The company has approximately 35.5 million shares outstanding. It has $50 million in authorization remaining and intends to remain opportunistic and flexible regarding further repurchases. The share repurchases are expected to be highly accretive over the coming years. The significant share repurchase program was executed without increasing overall debt levels or limiting the company''s financial flexibility.

Due to the lack of sales growth over previous years, some of fixed expenses such as payroll and rent have been deleveraged.

- The company announced operational efficiency program and the plan to generate $65 million plus in annual savings. These savings initiatives continued financial discipline, and accountability should result in decreased SG&A expense as a percentage of sales in the coming years.
- The company ended the quarter with 2139 locations, consisting of 1391 stores and 748 kiosks. The company has closed approximately 105 locations in fiscal 2008. This will result in a net reduction of two jewelry stores. While the closed stores were cash flow positive, they did not provide an opportunity for an attractive return on capital.

- The company will continue to take a consistent approach to evaluate real estate portfolio and address the underperformers, regardless of the economic environment. Over the long-term, this will raise the performance of the entire portfolio, as the company closes the underperforming stores that did not provide an opportunity to generate an attractive return. Capital will continue to be allocated to the brands with the best returns.
- At April 30th, the company had borrowings of $269 million under line of credit; approximately $21 million lower than the prior year. The company had $68 million in cash at quarter end, compared to $53 million last year.

Fourth Quarter 2008 Outlook

- Given the success in gaining market share during the third quarter, the company would expect sales trends to continue though at a reduced rate. The company believes it can move through an additional $20 million in inventory, bringing the total clearance reductions to approximately $120 million. This will result in lower gross margins than expected or than experienced in the third quarter.
- The company still expects the third and fourth quarters combined to be impacted by approximately 500 basis points to 600 basis points, in line with original expectations.

- This additional clearance inventory reduction will provide the flexibility to enhance assortments, resulting in greater clarity of offerings earlier than anticipated. The company expects SG&A in absolute dollars to remain similar to the third quarter.
- The company expects to achieve approximately $6 million from operational efficiency program, which will bring the total for the year to $12 million. The remaining $53 million, plus in overall expense reductions will be in fiscal 2009 to achieve the targeted $65 plus million in savings. The savings will be offset in the fourth quarter by variable expenses related to projected sales increases and occupancy related costs.
- Taxes will continue to be impacted by the relationship of taxable to nontaxable earnings, and fourth quarter tax rate is likely to be approximately 50%.

Fiscal 2008 Outlook

Inventory liquidation in fiscal 2008, combined with capital expenditures reductions, should result in operating cash flow in the range of $85 to $95 million, excluding the $175 of net proceeds from the sale of Bailey Banks & Biddle.

Key questions from the third quarter earnings call conducted by Zale Corporation on May 22, 2008.

Lorraine Maikis (Merrill Lynch): Is free cash flow $85 million to $95 million?

Neal Goldberg: Yes, it is.

Lorraine Maikis (Merrill Lynch): You are upping your clearance levels from a 100 to 120. Do you expect that to be a permanent reduction or do you expect to investment the incremental $20 million in new products?

Neal Goldberg: This is just to clarify that as we said we expect the additional 20, we will invest in mostly proprietary merchandise, bridal merchandise, diamond merchandises which we have articulated again as what we are going to be focused on.

Lorraine Maikis (Merrill Lynch): Can you comment on any new proprietary products or tests that you have been doing to try to grow the penetration of that type of offering?

Neal Goldberg: In the future we will add more color to it. Suffice to say is that we had robust testing during the Mother''s Day period and are pleased with many of the results of that. We think strategically going forward, by having great products; great quality, value prices; and combining that with the emotional experience we expect to be projecting with our marketing; we think we have got a combination that should serve us well in the future.

Lorraine Maikis (Merrill Lynch): Can you give detail of the training programs that you are using for the employees that are in these pilot stores?

Neal Goldberg: In our last call, we talked about having best-in-class stores that were outpacing the chain by double-digits, so almost 10%. That has continued, and as we look to the Pacesetters score what we have done is we have taken some of the knowledge that we have embedded particularly in authority with diamonds and with jewelry, and we have invested in those stores so that they can not only increase their confidence but be more articulate when they talk to the customer about those assortments. In terms of cost, the costs are not above what we have already built into our budget so it is minimal.

Janet Kloppenburg (JJK Research): On the clearance program, do you expect to have the $120 million in clearance completed by the end of the fourth quarter?

Neal Goldberg: We expect the majority of clearance to be done through the fourth quarter. We will continue some clearance through August. Clearance will always be part of our assortment. I do not view clearance as a bad thing. The majority of it will be the end of fourth quarter, potentially bleeding into the beginning of the first.