Our junior same-store sales were down 6% and represented 52% of our total apparel sales. Bullhead denim continued to be the primary driver of our juniors business. Unfortunately, the strength of denim was offset by weakness in swim and shorts which we experienced for the second year in a row. Although we scheduled deliveries of swim and shorts later in the season to be in line with warmer weather, these categories performed well below plan.

On a positive note, we have been pleased by the acceptance of a broader range of fashion tops. Young men’s apparel same-store sales were down 8% although the trend improved as the quarter progressed. Bullhead denim was the primary positive driver but was offset by the continued weakness in board shorts.

Over the course of the quarter we expanded the breadth of our T-shirt assortment to include a variety of new brands in different regions of the country. When you shop our stores you will note a dominance of printable, branded tees that touch a variety of themes that include actions sports, music, mixed martial arts and organics. We are encouraged by the response to this expanded assortment.

Turning to accessories, earlier I noted that apparel was 88% of our business in the first quarter. As I have previously said we believe that we reduced accessory inventories too deeply and have been subsequently chasing business into jewelry and scarf. We will continue to buy into trend in junior accessories as we build our fashion business. We believe there is additional opportunity to expand a tightly edited young men’s accessory business as well. Ultimately, we see accessories representing 12% to 15% of the overall assortment.

I will now speak a bit to real estate. During our last earnings call we spoke to an intense review of our real estate portfolio. As you may recall, we found that in a number of malls our customer is more sensitive to price than in other locations. As a result, we have reclassified our stores from a product assortment perspective into 525 core PacSun stores and 402 PacSun Value stores that also includes our outlet division. This has been work in process with assortments improving with each delivery. The important take away is that while trends are similar regardless of the customer and location between our core and value Pac stores we are making adjustments in an effort to maximize the performance of two different store profiles. We will continue to rigorously monitor and evaluate our real estate portfolio from a merchandising perspective as well as overall productivity.

We have in excess of 100 expiring leases in each of the next three years which will provide us the opportunity to make adjustments as appropriate.

Another important initiative we have underway is the development of a more robust PacSun.com website that better supports commerce and community. I would urge you to visit our website as we continue to make improvements in presentation and content. We view PacSun.com as an essential part of our strategy to speak to the music, action sports, social connections, fashion and emerging trends that are rooted in youth culture and the So Cal vibe. This site links a range of interests of our customers be they our sponsorship of the USA Amateur Surf Team, our sponsorship of two showcases at the South by Southwest Music Festival in Austin, Texas or attending the Coachella Music Festival in Southern California with our style leaders who blogged about the fashion and music scene.

Over the past few weeks I have visited over 35 stores across the country, most of them with our newly appointed Senior Vice President of Stores, Lynda Campbell. During the course of these visits I was generally pleased with the progress we have made in our assortments, in-store presentation, expense control initiatives and supply chain improvements. The front of the house and the back of the house have become aligned over the past year and are doing a better job of working in concert. Yes, there were still some inconsistencies in execution but significant progress has been made and we are continuing our efforts to improve in this area.

As we look at 2009 our focus remains on providing the customer with a compelling apparel assortment while we continue to control expenses and inventory. We believe that the environment will remain challenging for the foreseeable future. Against this backdrop we will continue to focus on making progress in the areas that we can control while positioning our business to be agile and to seize opportunities when and as the environment improves.

I will now pass the call to Mike Henry, our Chief Financial Officer.

Michael L. Henry

Thanks Sally. Although our sales environment remains challenging we are pleased with the results of our continuing efforts to manage expenses and inventories during this recession. Some important call outs underlying our first quarter results include; first, on a GAAP basis, SG&A expenses were down $19 million versus a year ago. Second, merchandise margins improved 140 basis points versus a year ago. Third, our inventories are down 31% in dollars and 25% in units versus a year ago on a per square foot basis and are highly current with more than 80% aged less than 90 days. Finally, we ended our smallest revenue quarter of the year with $104 million in working capital and no direct borrowings outstanding under our credit facility. We improved our cash position at quarter end to $32 million versus $25 million entering the fiscal year.

Now to some of the financial details of our first quarter performance. All comparisons in this commentary are to the first quarter of fiscal 2008.

Total sales were $223 million this year versus $267 million last year. Same-store sales declined 18% for the quarter. Apparel same-store sales declined 7% and represented 88% of total sales. They were 77% of sales last year. Non-apparel same-store sales declined 57% and represented 12% of total sales. They were 23% of sales last year.

Our former sneaker business which we exited during 2008 accounted for $12 million of last year’s sales and caused a 4 percentage point drag on our first quarter same-store sales results. E-commerce revenues grew 17% to $9.8 million from $8.4 million last year. We ended the quarter with 927 stores versus 942 stores last year.

Gross margin was $61 million or 27.4% of sales this year versus $75 million or 28.3% of sales last year. As a percentage of sales, merchandise gross margin improved 140 basis points primarily due to our increased penetration of apparel and proprietary brands. Distribution costs improved by $3.6 million or 100 basis points due to the consolidation of our distribution centers a year ago. Buying costs were flat as a percentage of sales and down $1 million versus last year.

Offsetting all of these gains was a 320 basis point increase in occupancy costs as a percentage of sales due to de-leveraging these costs on the negative 18% same-store sales result. In dollars, occupancy costs were down nearly $600,000 year-over-year.

SG&A expenses were down $19 million to $77 million and by 150 basis points to 34.4% of sales this year from $96 million or 35.9% of sales last year. Of the $19 million improvement in SG&A expenses, $7 million was due to lower non-cash asset impairment charges; $6 million was due to payroll savings in our stores and home office and the remaining $5 million was primarily from savings in areas such as legal, depreciation and consulting expenses.

Our income tax rate for the quarter was 44.4%. Net loss for the quarter was $8.7 million or $0.13 per diluted share versus a net loss from continuing operations of $12 million or $0.17 per diluted share last year.

Now turning to the second quarter. We continue to experience a very challenging sales environment and we are not expecting this environment to improve during the second quarter. Accordingly, assuming that same-store sales decline in the range of 17% to 20% for the second quarter, we would expect a quarter loss of $0.11 to $0.17 per diluted share. At these sales levels we would expect merchandise margins to decline by approximately 50 to 150 basis points due to necessary markdowns to clear spring and summer goods before the arrival of our back-to-school assortments.