Greetings, and welcome to the American Eagle Outfitters First Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Judy Meehan, Vice President of Investor Relations. Thank you. You may begin.

Good morning, everyone. Joining me today are Jay Schottenstein, Interim Chief Executive Officer; Roger Markfield, Chief Creative Director; and Mary Boland, Chief Financial and Administrative Officer. Also joining us for Q&A today are Simon Nankervis, EVP of Global Stores; and Michael Rempell, Chief Operating Officer. Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the company's current expectations or beliefs. The results realized may differ materially, based on risk factors included in our SEC filings. Please refer to the tables attached to the press release. We also have posted a financial supplement on our website. And now, I'll turn the call over to Jay for opening remarks.

Okay. Good morning, everyone, and thanks for joining us. Earlier this morning, we reported first quarter results. As anticipated, this was a challenging quarter, as we faced a number of headwinds. Weakness in demand led to soft traffic and a 5% sales decline. This, combined with elevated inventories, created downward pressure on our margins. We achieved slight profitability in the period well below the prior year. As we manage through the near term, implementing our plan to improve profitability is a priority. We made good progress during the quarter. Our plan includes: Creating great merchandise and improved customer experience across our brands; continuing to build strong digital and omni-channel capabilities; rationalizing our brick-and-mortar store fleet, expense reductions and distorting our international approach towards more licensed stores. We have been moving quickly to get our plans in place. So now let me give you some of the details. First, we are continuing to develop omni-channel capabilities to improve every touch point with our customers. We recognize the vast shift in industry dynamics and the need for transformation to remain competitive and win in the future. We have a number of projects aimed at optimizing our platform to create a better shopping experience for online and mobile shoppers. Throughout the year, we will launch upgrades to our online site to include improved product displays and better navigation. Additionally, we'll release a new mobile app later this summer with better functionality and speed. We've seen great earlier results from our buy-online, ship-from-the-store pilot program, including incremental sales that would've otherwise been lost due to stockouts and more efficient use of inventories. Currently, in 50 stores, we will ramp up to 100 by back-to-school. Additionally, our new fulfillment centers opens in July, providing leading supply chain functionality, much needed capacity and significantly faster customer…

Thanks, Jay. Good morning to all of you. The first quarter reflected micro headwinds, unseasonable weather and our own execution challenges. Product assortment isn't quite what it needs to be, and inventory was planned above trend, pressuring our results. However, we did see healthy demand for certain categories, including our Heritage bottom business, denim and pants. We're also pleased with our fashion capsules and how we are successfully adopting new styles into our mainline assortments. We saw the weakest results in men's shorts, mid tees and women's bare looks. Within Aerie, bras, undies and swimwear performed well. During the quarter, we needed to clear through excess inventory. And clearly, markdowns were not where we'd like them, yet we were able to selectively reduce broad wall box promotions. For example, we did not anniversary promotions during holiday periods. And in some cases, we excluded core businesses from the events. As we get inventories down in the second half, our goal is to continue to selectively reduce promotions. Improved product and more relevant marketing events will also support a better overall pricing strategy. The challenges we faced in the quarter underscore the importance of continuing to evolve as the retail industry changes. We are relying on the initiatives Jay outlined, including fleet rationalization and continuing to build our omni-channel capabilities. At the same time, we are also working hard to manage the business well this year against the backdrop of the current microenvironment. As we move forward, here is what the creative team is focused on. First, we are building upon and maximizing a leading Heritage bottoms businesses. This is our core strength, where we are driving innovation and delivering against exciting new emerging trends. We are known for the architecture of our fit systems and it's critical that we maintain outstanding…

Thanks, Roger. As Jay mentioned, the first quarter results were consistent with our expectations. Our performance reflected a weak top line, increased markdowns and expense deleverage. Total revenue for the first quarter decreased 5% to $646 million compared to $679 million last year. Our total revenue benefited from our noncom factory and international stores, as well as increased license revenue. Consolidated comparable sales decreased 10% following a 5% decrease last year. By brand, AE comps decreased 11% and Aerie was down 4%. Weakness in traffic and incremental markdowns resulted in lower transactions and transaction value. Additional sales information can be found on Page 5 of the presentation. The consolidated gross margin fell 420 basis points to 34.9%. The comp decline caused buying, occupancy and warehousing costs to increase 220 basis points as a rate to revenue. Higher markdowns also contributed, partially offset by favorability in merchandise and design costs. SG&A expense of $185 million increased 2%, or $4.3 million, which included $2.3 million in severance. First quarter expense reductions of approximately $10 million nearly offset incremental strategic investments related to new factory stores, international growth and omni-channel initiatives. We continue to work hard on expense reductions, which we expect to ramp up as we progress throughout the year. Depreciation and amortization increased $32 million -- to $32 million, driven by IT investments, as well as new factory and international stores. Operating income for the quarter was $8 million compared to $57 million last year, and EPS of $0.02 decreased 89% from adjusted EPS of $0.18 last year. Turning to the balance sheet. Starting with inventory, which can be found on Page 6 of the presentation, we ended the quarter with inventory at cost per foot down 7%, following a 6% decline last year. The year-over-year decline reflects a change in…

[Operator Instructions] Our first question is coming from the line of Simeon Siegel with Nomura Securities.

Jay, can you talk about the shift to international strategy as it relates to the markets you currently own? And then for perspective, what percent of sales does licensing currently represent and where do you think that could go? And then, just maybe a quick update on the factory strategy, can you remind us where the factory stores sit productivity wise and on a four-wall basis?

Simon is going to take this question.

Simeon, it's interesting. We've done a lot of work on our international business and we've identified a number of locations where we believe the brand will have great traction. To date, we're in 13 countries. By the end of this year, we'll have 14 licensed countries and we'll be in over 100 licensed stores. I think, as you look to the way that our owned and -- our breakup of owned and operated versus licensed business plays out over the next 2 to 3 years, well, what we've really done is be very focused on where is the best return on that investment for us, especially given the focus that we now have on fortifying the North American business and, in particular, driving incremental productivity out of our U.S. fleet. So I think what we'll do is you will see us -- the strategy change and adapt as we move forward. For example, Korea was a market that we have historically identified as a likely target for an owned and operated business and as part of our restructuring of our strategy, we've now identified that, that's an appropriate market for us to target a licensed store base, which is what we're in the process of working through at the moment. So as to the comment that Jay made earlier about our expansion of the licensed business over the balance for the year, we are looking for proactive opportunities and we are currently pursuing a number of options for additional licensed markets.

We'll move onto the next question, which is coming from the line of John Morris with BMO Capital Markets.

Maybe, Jay, or others in the room, a little bit more color on the omni-channel initiatives, which I think are impressive. Besides the Web upgrade, can you tell us a little bit more about what you're doing on the supply side? For example, are you looking at fabric platforming, vendor-managed inventory and the like, especially the opportunities you have within your fulfillment center?

Michael Rempell is going to take that question, John.

John, so you asked about omni-channel initiatives and some of the supply chain capabilities that we're building, so I'll try to address both of those. On the omni-channel side the team alluded to earlier, we really think about omni-channel in 2 ways. One is having a single view of our inventory across the company and really leveraging that inventory to serve the customer however they want to shop. The other is a single view of our customers, knowing all of their interactions with the company and being able to make special targeted relationships and offers to those customers. So we launched our ship-from-store capability. We're very excited about the initial results of that pilot. It's definitely demonstrated to us that there was previously unfulfilled demand in the market that we're now able to fill by leveraging inventory that was in our stores. So that's a huge win. We plan to expand that this year and then roll out additional flexible fulfillment capabilities next year. Single view of our customers is something that the team's worked hard on to make sure that we understand all our customers' interactions, whether they're in the stores, whether they're online, whether they're on a mobile device, et cetera. And what we're going to be doing in the back half of the year is really leveraging their entire relationship with American Eagle to make sure we're giving them the right promotions, compelling product and the right offers at the right time. So more to come on that, but we think there's going to be a big return there. So that's the omni-channel side. On the supply chain side, we mentioned we're launching our DC in Hazleton. It's a huge win for us. It's going to complement what we're doing with ship-from-store. Today, we're able to service…

Our next question is coming from the line of Betty Chen with Mizuho Securities.

I was wondering, Roger, if you can talk a little bit about some of the successes in the first quarter. I think, in particular, you mentioned some of the tops and also the fast-track capsules. Can you remind us what percent of the product can now benefit from fast-track and how that can change into the second half?

Right. The strength of our business continue to be in the Heritage parts, which you know are the bottoms business, the denim business, the casual pants business -- are pretty strong for us. And we feel good about that going forward. On the fast-track business, we have 2 different variations taking place. One is from point of design to in-store, get ready 45 days, and it's actually coming out of Italy, and we're doing this now on a monthly basis. And the acceptance in our stores, while at this point it's only in 75 stores, has been quite good. But the big payoff is the styles that are doing -- are running at less than 3 weeks supply. We're starting to get involved through what Michael talked about, the whole process we have in speed sourcing, to then take that and expand the quantities and do that through India and through China. And that will become part of the Heritage programs. So for each delivery, we will now start to input this fast fashion, and it will fit within, as you know, a lifestyle brand, the DNA of American Eagle.

Our next question comes from the line of Jennifer Black with Jennifer Black & Associates.

The new merchandise looks so much improved. In fact, they did a double-take and we can see your vision. I wondered how long it will take you to create the same deal in your new stores and old stores? And do you envision adding side-by-side Aeries to all your stores that have the space? And then, how many stores are in the same format as the new store format in our area? I'm in Oregon. And what kind of costs do you incur when you do these remodels and what do the returns look like out of the box? And we noticed that there wasn't clearance in this store, and so we were also wondering how that impacted the new stores that you were opening? And anything about traffic to the new stores? I was just really blown away when I saw the store.

Thank you. You had a bunch of questions in there. The fast fashion, we're -- as I said, we're in the beginning processes of it. Right now, it's in 75 stores, and I'm trying to figure out in an intelligent way how many stores we can expand it to. There's no question that the styles that pop up on less than 3 weeks' supply can work in the whole chain. Keep in mind, the amazing thing on the fast fashion, it's all 1 size fits most, and it's amazing. If -- anyone who tries it on, it fits them pretty well and I won't get into how we're able to achieve that, but we're able to achieve it. But obviously, when we then expand it to the stores, we're doing it in sizes because while, on the East Coast or West Coast, the customer may recognize it, across the rest of the country, 1 size is a little bit difficult for them to gather. On Aerie, this team we put together on Aerie is quite exceptional, and I appreciate your comments on it. And the new -- it was always built to be within the store. And then, when we decided we were going to add bras to it, I didn't feel that the bras were the right feeling for an American Eagle store. The rest of it is the intimate things for the AE girl. These new stores that we just designed, I think, Mary or Simon may have the numbers, it's quite amazing how successful. But keep in mind, these just opened up, but they're incredibly successful. And there's no reason in the right malls that we can't have side-by-sides and adjacent to American Eagle because it works for American Eagle and it works for Aerie and it makes our presence that much stronger.

So, look, just to answer your question, Jennifer, relating to the Aerie stores themselves. It's been part of our strategy with Aerie over the last 2 years to close the underperforming and generally oversized freestanding store locations with either side-by-side or shop-in-shops locations. And as we discussed over the last 6 months, our new Aerie concept was always due to debut in Q1 2014. And it's great to hear your feedback on how much you're enjoying the shopping experience. And, look, to be honest, we've had -- we've opened 7 stores. We've been very, very -- we've had great positive reaction from the market and from customers to the experience. And over the balance of this year, we look to double the size of that side-by-side fleet to 56 stores. In relation to how big do we believe that can become, I think, it's really an opportunity where wherever we've had an Aerie freestanding store, we are currently looking to create an opportunity for that to become either a shop-in-shop or a side-by-side. And in a lot of circumstances, we've actually taken adjacent tenancies and grown the footprint of the Eagle store to accommodate the Aerie side-by-side. But look, early indications and, as Roger said, it's been 4 weeks now, have been very positive. And we continue to expand on that strategy over the balance of this year.

Our next question is coming from the line of Paul Lejuez of Wells Fargo.

Can you talk about comp performance by type of center in the first quarter: A, B, C malls, street locations, outlets? And then, also just wondering about the store closings that you mentioned, the 150, what types of malls will those be in?

I think -- Paul, it's Mary. In terms of comp performance, I would say the comp performance was fairly consistent across all channels and across all types of stores. In terms of store closings, we did a very thorough assessment of our fleet and, obviously, the -- what we would call kind of the D, E, F malls are probably our least profitable stores. So obviously, those would rise to the top of the list. But it's more than just D, E, F malls, what you need to look at is how you can recapture those sales so we're not just walking away from the sales, so is there an adjacent store, can we move that customer to our direct business, et cetera. So there is a bit of a mix across all store formats in terms of the closures, but I would say probably more focused on the D, E and F malls.

And factory outlet performed similar to the mall stores this quarter?

What we've seen, Paul, is it's difficult with our factory business because we've grown the format so aggressively over the past 12 months. The actual fleet number has grown substantially. So we're not -- it's not -- you're not looking at apples to apples when you've got a mature mainline fleet and then a growing factory store fleet. So I think it's really too early to stay say whether it performed similarly or -- because it's really distorted through the number of new stores we've actually opened.

Our next question is coming from the line of Paul Alexander with Bank of America Merrill Lynch.

Just sticking on the 150 stores that you're closing, what other kind of characteristics can you share with us about them? And then on the assumptions that you're making for the transfer sales, are you assuming that a certain portion of that goes online or can you share a projection, maybe 20% or 30% of sales or something like that? And then on the assumption of the continuing negative trend that you mentioned that would result in these stores not meeting your hurdle rates, how far out are you projecting that trend in this plan? For instance, if you began to achieve positive comps at some point next year, does that change how you're thinking about these stores or would you reconsider closing all of them?

So I'll take the first part and then I'll give the second part to Mary. Look, I think in determining store closures, one of the things that we've been very careful and cognizant of is not just looking at a number on a piece of paper and drawing a line in the sand. I think what we've done is we've looked at the profitability of the store, we've looked at the impact on the store portfolio, demographic in the catchment area, other channels within the geography for sales and profit transferability. But the critical thing for us is any decision to close stores has to be done with consideration to the roles, role our stores play as a primary vehicle in new-customer acquisition. The store fleet, we still see the store fleet as a meaningful competitive advantage and in a way the brand acquires new customers and engages with its existing customers. An example of one of the decisions that we made last year was when we closed the store in West Valley Mall. It's sort of a 60- to 90-minute drive east of San Francisco. And the store hadn't been delivering on our minimum returns. We have 3 other stores within a 30-minute radius of that store, 2 mainline stores and 1 factory store. And upon closing the location, what we've seen is continued engagement by a large proportion of our loyalty customers across the other 3 locations, as well as our digital sales channel. So one of the critical elements for us is the transfer rates of customer spend and our ability to actually leverage that and maintain a percentage of the sales revenue, as well as profitability.

And as we looked at the analysis and the assessment, the brick-and-mortar fleet historic for a good number of years has been in a negative trend position. So we assume that going forward here for the next 3 to 5 years and kind of assess the fleet up against it. But to Simon's point, there's a multitude of factors that you take into account upon deciding what store and when to close it. So it was a very broad assessment, not just the comp trend. So as we said, we'll continue to assess this as our business -- as we watch our business trends. But we think this is generally about the right place to be.

Our next question is coming from the line of David Berman with Berman Capital.

This is Steve Kernkraut for David. The question that we have for you, and I guess it's for Roger or for Jay, but, obviously, you're seeing and adapting your strategy for e-commerce accelerating, but you're closing 150 locations, but if the remaining 850 locations that you're you going to have, are they going to be smaller-size stores, given that you're going to be focused on e-commerce with your omni-channel strategy? And I guess, also on the omni-channel side, if you could just give us an idea of what percentage of your sales are e-commerce now and where do you see it 3 years from now? And I guess the last question is of the 150 stores you're closing, are any of them going to be these factory stores that you've spent so much time over the last couple of years and so much money investing in, or is that going to be fixed and really the mall stores that are being located?

I'm going to take the start of that and I'll flick it back to Jay. I think, there's a big focus on the number. At the end of the day, it's 150 stores over a 3-year time frame. And I think that there are a lot of events or circumstances that can happen over the next 3 years as we go through that. And I think, one of the important things to note is that, historically, we have closed around 30 to 40 stores a year, with the exception of last year. One of the big differences is that in the development of our omni-channel approach to customers and the way that our customers now looking to shop with us, what we have done is we've made the decision not to aggressively pursue new mainline stores. So whilst it sounds like we're aggressively closing, we're actually not. What we're doing is we're not aggressively opening additional brick-and-mortar locations, which has historically been our trend. A large part of what we have within our fleet is the flexibility to adapt the fleet size based on business trends and what's happening. And as we see this shift between the brick-and-mortar strategy and the digital strategy, we are seeing those lines becoming more and more blurred all the time. And I think, we'll develop our strategy, especially with the buy-online, ship-from-store initiative now under way. we're seeing substantial opportunity throughout the fleet.

I think the key is we're trying to emphasize the way our leases are structured, it gives us tremendous flexibility. We have -- like Mary pointed out, we have half the fleet that comes due the next couple of years, at least, that puts us in the driver's seat as far as working with landlords. And as Simon was saying, and talking to Roger and Mary, is we do have that flexibility, which means that we see in certain stores that we may have targeted as a possibility for closing, if the sales improve there, those stores may not close. And the way the people like the way the merchandise is looking, but we feel our merchandise isn't currently up to the expectations that we expect it to be and we won't see it up to our expectations until later on this year. So if our expectations are right and we get the results we want, we may have a different number to report to everybody in the next -- in, like, next several months.

The next question is from the line of Susan Anderson with FBR Capital Markets.

I was wondering if you could talk about AUCs and your expectation for the back half? It sounds like you are expecting them to be down. And then also on that front, on the pricing front, what are your thoughts around that? And if you are lowering AUCs, will you be giving it back to the consumer?

Yes, for the back half of the year, we expect our AUC to be basically flat from last year. And I think, as we kind of look forward to the back half of the year, when you look at the overall kind of financials and where we think our margin will ultimately play out, with having a better balance of inventory, as Roger mentioned earlier, for the back half of the year more aligned with our sales trend, I would expect to see an improvement in our markdown rate as we make our way through the balance of the year with having the 2 better aligned. So I think we do have some opportunity here, but it's really more around markdowns and average unit cost.

Got it. And just one follow-up on the fast-track product, how should I think about the margin of that product versus your core product?

The beginning of the made-in-Italy project is lower, the chase out of India is higher.

The next question is from the line of Matthew McClintock with Barclays.

Mary and Jay, I guess I was wondering if you could talk a little bit about on the balance between reducing expenses but also making investments in the brand and experience itself. And when we think about the investments that you -- that need to be made to elevate the brand, et cetera, how do you think about spreading those investments between traditional brick-and-mortar stores now that you're closing some stores, but still feeling the need to make those, the remaining stores, more relevant but also making investments in e-commerce, how should we think about that mix?

Yes, it's a good question and that's really what we're trying to balance here at the end of the day. So as I mentioned in our first quarter results, our SG&A was just up slightly, but we had an increase in our critical investment areas around omni, around our factory store growth, around our international growth that we believe they do drive a good return to the company but, more importantly, are the right long-term investments to make here for the company. But having said that, our U.S. brick-and-mortar business has been under pressure for quite some time and we need to significantly reduce that cost structure, as well as what I would call corporate overhead that kind of goes along with that. So we're trying to find that right balance here of making sure our cost reduction is focused on non-growth areas and non-customer-facing areas, we don't want to lose that either, and which will give us the ability to invest in growth and to invest in a great store, which we have very -- many, many great stores here in the portfolio. So we need to keep them fresh, as well as we move forward across the year. So it's a balance. I think we're finding that right balance, divest in the declining business to invest in growth.

The next question is coming from the line of Brian Tunick with JPMorgan.

I guess, first for maybe Roger, just looking back now, I guess, the past few quarters, can you maybe parse out how you guys are thinking about the weakness out there? How much is coming from not having a dominant new fashion trend maybe in bottoms? How much is your own execution? And how much is the promotional pressures in the mall? And then, on the balance sheet side, we were just wondering, what is your comfort versus a minimum cash balance and your dividend payout ratio? How are you guys thinking about uses of cash as we move through the next couple of quarters and as you think about store closings, et cetera?

Brian, on your first question, obviously it's never one reason, it's always a number of reasons, but I think, you named them. I think our product execution presently and last quarter or 2 was not where it needed to be. The teenager customer is suffering. The promotional game is bigger than ever any we're withdrawing from it on a very calculated way. The traffic is down for all retailers in the malls. So you have that combination. The interesting thing is, is that American Eagle stores by far the dominant retailer in the teen space. We saw over 5 years actually, if you look at the comp trend over 5 years, we're flat, which is amazing. We had a fabulous 2012, and we do over $425 a foot. I think that -- and we have all the omni-channel variations taking place that you heard my partner Michael Rempell talk about. That combination and owning the bottoms business, I'm very optimistic about the future.

And then, regarding the balance sheet, we ended the first quarter with a little over $300 million of cash, which is fine for us as a company. That gives us the wherewithal as we look forward as well to continue with our dividend as it stands and, most importantly, continue with the investments that we need to make to grow the company long term. The store-closing piece, we're closing these stores upon lease expiration so we're not accelerating closures that would have a cash call with the closure if you accelerated it. So I think we have that all modeled into our cash forecast for the year and don't see any significant movement related to the store closures.

[Operator Instructions] Our next question is coming from the line of Oliver Chen with Citigroup.

As we look to model our cash flow from operations this year, is net working capital going to be a neutral kind of driver? Are there any other things we should think about in terms of getting that right? And also, on the fast-ship mix, what percentage approximately is on faster ship now versus where you want to be longer term, just so we can kind of dimensionalize the impact there over time?

Regarding the cash flow, nothing unusual as I look forward to this year in our cash flow in terms of sources and uses of our cash. We've articulated our CapEx spend for the year. Our operating cash is following -- pretty much following our business performance. So nothing unusual.

And on the fast fashion, as you recognized, we've been over-inventoried, the way it way planned. As that comes down in the second half, we'll be able to really get engaged in the speed-sourcing game. It should probably grow to 20% or 30% of the business, along with our Heritage brands, which are the core, and there's some tremendous innovation taking place in these Heritage brands now, especially in new fabrications and new washes, especially on the bottoms business. So that combination should be pretty strong for us.

Our next question is coming from the line of Dorothy Lakner with Topeka Capital Markets.

A question for -- just a follow-up for Roger. Obviously, you want better product performance and you're seeing some success with the fast-track fashion that you're doing and keeping the strength in Heritage, which is kudos to you in a very tough environment, how big -- how much bigger -- or how big is the -- where was open-to-buy if you go back a year or so and where is it now, how much bigger a piece do you think that can become? And are you getting through the changes that you're making to the merchandising and design teams or is that still to come?

I think the alignment is there now. I think it really is a pleasure every day now. We're all moving in the same direction. I just -- from the point of -- from concept to sign-off of a particular big season, those being the 4 big seasons of the year, it takes about 3 months to do it from concept within a lifestyle brand. And then, within that, Dorothy, on the chase, you're starting to put about 25% of that into that combination, and that you do on a 45- to 60-day period. That combination works very strongly for us and that's how we're going to continue to do it. And the teams are aligned. We just signed off on holiday. I must tell you, I love what I saw. We're getting great compliments within the organization. We have 1 boss, it's the customer, we'll see when we deliver holiday and spring concept is going along great.

Our next question is coming from the line of Kimberly Greenberger with Morgan Stanley.

I have just 2 quick clarifications. My question is on SG&A. In terms of the clarification, you talked about planning second-half inventory to grow in line with sales. Can we assume that's in line with the mid-single-digit decline you're expecting at the end of this second quarter? Is that...

Yes, regarding inventory, we are planning inventory down in the back half of the year, given the current trend that we're experiencing in terms of our comp performance.

So, Mary, is that a mid-single-digit or is it a 10% decline? I'm just not sure how to think about the second-half decline.

Yes, for Q2, we're looking down, with the change in payment terms, down kind of the mid teens, half 2 will be down as well, too. It's probably high-single to low-teen kind of range, obviously depending on how the business trend plays out. But it's going to be in that kind of double-digit range for the back half of the year.

Okay. Super helpful. So my SG&A question is can we take the $10 million SG&A savings that you realized here in the first quarter and just sort of annualize that for the rest of the year? Is there some bigger kind of SG&A cost-cutting program you're working on? And then just with regard to the $10 million to $15 million of SG&A savings you're looking for from your 2014 store closures, I think you said you'll start realizing that in 2015. Is that a net of lost gross profit dollars or is that a gross savings number and then we need to net out the lost gross profit from the stores?

The store -- the $10 million to $15 million profit impact in 2015 is net of everything. So it's basically the bottom line P&L impact of those store closures. Regarding SG&A for the balance of the year, as I said, we're -- as we sit here today looking for SG&A to be up slightly throughout the year, but really our goal here is to drive cost reduction, which we have a lot of plans and works under way to do, to offset our growth in critical areas of the business. So think about it as an offsetting way to make sure we net out to something closer to flat to up slightly for the year. So that's our objective. The growth initiatives are important. We can't pull back on those. Factory stores are critical. International growth is critical. Our omni work, as Michael articulated earlier, is really important for the long-term growth of the company.

Thank you. Ladies and gentlemen, we have reached the end of our question-and-answer session. And this does conclude today's teleconference. Thank you for your participation and you may disconnect your lines at this time.