fiercely loyal to the Gymboree brand. So we think as we get out of 2021 and into 2022, we’ll revert back to a large component of that business circled around important occasions and milestones in that young customer’s life..

Our next question comes from the line of Paul Lejuez of Citi..

Hey, guys. Thanks. A couple of questions. Curious on the higher merch margins, if that included the $13 million of the product donation or for your kind of separating that out when you talk about merch margins.

Also on the 1.9 million customers digitally picked up, curious where you think they came from, whether they found you more in the first half of the year, the second half of the year, anything you could add on spending patterns of those customers. And then just you mentioned that closing those 300 stores were accretive to operating profit.

I just want to make sure I understand, were those 300 stores collectively losing money as a group? And – or are you saying that they made money, but you’re actually going to make more money now that they’re closed, assuming that sales transfer comes in where you want? Thanks..

Sure. Well, I’ll take the digital question and then I’ll leave it to Rob and Mike to answer about merchandise margin and the closing stores. From a digital perspective, I think, really, when you think about our strategy, we were ahead of it. As far as the digital transformation investment, we made our $50 million investment in 2017 to 2019.

So when the pandemic struck, we were able to pivot quickly into ship from store, and a lot of others weren’t. And so we were able to get a significant amount of customers and a significant amount of revenue from our ship from store throughout the pandemic.

So, I would tell you that from a customer acquisition point of view, we got a lot of the customers in the first half of the year, but we are also able to continue to get customers in the second half of the year as well, albeit at a lower pace. I’ll tell you that the omnichannel and digital customer spends three times more.

So, as I discussed earlier and when I was answering a question, I think that that’s important to note, that retaining those customers takes some pressure off the acquisition number, and that’s what we’ll be focused on 2021 is continuing to retain those customers.

I think from an acquisition point of view, when you look at how many people have gone out of business in kids retail and how many stores have been forced to close because of bankruptcies and financial issues, that there is a significant amount, particularly in the size two and up space to continue to take customers from those struggling retailers into 2021 and beyond..

And Paul, from a gross – a merchandise margin perspective, the $13 million of donations were outside of the increase of 200 basis points of merchandise margin. A part of that product never even made it to the selling floor. And we made the decision to donate as opposed to either pack and hold or liquidate through our stores..

And Paul, to round out your question on the store closures. The store closures, the transfer from those store closures between our e-commerce site and the remaining fleet actually more than fully offset the lost profits from closing those stores..

We have time for one more question. Our final question comes from the line of Marni Shapiro of The Retail Tracker..

Hey, guys. Congratulations on a really impressive job through the whole year and through all of this. I guess, can you – so can you talk a little bit about the environment that you’re now playing in? It seems with a lot of the weaker players gone or even some of them just closing stores, it feels much more rational out there promotionally.

And I know you guys are a promotional retailer, but can you talk about how you’re thinking about your level and depth of promotions for 2021? Is there an opportunity to play with that a little bit and continue to push either AUR or even just merchandise margins?.

Yes, sure. I think, based on what Mike said and answered a couple of questions about merchandise margin, we’re pretty excited about our merchandise margin increases in Q4, and I think a lot of that comes from a more rational environment, as you’re speaking about. And I think there’s opportunity for price realization.

There’s also opportunity to pull back selectively on promotions. I mentioned in my prepared remarks in the script that in 2018 and 2019, we had a very public-stated strategy of giving up short-term profitability in order to get long-term market share gains. And like I said, not knowing about the pandemic even, that was a pretty great spot-on strategy.

So I think now that there is a lot less players out there in the zero to 10 space, particularly ones that compete directly from us from a mall-based perspective, we have an opportunity now to selectively, as I said, start to raise AURs where appropriate and to pull back on unnecessary, if you will or unneeded promotions.

So I think that, that’s going to be a big part of our story going forward as we continue to make advances in the merchandise margin, not only in stores, but very importantly, on the digital channel as well now that it represents approximately 50% steady state of our total..

Thank you for joining us today. If you have further questions, please call Investor Relations, 201-558-2400 ext. 14500. You may now disconnect your lines and have a wonderful day..