Jeff Black - IR, SCR Partners Mike Madden - President and CEO Adam Holland - VP and CFO

Sumit Desai - KeyBanc Jeff Van Sinderen - B. Riley Anthony Lebiedzinski - Sidoti & Company David Magee - SunTrust Neely Tamminga - Piper Jaffray

Welcome to the Kirkland Third Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this conference is being recorded. I would now like to turn the conference over to Jeff Black of SCR Partners. Please go ahead.

Thank you, good morning and welcome to Kirkland's conference call to review results for the third quarter of fiscal 2016. On the call this morning are Mike Madden, President and Chief Executive Officer; and Adam Holland, Vice President and Chief Financial Officer. The results as well as the notice of accessibility of this conference call on a listen-only basis over the Internet were announced earlier this morning in a press release that's been covered by the financial media. Except for historical information discussed during this conference call, the statements made by the company management are forward-looking and made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Kirkland’s actual results in future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in the Kirkland’s filings with the Securities and Exchange Commission, including the Company’s annual report on Form 10-K filed on April 8th, 2016. I will now turn the call over to Mike Madden.

Okay, thanks Jeff and good morning to everyone. As we expected the third quarter was challenging as sluggish traffic trends continued across much of the sector and drove higher than expected promotional activity. Total sales increased 7% to $138 million driven by new store openings and a double digit increase in e-commerce sales. Comparable store sales decreased 2.3% reflecting softness on the brick-and-mortar side. While comp trends remained under pressure, the quarter benefitted from some improvements in our operations that we have been building toward during the year. Our ongoing work in the supply chain has yielded savings on inbound freight cost versus a year ago and is creating efficiencies in our distribution center operations. We also have improved our overall expense management showing leverage on our operating expenses for the second quarter in a row despite negative comps. Our inventory position has improved dramatically. After several quarters of inventory increasing at a rate greater than sales, we are now on the right side of that comparison which bodes well for margins as we enter 2017. Our balance sheet ended the quarter in good shape with $28 million in cash and no debt outstanding as we head into the heavy cash generating fourth quarter. It’s important to point out that our sales were a bit weaker in October than in August and September. We tend to have a larger Christmas assortment penetration versus our competitors at that time and the transition to this year’s holiday set occurred against the election run up and unusually warmer weather. November trends while starting slowly in the first week have improved post the election in our seasonal categories which performed well in the third quarter, have an even more prominent role in the fourth quarter. So we believe we are well positioned as we move into the holiday period. In addition to our seasonal assortment, our mirrors, fragrance, and furniture categories provided nice gains in the third quarter. We have seen an elevated level of promotional activity leading up to Thanksgiving. We expect the promotional environment to be more pronounced this year, and that conservatism is incorporated into our guidance. Having said that, our inventory is in excellent shape and that should allow us to compete effectively and press for share where we see opportunities. We outlined some targeted initiatives to address our traffic trends in the last call, and I’m very pleased with the progress we are making. During the quarter, we launched our new brand campaign, “Your Doorway to Home”. The campaign spans all Kirkland's marketing activities and rebalances the message to emphasize inspiration as well as value. From a media perspective, we completed a shift from press marketing to digital, and it's enabling us to expand our reach and frequency as well as more effectively target our marketing dollars. We're executing on a range of programs to inspire shoppers to visit Kirkland's for the holidays, and we’ll convey Kirkland's clear edge on price where appropriate. Kirkland's compares favorably in price across many items and we want to make sure we get due credit for that. We're also making progress to rejuvenate our loyalty program, with a full refresh set for 2017. The program was launched in late 2013 and now has over eight million members. We've begun implementing initiatives to increase frequency by offering special rewards for key segments of the program, and we're evaluating new reactivation initiative to re-engage with customers that have not transacted with Kirkland's for a period of time. We're excited about the program's potential to drive sales with new existing and previous customers. Turning to real estate, we completed our 2016 class of new store openings this month, on time and on budget. The 42 stores opened this year benefited from improvements to the site selection process, and they're performing well thus far ahead of our internal estimates. We also closed 14 stores this year; we're doing a lot of work to analyze our penetration by market. While the 2017 plan is not final yet, we are aiming to open fewer stores than in 2016 and will likely close a few more stores still netting a gain in store count. We will increase the focus on re-locations which are generating a favorable ROI. We are seeing growth opportunities and outlet centers having opened some very successful stores during 2016. Well I’ll outline more of our thinking there when we provide our 2017 outlook in March, but longer-term, we may remain committed to our goal of 500 stores as we evaluate our opportunities market by market. As you know, e-commerce remains one of our top areas of focus. In addition to our fulfillment center in Jackson, which opened during Q2, -- Q1 this year, we've made several improvements to support more profitable growth. These include some upgrades to our supply chain technical systems to improve speed and performance and provide our fulfilment operators with enhanced efficiency for the peak season. We've also increased our third-party drop ship business alleviating some pressure during peak periods, and we’ll continue to improve our labor management and facility the longer we operate in it. Sales in the channel increased 13% against the very strong 38% rise last year. Although this rate of growth is down from prior quarters, we are comfortable with our ability to better control and manage the business at this level. We are encouraged by the results we are beginning to see in improving the profitability of e-commerce and not just driving the top line at all costs. We worked hard to absorb a rapid increase in e-commerce penetration, and believe we are well equipped with the plan in front of us to profitably expand the channel. Our priorities here are to increase our capabilities to buy online and pick up in-store, expand our vendor drop ship business, and optimize our online merchandise assortment. As we evolve our marketing, real estate, and e-commerce initiatives, we’re making strides to infuse our product assortment with more excitement and newness. We've reduced the penetration of our core product to below 20% in support of that effort. The benefit will be more evident in spring 2017 given the large percentage of our second half assortment devoted to seasonal merchandise. Our team continues to focus on the art and textiles categories and we expect improvements as we enter next year. Overtime, we believe there's an opportunity to improve inventory turn and reduce our working capital requirements. As you know we’ve talked a lot about continuous improvement in prior calls. Along those lines, we are investing in the business by making some key additions to our leadership team. Mike Cairnes will join Kirkland's next week as EVP and Chief Operating Officer and Sarah Hussey joined Kirkland's in the third quarter of this year as VP of planning and allocation, both are newly created positions that bring an abundance of retail experience to the table. Mike has a long and distinguished career and comes to us after a number of years at Michael stores, and Sarah has an exemplary track record as well and joins us from Sports Authority. Our business has become more complex, now including a growing e-commerce channel and new supply chain dynamics as well as recent investments in technology processes and people across many of our key functions. Mike and Sarah will support our long-term goal to drive continuous improvement, and the new structure should create better alignment in the organization. We need to lift our operational execution across-the-board. My goal is to get us to the point where we can take that for granted. We're on the right track and these hires will help us make faster progress. It’s a great time to bolster the team for further success as we head into a New Year. Our team has been working relentlessly to improve our business for both the short and long terms. We are starting to see some signs of stability and some of our key initiatives are beginning to bear some fruit. We look forward to updating you on the progress over the coming quarters. Now let Adam discuss the financials.

Thank you, Mike. Net sales for the third quarter increased 7%, with total comparable store sales decreasing 2.3%. A 5% decline in brick-and-mortar traffic was the primary reason for the overall comparable store sales decline. Geographically, store traffic was down in most of our states with meaningful traffic declines occurring in Florida, North Carolina and Virginia. Hurricane Matthew hit these and other Eastern states during Q3, negatively affecting our total comparable store sales by approximately 40 basis points. Thankfully all of our employees are safe, and no Kirkland stores incurred meaningful damage during the storm. Texas and Louisiana while not influenced by hurricane Matthew continue to show negative traffic trends although they trended closer to the company average. Our conversion rate in stores showed some sequential improvement from Q2 to Q3, edging up close to 2%. Our average ticket was relatively flat during Q3. We opened 11 new stores during the quarter and we close one, ending with 401 stores representing 31 more units or 8% more than the end of Q3 last year. Moving on to e-commerce sales, e-commerce generated $10.8 million in total revenue during the quarter and accounted for approximately 7.8% of total revenue during Q3, a 13% increase over the last year. This increase was driven by continued growth in both website traffic and conversion rate. Moving onto gross profit, third quarter gross profit margin decreased approximately 70 basis points to 36.5%. Merchandise margin increased approximately 28 basis points, to 55.5%. Our promotional activity was somewhat higher during the quarter, benefits from our new West Coast bypass operation and favorable market conditions drove inbound rates lower, allowing us to achieve the increase in merchandised margin over the last year. Store occupancy costs increased 772 basis points as a percentage of net sales during the third quarter. Store occupancy expense was as we expected from a dollar perspective. Outbound freight costs, which included e-commerce shipping, were down approximately 15 basis points as a percentage of net sales, as we have consolidated and improved our outbound to store outs. Finally, central distribution costs increased approximately 41 basis point, the addition of the new e-commerce fulfilment center and the associated increase in labor costs accounted for most of the increase as a percentage of sales over last year. Moving on to operating expenses, operating expenses for the third quarter were 33% of sales, which was down approximately 61 basis points from last year. Store-related operating expenses leveraged 31 basis points during the quarter, primarily due to tightly managed store payroll. Additionally, store supplies and marketing cost were lower in dollars and as a percentage of sales compared to the prior year period. Corporate-related expenses leveraged 39 basis points over the prior year. Lower professional legal fees along with lower travel costs help drive much of the improvement over the prior year. E-commerce related operating expenses increased 9 basis points compared to the prior-year period. Depreciation and amortization increased approximately 36 basis points as a percentage of net sales. The tax benefit for the quarter was $767,000 or 47.6% of pre-tax loss. We recorded a discrete item in the quarter relating to an adjustment to our deferred tax assets after filing our prior year income tax return, which benefited diluted earnings per share by about a penny. The net loss for the quarter was $0.05 per diluted share. Moving to the balance sheet and the cash flow statement, at the end of the quarter, we had $28.3 million of cash on hand. Inventories at the end of Q3 were $99.9 million, an increase of 4.7 % over Q3 last year. As previously discussed on our last conference call, the Q3 2016 ending inventory amount includes the incorporation of our new West Coast bypass operation, which we successfully implemented in August. This new bypass allows us to gain ownership and control of our product earlier in the pipeline without having a negative impact on working capital. The new in transit inventory bucket totals approximately $6.6 million and is included within the Q3 2016 ending inventory balance. As we recall, we ended Q3 of 2015 with elevated inventory levels. At quarter end, we had no long-term debt and no borrowings were outstanding under our revolving line of credit. Year-to-date for Q3, 2016 cash provided by operations was $12.1 million reflecting our operating performance and changes in working capital. Year-to-date capital expenditures were $28 million, with approximately 78% of CapEx relating to new stores and existing store improvements, followed by 13% related to IT system improvements and finally 9% related to supply chain. The implementation of the West Coast bypass during Q3 required a minimal capital investment. Turning to our guidance, as mentioned in our press release earlier today, we have adjusted some of the components of our fiscal 2016 annual guidance previously provided in our August 23, 2016 earnings release. We plan to end the year with 404 stores representing total unit growth of 7% over the end of fiscal 2015 with square footage growth approximating 9%. Total fiscal 2016 sales are now projected to increase approximately 7% over fiscal 2015, implying a fourth quarter comparable store sales decrease in the range of 1% to 2%. For the year, gross profit margin is expected to be down compared to the prior year, given an increase in supply chain and store occupancy costs, partially offset by a higher merchandise margin. Operating expenses are expected to increase slightly as a percentage of net sales for the year, and we are cycling against a reversal of a bonus accrual as well as a favourable true up relating to our workers compensation insurance reserves from the fourth quarter of fiscal 2015. . As a result, earnings per share is expected to be in the range of $0.70 to $0.80 per diluted share. Capital expenditures are expected to range between $28 million and $31 million, compared with $35 million in fiscal 2015. As for these factors we would expect to continue to leverage operating expenses. As a result, earnings per share are expected to be in the range of $0.70 to $0.75 per diluted share. Capital expenditure should approximate $31 million compared to $35 million in fiscal 2015. Operator, we are now ready to take questions.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Brad Thomas of KeyBanc. Please go ahead.

Hi, this is actually Sumit Desai on for Brad. I'd like to start with a question on pricing and brand awareness. We recently conducted a pricing analysis that showed your products were at a pretty compelling discount to certain online competitors, and it seems to imply that there may be an opportunity to drive more awareness of this. Do you have any initiatives currently in place to drive more pricing awareness and does that tie into your new brand campaign?

Thanks for the questions. Yes, we certainly saw the analysis you guys did, and we're really not surprised by some of the results there. We feel our pricing is very compelling. We can do a better job of calling that out inside the store, and that is definitely part of our campaign. I think, we're trying to introduce a number of things with this campaign. One is to add a little more in the way of inspiration to our messaging. We feel our brand is unique in that regard, it's a different experience than what you get in some of the other competitors. But that is coupled with this value proposition, and we feel good about that angle of our branding as well. We just need to execute better on that, and the campaign gives us a chance to do that both through our social interactions, through our e-blasts, through our in-store collateral, and in any other messages that we deploy to customers. So we see that as a big opportunity, and it was good to see that research that validated that against the competitors you did in your survey.

Thank you. If you achieve your full year guidance, what do you think your cash balance could be at year-end, and how should we think about your capital allocation priorities with that cash balance?

Yeah, I’m going to let Adam comment on the cash balance itself. In terms of priorities, we -- obviously investing in the business is number one, you know we ended the quarter in a nice position. No debt on the balance sheet, nothing drawn on our line of credit that gives us a lot of flexibility to invest in the business and maintain a conservative capital structure. We have a history of returning cash to shareholders through repurchases and we paid out a dividend even last year. So we'll continue to look at those opportunities as well to enhance returns with any excess cash that we have. But investing in the business is the priority, but we are certainly considering those other alternatives as they come up.

Yes and in regards to the range, between $50 million and $55 million is where we would approximate the year-end cash balance.

Okay. Thank you. And on quarter-to-date trends, if I heard you correctly, I think you mentioned that November started slowly, but has improved since then following in October that was a little bit softer up against the election and with normal weather, is there anything you're seeing in November, by product -- by product category or geography that would further suggest trends are improving sequentially as you'd like heading into holiday?

Yes, I think the note in the script that I made in October was a little weaker. We attribute that to the prominence of our Christmas product, which is really dominant on the floor and the macro factors that we're up against in that month given that penetration level. So as we moved into November that first week was tough. I mean, I think it was tough for a lot of people, but once we got beyond that we've stabilized a bit and our Christmas assortment, our seasonal product is starting to take hold I think more with the customer, their mindset shifting toward the holidays a little later this year, so we feel good about that assortment and it's the chance for success over the next several weeks as customers are really even more in the holiday mode, so we still guided to a negative 1 to negative 2, but we see the business stabilizing a bit.

Okay, great. Thank you and the last question on store growth. As you mentioned, you accelerated your store growth this year and noted they are performing well, could you comment on any implications that may have for next year's growth rate as well as the cadence?

Sure. We are pleased with our class this year. I think, one thing I did say is we do, and we signalled this last couple of quarters. We do see the growth rate dropping a bit next year. We've got some things we want to get fully into place on the supply chain in e-commerce side, and taking a little pressure off of that growth rate I think is the right thing to do. We're doing some relocations, we’re re-positioning some stores in select markets. But we will still be a very active player out there next year, and in terms of real estate, we’ve gained a lot of confidence I think in our site selection model. You know these relocations are really important to us to get the chain up to a standard that we feel it needs to show, and so little bit less in terms of growth rate, but still a lot of activity and repositioning going on within the fleet of stores.

Okay, thank you.

Our next question comes from Jeff Van Sinderen of B. Riley. Please go ahead.

Good morning and let me say, congratulations on the improvement in some of your metrics. Just wondering on the oil patch trend versus the chain average, I think you said it was pretty close to the chain average, just wondering if there's anything to read into that. And then if there’s anything we can look at as far as I guess what Mike [Indiscernible] will be focussed on in his first six months or so.

Yes, this is Adam. We are starting to cycle up against some of the softness we saw last year in Texas and the other oil producing regions. And we're just -- we're not seeing that turn back around yet, although the level of decline has moderated. And another thing about Texas, it is also impacted by border activity being down. We've got 10 really good stores on the border. We've got some really high volume stores down there that and that's also weighing on some of that -- some of that traffic pressure with Texas specifically.

And I'll -- and Jeff, I'll take the Mike Karen’s [ph] question. We -- you know first thing I’d say there is I’m proud of our existing team and what we're accomplishing as a group. It’s a solid group. As I was evaluating the needs, I felt we had some gaps and particularly and in the type of leadership that has deep experience in managing some of these retail cross functional groups, that and it on a day-to-day basis, I mean, I cited in our script, we really need to lift our operational execution here. We really need to get away from having to fight the fires every day, and be focused on the longer term and looking ahead. And so I feel like we needed the position to position us to do that and I think he's a good fit. I think it's going to take him, take -- certainly take a little time for him to get up to speed, but I think he's a good mix into our culture. I think he's got a good history of managing large operations on a day-to-day basis and he also brings some strategic capabilities to help us shape vision going forward. So excited about that, and while I'm talking about new additions, I’ll throw in the P&A hires well, which we really see unique opportunities inside that function ensuring full utilization of our technology investments we’ve made, partnering with our supply chain to really work through the merchandise flow, building good partnership between planning and merchandising and then just understanding space in the stores to a level that we have, we currently haven’t been up to. So, I see a lot of opportunity in all those areas as we move forward.

Okay that’s great. It seems like great hires. And then if I get through another one, I notice you guys are running some early -- Black Friday weekend deals, and then I think you spoke to kind of a relatively promotional environment out there. Any thoughts on how you think that the kind of the early Black Friday deals will impact the I guess the timing of consumer spending behaviour, and then also are you going to do incremental deals when Black Friday arrives?

Yes, I mean, we are as – as we already mentioned it certainly promotional period .I think it’s more promotional than what we’ve seen really. I mean, I’d get a lot of the E-blast from all the different retailers and I'm pretty amazed about what I'm seeing hit my inbox, and there's a lot of deals to be had out there. You know we’ve got our share as well. We are building up to Black Friday. We will have some unique and aggressive things going on for that day. It’s – it is you need people in your doors on that weekend, that's a big day for us, and everybody else. So I think you'll see us go hard at it, but we're trying to space in a lot of this other messaging through our marketing initiatives and we kind of hit that periodically as well. It’s not all about price it's about trying to create some enthusiasm and excitement about the type of product we sell and what you can do with it. So we'll mix that in as well, but we're going to be, we’ll be out there and fighting the good fight on Black Friday. I think we are primed and ready.

Okay, very good, appreciate that detail and best of luck for the rest of holiday.

Thanks Jeff.

Thanks Jeff.

Our next question comes from Anthony Lebiedzinski of Sidoti & Company. Please go ahead.

Good morning guys, thank you for taking the questions. First, on the e-commerce, I think Mike or Adam you admitted that the e-commerce sales growth has slowed, so how should we think about kind of a more normalized rate of growth for e-commerce sales and also you did mention the increased use of drop ships, so what’s the differential for drop ship merchandise for you guys?

Okay, well – we did show a little bit lower growth rate in Q3 sequentially, some of that was expected. The ramp up in the business and the way it progressed over the last couple years suggested that the back half was a tougher comparison and a lot of that came through with the timing of our marketing push online and the availability we gave the customer for ship to store. And ship to store is a great thing, and then it's been a great way for us to beef up the channel and grow, but it's also getting to a point where it's taxing the organization a bit and its technology and our technology around it and our capabilities. So we are controlling it a little bit, Anthony at and I feel more comfortable with the way we’re running that right now even at a lower growth rate, because we're a little more profitable. And so I would expect this kind of range maybe a little better, but you know double-digit, but not up in that range where you saw as the last several quarters, and as we turn on more capabilities with our supply chain in our fulfilment and inside the store, really our priorities being buy online pick up in store, using that inventory instead of shipping it all the time. We got to get those things in, and that will really further help the profitability and enable more growth as we go forward. So I feel good about that. What was the last part of your question, I'm sorry?

About the drop ship merchandise, so what's the difference in margins so generally speaking?

There's a gap in margin, you know I'm going off the top of my head area. You know our normal merchandise margin is in the fifties, in the drop ship margins below – kind of 30, 35 ish, but you got to remember, you don't have any of the labor, any of the touching, that's, that's the margin. So we are not having to put up all of our resources into the last leg of the fulfilment there, and it really helps the equation.

And Andy, and I’ll just add -- just a drop ship still a small piece of the business.

But growing.

Okay. Got it, got it. So turning over to the two new executives that you just hired, so are you looking to perhaps further expand your management team, or do you think you Mike are you happy with the current team that you have now?

Right now I feel good about where we are. I think those were the moves that I really identified and wanted to make at this stage, anything we do in the future is going to be based on what we experience from here, and how the business evolves.

Got it, okay and as far as CapEx so just looking at the different buckets new stores versus omni-channel, versus supply chain, I know for next year you said that new store growth will moderate a bit. Looking forward towards next year, how are you thinking about the other components of CapEx as far as Omni-channel and supply chain, I know you open the new 3PL [ph] facility, so how should we just think about broadly CapEx for next year?

Anthony, this is Adam. Next year’s CapEx, and of course we’ll have more details on this when we have our call in March. It's going to be less than 2016, it will still be heavily weighted towards new store openings. We don't anticipate there will be a large CapEx outlay, related to the West Coast bypass. A lot of that infrastructure is systems based and has already been put into place over the last few years; it's just a matter of turning on the functionality.

Anthony, I’ll add to that. Just the way to think about non-store related CapEx is really, it's a very – they are targeted investments. We’re going after like as Adam said, the West Coast, you know adding functions here and there that have a nice payback and we're kind of apart from the largest sweeping investments we've made in the past years like Oracle and turning on e-commerce and you know that the multi-million style investment. So very targeted and hopefully will help us improve margin going forward.

Okay, thank you.

Our next question comes from David Magee of SunTrust. Please go ahead.

Yes, hi good morning and congrats on the stability and as well as your new hires too.

Thank you, David.

Mike, how are you evaluating the success of the new brand campaign or how will you evaluate the success of that as you go forward?

Well it’s ultimately about traffic. And as we look at the messaging that we're deploying, you look at the markets that you're hitting and overtime you're measuring how is the traffic looking at those markets relative to the rest of the chain. What are the open rates on some of the E-blast that we’re deploying, how are people really engaging with the content that we're putting out there. We've -- you know we've done things like launched a brand video, when we posted that on the site. We've got inspirational things going on the stores that tied to the campaign, and its message. We’ll continue to kind of roll that out. It's definitely early to call the impact on that in financial terms as we’ll know more as we work through the fourth quarter and into early part of next year. But this has some lags and will continue to kind of use that message to create content that engages the customer.

And so far so good, although it is early.

Yes, so far so good. I like what we're doing in terms of the creative on the -- on the E-blast. I mean, it's much cleaner, you track this every week and look at what we do, hopefully you take note of it, but the site is it has kind of been re -- not completely redone on the user interface, but we tweak some things and I think it looks a lot I just use the word clean, it looks a lot cleaner, and up to standard. So we'll continue to do that, and hopefully see some benefits from it. But it is early, and we’ll continue to talk about it though and report you know what we're seeing and how we view it.

Thank you Mike, and then secondly, can you talk a little bit about the importance of Black Friday versus how it has been historically and when will you hit your peak volumes this season, given the fact that you had so many decorations I assume is earlier than a lot of retailers.

Yes, I mean, yes I've been here 16 years. By Fridays it’s been the biggest day every year I've been here. And that is the case here. I think that's the prime territory for when customers are shopping for Christmas decor, a lot of people that weekend or kind of retooling the home, to show the decorations and then even that period subsequent to that as well. But then, you know our merchandising is not one-dimensional and then it's all of the core this time of the year. We will have a lot of gifts statements that cover that territory between Black Friday and Christmas. But Black Friday continues to be the biggest day. Now it’s not a make-or-break, I've seen us have a soft Black Friday and a good year. And I've seen us have a good Black Friday and a poor year. But it's a big day, and it's one where I think the customers really engaged in the season, and we are merchandize really speaks to that. So it's important, but it's not a make or break, and we've got several weekends, between we’ve got a couple extra days this year actually between Thanksgiving and Christmas, and we'll have a lot going on in the stores from a decorating standpoint early, and then entertaining and gifting as you work your way through the season.

Great. Thank you guys and good luck.

Thanks, David.

Our next question comes from Neely Tamminga of Piper Jaffray. Please go ahead.

Great, thank you. Hey guys, so two questions, really specific typical sell-side analyst question upfront. The November sales trend that you guys are setting on the other side of the election is that comping positive or is the queue for guidance of minus implied guidance comp guidance of minus one, minus two kind of implied more on that trend line the occurring post election?

Well, it’s kind of not a clear answer. I mean the first week was really tough, then we kind of improved since then, and we're having some positive days. But it's more in line with that without guidance I would say.

And have you got to stand back [Indiscernible] I know that your business is crazily different actually back in like '04, but have you compared this, any of your trends that you’ve seen so far to prior election cycles, just giving you confidence towards the trend line of improvement?

We have Neely. I mean if you look back in 2012, you know it’s presidential election year. You know, you had a few more days between Thanksgiving and Christmas similar to this year. Even things, the shift and the daylight savings time was similar in 2012 in terms of the retail week. So we've gone back the last four years, looked at those, looked at the improvements, and you know there's been a lot of lot of things published in the retail world about the effect of the election and seems like no one can really quantify the effects that it seems overall have had a negative effect with folks thinking it’s going to improve as the season goes on and that’s what our guidance implies.

Okay, [Indiscernible]. So question then bigger picture, on your assuming capital. Really great additions, but could you just remind us a little more on the org structure, so as I sit back and then see these titles, it would seem to me that you know Adam for you, you really you know helped pump [ph] up some of your team, by adding that P&A, am I right in thinking that putting application reports in directly for you or to have that run on org chart and then for Mike, you’ve obviously found a partner and Mike, Mike squared. [Indiscernible] okay, so I guess we're just trying to figure that out a little bit more, and instead of asking about how they're going to be focusing on their time, I guess what I'm asking each of you or [Indiscernible] how are you looking forward to spending your time slightly differently in 2017 versus where you have in the past couple of years? Thank you.

Yes, well I’ll give you a little color on the org structure. The P&A will report to Mike when he joins and Mike would have merchandise, I think we felt it out in the release. Mike would have merchandising operations, supply chain, P&A and marketing. I think that's where the biggest need is, it’s that day-to-day management of the -- of the linkage between a lot of those functions. I mean, we're not the newest, or we have been doing a lot of marketing over our history. I mean we are integrating a lot into the organization that you know previously wasn't there. There's a lot of process improvement that we need to put into place. The linkage between marketing, merchandising in stores. So in making that, I mean in putting him over those things, that's what I'm trying to hit on, is that, that coordination level that a retailer needs and it gives me a little bit more out of that day-to-day stuff and allows me to really devote more time to looking ahead and thinking about where we need to be, what do we want to test, what do we want to try, to continue to evolve this brand into bigger and better things. You know Adam will maintain and certainly the finance side and as well as IT and then we have HR, Legal also out there. Michelle, who had done a lot for us in the past in terms of human resources, merchandising stores will be really focused on the store side, and real estate rolls up under stores now because there's a big, there's a big component and also Michelle would have merchandise presentation. All those things really work together in a way that that can drive our productivity going forward, understanding that space what the store design looks like and how we're presenting the product and with a vision for the merchants and bringing that live in the stores that's why to connect those things together in the orange structure, hopefully that gives you a little more clarity about how we are set up and where we are going.

So just If I'm hearing you guys correct, it really just helps you know the human capital hours and skills great [Indiscernible] that you’ve just hired, right. But this is really taking your ideas into action and really compressing the time, between ideas.

Yes.

Okay, all right. That’s awesome. All right, congratulations to you guys on those hires and have a wonderful Thanksgiving.

Thank you to you Neely.

This concludes our question and answer session. I would like to turn the conference back over to Mike Madden for any closing remarks.

Well thank you everybody for your attention and your questions today. We're looking forward to the season. We commend all of our store teams out there that are working really hard right now and wishing the best for the holiday season and with all you the best for the holiday season. So talk to you next time.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.