Ladies and gentlemen, thank you for standing by. Welcome to the Signet Jewelers First Quarter Results Conference Call. During the call all participants will be in a listen-only mode. After the presentation we will conduct a question-and-answer session. Instructions will be provided at that time. [Operator Instructions] Please note that this call is being recorded today May 26, 2016 at 8:30 A.M. Eastern Time. I would now like to turn the meeting over to your host for today's call James Grant, VP of Investor Relations. Please go ahead, James.

Good morning and welcome to our first quarter fiscal 2017 earnings call. On our call today are Mark Light, CEO, and Michele Santana, CFO. The presentation deck we will be referencing is available under the investors section of our website, signetjewelers.com. During today's presentation we will in places discuss Signet's business outlook and make certain forward-looking statements. Any statements that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. We urge you to read the risk factors, cautionary language and other disclosures in our annual report on Form 10-K. We also draw your attention to slide number 2 in today's presentation for additional information about forward-looking statements and non-GAAP measures. I will now turn the call over to Mark.

Thanks, James. And good morning, everyone. There are five key messages I would like you to take away from our presentation today. First, in what has been a choppy retail environment we were able to deliver record EPS at the high end of guidance. Our operating income, our net income and our earnings per share were all up over 20% year-over-year. This was due in large part to managing our expense structure in disciplined fashion and realizing synergies that position Signet well for the long term. This prudent expense management included good results in credit which Michele will speak about in more detail later. Second, we delivered solid sales for the quarter. Although our sales were slightly below our guidance they were still strong enough to deliver on our earnings expectations. Year-to-date we are gaining profitable market share. The third point I want you to take away is that we remain a growth story, a prudent, measured and profitable growth story. We remain on pace and are committed to growing our stores' square footage. Our disciplined, internal rate of return requirement on new stores of 20% remains firm. The growth this year will be led by Kay jewelers outside the enclosed mall. This is a departure from many other retailers that are having to reduce square footage these days. Fourth, we are reaffirming our annual earnings guidance. Our first quarter results and sales flow through keep us positioned to achieve our year end goals around EPS, adjusted EPS and synergies despite a lower sales outlook. And fifth, we are conducting a strategic evaluation of our credit portfolio, as we are always looking for ways to optimize our operating business model. Goldman Sachs, who has vast experience in this area, has been engaged as the company's advisor in this process. We…

Thank you, Mark, good morning everyone. So we'll start with our first quarter sales performance. Signet's comps increased 2.4% and that's on top of a 3.6% comp increase in the prior year first quarter with all three of our divisions delivering positive comp sales. Total sales increased 3.2% and on a constant exchange basis total sales increased 3.9% for the quarter. In looking at total sales and comp performance by operating segment let me share some additional color. In Sterling Jewelers total sales increased 3.8% to $980 million which included a comp increase of 2.3% on top of a prior year increase of 2.3%. Sales increases were driven principally by strong sales of select branded bridal jewelry, as well as fashion jewelry. The Zale jewelry operating segment's total sales increased by 2.3% to $381 million and 3.2% on a constant currency exchange basis. On a geography basis our Zale US sales increased 3.7% and comps increased 2.4% and that's on top of a 5.4% increase in the prior year. Our Canadian total sales declined 6.2% but increased 0.2% on a constant currency basis with comp sales decline of 0.6%. Canada sales continue to be impacted primarily by the Western region of Canada due to the struggling energy industry. Across stores sales were driven primarily by diamond fashion jewelry and branded bridal. Our Piercing Pagoda total sales increased 7.5% to $69 million with comp sales of 5.6% on top of 6.1% last year. Sales increases were driven primarily by gold chains and diamond jewelry. In the UK our total sales decreased 1.7% to $144 million, but increased 4% at constant currency rates. Comp sales grew 3.4% and that's on top of a 6.2% comp increase in the prior year. Diamond jewelry and prestige watches were the primary drivers of sales increases…

Thank you, Michele. To sum up we had a good quarter: record EPS, operating margin expansion, excellent inventory management, solid sales and profitable market share growth. I want to sincerely thank and congratulate all the Signet team members for all their hard work and accomplishments. And with that we will now take your questions.

[Operator Instructions] Your first question comes from the line of Rick Patel from Stephens. Your line is open.

Thank you and good morning everyone.

Good morning, Rick.

Can you help us think about the decline in traffic? I know it's not a new development, but is this something that is going on across the whole jewelry industry, and if so what does it say about customer shopping habits? Since bridal is doing well, I guess is there some level of fatigue out there to buy fashion jewelry or is competition just getting a little bit tougher for certain categories? Just some help on thinking about that.

Thanks, Rick. Decline in retail traffic, we're seeing a decline as everybody else is seeing a decline that we saw in the first quarter. We do have a third party company that tracks the traffic in the malls and it is showing that retail traffic as a whole was down for the first quarter. We have some traffic counters in our Jared stores, some in our Kay stores and we're seeing declines not as much as you are seeing with some of the third-party providers out there. But to your point, bridal is our stable type of business where it is a premeditated purchase and people are coming into our stores thinking about bridal and shopping beforehand. So we don't believe we're as affected by retail traffic in jewelry, as our retail competitors. But there is an effect, obviously, if there is less people in the malls. And more so like you said for gift giving. Now gift giving is also premeditated purchase but we're seeing less traffic in the malls right now, and overall retail traffic is down. But we still think the consumer is vibrant out there and we are seeing it in our own sales that you are seeing that we had a very respectable comp increase as it relates compared to the rest of the retail industry world.

Thank you, Mark. And just a question also on the department store space and the competition there. Macy's in particular recently talked about taking a more aggressive approach with fine jewelry and engagement. Have you seen an impact of this on your business and can you touch upon I guess what you see as the biggest differentiators between your business and what department stores would have competitively?

Sure. We are well aware of Macy's test, we were aware of it last year, we shopped the stores that we believe are being tested, we shopped them both from an inventory assortment and from a sales approach and a customer service perspective. And we believe we have tremendous competitive advantage against all of our competitors including Macy's and other department stores. When you just look at our assortment whether it be in gift-giving products and fine jewelry or more importantly in engagement and bridal category our assortment is far beyond anybody else out there. And in this category, as I stated, the customer engagement is critical and the experience that they have in the stores is critical. We believe that our team members out in our stores are better trained and better equipped to educate our customers on this critical emotional purchase and educate our customers on qualities of diamonds and understanding their needs. So our competitive advantage are we believe we have a better assortment, we believe we understand diamond fashion jewelry and diamond engagement much better and we believe we have much better trained and experienced salespeople to take care of that specific jewelry customer.

Your next question comes from the line of Oliver Chen from Cowen and Company. Your line is open.

Thanks, congrats on really awesome results in a really tough retail tape. So Michele I want to ask you the reaffirmance of guidance, the details are really helpful. On the gross margin and SG&A side what are the main drivers that are enabling you to - for that to offset some of the reality of the comp? . : And also are there drawbacks to outsourcing the credit portfolio just because of your very integrated selling process and if there's any learnings that you've had with Zale and ADS? It sounds like you are still encouraged by that relationship, that would be helpful? Thank you.

Thanks, Oliver. So let me start with your question in terms of the gross margin and SG&A and some of the primary drivers that we're very much focused on. So first, it does start back with the synergies and really pushing the synergies through gross margin both SG&A. I mentioned on the call on the gross margin what we're really starting to flow through and we continue to expect to have opportunities as we move into the year on the synergy front really relate to our discounting controls that we put in place. There's repairs, our vendor terms. We did actually move from in-sourcing our special events to outsourcing that. That has had a favorable impact on our gross margin. So there's a lot related to synergies that we see flowing through there and in addition there's still a little bit of favorability we're getting on the commodity cost front that's flowing through gross margin. On the SG&A side, on the synergy front we did a lot of work and we talked about this during the fourth quarter where we had accelerated some of the work around our organizational design efficiencies. And so we're starting to see those benefits. We will continue to see the benefits flowing through related to that in terms of payroll savings. We also have been really looking at optimizing our labor scheduling as it relates to our store payroll. So we continue to expect to see favorability flowing through that in the year leveraging our SG&A. And then more importantly as I was referencing, there's additional expense levers that management really does have control over. And although we will want to continue to preserve our more customer facing expenses, those expenses such as our advertising, line item, et cetera, for those that are less directly customer facing, whether it's our travels, our supplies, our support center, those are the ones that we are really able to tighten our belt and take a more disciplined approach to give up us the confidence that we will be able to hit our EPS guidance.

And Oliver, in reference to your credit question I'm going to be kind of giving you a holistic answer and answer your three questions about timing and drawbacks and learnings from Zales. And I want to start off with stating, and I just need to start off because we said in the announcement, that our credit metrics in our credit portfolio are strong. As we said our credit metrics are improving sequentially and within our expectations and all we fought for and involved in our earnings guidance both on a quarterly basis and on an annual basis. So our credit metrics are strong. To answer your questions, the reason why we're doing this credit project, your point is, yes, we have had some good experience with ADS. We've had a full quarter now under our belt where ADS has been managing our entire credit portfolio for Zales from January through now we're having some good experiences and we're learning more. And at Signet we're an evolving company. We're always looking for ways to better improve our business part of our business. That being said, we always feel there's ways of us getting smarter and understanding more about our business and we've also seen other major retailers out there. And I'm sure a lot of you know of them, that have carried internal receivables and have sold their receivables and have done work with receivables of recent and we've just understand there is an evolution going on and we want to make sure that we're on top of it. We're a business that is constantly looking for ways to improve ourselves. Actually one of our mission statements is that we're always looking to continuously improve. So we look at every facet of our business on a regular basis to make sure…

Okay. Just a quick follow-up, that's really helpful. You've given really helpful detail and more detail over time regarding your credit portfolio. Some investors are asking a lot about accounts receivable aging and the FICO score distribution and the reality of using the recency accounting methodology. Could you brief us on how you're feeling about those topics in terms of what you're seeing in your portfolio? It's an accounting method that you've used throughout many years. So I understand that it's very integrated in your processes?

Yes, thanks Oliver. So real quick on that. We talked at quite length on the last call that at the end of the day, regardless of recency or contractual, whatever method you are on, the financial results are going to yield the same answer. The provision will be the same, our bad debt expense will be the same. But to that point, the reason why we use our recency is one, we have done it since the beginning of time, and it really has worked well for us over the years with the type of lending that we do, jewelry lending that emotional connection and it does optimize our collections for us. And so with the use of the recency it does help us to engage with the borrower, start collecting quicker. It gives the customer some flexibility based on the disciplined criteria that we had outlined of our recency aging, what a customer has to remit to stay current. It leaves that customer in good standing if they are having maybe a challenging month where they can't remit a full payment. And that psychology and that flexibility of working with that customer puts that customer first, and that at the end of the day really drives maximization and optimization of our collection effort. Then as I said, importantly, the financial results will be the same. Now we'll continue and when you see the 10-Q that we plan to file within the next week or so in the footnote you'll see the same type of a breakdown of our aging. So we've continued to provide that, the 30 day, 60, et cetera and 90 days. In terms of FICO scores that will be an annual disclosure for us. But what I can tell you is the FICO scores are broadly in the same range as what we saw in Q4 which everybody would expect that you're not going to have major shift quarter-to-quarter on that.

Your next question comes from the line of Bill Armstrong from CL King & Associates. Your line is open.

Good morning, everyone. Question on…

Morning.

Good morning, Piercing Pagoda, so that's the division that arguably would be the most vulnerable to changes in mall traffic, given its locations within the hallway and the impulse nature of the purchase. That was actually the best performing division in terms of comp in the quarter. So I was wondering if you could maybe review for us what's going on in Pagoda and how is that division performs so strongly in such a weak environment?

Sure, thank you, Bill. Great observation. First of all, it always starts off with people, and we have a great leader who is running our Piercing Pagoda business named Jaime Singleton, and we have very motivated team members at Piercing Pagoda, and they feel great about the business and investments we are making in the business. Specifically what's helping our cause, if you look at the release, the average price is up dramatically in Piercing Pagoda. And what the team has done in Piercing is they have invested more in 14 karat gold, more in diamonds. So what they are doing - and we are training our people to be able to be comfortable selling at Piercing Pagoda 14 karat gold and diamonds and they are motivated and excited about the business. So we're getting benefit in Piercing Pagoda, even there's less traffic in the mall, we are getting the benefits similar to what's happening in our mall stores is that we are increasing our average sale dramatically. And a lot of that again is due to increased assortments in 14 karat gold and diamond jewelry and increased training on how to sell that product.

Okay. Great, thanks. And you gave some industry data in your slide presentation, the industry lost a net 700 jewelers. Is that individual stores and are you seeing kind of regional chains going down or are these more kind of individual mom and pop type of stores do you think are exiting the market?

Bill, year-on-year there is an increase in the decline of jewelry store doors closing from 2014 to 2015. I believe it was about 100 basis points, but it was a big decline. And the vast majority of them are independent stores that are closing doors. And there is a lot of reasons for that whether it be lack of profitability, lack of a successor to turn the store over to. But the facts are the facts that the jewelry store doors are closing at a faster rate in 2015 than they did in 2014.

Let me just add to that, I mean that is one of the advantages whenever you are going through a somewhat softer environment given that we are so fragmented with a lot of these independent small mom and pops that does generally put pressure on those doors and you start to see an up-tick in those store closures. So we are probably one of the few retailers that actually benefit with gaining profitable market share gains in these type of environments.

And just to pile on to Michele's point, Bill, is a good reason as why we stated that we're expanding our stores more so outside the malls because a lot, the vast majority of jewelry sold in this industry in this country for certain is done outside the mall. And so we see opportunity to continue to grow Kay from those doors that we're closing primarily outside the mall and as we said after the end of 2017 an opportunity to start opening Zales stores outside the malls.

Your next question comes from the line of Simeon Siegel from Nomura Securities. Your line is open.

Thanks. Hey guys, good morning, nice consistency.

Thank you.

Thank you.

So just recognizing the synergy this year are going to be primarily expense savings related, can you talk to the ongoing opportunity to narrow the sales productivity gap, what should that do for the comp trajectory there? And then in light of what's looks like on ongoing shift to higher ticket items, you specifically called out a shift from Charmed Memories, can you just talk about that Jared Pandora rollout and any thoughts or expectations there? Thanks.

Yes, the Zale productivity, there's a lot of initiatives out there and we still feel very strong and have built good increase for Zales going forward. We continue to see benefits from our cross selling of brands. We continue to see tremendous benefits and we think there's going to be a huge benefit to Zales is having our repair business, our repair business being internal, not being done by third-party contractors which will help the top line not only in the repair business but ultimately you take care of our customer. You have a new customer for life and you take care of that customer. So we have a lot of areas of business that are going to increase the top line. But we are focusing right now on making sure that we get the model in place and we get the appropriate level of SG&A in line for that business model. So we do see good opportunities to continue to grow Zales going forward. And if you look at the comps for the Zale business itself in this past first quarter it was up over 3.5% which is better than most of retail. So we still feel really good about the opportunities for Zales on the sales line. As far as the average sales in Pandora, we did see some beads slowing down but not in our Pandora business. We have a big bead business, Pandora is just in our Jared stores and we're very happy and excited about our Pandora partnership. As we said we have these new store in stores, it will take us see year to roll them out but we will have all the new stores, our new stores, the Pandora stores in our Jared of stores by November 1. Right now we just completed about 50 doors and initial - it's early but initial sales results are very good to us. So we see great opportunities with Pandora in increasing our partnership with Pandora. And a big benefit of the Pandora partnership we have is not just selling more beads. But Pandora has been doing a great job of designing new jewelry products at lower price points that we really haven't done a great job with in the past and have not had a good inventory assortment of the Pandora jewelry product. And we're very excited about that opportunity for new business in our Jared stores this fourth quarter.

Your next question comes from the line of Jeff Stein from Northcoast Research. Your line is open.

Hey, good morning guys. Michele, a question for you with regard to ADS, I'm curious what the approval rates, what kind of approval rates you've seen on the ADS credit metrics relative to your in-house credit? And then I've got a couple of follow-ups.

Yes, so we're really excited with partnering with ADS and this is really the first full quarter that we've had them in play. Overall what we've seen with our Zale credit penetration rate for Q1 it's about 48%, now that's inclusive with primary with ADS, as well as our in-house second look that we're doing. But that 48% penetration rate compares to about 41% last year. And that really - that increase in rate is really driven by the primary lending that ADS is doing. And so what we're seeing and what we expected to see as part of the benefits with ADS, is it's driven by both a higher application and higher credit lines with ADS. And first, when you think about the change over to ADS there was a re-launch of the credit cards to customers, so one, you generally get that drives customers back into the stores. In addition, we did some field training relating to the ADS rollout. I'd also say that when we think about the credit value proposition related to ADS it really is more appealing than traditionally what we've had as it allows for lower minimum purchases that are required. And then also the application process, it is much more quicker and easier for that applicant. Previously it was a paper application where now we've utilized technology, hand the drivers license, punch in data and then they are off to the races with ADS. And then I would also lead to that when we think about the benefit of ADS in that relationship it is the reduced or the lower expenses associated with that which is flowing through our P&L.

Perfect. And a question on the bump that you may have received from extended service plans in first quarter both from a comp store standpoint and an earnings per share standpoint since I don't think you had anniversaried that change until Q2.

Yes, you are correct, Jeff. We will anniversary that in Q2. So we did see the impact in Q1 and on a consolidated basis it was about 70 bps to comps and about $0.07 or so to EPS.

Your next question comes from the line f Ike Boruchow from Wells Fargo. Your line is open.

Hey, everyone, good morning. Thanks for taking my question. I guess for Michele, I'm just curious do you have data on your credit customer about what percent of credit customers would be fine buying something without that option, but maybe just like the 12month interest-free or something like that versus the ones that would actually need the in-house financing arm to buy his or her item? And then just a follow-up to that I guess Mark, when you guys guided I think Valentine's Day was already over, I assume that's a big part of the quarter. So I'm just kind of curious can you comment on April? It was tough for most of retail, it seems like it was probably tough for you guys. I'm just curious about how the quarter maybe played out? Thanks a lot.

Good morning, Ike. So in terms of your question with the data that we have with our customers and I think the question was would they use another form if we didn't have a credit, we have a lot of information on our customers and we look at the data in a lot of ways. That's one that becomes a little bit difficult to track if we didn't have it would the customer still make that purchase. It really is challenging to be able to quantify that. But it is information that we're always looking at very closely to understand the benefit and the competitive advantage of the credit offering.

And Ike, how are you. In reference to your question about our guidance and Valentine's Day to your point you're right, we guided to have a 3% to 4% and we put that guidance out there on March 26. We had Valentine's Day under our belt. That being said, we had April ahead of us which leads up into obviously some critical shopping for Mother's Day and there was a slowdown in April. If you just look at what we have accomplished compared to what our guidance was at the time we gave the guidance there is no doubt that there is a slowdown in April that we experienced like all of retail. We've all been exposed to all the retail numbers out there for the first quarter. So our numbers slowed down but were better than most. That being said, going into May we're seeing a similar level to May, not better, not worse, we're seeing similar levels. So the guidance that we're giving you for Q2 is assuming that things don't get better and things don't get worse from an economic environment basis. But even though you didn't ask I want to say to you that we still feel very strongly about our earnings guidance for the year and we believe that we have a great opportunity in the second half, as I stated, we have a lot of initiatives - we have more initiatives this year than we even had last year, as I mentioned with the extension of Ever Us, as I mentioned with the Chosen diamond for Jared that tested wonderfully. We're very excited about the Pandora store-in-stores. We're very excited about the Vera Wang extension going into diamond jewelry and pearl jewelry. And we're very excited about this new technology that we're enabling our people in our stores to really be more sophisticated and more knowledgeable about their customers past experience and what they bought and what they can go buy in the future to help them communicate better with our customers. So, yes, we saw slowdown in April, but we're still outperforming most of retail and we still feel very bullish assuming the economy stays stable that we're going to have a very good second half and fourth quarter.

Your next question comes from the line of Dorothy Lakner from Topeka Capital Markets. Your line is open.

Thanks, good morning everyone. Just wanted to follow-up on some of those things, Mark, that you were just talking about. I wondered if you could provide a little bit more color on this new technology, the clienteling kind of technology and when the training is going to occur. So when we should start to see some benefits, obviously for holiday, but just wondered on the timing. And then also just the timing of the Vera Wang fashion introductions, the diamonds and pearls? And then just on Ever Us, obviously a big success story for you all. I'm wondering if you are seeing any changes in the customer base for that. I know you had seen a broader customer acceptance for that product than you had expected, sort of different types of clients than you expected. I wondered if that's changed any as we go into the rest of this year? Thanks.

Thank you, Dorothy. First a little bit more color on the technology I was referring to, so we have some great partnerships that we're working with some software technology companies like salesforce and Rosetta that's working with us on this project we're calling clienteling. And just to give you this spot, a good jewelry sales consultant has a book and they will talk, they will have it and they'll keep it manually now to understand all of their customers what they bought in the past, what are their key special occasions and their lifetime moments, whether it be birthdays or their loved ones or anniversaries or just graduation gifts and that type of things, and all that has been done manually in the past. We're going to be able now to have and give our associates real time information through their iPad and they can understand what their customers have bought in the past, what birthdays are coming up, how to communicate with them more intelligently. We will also be able to use this technology for CRM. So we think there is just vast opportunities of what we can get incremental benefits and sales from this new technology. To your point, we are training up our people at our Jared and our Kay stores and we will start in August. We will have a big training conference at our leadership conference in October and for Jared and Kay they will be fully ready for this aspect of this new technology for the fourth quarter. And we think there's a good opportunity to increase our sales and get incremental sales with just communicating more effectively with our customers. As far as Vera Wang and the extension of jewelry, we just think it's a great opportunity. Vera as I said is a…

Your next question comes from the line of Janet Kloppenburg from JJK Research. Your line is open.

Hi, everybody. Congrats on a good quarter, nice showing.

Thanks, Janet.

Mark, I was just wondering if you could talk a little bit about your outlook for the fashion jewelry component. It feels like there's a lot of newness that you've created on the bridal site, both Ever Us and Vera, and I'm just wondering if you're finding it more competitive on the fashion side? And if you could also help me to understand what's going on in the Jared business a little bit more. I know you're transitioning maybe the promotional strategy there and the pricing strategy. But if you could elaborate a little bit that would help a lot? Thank you.

Sure, thank you, Janet. The fashion outlook, the fashion business is a business that we have to stay on top of and it's not you got to continually investigate and innovate with new opportunities and new styles like we did with Ever Us. And we have a lot of exciting things in the pipeline. I touched on several of them. One is Pandora is all about fashion. Pandora jewelry is all about fashion. When you think about Vera Wang designs and what we're going to do is all about fashion. So we have a lot in the works and that we're testing in the pipeline. I was just sharing some for competitive reasons that we're always looking to be innovative and look for new ways of continuing to test new things in fashion. It gives me an opportunity to say something broader. For us to continually gain market share in the jewelry industry over the last 5, 10 and 20 years and for us to continue going forward we as a company have got to constantly be innovative. We've got to consistently have new ideas in our pipeline not only as it relates to fashion which is critical, but all facets of our business. So we are continually, that's why we open the design center and that's why our design centers are continually looking for new ways and looking at fashion trends to continually test and look for new ways, of innovative ways to sell fashion and gift-giving products to our customers. So we believed we have a good, healthy pipeline in fashion. As far as the Jared business goes, Janet, we have said that we believe, firmly we believe that even though Jared's comps were down in the first quarter and their total sales were up and we believe…

And your next question comes from the line of Lindsay Drucker Mann from Goldman Sachs. Your line is open.

Thanks, good morning everyone.

Good morning.

Good morning.

I wanted to clarify Mark, just quickly a comment you made before about the end to first quarter and beginning of second quarter. The start to the second quarter, are you saying that the momentum you are seeing to start the quarter is consistent with your 2Q guidance or are you embedding some degree of acceleration in the way it feels like you are embedding some degree of acceleration in the back half of the year? That's my first clarification. And secondly, as you think about the strategic review of the credit book you talked about basically every kind of scenario that could be determined from this outcome. I was curious Mark, as you think about what the priorities are for the outcome is it shareholder returns, is it unlocking value? And as you think about now, I know that this is your initial strategic review with an outside party, but you've been conducting some review internally and you do have this partnership with ADS now a good quarter under your belt. Is there a scenario you believe where you could have a third party run the credit portfolio and not have to change your current lending practices or is it two very different? Thanks very much.

Okay. First answer your first question, Lindsay, what I was saying is that April, the decline after we announced and the decline it was declining as the rest of retail was and May was at a similar levels to April. So that was built into our first-quarter – second quarter guidance of being up 1% to 2%. And so what we're saying is that our April decline it's not decelerating, it is not accelerating, it's similar to what's happened in April is what is happening in May. That was that is that clear for you Lindsay?

So you are in order to get to an up 1% to 2% business would have to accelerate from here?

We believe that we feel comfortable in our guidance of 1% to 2% that we can deliver that sales guidance for the second quarter.

Yes, I think with what we've seen as Mark said with May being very similar to what we had observed in April and we've incorporated that into the guidance that it's a very balanced view in terms of balancing both the upside, downside risk to achieve a 1% to 2% comp. So we feel good with that comp guidance.

And your question about our priority as it relates to the credit review, and Lindsay you are not going to like this answer, but shareholder value and operating profit are both hand-in-hand. So it's about both, and when we look at this we are going to look at it holistically. What options do we have, what alternatives do we have that can help enhance, potentially enhance the profitability and or the shareholder value, we believe they go hand-in-hand. So are there opportunities for third parties, can there be, that's what the analysis is all about. We are looking to see what the opportunity is out there. And we have to take a deeper dive and we need time to make those determinations. But to be confident in understanding what we're going to do is make the right decision for our business model to make the right decision that is right for our shareholders and what is right for the company as a whole and our customers. And we have to take all those elements into our decision making process. And we'll keep you up to speed, Lindsay. We just wanted to announce to everybody because we did hire Goldman Sachs who has a lot of experience. And to do this thorough analysis we will be talking to different type of constituents to get this analysis done. And we wanted to make you and everybody else aware that we are doing that now, but we will keep you up to speed once we have more information and talk more intelligently with more data.

Thank you. And ladies and gentlemen, we are out of time for our formal Q&A session. I would now like to turn the call back over to Mr. Light.

Thank you. I'm trying to find my date here. Okay, thank you for taking part in this call. I wanted to let you all know that our next scheduled call is at August 25 when we review our second-quarter earnings. Thanks again to all of you and good-bye.

Thank you. Ladies and gentlemen, that concludes today's call. You may now disconnect.