Question-and-Answer Session

Operator

Once again, I would like to remind everyone in order to ask a question, press “*1” on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Lorraine Hutchinson, Bank of America/Merrill Lynch.

Lorraine Hutchinson – Bank of America/Merrill Lynch

Thank you. Good morning. Just wanted to follow-up on your SG&A expectations, you made great progress this quarter cutting $30 million or so, can you put that into context with the new restructuring savings and then maybe talk about the pluses and minuses outside the restructuring program, where you’re saving and where you expect inflation on that SG&A line.

Michael J. Nicholson

Sure, Lorraine. In terms of the quarter as I mentioned in my opening comments, overall we were successful in reducing SG&A by about $30 million versus the prior year, 20 of the 30 comes out of four wall and the balance of it comes out, half of it with home office overhead and marketing.

In terms of restructuring savings for the quarter, we realized about $10 million of restructuring savings that’s reflected in the $30 million year-on-year reduction. In terms of how we’re thinking about SG&A for the second quarter, the $245, what I’d say is we are anticipating some incremental variable four wall expenses associated with a higher top line as well as some incremental marketing expenses in the back half of the second quarter as we position the brands as they move into the third quarter and fall season.

Lorraine Hutchinson – Bank of America/Merrill Lynch

Thank you and then just a quick follow-up on inventory, you sound really excited about the product coming into the stores in the second half. How are you thinking about ordering inventory and making sure that you’re still conservative enough in your plans?

Kay L. Krill

Well, let me address the inventory right now, Lorraine. It’s really different by brand and at LOFT for example, our markdown inventory was particularly light entering Q1 and we saw very soft comps in the non-full price product and much better comps in the full price product. And we really think that in carrying more inventories in LOFT could have improved our comps somewhat, but for Ann Taylor the comp benefit of carrying more inventory would have really been less significant and actually more risky because the product was not as compelling.

Going into the third quarter we have bought a little bit more in both divisions anticipating that we still will have a double-digit comp decline in the third quarter but not as significant as we’re experiencing the first quarter because we’re up against easier comps. So, we have bought the second half lightly and conservatively but more than we bought the first half.

Lorraine Hutchinson – Bank of America/Merrill Lynch

Thank you.

Operator

Your next question comes from Tracy Kogan, Credit Suisse.

Tracy Kogan - Credit Suisse

Thanks. Two questions, the first is a follow-up to the question on SG&A, in the first quarter I think you had guided to a level that was maybe $10 million more than where you came in and just wondering if that incremental savings was related to this new cost savings program and then, the second question is, Kay, can you talk about the rationale behind the change in the product flow strategy at Ann Taylor stores and maybe it’s just something that you’re only doing until you get the new product in, but if you could just give a little more detail there. Thanks.

Michael J. Nicholson