Michael O’Sullivan: It is important to separate out the comparable stores from the new ones. The 26 comparable stores are performing well, close to plan, so we are happy with those. The new stores, the March opening group where we had eight new dd''s stores open and we had mixed results among those eight stores. It is only eight stores and they have only been open for five months. We are diagnosing the performance of those stores, but there is not any clear pattern at this point. Michael was just flagging the fact that the performance had been a little mixed.
Michelle Clark (Morgan Stanley): Will we continue to see dd''s openings in new markets through the rest of this year?
Michael O’Sullivan: Of the eight new stores, two were in new markets. It is not that all eight were in new markets and that is the pattern. It was only two stores. Throughout the remainder of the year, we will be opening additional new stores in additional new markets and indeed we did open additional dd''s stores in June and July, but those stores have only been open a few weeks, so we would not comment on their performance at all.
Jeff Black (Lehman Brothers): What do your comparables assume going forward from California and Florida and are you seeing any weakness specifically in California that would lead you to lower that comparable rate?
Gary Cribb: When we look at California and Florida, we separate the two. California is performing better than the company today. Florida continues to trail the chain in the minus low single-digit area and we have seen that trend for a while now.
Jeff Black (Lehman Brothers): Is there anything in traffic conversion overall that you are getting a clue on now that makes you want to pull the trigger and lower the comparable guidance here?
Gary Cribb: Part of our conservative outlook is there is a lot of uncertainty as it relates to the economic markets and a lot of our fellow retailers have had negative projections for the back half, but we are hopeful that we will do better. We are just taking the prudent conservative posture.
Jeff Klinefelter (Piper Jaffray): The home category has been noted as an area of strength for you for several months. It has also been noted by many other retailers in department stores. Do you see any opportunities for you to chase expanded assortments within home or what categories specifically represent opportunity now going into the second half?
Michael Balmuth: There are opportunities, more than normal in the market there. That is a broad-based within the home business and that is a good thing for us. the opportunities we have isolated are much more in the gift giving part of home and we have a much stronger position in those for the holiday period.
Jeff Klinefelter (Piper Jaffray): With the weakness in Florida, some of it being the housing market-driven consumer sentiment changes in spending, do you have opportunities to go in and do some stepped-up level of marketing or any special event marketing to try to take the opportunity to deliver more value to some of these consumers?
Michael Balmuth: We have a focus at our company and it is more on improved assortments and tailoring our assortments to what we think the customer wants and putting the best bargains out. We would not take a marketing advantage down there. We would look specifically for merchandising opportunities that were more sustained in the area as opposed to just increasing marketing to drive our business.
Brian Tunick (JP Morgan): Is the competition in the buy of the goods out there or more on the promotional cadence?
Michael Balmuth: It is promotion. There are discounts that could happen based on the more recent lowering of sales and earnings expectations by the more mainstream sets of key retail information sector. On the buy side, that is not the issue. The off-price, basically what we watch for is the promotional beat out there in department stores and when you have these kind of macroeconomic issues coupled with a drop in sales projections, there is a potential for mainstream retailers to become more aggressive promotionally and that is what we are referring.
Brian Tunick (JP Morgan): Can you expand on the micro-merchandising rollout and where are you in that timing?
Michael O’Sullivan: The main objective of that program is to improve our assortments at a local level and improve our ability to trend at a more detailed level in stores. 2007 is the year that we are building those capabilities and those processes and that building process is going well. We expect to roll out the program on a pilot basis in early 2008 and then to expand it to our main businesses in the following couple of years after that. It is going to be a while before we see any results of that activity, but we are happy with how it is going in terms of the development of the program.
Kimberly Greenberger (Citigroup): You are seeing an opportunity to further reduce inventory in your stores. Is that based on some sort of analysis of how the inventory is flowing in the stores or is this reaction to the external environment or some combination thereof?
Michael Balmuth: We have looked at turns across the store and we have looked at markdowns. In hindsight, it is clear that we carry too much inventory and if you couple that with the choppiness that we found all season in our sales and that means that we had a better than expected March and we had a worse than expected April, we had a better than expected June, we ran into trouble, our business slowed down starting in mid July. The consumer is shopping not in as predictable a pattern. With that, we think we put ourselves in better stead by carrying less inventory and by doing this, we put ourselves in a better position to preserve our margins to the degree that we can out there depending on what the environment becomes. In our off-price model, we can always run after merchandise if in fact we found that we have gotten too conservative.
Kimberly Greenberger (Citigroup): What is driving the comparables?
Michael Balmuth: Our average retails were flat year-over-year. The comp was driven about half by more transactions and half by the basket was up by about a point.
Kimberly Greenberger (Citigroup): Can you comment on the level of markdown inventory at the end of July versus last year?
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