GCO
#So Pam, when you look at Journeys, Journeys was actually above the mall levels.
Journeys is positive with traffic; the mall levels were still for the first quarter negative.
Lids has been facing traffic challenges, so Lids was actually below the levels of mall traffic.
And Pam, you know our interpretation of that, obviously, is we've got Journeys very much on-trend.
And their traffic comparisons are against a period when they were less on-trend.
And then the opposite is true at Lids.
So there is the overall traffic trend in malls, which continues to be slightly negative.
But Journeys is outrunning [Macklin] and Lids is slipping a little bit behind at the moment.
Well, and the thing that we remind you of is that even with the traffic trends that we are seeing in malls these days, we are seeing higher conversion.
What the customer is doing this days is they are doing all of their window-shopping and using their digital devices to determine what they want to buy prior to coming into the store and prior to coming to the mall.
So we are actually seeing, particularly in Johnston & <UNK>, some very nice conversion increases, which along with the ticket size is what has been driving their very nice comp.
So in terms of the concentration, we continue to first of all assort the store to give the customer what they want.
We have seen with the retro athletic trend and with the fashion trend in athletic to be an opportunity to diversify beyond the concentration that we had in the last fashion cycle.
So we are feeling pretty okay about the concentration at the moment.
In terms of the fashion cycle, that's a big wildcard.
We feel like we are in a good spot for this year.
We see the brands coming in and refreshing the look that they are providing our customers in a way that reinforces newness inside of what the current overall trend is.
So we are feeling it is pretty good.
If you look at the history, we've had two-, three-, four-year runs with these fashion trends.
There have been concerns that social media shortens that.
Right now we feel like we are on a very good trend, and as I said, we feel pretty confident about the rest of this year.
So Jon, I will take the first one and then hand it over to <UNK> to answer your second question.
But in terms of the second quarter, so you will just have to think a little bit about our business.
First and second quarters are very low-volume quarters until we get into back-to-school.
And the third quarter and in holiday in the fourth quarter, we are at smaller sales levels and therefore it's difficult to leverage our fixed expense base.
And so we will take staffing down to one person in stores.
We have got the same rent in May that we have in December.
And so we are doing all we can to manage our expense base.
And so the headwinds specifically that I was referring to are that we still expect that Lids' comps will be negative in the second quarter.
And while we didn't initially anticipate that Schuh's comps would be negative, we now, just given the experience we had in the first quarter, have taken their comps and guided their comps to be negative in Q2.
We are very encouraged by what we are seeing in both Journeys and in Johnston & <UNK>.
But in such a low-volume quarter, the combination of those negative comps from those couple of businesses is what we would describe as a headwind.
I will just first add on to that one.
The other thing that we are experiencing in our business, which has been going on for years, is the expansion of our digital business and the negative comps in our stores, which we have repeatedly said is dilutive.
So over many years, what has happened is our operating margin is not what it used to be.
We want to see it start to climb back up.
But while we are at a lower operating margin, the quarters that take the real hit are the first and second quarters because we have very little flexibility on costs, given that those are ---+ the stores in particular are fixed cost machines for the first two quarters before we start ramping up our labor for back-to-school and Christmas.
On your question with regard to the improving comps at Lids ---+ at Journeys.
You are correct; last year, they improved meaningfully in every quarter.
And so when you look at our projections for this year, we are bringing the expectations for Journeys' comps down a little bit every quarter.
The best way to probably understand it, though, is I would encourage you to go back and look at a three-year stack.
Because when you look at some of the strong comps from last year, much of last year's strong comp was a rebound from the weak comp the year before that.
And so you really have to go back in history to understand the shape of the comp.
And I would encourage you to go back ---+ I won't go through all the numbers here, but go back and look at a three-year stack to get a feel for what we are doing with our expectations.
Yes, let me give you some general themes and then I ask <UNK> to give you more specifics.
The headwear business has gotten a little more difficult for us.
It's ---+ ballpark, we do two-thirds of our business in headwear and about a third in the Locker Room business.
And so the headwear business, because we are just searching for that next fashion trend, has been more challenged than it has been in a while.
The Locker Room business on a trend basis is actually getting a little better.
It's not as negative as it was.
Underneath that, there is a lot of stuff, which is just the nature of the licensed sports business.
So for example, last year we had the International World Series, in which we did a lot of business.
And so we missed that this year.
Cubs ---+ obviously the tail end of the Cubs was going on right now a year ago, the excitement of the new season after winning the championship.
Then we have some good things.
The Yankees doing as well as they are; that's our number one team.
And so the Yankees are terrific for the business.
So when the Yankees are doing well, MLB is doing well.
For more detail, <UNK>.
So <UNK>, just specifically around your question.
In the first quarter, Lids stores, just given the headwinds <UNK> described, their comps weren't that different than the Locker Room stores.
And as we said, we are very excited to be getting into baseball season because baseball is our number one league in the first quarter.
It's still our number one league in the second quarter; it becomes even bigger.
And then the impact of baseball starts to trail off in the third quarter with the start of football season.
So far, our Clubhouse business in particular has been on fire because the Yankees have been on fire.
And so that's been a very nice tailwind that has been driving the Clubhouse business and really the Lids business overall.
I will just make the one comment.
We don't give a quarterly guidance because of all the moving parts that I just finished describing, particularly in the Lids business.
This is just another example of moving parts.
And so with that said, let me hand it over to <UNK>.
Yes, I know that it's a tricky week and it's tricky in particular because it's such a big back-to-school week.
It might not be as impactful in other businesses.
So just on the basis of last year, <UNK>, if you look at the dollar amount of business that we would end up shifting from the third quarter to the second quarter, if you shift about $20 million, that should take care of the shift.
And then you can work whatever your flow-throughs are to be able to flow through the right amounts.
As I said, we feel like there is some positive opportunity for gross margin this year.
We saw gross margin up 30 basis points in the first quarter.
We also think that there is stronger opportunity in the back part of the year for that gross margin lift, only because we have more opportunity to do business than both with back-to-school and with holiday.
In general, we continue to deliver a double-digit gain.
We are pleased with that.
And it has sort of been in the ballpark of our expectations.
In terms of specific business units, <UNK>.
Yes, so you know, Pam, we are not breaking out specific business units anymore just because online comps are just so integrated with store comps these days.
But we were up 10% against really a phenomenal up.
I think we were up close to 30% last year in the first quarter.
So a little bit of the lower comps this first quarter I think is against a very strong compare from last year.
Journeys' business especially has been comping strongly on the direct side.
Journeys, some of our other businesses are more penetrated and so there has been lots of opportunity for Journeys to grow quickly because of some of the investments they have been making.
And Pam, this is going to get over time a little trickier for us to discuss and for you to analyze in the sense that the world is blurring in terms of what's an online sale.
If you have a person who comes online but is buying from you because they have the chance to pick it up in the store, you have to give credit in a way for both the digital and the existence of that store for having closed that sale.
So I think increasingly we and others in the retail space will be just talking about comps.
And then try to give some color about how much digital is helping comp, but it won't be strictly defined to what the digital sale was, which we have heretofore defined as a sale that is made on somebody else's device.
And I would just remind you that we run our e-commerce businesses to be profitable.
So we are happy to take e-commerce sales to the extent that the customer wants to make those sales.
But the other thing that we've been delighted about is the strength of the store business for both Journeys and Johnston & <UNK>.
Because the positive store comps and the cost reductions that we have implemented and a strong direct business, that makes for a good formula for profitability.
We did cover that on the call.
Just the main theme is there is a dearth of fashion excitement in the headwear space right now, which is hitting the category, hence Footlocker's comments.
And right now what we are doing is testing a lot of different things; working very closely with our vendors to create more excitement and explore possibilities for the next trend.
But we are not having great predictive ---+ we are not predicting when the next trend is going to appear.
Thank you, everybody, for joining us.
And we look forward to having a conversation with you at the end of the second quarter.
Have a good day.
