Key questions and answers from the first quarter earnings call conducted by Chico’s FAS, Inc. (CHS: chart) on May 28, 2008.

Kimberly Greenberger (Citigroup): Is there something else you are looking at in your business that’s giving you a reason for that optimism?

Scott Edmonds: We are looking for gradual improvement as we approach going into fourth quarter. Certainly there are a number of issues that are being addressed in each of the businesses from a merchandising perspective.

We are trying to make positive change. It sounds like we have got the jacket fit worked out well in Chico’s business, that’s helping. The accessories business we are trying new things every day its just that’s been a little bit challenging from an overall market perspective but we constantly introduce new products.

In the White House, Black Market business we are still trying to look at the collections part of the business as well. It looks like we have done a decent job in terms of addressing the fit issues in the bottoms; time will tell how the customer receives that in the second and third quarter.

Kent Kleeberger: When you just look at the historical builds on fall versus spring and you compare the volume of by week, by brand we are a bit more optimistic coming against the dismal numbers that we posted last year.

Kimberly Greenberger (Citigroup): Are you buying inventory with the expectation that comps will be positive?

Scott Edmonds: We are still working out our fall plans but we are going to manage it much closer to the vest. My perspective is that we can still do positive comps on lower inventory levels.

Tracy Kogan (Credit Suisse): Could you refresh us on your store openings planned for 2009 and whether those plans have changed given the continuation of weak trends?

Scott Edmonds: The store opening cadence is going to slow down as we go through the balance of this year. We are one of a few retailers that include occupancy as part of our SG&A costs so as we slow down the store growth we will probably get some relief in the occupancy line and therefore the SG&A rate.

Right now we are committed to about nine or 10 new stores and that’s it. Maybe there are some additional relocations, remodels but we are just holding close to our vest until we see significant improvement in trend.

Liz Dunn (Thomas Weisel): Could you talk about the inventory, the unit positioning versus the total number you reported?

Scott Edmonds:Looking at Chico’s business our average unit retail is actually down and while White House, Black Market is up slightly they are down in units as well. We were not that efficient in recognizing our marked out of stock.

Typically most apparel retailers will clear their selling floor for the previous season’s goods about 45 days or so after the end of the previous season and our execution on that has been somewhat inconsistent. In addition to having some aged inventory in the Chico’s brand and everybody infers that once the goods are transferred from the front line stores they go to the outlets.

We have a similar situation in outlets in that we have a significant number of units that are aged in the outlet stores. We have taken an opportunity to take the charge to clean up inventories. We are also looking at doing some liquidations with jobbers which previously this business has not done for quite some time but the fact that we are adamant about trimming our inventory levels we are looking at any reasonable approach to get rid of some of the excess units.

Jeff Black (Lehman Brothers): Could you just frame up the expense opportunities you see over the next couple of years?

Kent Kleeberger: The biggest opportunity we have is in the margin category. We can cut expenses and we can set goals to trim SG&A 10 or 20 basis points a year but in my estimation the real opportunity is margin. It really goes into various buckets. The first bucket that comes to mind is the ability to do direct imports. The direct import portion of our business is under penetrated.

We have an inordinate amount of our deliveries to the distribution center facilitated via air versus ocean and that is really more complicated because it involves the product calendar and being disciplined holding to go, no go dates in terms of when we cut goods.

In addition to doing direct importing there’s also an opportunity to do direct sourcing but that also requires some investment in terms of opening up a footprint if you will overseas in order to potentially go to direct to factories an bypass some of the middle men, not eliminate them but to bypass some of that business as well as doing a better job in terms of managing our piece goods and as the quality opportunities to address issues over there as opposed to when they hit our DC over here.

Adrienne Tennant (Friedman Billings Ramsey): Can you talk about the bonus guarantees and have you seen any field organization turnover as a result of that?