Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Greetings, ladies and gentlemen, and welcome to the Charming Shoppes, Inc., announces initiatives to increase shareholder value. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Ms. Gayle Coolick, Director of Investor Relations for Charming Shoppes, Inc. Thank you, Ms. Coolick, you may now begin.
GAYLE COOLICK, DIRECTOR IR, CHARMING SHOPPES, INC.: Thanks, Latonya, and thank you all for joining us this morning. With us today are Dorrit Bern, Chairman, CEO, and President of Charming Shoppes; Eric Specter, Executive Vice President and Chief Financial Officer; and Steven Wishner, Senior Vice President of Finance, Strategy, and Business Development.
Today's discussion will contain certain forward-looking statements concerning the Company's operations, performance, and financial condition, including sales, expenses, gross margin, capital expenditures, earnings per share, store openings and closings, and other matters. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those indicated.
Information regarding risks and uncertainties are detailed in the Company's filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K for the fiscal year ended February 3, 2007. Our complete Safe Harbor statement is available at www.charmingshoppes.com.
We have a number of initiatives to discuss with you this morning, and I would like to go ahead and turn the call over to our CEO, Dorrit Bern, who would like to review today's announcements. Dorrit?
DORRIT BERN, CHAIRMAN, PRESIDENT, CEO, CHARMING SHOPPES, INC.: Thanks, Gayle. We do have some very, very significant initiatives to discuss with you all this morning. Hopefully, you have had a chance to look at our press release, but let me walk through some of the points that we made.
Number one is that we're going to relocate our Catherines chain from Memphis, Tennessee, to Bensalem, PA.
We are going to launch and have launched on November 1 the Lane Bryant Woman catalog, which as you all know we have been waiting to do for the last five years. We have made the acquisition of the Lane Bryant retail credit card file. In addition to the significance of this to our credit card business, the opportunity to now have a loyalty program, which has been sorely missing from our Lane Bryant brand, is very exciting.
And I think most importantly for those of you that have known this Company for many years, the fact that our Board of Directors is in full support of a $200 million share repurchase program for Charming Shoppes. Very exciting. Certainly an indication of how our Board and the senior management team feels about the initiatives and, quite honestly, the future of this Company.
So let me walk you through a few of the initiatives quickly and then I will turn it over to Eric to talk about earnings. As you all know, I'm not going to continue to beat on the fact of, you know, the kind of seasons we have had, the weather we have. Our Catherines and our Bug business, the content is right, the marketing plans have been good. But we have continued to experience a decrease in traffic, and we feel that this is about the macroenvironment.
Unfortunately, that is not true of Lane Bryant. As you all know, we replaced the president and chief merchant of that company in June. We have a brand-new management team in place with a new president and three new merchants. Quite honestly the best merchants in the Corporation have been put into that brand.
We know the importance of the brand to the American consumer. They are working on content and we are confident that the product mix, in time, certainly at the beginning of the spring season and the middle of the spring season, we will begin to see movement in terms of this business turning around and producing for the Corporation.
Most recently, we have brought back the Lane Bryant credit file. We have reissued this week -- this is quite a number -- 2.3 million credit cards to our most loyal Lane Bryant customers. Additionally, we have introduced the loyalty and rewards program that I talked about earlier. Again, very exciting. This was a huge hole in our business, the fact that we were not really able to offer that loyal customer the reason to keep coming back and back and buying from Lane Bryant.
For the fall season, which will be fourth quarter, we're definitely increasing our direct-mail advertising for all our brands including Lane Bryant. We have introduced a cable television advertising program for the first time for the Thanksgiving holiday season. And of course the reissuance of the Lane Bryant credit card.
Now let me talk about the consolidation that we mentioned in the press release. As you know, Catherines we purchased in 2000, is a plus size retailer primarily specializing in that much larger, extended size lady. It has been our steady-eddy business for the last couple of years.
The individual that helped turn that business and reposition that business for us initially was Diane Paccione. We have now -- are going to move that organization back up to Bensalem, PA, where Diane has the responsibility currently of running our Lane Bryant outlet division, our Petite Sophisticate outlet division, and our Bug division.
So we are very confident that this business is going to continue to flourish under Diane. Obviously, we get the opportunity in terms of cost synergies. But most importantly, we get Catherines closer to the market.
Of all of our brands, it's the Catherines business that is the most dependent on 7th Avenue in terms of their vendor mix. The fact that we had them tucked down in Memphis, Tennessee, where they didn't have the opportunity to come into the market on a more timely basis, I believe, was a hindrance to this great business and to this great Company. So we are very excited about that consolidation.
We now also have product development opportunities. Our human resources, finance planning, and allocation departments will be consolidated. But we still will keep the integrity of the merchandising and PD teams. So again, a very exciting initiative for the Company.
Catalog. Five years we have waited to launch the Lane Bryant catalog. It is launched. It is a very successful business. As you know, it belonged to someone else. We are very excited about the first initial sales that we have gotten in the last 10 days.
In addition to that, the new president that was put in place has done an incredibly good job of refreshing all of our catalog titles. That business had been very difficult for us for about the last year and a half. That business has modified. The kinds of decreases we are experiencing has stopped.
Lori and her team have gotten us in the e-commerce business in a much more aggressive way. We had about 15% to 18% penetration in our catalog business, which of course is just absolutely awful. Lori is fast on her way of getting us back in that 40% to 50% penetration. So we are very excited about what she has done.
She sat down with her team and looked at all our catalog titles. We realize that we had one catalog title in the form of Regalia that really was an outlier. It really didn't work back into the core Old Pueblo Trader business in terms of how all the catalogs work and move in terms of the names. So we are going to be closing the Regalia catalog.
We are very confident that these other catalogs, which are profit centers for us, will continue to grow under Lori's leadership.
At this point in time, I would like to turn over the discussion to Eric for the third- and fourth-quarter guidance.
ERIC SPECTER, EVP, CFO, CHARMING SHOPPES, INC.: Okay, thank you, Dorrit. Again, the comments I will make have been outlined in the release this morning. But to pick it up, we have guided downward for both the third and fourth quarter. The third quarter downward revision is a result of continued weakness that we saw through the month of October. In fact, October sales actually decelerated from the August-September period slightly, …