Gary Walter (Credit Suisse): Your direct competitor has backed away from some of the aggressive promotions they were doing about a year ago. Is that proper market intelligence or are they still playing around?

Philip Francis: There were five or six districts where they did some activity several months ago. We have not seen an expansion nor heating up of that activity.

Gary Walter (Credit Suisse): Another company yesterday reported that it also had a fifty-third weekend and it helped the comparison in terms of this week. You got another weekend to spring versus last year. Did that have any impact on the comps or is the comp apples to apples in terms of the actual weeks?

Philip Francis: Our business is not so much spring. Other than end of the year holidays, we are not necessarily a holiday-centric business. We have been lined up anyway and that is not true with us.

Gary Walter (Credit Suisse): Could you comment on new store productivity?

Philip Francis: The fourth quarter was better.

Peter Benedict (Wachovia): The inflation impact on sales was 4.3% in the first quarter. What the assumption is for the full year in terms of how inflation went back to top line?

Chip Molloy: Inflation is here with us for the rest of year. We knew it was with us going into the year. It is more than we expected, but we got that baked into our guidance, and we do believe that it is here to stay for most of the year.

Peter Benedict (Wachovia): You have taken some price again in the hotels area recently. Can you update us on the strategy there?

Philip Francis: We tested pricing both seasonally and geographically, and what we said last fall was that we tried some in effect holiday pricing, and we were pleasantly surprised by the lack of noise or anecdote or letter or e-mail or anything else. We also regularly do geographic pricing checks on grooming as well as hotels, and anytime we see movement in the market place, we have the capacity to be DMA specific on either hotel or grooming prices, and as there is opportunity, we are not trying to be price leaders in grooming. We are trying to be quality and customer friendliness leaders in grooming, so we would always want to price above the median, though never be highest, and we can look geographically and finite way, and when we get a chance to move, we move.

Mike Baker (Deutsche Bank): Are you seeing trade down on your food business, in other words, how is your premium versus your regular food?

Chip Molloy: We do not have data on any trade down. There is a barrier to justice systems if you do that. We specifically call that Super Premium and Rx Foods as among our best growers. We continue to watch that. When you say our share of sales in the hard goods, chip was down from 44 to 41, whereas consumables were up a couple of points and service was up the other point, so we add to 100 on everything. There is some unit slowness in hard goods, and where we think it is you can not see it in new pet, but in replacement hard goods. My example is if your dog 1740 the first of August and the consumer is feeling pressed, they can buy that and turn that into a Christmas present, and that would not be a share loss for us, but it is top line pressure. I feel good about the fact that we are well positioned in consumables, because the consumables business has been strong. Grooming business has been strong, and should the economy turn around, I would look for hard goods to get help from that.

David Strasser (Bank of America): What are you seeing regionally?

Philip Francis: In some of the places you read most about subprime mortgages, there are stores in California that we think are affected and Arizona as well, in parts of Florida. I would call that Texas does not seem to us to be noticing that there is a problem with subprime, but if I were to call that too, I would say parts of California, part of Arizona, and part of Florida, which matches up well with what we read about the mortgage stuff.

David Strasser (Bank of America): Looking at the second quarter, from a modeling standpoint, which part of the P&L gets hit the most in the second quarter as far as the weakness?

Chip Molloy: Gross margin is going to take a significant similar hit as it did in the first quarter, and the pickup that we are having in the first quarter on the expense side, we are not going to see that leverage in the second quarter because of the one-items that are hitting SG&A. The $4 million and the Banfield that we commented on, that is up in March, and the other $7 million that we spoke of is all down in SG&A.

David Strasser (Bank of America): The one company who continues to see good strength in this category is Wal-Mart. Are you seeing them doing anything differently?

Philip Francis: We watch Wal-Mart closely and we read anything Wal-Mart put out as quickly as you do. We think that their mix is more heavily consumables than ours is. Their emphasis on consumables and inflation in consumables would be good to them. We have read of their intent and seen a few stores. They are paying more attention to hard goods. I took it as a good sign when they said they thought that the pet category was relatively recession and economic pressure resistant. We interact with them on about 50% of our sales and only 20% SKUs, and that has been true for ever, and we have designed our business model with things like services which they do not do, and what it comes down to for us is we watch the competition, but as soon as we focus mostly on doing what we do well, that is when we seem to do best, and we will watch and see what we can learn, but if we focus on quality of execution, we usually do alright.

David Cumberland (Robert Baird & Co.): How are you able to achieve an increase with the unfavorable mix shift between hard goods and food?

Philip Francis: In times of inflation, retailers who can revalue inventory are advantaged on the margin line, as we get cost increases, we are not for being macho or something waiting 6 weeks before we pass through the cost, and if I was going error, I would pass it on a week earlier rather than I would a week late, and other than that, it is just economies of scale, continued new negotiation, more private label, more stuff sources overseas, and a lot of that stuff, but we have got groups of people whose whole life is trying to work on the cost of goods irrespective of what is going on in the macro market place.