Good afternoon, ladies and gentlemen, and welcome to Shoe Carnival's Fourth Quarter Fiscal 2017 Earnings Conference Call. Today's call is being recorded. It is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. .

Management's remarks may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements.

Forward-looking statements should be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's earnings press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date.

The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements discussed on today's conference call or contained in today's press release to reflect future events or developments. .

During this call, we refer to certain non-GAAP financial measures, including adjusted SG&A expenses, adjusted net income and adjusted diluted earnings per share. The non-GAAP financial measures are provided in addition to and not as alternatives for or reported results determined in accordance with GAAP.

A reconciliation of our reported results determined in accordance with GAAP to the non-GAAP financial measures is included in the financial tables of our earnings release. .

I'll now turn the call over to Mr. Cliff Sifford, President and Chief Executive Officer of Shoe Carnival, for opening remarks. Mr. Sifford, you may begin. .

Thank you, and welcome to Shoe Carnival's Fourth Quarter and Fiscal Year-end 2017 Earnings Conference call. Joining me on the call today is Kerry Jackson, Senior Executive Vice President, Chief Operating and Financial Officer. .

Before we begin, I would like to remind everyone that fiscal 2017 consisted of 53 weeks, while fiscal 2016 consisted of 52 weeks. References to annual comparable store sales are for the comparable 52-week period ending January 27, 2018. In addition, the fourth quarter of 2017 consisted of 14 weeks, while the fourth quarter 2016 consisted of 13 weeks.

References of fourth quarter comparable store sales are for the comparable 13-week period ending January 27, 2018. .

On today's call, I'll provide a brief overview of annual company's operating highlights and our fourth quarter sales results as well as an overview of our fiscal year 2018 guidance. Kerry will review the financial results in more detail, then we'll open up the call to take your questions. .

2017 was a transitional year for Shoe Carnival. Our team further refined our strategic direction in order to position us for long-term growth. The evolution of consumer purchasing habits has resulted in us consistently making important changes and strategic investments across our business.

These are already evident in terms of how we engage with Shoe Carnival customers and the multiple opportunities we provide to them to find our assortment of footwear for the entire family, whether they are in our stores, online or on a mobile device.

In addition, we are excited about the ways in which we will continue to better utilize our Shoe Carnival customer data to create an even more fun, exciting and memorable shopping experience. .

Before I get into more detail about the progress we made on our strategic initiatives, I want to give a brief overview of our annual sales. For the year, net sales increased $18.1 million to $1,019,000,000 compared to fiscal 2016.

Comparable store sales for fiscal 2017 increased 0.3% compared to the prior year, and we reported adjusted earnings of $1.49 per diluted share at the high end of our expectation of $1.42 to $1.49. GAAP earnings per diluted share for fiscal year 2017 were $1.15.

Kerry will provide more detail on the difference between the GAAP and adjusted earnings per diluted share in his prepared remarks. .

In addition, we used approximately $35 million during the year to enhance shareholder value through share repurchases and our dividend programs. Our Board of Directors and management team remain committed to returning excess capital to shareholders.

We are pleased our Board of Directors in December announced a new $50 million share repurchase program for 2018. .

As many of you may recall, we had a difficult start to fiscal 2017 as tax refunds were delayed in the first quarter. And later in the year, Shoe Carnival stores in the Southern U.S. and Puerto Rico were affected by 3 major hurricanes.

In addition, during the fourth quarter, we strategically pulled back on our promotional cadence, including the decision to close our doors on Thanksgiving Day. .

Despite the external challenges and our promotional changes, when the consumer had a need to buy, they shop Shoe Carnival. Our merchants did a great job during the important shopping seasons, like back-to-school. We are very pleased with our inventory position at fiscal year-end, which was down 5.2% on a per-store basis, in line with our expectations.

And both our gross profit margin and merchandise margin improved 140 basis points for the fourth quarter compared to the prior year period. .

Now I'd like to add a little color on fourth quarter sales. On a comparable 13-week basis, traffic declined mid-single digits, while conversion, average transaction and units per transaction increased low single digits.

Focusing on our fourth quarter comparable store sales by department, our women's nonathletic department ended the quarter down mid-single digits on a comparable basis.

As we expected and planned for, women's boots sales were down high single digits due to our decision to be less promotional, which again included closing our stores on Thanksgiving Day. Margin in boots improved 310 basis points. But more importantly, we reduced per-store inventory in women's boots at year-end in excess of 20%. .

The men's nonathletic department ended the quarter down low single digits on a comparable basis. The decline was also due to the reduction of our promotional cadence, primarily on our seasonal boot category. Margin in men's seasonal boots improved by approximately 140 basis points. .

Children's shoes were up mid-single digits on a comparable basis. Children's athletic increased high single digits, while nonathletic was down mid-single digits. Children's boots declined mid-single digits, while margins increased 260 basis points. .

Adult athletics was up low single digits on a comparable basis. While our men's basketball category continues to struggle, we were very pleased with the performance of women's athletic. .

I am proud of the way the merchant team executed on our strategy to reduce promotions in the fourth quarter. As a result, we entered 2018 with less seasonal product, and we believe we have a good opportunity to realize better merchandise margins for the year. .

Now I'd like to spend a few minutes to review the key strategic initiatives our Shoe Carnival team executed during fiscal 2017. First, as many of you know, we decided to exercise patience with opening new stores.

We continue to expect better real estate opportunities in the near future as we look to benefit from the evolving specialty retail landscape, including retail consolidation and store closures. We believe this and our implementation of our CRM strategy will enable us to once again ramp up store growth. .

Second, we engaged a strategic partner, who specializes in creating a more holistic approach to focus the entire organization on a more customer-centric model. As part of this strategy, we utilized our loyalty program, Shoe Perks, and the tremendous data we have on our 12 million most loyal customers to develop customer segmentations.

We then identified our highest-value customers to better understand how they shop with us by channel and product categories. We believe this will begin to transform how we connect with consumers and fuel future sales growth. I'll go into greater detail on this in a minute in terms of our outlook for 2018. .

We also created a new platform for our digital storefront to enhance performance and reliability online, and we are pleased with the results thus far.

Additionally, we relaunched our mobile app to become more user-friendly for customers that want to shop online from their mobile phone, check weekly promotions and also allow our Shoe Perks members to see how close they are to earning rewards.

At the end of fiscal 2017, 70% of our e-commerce traffic shopped Shoe Carnival via a mobile device, and approximately half of our brick-and-mortar sales came from customers who have engaged Shoe Carnival through their mobile device. We expect this trend to continue to grow in the years to come. .

And to increasingly connect with our customers, we also launched an SMS program in the third quarter. That gives our customers the ability to choose how they want to receive up-to-the-minute information on Shoe Carnival's latest offer or new product introductions. We are pleased with our initial launch.

And as we roll out Shoe Perks 2.0, we believe the growth in customers who prefer to receive SMS communication will continue to accelerate. .

As we look forward into 2018, we'll continue to implement and evolve our CRM strategy. We believe that the change in retail environment 101 or direct communication with our Shoe Carnival customers is critical to long-term success. .

As I mentioned earlier, we have taken Shoe Perks data and we developed customer segmentations for all our high-value shoppers. With the diversity of our stores, we are in the process of taking this data and breaking it down to the individual store level to get a more definitive understanding of each store's high-value shopper.

We have very rich data that our analyst team will mine to help our marketers, our merchant team and our real estate team achieve the goals we set for them. Once this project is complete, we will leverage customer insights to better serve our customer and further differentiate the Shoe Carnival brand down to the store level.

We are really excited about how this will shape our future growth. .

During the second quarter of fiscal 2018, we'll be launching Shoe Perks 2.0, which is designed to incentivize our high-value customers and to make Shoe Carnival their store of choice for all their family footwear purchases.

We believe that customers who may be shopping us once or twice a year will recognize the benefit of becoming a high-value shopper. .

We will launch our vendor drop-ship initiative. Our goal is to have vendor drop-ship ramped up by the end of the second quarter. This technology will allow our customers the opportunity to seamlessly view and select from a broader brand and style selection than currently offered at shoecarnival.com.

For Shoe Carnival, we get to test styles, brands and expand sizes without the risk of inventory ownership. .

In February of this fiscal year, we launched our first brand landing page with our largest brand. We believe brand landing page will enhance our site and make us more relevant in the marketplace.

And our merchant team will continue to analyze our footwear assortment with the goal of reducing per-store inventories through SKU and brand reduction, while also increasing depth in key items. .

I am very pleased with all the decisive, strategic action our teams has taken to further differentiate Shoe Carnival for our future growth. The investments we've made in technology and customer engagement are incredibly important as we take Shoe Carnival to the next level of growth with today's consumer.

We accomplished a lot in fiscal 2017, and we believe our efforts will yield benefits in fiscal 2018 and even greater value in fiscal 2019. .

Moving on to real estate. We ended the fourth quarter with 408 stores in 35 states in Puerto Rico. During the quarter, we closed 16 underperforming stores for a total of 26 stores for the year.

I'm pleased to report that since our last call, we have reduced the number of store closures for '18 through a combination of improved performance and better terms with certain landlords.

We continue to work diligently on each store on the closing list, with the goal of improving the metrics of each of these stores, thus reducing store closures from the current number. .

Currently, our real estate plan for fiscal 2018 includes the closure of 25 to 30 stores, particularly if we cannot improve the performance of those stores to our minimum contribution expectation. Even though this would reduce our overall store volume near term, we expect to realize long-term operating income and EPS improvements.

New store openings for 2018 will be in the low single-digit range. Although we are not providing guidance beyond 2018, I wanted to mention that we do not expect to continue the level of store closings we have experienced over the past several years in 2019. .

Finally, I'd like to give a little color on our expectation for fiscal 2018. We continue to plan our business conservatively in order to more efficiently manage inventory and margin. Since Easter shifted out of April into March, I will not give quarter-to-date sales.

I will say, we are happy with the performance of our seasonal product categories and the continuation of the strong athletic and athleisure trend we have been experiencing over the past year. We believe this trend will continue through the back-to-school time period.

Our merchant team has done a terrific job of identifying key items and categories for the spring season and back-to-school, and we believe we have built appropriate depth in those items and categories to achieve our goals. .

Based on these expectations, we expect fiscal 2018 net sales to be in the range of $1,013,000,000 to $1,023,000,000, with the comparable store sales up low single digits. We expect earnings per diluted share to be in the range of $1.85 to $2. .

That concludes my overview. I would now like to turn the call over to Kerry. .

Thank you, Cliff. Fourth quarter net sales increased $9.0 million to $243.2 million compared to the fourth quarter of last year.

Of this increase in net sales, $13.0 million was attributable to the extra week included in the fourth quarter of fiscal 2017 compared to Q4 last year, along with an increase of $4.9 million in sales from the 23 new stores opened since the beginning of the fourth quarter of fiscal 2016.

These increases were partially offset by a loss in sales of $7.9 million from the 30 stores closed over the same period of time and a decrease in comparable store sales of $1.0 million or 0.5%. .

Our gross profit margin on a GAAP basis for the quarter was 28.9% compared to 27.5% in the fourth quarter last year. The merchandise margin increased 1.4%, while our buying, distribution and occupancy expense were flat as a percentage of sales.

Included in the gross profit in the fourth quarter this year was a $3.3 million gain on insurance proceeds related to hurricane-affected stores. Excluding the gain on insurance proceeds, our adjusted gross profit margin would have been flat for the fourth quarter. .

SG&A expenses on a GAAP basis increased $4.1 million in the fourth quarter of fiscal 2017 to $70.0 million. As a percentage of net sales, these expenses increased to 28.8% compared to 28.1% in the fourth quarter of fiscal 2016. We estimate approximately $2.9 million of the increase in SG&A expenses was due to the extra week included in Q4 this year. .

SG&A in Q4 this year also included noncash impairment charges of $3.4 million for 30 underperforming stores and a $1.9 million increase in stock-based compensation expense due to the enactment of the U.S. Tax Cuts and Jobs Act of 2017 and its impact on the anticipated vesting of the company's outstanding performance-based restricted stock.

SG&A in Q4 last year included noncash impairment charges of $3.6 million for 7 Puerto Rico stores. .

Excluding the noncash impairment charges in Q4 this year and last year and the additional stock-based compensation expense recorded in Q4 this year, adjusted SG&A expenses increased $2.4 million to $64.7 million. As a percentage of net sales, adjusted SG&A expenses were flat with Q4 last year at 26.6%. .

Store closing costs on a GAAP basis included in both cost of sales and SG&A in Q4 this year were $4.3 million compared to $4.6 million in Q4 last year. Store closing costs primarily consist of impairments, fixed asset write-offs, severances, lease termination fees and store teardown and cleanup.

These costs are partially offset by the reversal of accrued rent expense for leases with rent escalations. .

On a GAAP basis, income tax expense in Q4 this year was $4.0 million compared to an income tax benefit of $607,000 in Q4 last year. The December 2017 tax law change reduced the company's corporate statutory tax rate from 35% to 21%.

The company remeasured its deferred tax assets and liabilities using the new lower tax rate, which resulted in a $4.4 million additional charge to income tax expense in the fourth quarter of fiscal 2017.

Excluding this additional charge to income tax expense and excluding the tax effects of the gain on insurance proceeds, noncash impairment charges and additional stock-based compensation expense I referenced earlier, the adjusted income tax expense for Q4 this year was $433,000 and $739,000 in Q4 last year.

We expect our effective tax rate for fiscal 2018 to be approximately 24.5%. This is a significant decrease from our historical effective rate of between 37.5% to 38%. This decrease in taxes paid should result in higher EPS and cash flow. We intend to utilize the additional cash flow to fund higher store wages and company initiatives, such as CRM. .

On a GAAP basis, the net loss for Q4 this year was $3.9 million or $0.24 per diluted share compared to a net loss in Q4 last year of $920,000 or $0.05 per diluted share.

Excluding the effect of the previously discussed unusual items in Q4 this year and last year, adjusted net income for Q4 this year was $1.7 million or $0.11 per diluted share compared to adjusted net income in Q4 last year of $1.3 million or $0.07 per diluted share.

Weighted average shares outstanding in Q4 this year decreased 1.4 million shares or 8%. Total shares outstanding at the end of Q4 this year were 16,947,000. The extra week included in Q4 2017 had an immaterial effect on net income and diluted earnings per share on both a GAAP and adjusted basis.

We have included in our earnings release today a GAAP to non-GAAP reconciliation table illustrating and describing the adjustments to earnings. .

Now turning to cash position and information affecting cash flow. We ended the year with $48 million in cash and cash equivalents and no cash borrowings on our $50 million line of credit. Cash generated from operations after purchases of property and equipment were $20.7 million.

In fiscal 2017, we repurchased 1.3 million shares of common stock at a total cost of $29.8 million. No shares were repurchased in the fourth quarter. However, quarter to date, in the first quarter of 2018, we have repurchased through our 10b5-1 program 475,000 shares at a total cost of $11 million.

We currently have $39 million available under our share repurchase authorization, which runs through December 31, 2018. In addition, for fiscal 2017, we returned $4.8 million to shareholders through our quarterly cash dividend. .

Depreciation expense was $5.9 million in Q4 this year and $23.8 million for fiscal 2017. Capital expenditures for fiscal 2017 were $19.7 million, with $13.5 million used for new stores, relocation and remodels. Lease incentives were $4.8 million for the year. .

My last comment today will be to discuss the calendar shift in fiscal 2018. Due to the fact that fiscal 2017 was a 53-week year, the fiscal 2018 calendar -- quarterly calendar ends 1 week later than it did in 2017. While the shift affects each quarter during the year, it is most apparent in Q2 and Q4. .

Let me explain. For fiscal 2017, our second quarter ended on July 29. And the very next week, the first week of Q3, our back-to-school sales accelerated significantly. Due to the calendar shift, in 2018, our second quarter will end on August 4, thereby pulling in those sales for back-to-school into the second quarter and out of Q3 in fiscal 2018. .

If the 2017 calendar was restated to 52 weeks and reflected the 2018 ending dates, we would increase 2017 sales in Q1 by $5.1 million, increase Q2 sales by $23.0 million, decrease Q3 sales by $24.9 million and decrease Q4 sales by $15.7 million.

The net effect of the calendar shifts and having 1 less week will reduce fiscal 2017 sales by $12.6 million. .

This concludes our financial review. Now I'd like to open up the call for questions. .

[Operator Instructions] And your first question will come from Mitchel Kummetz with Pivotal Research. .

Kerry, I just want to drill down on the gross margin a little bit. So for Q4, it was flat if you ex out the insurance gain. And that's with gross -- with merch margin up 140 bps and buying flat.

I'm trying to understand; can you reconcile that for me? Where did you lose 140 basis points when you take those 2 other pieces into consideration?.

Well, I don't think -- from the liquidation of the closing stores was the primary component of that, which will have -- there's 30 basis points worth of gain in the fourth quarter from the closing of -- or from the gain on the insurance settlement for the hurricane stores.

And the only other item that really flowed through there was the liquidation of stores in the fourth quarter. .

So what was the impact of liquidation of stores? And is that not part of the 140 basis points of merch margin?.

It is. That's what's included in that. And that's what [indiscernible].

Seasons if margins were flat. If you take the -- so he's reconciling. .

I can always follow up with you guys afterwards. Let me ask you, on boots, Cliff, could you say -- I know that you guys -- you planned boots down on the fourth quarter. So could you say what percent of your sales in Q4 were boots? And then how did boots -- you broke down boots kind of across men's, women's and kids.

I'm just kind of curious how boots comped as a group.

And then what was the comp on the non-boot piece in Q4?.

You would have to allow me to get the comp in the non-boot piece. But the boots were down in total high singles. And as a percent to total, I think you were asking me that question as well. .

Yes. .

Last 2016, for the fourth quarter, boots accounted for 25% of our total sales. And this year, in 2017, 23%. So we lost 200 basis points against the total. .

Okay.

Can you guys say what the impact on comp was for not being opening on Thanksgiving this year?.

Had it not been for that, we would have been positive for the quarter. .

Okay. And then lastly, Kerry, on the guidance, what share count is that EPS range based on? Because you guys obviously have the buyback, and you bought back some stock already in Q1 to date.

Are you -- is there any buyback implied in the guide?.

It is. We're using weighted average diluted shares on an annual basis of about 15.2 million. And Mitch, I now understand your question. I'm sorry, I should have -- I thought you were saying something there. The entire 140 basis point gain in the Q4 merchandise margin was the $3.3 million gain on insurance.

So when you strip that out, it was flat on a year-over-year basis. .

So the merch margin was flat. But merch margin on boots were up, but then you lost some -- where did you -- where did you lose the merch... .

The loss [indiscernible] the entire loss in margin, first of all, we didn't put boots into the closing stores because they were going to close in the fourth quarter. It didn't think [indiscernible] seasonal boots into a clearance store. So the clearance stores did not have to clear through that boot product.

So the entire loss from a margin perspective was the closing of the 16 stores. .

Next question will come from Chris Svezia with Wedbush. .

I guess, first question I have is just on the comp guidance. In the press release for the year, you say flat to low single-digit positive. But Cliff, in your optimism, you said low single digit, I think, for the year. Just curious, which is it. .

Well, we expect to be up low single digits for the year. If -- I missed that in the press release that said that. I apologize for that, but we expect sales to be up low singles. .

Okay. And then just on the map for the year in terms of revenues, revenue being, if you pick the midpoint, roughly flat despite not having extra week and despite all the store closings. Just mathematically, Kerry, maybe you could just walk through kind how you're getting there.

Or maybe you would have thought you would have sales down slightly given all the store closures. Just maybe walk through how you're thinking about that. .

Well, the small comp stores -- the low single-digit comp store increase is the primary piece of it. Now keeping in mind that when we close the store, we basically force out the inventory. So whatever's left, we end up closing through the wall.

So what we see is that we have a fairly substantial hit to gross profit margin in the store, but we see limited sales decline because of that store closing, because you're artificially pushing the shoes out the door through accelerated discounts. .

Okay. I see. Shoe Perks, just -- will you -- are you assuming or thinking about any benefit related to whatever you're going to do during the second quarter in terms of comp, in terms of the business? Or maybe just help out what you plan on doing. Are you targeting e-mails? I don't think you were doing that beforehand.

Just a little bit more color on what you're doing in Shoe Perks and how you think about that. .

We are going to be targeting our e-mail more effectively, I do believe that. We are going to improve Shoe Perks program by offering levels that allow our customers to get to a VIP level. And we do believe that it could be accretive to our sales comps. And in fact, that's part of what we built into our low single-digit comp.

But we don't believe that this is going to be up and active until the latter part of the second half. So the sales increase that we expect to get would be as we go through the third and fourth quarter. .

Okay. And just on -- when you said, Kerry or Cliff, when you talk about merchandise margin being up for the year in terms of fiscal year '19, how does -- how do the other elements to the P&L play into that? Buying and occupancy, SG&A, just some color on those parameters. .

one, the hurricane effect, the gain on that, which is in the prior year will not be repeated; and then have some effect -- the decline in the merchandise margin. We should be able to leverage our SG&A cost against the small comp store sales increase, plus we won't have as many store opening costs, nor store closing costs in '18.

It's just the improvement in operating margin for the year. Then the rest of the gains from an EPS standpoint's going to come from the lower tax rate. .

But you said that was following on a GAAP basis.

What about non-GAAP? What about on the $1.49 that you did for the year?.

We -- GAAP versus non-GAAP gets very difficult, from what our attorneys are helping us to understand biggest the SEC is such a hot issue. I'd rather reconcile from the GAAP to GAAP for you, and then you can look at the adjusted. Now keeping in mind, as I said, that part of the gross profit piece of it, part of the decline is not repeating that gain.

But then the other piece of the decline in the gross profit margin's going to be from the cost of the liquidations of the merchandise for the 34 store -- the 20 to 25 stores... .

25 to 30. .

25 to 30, I'll get it right. 25 to 30 stores that we have planned. .

[Operator Instructions] From Susquehanna, we'll hear from Sam Poser. .

Do you all expect the -- how do you think about -- and you talked about gross margin a little bit.

But can you give us a breakdown of expenses and gross margin for the year '18? How are you are thinking about that?.

I didn't hear it. I can't hear him. .

You're saying what are the qualitative pieces of guidance for 2018?.

Yes. I mean, can you give us some idea? Are you expecting to see gross margin growth given your inventory's so clean and then you'll continue investing so as you'll see some deleverage in SG&A but expect gross margin to grow? Or I mean some direction there. .

I do. Sam, I think we have an opportunity to improve the margin on product as we go through the year because we entered the year incredibly clean with our boot inventory down, in total in the 20s, our seasonal boots product down in total in the 20s. So I'm -- I think it gives us an opportunity for growth through the year.

Additionally, if we don't -- if we can continue to work on the stores that are supposed to close in the fourth quarter, and we can save a few more of those stores, which we think is a possibility, then that is also going to help our gross margin. Right now, we're scheduled to close, if I remember correctly, almost 20 stores in the fourth quarter.

And that would have an effect on gross -- fourth quarter gross margin. But if we can reduce that store count and -- we are very helpful that, that will be the case, that we can do that. I'm sure that, that's a little bit in the air because of the number of store closures.

But I think when you combined the 2, was a distinct opportunity to see an improved margin on product. .

And then on the investment side, you're investing in a lot of these new systems and so on.

Does that mean that -- I mean, I guess, the question is how much investment do you need to continue to improve your relationship with your customers? And then how much investment do you continue to need on top of everything you've already done to continue improving that communication with your customers?.

Well, Sam, the -- we don't know -- today, I can't give you a number on the investment for the CRM software. We're still in the process of vetting that. I can tell you that by the fact that we're -- we've chosen not to open up new stores and use our capital this way, is built into -- partially built into the budget -- or mostly built into the budget. .

So I mean, we could say... .

Our best estimate. .

Kerry or Cliff, to simplify this, you're expecting modest growth in gross margin, offset by probably, if you comp way at the high end, you might get leverage in SG&A. But it's unlikely you'll see SG&A leverage.

Is that a fair way to think about it?.

From an -- if you're comparing our guidance to the adjusted numbers, each of those categories are relatively flat as a percentage compared to... .

Compared to last year. So on an adjusted basis... .

Compared to last year, yes. .

[Operator Instructions] And we have a follow-up from Chris with Wedbush. .

Can you define, by any chance, what low single-digit store growth is for this year? Or are you just talking like 3 stores, 4 stores? Or is that just anything from 1 to 9?.

Well, it's anything less than 5. Actually, low single digit, when you say anything under 3.5. So you can't book half a store. I'll tell you, it's going to be somewhere in that range. .

Okay. And with regard to just -- I'm just curious.

Given the fact you're going to benefit a little bit in Q1 and obviously, a lot in Q2 from this timing of the extra week, from an earnings perspective, is it fair to say that you would see the majority of your growth -- or pretty significant growth, earnings growth in the second quarter? And then, obviously, potentially less or maybe slight declines potentially in the back half of the year just given the timing of the calendar?.

I think you're going to see increases in both Q1 and Q2. Remember we had a very difficult Q1 last year with a negative 3% comp number -- 3-9 comp number we're guiding to not repeat that. And then -- and the shift in the important back-to-school week into Q2 helps the profitability significantly there.

And then you'll see -- most likely see declines in Q3 and 4 in the -- due to the shifts. .

Okay. Got it. And then, I guess, Cliff, the weather is treating you pretty well. .

Well, right now, it's raining like son of a gun. .

I see no other -- actually, we take a question from Greg Pendy with Sidoti. .

Just, I guess, big picture, can you just -- as you kind of hold out for possible better real estate opportunities, I mean, just as we think about that, does that mean -- would you consider maybe increasing your footprint in malls right now, where at least we're hearing maybe there are some opportunities and your penetration is low? Or are you going to sort of maintain your current footprint?.

We have, Greg, we have slightly over 20 stores in malls today. And to be honest with you, we really -- we're not in any A malls. We're in a few Bs and a few Cs. We'd really like to see the fallout in malls before we start making the commitment.

And that really is part of the entire strategy, is that there's so many retailers that have closed around us or rumored to be closing around us that we really need to see where the fallout is before we start, especially before we start entering in the B malls or C malls. .

From Pivotal Research, we'll hear from Mitch Kummetz. .

Yes, just had a quick follow-up. Cliff, you're still obviously enthusiastic on the athletic trend. And I'm just curious, how much of that is just a function of you see that as a strong trend broadly versus you're continuing to get better access to more product from the brands.

I mean, if I'm not mistaken, Adidas has talked about continuing to expand some price points with more a focus on the family channel. And I'm just -- and maybe you could talk a little bit, too. But I know you've done some Nike shops, and kind of wondering where you're at there.

And where that's trending for 2018? And I know you've done a little bit with PUMA, maybe Adidas as well, and I'm kind of curious how that's progressing. .

That's a great question, Mitch. Thank you. The -- we are getting better product from all our key vendors. You mentioned several. We're getting a family channel level of signature product in basketball. We're getting better product selection from all the vendors that you just mentioned.

I hate to talk specifically about vendors on the call, but we do believe that's part of the growth that we've seen and the continuing growth that we expect to see, and that the product just keeps getting better.

But one of the key elements to what's going on is our buyers have done an excellent job, and I'm just absolutely proud of the way that they look at the product and have done a great job of identifying the key items and buying big depth in it. So we don't disappoint many customers, and that's a good thing.

And then to answer your question about shops, we plan on opening -- and I won't get specific on the brands. But we expect to open a minimum of 25 additional shops this year, in fact, 25 additional shops this year and next year.

So we're very pleased with the performance of these shops, and what they brought to our athletic business, and to the percentage that athletic becomes of the stores where we put the shops in. .

And at this time, there are no other questions. I'd like to turn the conference back over to management for any additional or concluding remarks. .

Then thank you for joining us on the call today. And we look forward to speaking to you again in May on our first quarter results. Thank you and have a good week. .

Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation, and you may now disconnect..