Jim Chartier (Monness, Crespi, Hardt): Where you are in lowering the cost for new store build outs and if the reduced costs were going to be in place for you to open stores in the second half of the year?
Chuck Crovitz: Yes and yes. We have made good progress on doing that and are starting to see some nice results from the sourcing holding the store building off in the first half of the year has allowed us to consolidate. We are still not where we think we can ultimately be but it will represent good progress and you will see that in the second half of the year.
Jim Chartier (Monness, Crespi, Hardt): What percentage decline in price are you targeting?
Chuck Crovitz: I would prefer to talk to you about what we have accomplished.
Margaret Shipiro (Retail Tracker): At the end of the second quarter you are hoping to end inventory down high singles to low double. Do you expect that through the entire back half of the year?
Richard Flaks: From an inventory perspective we are not going to give definitive guidance beyond one quarter but directionally we expect inventory to be down throughout the whole year. Some of what comes in the fourth quarter is spring product. We have just seen our spring presentation so until we have purchased the goods it is hard to give definitive guidance that far out. Our targets are directionally to be down throughout the whole year.
Margaret Shipiro (Retail Tracker): With the merchandising side you have had some issues in newborn and big girl so is the inventory down across the board or are you focused on certain areas with managing it more tightly?
Richard Flaks: The inventory investment is down in all areas because all areas were inflated. It is just not a straight line. It is not down equally in every single business. We went back and did an analysis of the businesses and we have made the strategic investment in different places based on where we thought the opportunity was. Even within businesses it is not equal by category. We just went and did a lot of analysis on the inventory.
Margaret Shipiro (Retail Tracker): On the merchandising side, you talked about moving out of best and into better. Some of the tee stands of fashion do they start to disappear or are they more of the one-off items that you have layered into your stores?
Dina Sweeney: We said we re-invested the mix from best into better product. You will still continue to see fashion elements within the store reflected on the tee stands. We have not given that up. They are unique pieces to us.
Richard Flaks: Although we have not given up those fashion pieces we have as part of the narrowing we have narrowed it. One of the reasons we did that was we were experiencing not leaving enough fixtures open to put sales product on so we have narrowed the assortment go-forward to make the assortment look more focused and tightened.
Jeff Steinberg (No Company Listed): As you are looking at the business structurally you are making a lot of progress. Is there any reason to think you can not return to the historic operating margin of the business and success of the business?
Sue Riley: That is our goal. It will take some time to get there. There are some structural changes that have to be made. It will take some time but we can get there.
Jeff Steinberg (No Company Listed): You had talked in the past about having targets for operating margins that had been substantially better than the 6% you had achieved. Is that true?
Sue Riley: That is correct. In the divestiture of Disney we have expense we have to absorb. It will take some time to get there but it is our goal to restore The Children''s Place to its historical level of profitability.
Jeff Steinberg (No Company Listed): What might allow you to do better than what you had done in the past in terms of operating margins?
Chuck Crovitz: It is a combination of generating higher sales per store and our inventory mark down performance is going to help us there. There is some category expansion that we talked about in terms of shoes. We have a booming eComm business that we feel good about and that has positive operating margin leverage for us. Then we do have some engineering to do on the cost side which will both reduce cost and increase efficiencies. Some of those will have impact on margins as well. We are going through a laying out series of initiatives but in terms of the long range planning we have done we think we can get back to the historical levels of profitability that are well above 6%.
Kimberly Greenberger (Citigroup): Is the pressure you are expecting on IMU through the rest of the year as you increase you investment in good and decrease the best investment 50 basis points or 100 basis points?
Sue Riley: Your range is not far off the mark. I would say between 50-100 basis points on IMU for the year.
Kimberly Greenberger (Citigroup): Last year the mark down for the core Children’s Place division was up multiple hundreds of basis points. Can you remind us a general range you saw in increased mark down activity last year?
Sue Riley:We had seen increase in our mark down rate in the second quarter of 2007. That is when we started to see the consumer acceptance of our products was not what we had anticipated. It was second quarter, third quarter and fourth quarter of last year where mark downs were significantly ahead of the 2006 levels. We are expecting them to moderate but we are being somewhat cautious at this point because we have not seen the consumer’s reaction to our back-to-school assortment yet. I will say we are encouraged by the early consumer response to summer.
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