Lawrence P. Molloy

Well, the biggest point there is really about the softness in discretionary items. At this point, Gary, we’re driving a cost structure originally to get us to a 2.5 comp to leverage which we expect it to be in that path by the second half of next year, but that was assuming that we wouldn’t have product margin degradation. The fact that we''re now in a place where the mix shift is overcoming the rate changes that comp number is we''re going to have to trim more on our expenses which is what we''re doing, but our target is to be in that two range.

Gary Balter – Credit Suisse

So we could be lower or you could be lower and still be kind of flattish on expense percentage.

Lawrence P. Molloy

Sure.

Gary Balter – Credit Suisse

And then lastly, as you look at PetsHotel, one of the worries we get from clients is the worry about how is that going to do in the slower environment. People won''t be taking as many vacations. They may not use it as much, etc. What are your thoughts on that? Obviously you''re slowing your growth a lot.

Philip L. Francis

Well Gary this is Phil. The reasons you said it’s a matter of degree I suppose, when human travel slows a bit why PetsHotel slows and that''s why we did what we did next year. What we''ve essentially done by going to 20 is the hotels we had planned for new stores, which we''ve dialed back, if we had a hotel planned at any of those 42 stores that was new we''re doing it. But in all of the stores that might have been remodeled or retrofit stores we''re not doing those we''re delaying those. There are a couple benefits. Remember the CapEx is lower for a hotel in a new store than in existing because we don''t have to deconstruct anything. So the 20 hotels we''re going to put up are going to have a lower average CapEx cost next year that wouldn’t be the norm, and we don''t lose anything; no something falling out of our deck of cards because we don''t do a remodel. We can merely do the remodel two or three years later when the travel picks back up. So, we believe it’s a good business.

We''ve got lots of stores full for Christmas. Now the difference is instead of being full six weeks, nine weeks ahead of time they''re full seven weeks ahead of time, but there is a little bit of effect there. I don''t think you could stay at a PetsHotel anywhere if you tried to get a reservation around the 10th of December. I mean they''re going to be full and they''re going to be sold out. So we''re not just doing the new ones which are low CapEx than the ones we have to do or lose, we''re merely saving the more expensive ones in an existing store for a more advantageous time.
Gary Balter – Credit Suisse

Okay that’s great. Thank you very much.

Operator

Our next question is from David Mann from Johnson Rice, your question please?

David Mann – Johnson Rice & Company

Hi yes, when you''re looking at the mix shift that''s going on and going into the fourth quarter when you have a higher discretionary spend typically, how are you approaching that in terms of what your expectations are and are you changing your marketing at all to try and offset that degradation?

Lawrence P. Molloy

Hi David it is Chip and I’ll talk to the first part and then I’ll let Bob talk to the second part. How are we thinking about it? We do think it’s going to be a week in the fourth quarter. We think that at the gross margin line that we’re going to have a bigger impact, negative impact to gross margin in Q4 than we did in Q3 related to that mix shift and we’re planning for that. On the flip side there are some opportunities in Q4 that will help stabilize the gross margin. We think once again at W&D that we’re going to get a fair amount of leverage, more than we did this quarter in Q4. One, because of transportation network''s improving plus fuel costs have come down tremendously. We’ll also not see as much degradation on the occupancy line as we saw in Q3 either. So we are planning for gross margins all in to be down. They won’t be as bad as they were in Q3 from a year-over-year perspective. They will be worse at the product line but there are other areas to make that up.

Robert Moran

Hi David, this Moran, I’ll take over the marketing side. We’re doing a number of things. Obviously we’ve got a lot of foot traffic during the holiday time and we also know that we are creating traffic through our consumable side. So what we want to do is really ride on the coattails. One is on the in store environment we have a great opportunity while the customer is in looking for either the consumable or looking for gifts to really enhance the in store environment. We’re looking at that from category special 20% off on certain lines. We’re looking at emphasizing our PetPerks program and database to really emphasize the hard goods. And then obviously we’re investing and continuing to invest in marketing. Especially in not only December but in January which is one of our biggest months of the year. So a lot of business is normal but a little bit more focus on hard goods so that we can mitigate the mix shift.