Paul Lejuez: How about net openings, though? Are you thinking about some closings as well? Just as you’ve kind of seen the last two years of performance, are there stores that you need to reevaluate after the weak performance in DTC for the past couple of years?
Michael Casey: We do probably close about a dozen low-margin stores this year when leases expire, rarely do we close a store early because the lion’s share of our stores, nearly all of our stores are cash flow positive. So rarely, we closed them early. But when a lease comes up for renewal, you have to decide whether or not you’re going to re-up for another 10 years. And we’ve done in recent years. We just assumed let that lease expire and move to a better location where there’s better traffic patterns, better cotenancy, better condition of the center. We’re seeing good results with the new store openings. But going forward, the next year, we’ll probably close 10 or more stores as well. We did the heavy lifting on store closures when the pandemic hit probably closed about 140 stores since the pandemic probably gave up some portion of $140 million in sales.
But by doing that, we’ve actually made retail more profitable because we pushed more store – more sales into existing stores. So that what we call that transfer benefit was meaningful. It was probably about 25% of the sales from store closed, stores went over to existing stores at higher margins. So we continue, I think there’s – so something recently. I think some portion of 350 stores come up for lease renewal, lease consideration that every year gives us an opportunity to close stores that we don’t think are going to contribute meaningfully to the growth in sales and profitability in the years ahead.
Paul Lejuez: Okay. Thanks. But Mike, the comps have been down pretty significantly for two years in a row despite benefiting from that transfer. So how do we connect the dots there?
Michael Casey: Well, you need a better mix of stores, you need to drive more traffic to those stores through better, more effective marketing capabilities. We have new marketing personalization capabilities. We’ve made significant investments in e-commerce. But the more we open up stores closer to the consumers and close some of these outlet stores that are located further away. I can tell you is we’re seeing good returns on new store openings. It’s the number one source of new customer acquisition and about 70% of kids apparel is bought in stores. So we continue to believe stores are important.
Paul Lejuez: Thanks, guys. Good luck.
Michael Casey: Thank you.
Operator: Thank you. This will end the Q&A portion of the conference. I would now like to turn the conference back to Mike Casey for closing remarks.
Michael Casey: Thanks, Chris. Thank you all very much for joining us this morning. We wish you and your families a happy, healthy holiday season. We’ll update you on our progress in February. Goodbye, everyone.
Operator: This concludes today’s conference call. Thank you all for participating. You may now disconnect, and have a pleasant day.
