Ann Taylor division net sales declined 4.4% and comparables store sales were also down 4.4% versus a 6.1% comparables tore sales gain in the third quarter last year.

- On the other hand margins were solid as the company managed in store metrics to help offset the soft traffic.
- Total inventory per square foot down was 1% versus year ago excluding the impact of Beauty.
- This is on top of the 13% decline in total inventory per square foot achieved in the third quarter last year.

Strong categories for Ann Taylor were dresses, item jackets, textured and novelty sweaters and woven and knit tops, while basic sweaters, pants and non-apparel were soft.

The company launched Beauty initiative in time for holiday shopping. The offering consists of a fine fragrance named Possibilities, which comes in three sizes as well as a purse spray a body lotion and a gift set. Beauty offering includes an Ann Taylor body care collection consisting of body lotions, body mists and body washes in six scents and will be prominently displayed at the front of the store at launch.

- The company is optimistic about this product category given its attractive margin characteristics as well as being ageless, size less and season less.
- Another growth initiative for Ann Taylor is recent introduction of Ann Taylor Collection, which is a higher priced, higher quality collection targeting affluent professional women in 24 of more upscale locations.
- The new collection is priced about 40% higher than core Ann Taylor assortments and consists of high quality suitings, separates and dresses as well as coordinating tops and accessories.

Loft net sales advanced 9% and comparable store sales were down at -0.3% versus the 0.9% comparables store sales decline in the third quarter last year.

- The company achieved strong margins at Loft on the strength of healthy in store metrics, it helped to offset the soft traffic environment. In addition, Loft did a good job managing its inventory and ended the quarter with inventory per square foot down double digits.
- On the product side fall assortments were well balanced, had better end use penetration, had more color and novelty and had a more appropriate mix of updated classics versus fashion.

- The company has reduced basic sweater offering in favor of novelty sweaters and it has modified fabrics and yarns to be more season less. Assortments are focused on wardrobing clients with versatile product that take her from day into evening.
- Maternity was launched in 20 Loft stores and online. This business is off to a good start and the company added another five stores bringing the total number of stores that carry Maternity to 25.

- Factory delivered another strong quarter and was a positive contributor to overall margin performance.
- Online business continues to grow rapidly and recently upgraded sites offer improved navigation and check out as well as strength and stability to accommodate increased traffic.

Year-to-Date Financial Highlights

- Net sales increased 3.7% to $1.8 billion, compared with net sales of $1.7 billion in the first nine months of fiscal 2006.
- Net sales at Ann Taylor declined 2.5% to $652.6 million, compared with net sales of $669.3 million in the first nine months of fiscal 2006.
- At LOFT, net sales increased 2.3% to $881.1, compared with net sales of $861.7 million in the first nine months of fiscal 2006.

- Comparable store sales declined 3.4%, compared to a comparable store sales increase of 6.2% the prior year.
- Comparable store sales at Ann Taylor declined 2.2%, compared with an increase of 6.6% the prior year.
- At LOFT, comparable store sales declined 6.9%, compared with an increase of 6.0% in the first nine months of fiscal 2006.

- Gross margin, as a percentage of net sales, decreased 2.4 margin points to 53.4% in.
- Selling, general and administrative expenses, as a percentage of net sales, decreased 0.5 points to 44.1%.
- Operating income declined 13.5% to $167.3 million, or 9.3% of net sales, compared to operating income of $193.3 million, or 11.2% of net sales, in the year-ago period.
- Net income was $103.9 million, or $1.61 per share, compared with net income of $121.5 million, or $1.67 per share, for the first nine months of fiscal 2006.

Key questions from the third quarter earnings call conducted by Taylor Stores Corp. on November 16, 2007.

Brian Tunick (JP Morgan): Factory margins are increasing. Where factory margins are year to date relative to the consolidated corporate margins or where potentially you think this division could be?

Kay Krill: We do not break margins out by division. We are enjoying attractive margin growth in this channel.

Brian Tunick (JP Morgan): On the product cost side, wool costs are up 30-40% year over year. What are you doing with your product mix with product costs?

Kay Krill: We are seeing costing pressures as we head into 2008. However, we have many internal sourcing initiatives in play to help us mitigate the pricing pressures stemming from inflation and currency issues and raw material increases in particular. We are on it and we expect to offset some of the external factors with our internal plans.

Dana Cohen (Banc of America): Would it be fair to say that the corporate decline on the gross margin was entirely due to Ann offset in part by increases at Loft and Factory?

Kay Krill: Directionally, yes.