Thank you, Dick and good morning everyone. These are indeed unprecedented times that require disciplined and prudent financial management to navigate successfully and emerge even stronger. And I am proud of the progress our team has made so far to maximize our liquidity and financial flexibility, control costs and carefully planned the best path forward during our phased reopening.
To recap where we stand from a financial point of view, let’s start with our balance sheet. We began the fiscal year in a strong financial position with $907 million in cash and just $122 million of long-term debt outstanding.
As the potential impact of the COVID-19 pandemic became more evident, we took steps to bolster our cash balance and increase our liquidity.
First, we took immediate actions to minimize non-essential spending, including reductions in marketing, extending payment terms, limiting rent payments, reducing merchandise purchases and deferring incentive compensation for senior executives and certain other team members.
As a precautionary measure to increase our cash position, we borrowed $330 million under our $400 million credit facility. We immediately reduced capital expenditures to essential projects and lowered our full year CapEx plan. In the first quarter, we invested $52 million in the business, well below our initial plan for the period.
For the full year, we now expect to spend $138 million on capital expenditures, down 50% from our prior projection. Included in this new plan are 28 new stores and 47 remodels or relocations of existing stores, down from the 65 new stores and 125 remodels or relocations we planned at the beginning of the year. Furthermore, we temporarily halted our share repurchase program and did not repurchase any shares this quarter under our $1.2 billion share repurchase authorization.
As Dick mentioned, our Board also suspended our quarterly dividend program beginning with the second quarter.
As a reminder, the dividend for the first quarter was declared by our Board prior to the COVID-19 pandemic. I want to reiterate that our Board will continue to evaluate our dividend policy on a quarterly basis. Taking all these actions together, we ended the quarter in a strong position with over $1 billion of cash and cash equivalents.
While this is a decrease of $114 million from the end of Q1 last year, it reflects an increase of $105 million, since the start of 2020.
Moving on to inventory, we ended the first quarter with $1.5 billion on hand, a 20.4% increase over last year’s first quarter. A sound result when compared to the 43.4% decrease in total sales. On a constant currency basis, inventory increased 21.3%, compared to the 42.9% decrease in sales.
Our merchant team is actively working with our vendor partners to manage our inventory levels and purchases in the midst of the significant sales decline to ensure we come out of the current crisis in a healthy position.
Turning to the income statement, we reported a comparable sales decline of 42.8%, with double-digit declines across every region and banner, driven by our store channels and Eastbay. Breaking our sales down by channel, our stores posted a 53.4% comp decline while our DTC channel strengthened as we progressed through the quarter and posted a 14.3% gain.
As a percent of sales, DTC rose to 30.8% of sales, up from 15.4% last year. With most of our stores closed since March 17 or approximately half of the quarter, the COVID-19 pandemic weighed heavily on our results as customers held back on non-essential items. Trends in our business began to improve in early April and we saw a significant ramp up in our digital channel, in fact approaching triple-digit comps, driven by pent-up demand for on-trend styles and several high heat launches. Classic basketball styles remained the most sought-after with Air Force 1 and AJ1 being the key drivers across men’s, women’s, and kids. The Jordan Retro business was strong and benefited from the Michael Jordan docu series, The Last Dance. From adidas, Yeezy continue to resonate with our customers with each release selling out.
Moving down the income the income statement, our gross margin decreased to 23% of sales from 33.2% in the prior year first quarter. The lower rate was driven by 850 basis points of de-leverage on our occupancy and buyers compensation expenses and 170 basis point decrease in our merchandise margin.
Looking at our occupancy and buyers compensation expenses, while we did not make our April rent payments based on the accounting rules, we did not reduce occupancy expense as our rent negotiations with our landlords are still in process. The lower merchandise margin was driven by the higher penetration of digital sales, which carry a lower margin rate, as well as increased promotions. We increased our promotional activity in response to the environment to drive traffic to our digital sites, both in the U.S. and abroad and in order to clear product and work towards a healthy inventory position.
SG&A expense dollars decreased 24% or $100 million compared to the prior year.
However, as a percent of sales, SG&A rose to 26.9% from 20% last year.
As the quarter progressed, we reduced our variable expenses such as bonus accruals, marketing, and travel among a long list of expense categories, to better align with sales.
However, the magnitude of the sales slowdown led to the de-leverage. We believe cash preservation will remain a focus for the remainder of fiscal 2020. With that in mind, our team will continue to manage our expenses diligently as we navigate through the pandemic and the reopening of our stores. Depreciation expense was $44 million in the quarter, flat to last year. We incurred $1 million of interest expense in the first quarter compared to $4 million of interest income in the prior year, which reflects our increased debt following the drawdown on our credit facility and a reduction in interest rates earned on our cash balances.
Our tax rate came in at 22%. This is 440 basis points lower than last year due to the level and mix of losses in various tax jurisdictions where we operate.
As you think about the full year tax rate, there may be significant quarterly shifts in the rate due to shifts in income and neither of the initial outlook or the first quarter rate should be relied on as a guide post for the full year. We look at the first quarter from a cash flow perspective we posted negative free cash flow of $174 million, comprised of negative cash flow from operations of $122 million and $52 million of CapEx.
As we look forward, we believe we can minimize the level of cash burn as we make progress reopening our stores and as customers continue to engage with us and become comfortable shopping in the new environment.
While these actions reflect our commitment to pulling all the levers we can to protect the health of our business, in light of the ongoing uncertainty in the global retail environment, we are not providing updated guidance for fiscal 2020. Please note, not included in today’s results are impairment considerations. The company is evaluating approximately 70 stores with long-lived tangible assets of $50 million for potential impairment, approximately half of the locations relate to Runners Point and Sidestep stores that the company is seeking to exit, part of the broader plan to restructure those operations. Any impairment charges recorded will be excluded from our non-GAAP results consistent with our past practice.
Before we move on to your questions, I want to reiterate that our first priority is the health and safety of our team and our customers. We believe we are taking all the necessary steps to make sure our associates and customers feel safe coming into our stores. These are challenging times, but our customers are resilient and passionate about sneakers and youth culture and we remain focused on inspiring and empowering them.
We have a strong financial position, strategic relationships with our vendor partners and deep connections with our customers. We believe we are well-positioned to not only navigate through this crisis, but emerge even stronger.
With that, operator, please open up the call for questions.