Tom Filandro - SIG Richard Jaffe - Stifel Nicolaus

Good day ladies and gentlemen and welcome to the Casual Male Retail Group’s second quarter earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) I’d now like to introduce to your host for today’s conference Mr. Jeff Unger, sir you may begin.

Good morning and thank you for joining us today for Casual Male Retail Group’s second quarter 2009 fiscal earnings call. On our call today is Dennis Hernreich, our Executive Vice President and Chief Operating Officer and Chief Financial Officer and David Levin, our president and CEO. I’d like to read our forward-looking statements and then introduce David. Thank you and thanks for joining us today. Today’s discussion contain certain forward-looking statements concerning the company’s operations, performance and financial conditions including sales expense, gross margins, capital expenditures, earnings per share, store openings and closings, other matters. Such forward-looking statements are subject to various risks and uncertainties that could cause the actual results to differ materially from those assumptions mentioned today, due to a variety of factors that affect the company, information regarding risks and uncertainties are detailed in the company’s filings with the Securities and Exchange Commission. Our complete Safe Harbor statement is available at www.casualmale.com. David the call is yours.

Thank you, Jeff. This morning we announced our financial results for the second quarter of 2009. The results speak loudly to the strategy that we laid out at our last call on May 21. The proactive stands we took on retooling our infrastructure and expenses, in response to the downturn in the economy has had a direct positive impact on our bottom line. We’ve executed extremely well in our ability to control the controllable metrics to our business. With the decrease in sales of $15.2 million or 13.4% compared to the same quarter last year, we actually increased our pre-tax earnings by $1 million or 31%. Our initiative to focus on gross margin dollars and cash flow has been very effective, even though it may have had some impact on our top line sales. Our comp sales were negative 13.9% for the quarter compared to a negative 10.7% in Q1, and now negative 12.4% for the year. Our sales during the Father’s Day holiday were negatively impacted because last year we had a TV campaign in May June and this year we do not. Our decision not to run TV the spring, June TV campaign accounted for the half of the marketing spend reduction in Q2. It was during this timeframe that the top line was impacted more than our usual run rate. The subsequent to Father’s Day we have seen our comps come more inline with a year-to-date trends. In terms of how the businesses performed it continues to be consistent with the trends of the last several months. Casual Male comps have been off 9% and Rochester has been down 27%. As I’ve said in the past CMRG is a good barometer of how the economy is reacting in a difficult period because we cater to all economic…

Thank you, David. Good morning, everyone. Thanks for joining us as we review our second quarter results and discuss our outlook for the balance of the year. As David indicated, although the weaken economy continued to negatively impact our sales trend, we are pleased today to report second quarter net income of $3.6 million or $0.09 per share, as compared to $1.9 million or $0.05 per share for the second quarter last quarter. Despite sales decreases of 13.4% for the second quarter and 11.4% for the first six months of 2009, our operating income increased 15.6% for the second quarter and 7.5% year-to-date. These improvements in our operating results are attributable to our continued focus on carefully managing our inventory levels, maintaining healthy margins and significantly reducing our SG&A costs consistent with our strategies and financial goals discussed at our last earnings call in May. In addition to the improvement in operating income, our net income benefited from a reduction in our effective tax rate resulting from the utilization of the company’s fully reserved net operating loss carry forwards. This benefit resulted in a reduction in income tax provision of approximately $1.3 million or $0.03 of share for the first six months of fiscal 2009. Our quarter two results are consistent with what we described at the end of quarter one with respect to the significant refinements we have made to our business model, which include a 15% reduction in SG&A levels from last year, carefully managed inventory levels to minimize merchandise margin risk together with a specific approach to provide our customer with meaningful assortments for his wardrobe needs, employing a store assortment planning methodology to optimize merchandise performance in each location, providing our customer with assistance in purchasing his wardrobe needs. Finally employing a contact marketing strategy to…

(Operator Instructions) Your first question comes from Tom Filandro - SIG.

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We’re expecting these stores, when they combined each other that will carry 100% of the existing Casual Male stores and 40%, 50% of the sales from the Rochester store when you put them combine. What I was trying to describe is these five specific stores that we have converted, their average sales were about 1.5 times the normal Casual Male stores which was about $650,000. Now they are performing at about 2.3 times the average Casual Male store and of these five stores, I don’t believe any of them were in the top 10 until out of 400 plus stores, and now four out of five are already in the top 10.

Can I ask this question to David? Those are great numbers, can you give us a little more detail on where the incremental volume coming from, I mean if you look at the overall mix where you are seeing the greater benefit. Is it private label, is it branded, is it suit, I mean what’s happening?

Because it’s only been four weeks we’re not really going to talk about the specifics yet and probably until the next phone call. We just wanted to give a little color at this point time. We have got a lot of analyzing to do as to how much the Casual Male customers trading up, how much is the Rochester customer trading down, what impact are we having with new customers coming in, what impact are we having from outline stores that are moving over to the hybrid, lot of variables to work with. We are just giving a little color because we really haven’t had enough time to give further depth. We will on the next phone call.

Dennis quick one for you, I think as you described your contact marketing strategies and you mentioned some of the numbers, can you give us a sense how is think about the back half in terms of just total catalog search, direct mail and prospecting and are there any major shifts in the strategy this year, meeting more direct mail, less catalog or one or the other?

No. Our second half, Tom, is similar to the first half in terms of our marketing campaigning. The number of catalogs being distributed in the second half is just seasonally higher than the first half, but generally the same context strategy that we’ve been working with during the first half and much the same also on the direct mail side.

In terms of prospecting?

Very little.

Your next question comes from Richard Jaffe - Stifel Nicolaus.

A quick question, obviously the marketing spend was a big help in the quarter regarding the SG&A savings. Could we look forward a little bit and anticipate what the savings will be or what they were last year and the percentage change we should anticipate?

The marketing rates that I just described, Richard, for the year will be in the same neighborhood as they were in the first half. Slightly less just because of the greater volumes we expect in the second half.

Could you talk about some of the operating metrics of the hybrid stores? Are you willing to go into your sale per square foot or number of transactions before and after or any of the more...?

I think the as I mentioned this stores have been opened barely 30 days. I think we would like more time to let them operator, let them get new fall assortments. We just marketed into these markets, and I think we’ll have much more details with respect to this and future strategies on the next in the quarter three.

I appreciate because, that 30 days we shouldn’t build a model on. Last question do you guys subscribed to any of the services that track selling by category to MPD? If you could share that with us regarding trends for men’s apparel and big and tall sizes?

NTD does that study special for us. We have not updated that recently, Richard.

I know there is sort of macro men’s data out, which is obviously trending negative, but I didn’t know if you guys knew by sector or whatever. It would be interesting to see. Okay. Thanks very much.

(Operator Instructions) Your final question comes from Tom Filandro - SIG.

Can you just tell us, what’s going on in terms of IMU? Anything on the product side and also if you could, can you give us a real estate update anything happening in terms of better negotiations? How many leases do you have coming due? Are they significant or not over the next couple of years? Thank you.

The IMU, Tom is steady and has risen slightly during this year and probably will rise slightly again for the balance of the year. So we continue to watch our merchandise cost, work with our vendors, find new freight routes to bring merchandise and to maintain and even grow slightly our IMU. So we’re very pleased with all of that. We’ve been very busy on the Real Estate. Our Real Estate Group very much occupied with many of our landlords. Landlords have been generally cooperative and understanding and working with us on revising terms. We’ve had a fair amount of success of reducing base rents over the remaining terms of many of our leases, but the effort still continues. There’s still a lot of work to do, a lot of landlords to get deals with, and so that effort will continue. Go ahead, David.

I think the point is, we usually have about a 100 leases coming due on any given year, but we’re renegotiating every lease that we have. Even if we have four, or five years left on our term, we’re going back and trying to renegotiate better terms on the existing leases at this time too. So every lease is being attacked at this point in time.

Can you give us an update too on the new businesses, anything on that front or is it all just a sort of a breakeven strategy overall?

All our new businesses, outside of Europe is profitable, growing more moderately, and so with reducing the amount of prospecting, they’ve gone into the black and we expect them to continue that way.

(Operator Instructions) I am showing no further questions sir.

We appreciate you dialing in today and again we’re excited about the hybrids. We got a lot more information coming forward, and we think that’s going to be a good vehicle for us for the future. As we said, we’re keeping as tight model as we can as until we see things change and we’re somewhat optimistic that the comps will start to improve somewhere along the in line in the next several months. Thank you again for joining us and we look forward to again talking with you at the next meeting. Thank you.

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may all disconnect. Thank you and have a nice day.