Gross margin before occupancy cost as a percentage of sales decreased 196 basis points from 58.1% to 56.14%. Decreases in our retail clothing product margins as a percentage of related sales of 327 basis points was driven by a decrease in merchandise margins resulting from customer response to our promotional activities.

We ended the quarter with retail apparel inventory below last year by 8.2% which compares to a decline in related sales of 7.6% for the quarter. We continued to be vigilant in managing our investments and inventory to support sales demand.

Occupancy costs decreased on a dollar basis by 1.3%. It increased in percentage of total net sales by 55 basis points moving from 14.98% up to 15.63% primarily due to the deleveraging effect of reduced comparable store sales.

Selling, general and administrative expenses before advertising decreased 10.7% from the prior-year quarter. As discussed in the previous conference call, we implemented a number of measures during the fourth quarter to adjust our operating costs to the realities and external conditions. These cost-cutting measures as well as operating efficiencies kept us realize SG&A leverage.

So to recap the first quarter results, our diluted earnings per share were better than our expectations as well as that expected by consensus views on Wall Street.

Our promotional posture is continuing to resonate with both new and existing customers and is positively impacting gross profit dollars due in large part to our marketing and merchandising initiatives. We are continuing to drive reductions in operating cost and increase efficiencies wherever possible without decrementing our market share. These things collectively contributed to our better than expected bottom line results.

Let me now turn your attention to our liquidity and balance sheet. At quarter end, our cash reserves and short-term investments were $125.2 million and outstanding debt was $39.2 million, which has a maturity date of February 2011. We finished the quarter with capital expenditures of $50 million and expect to be in line with our last full year guidance range.

Weighted average diluted shares outstanding of 52 million were 0.2% or 100,000 shares below than the first quarter of the prior year. We did not repurchase any shares in the quarter and therefore continue to have available 44 million of remaining authorization. Now that covers the review for the quarter.

Let me turn your attention to the second quarter. As we have discussed in the last call we have implemented modifications to our forward guidance practices primarily due to lag of forward visibility as to macro economic conditions. Specifically, we had provided guidance for the first half of the fiscal year and we have now updated the second quarter forward guidance. We will provide third quarter guidance when we report our second quarter results.

We anticipate our second quarter comparable store retail apparel sales to be down in the range of 4% to 6%. We are basing this on current trends plus our assessment of the overall economic climate. That being said we see some positive signs in terms of stability and our results can be impacted and are impacted by the level of promotional strategies that we have implemented. We anticipate a 3% to 5% increase in our Tuxedo rental business for the second quarter of the year. This is a modest reduction from our original plan and is reflective of the effects of a weak economic environment on the wedding industry that we had experienced in the first quarter.

Gross margins for the second quarter is still expected to be below the prior year particularly as we continue our accelerated promotional activity. However, the rate of decline for the second quarter is expected to be less than that realized in the first quarter and is driven by the higher mix of total sales in the quarter coming from our higher margin Tuxedo rental business.

As a reminder, the second quarter is a seasonal peak for our Tuxedo rental business which has positive implications on our margin. We anticipate second quarter occupancy cost on an average store basis to be flat in dollar terms.

Selling, general and administrative expenses before marketing expenses for the second quarter are expected to decline 6% to 8% when compared to prior-year cost and excluding $7.3 million in prior-year cost associated with the closing of our Canadian base manufacturing facility. The driver here included continuation of the benefit of actions initiated in the fourth quarter of the prior fiscal year to lower our cost.

Net interest expense is expected to decline for the second quarter as we increase our cash reserves from continued gains in free cash flow. Our effective tax rate for the second quarter is expected at 38.3% down from the prior year comparable period of 39%. The full year tax rate is now expected to be 37.2%.

We expect second quarter earnings per share then to be in the range of $0.56 to $0.60. That concludes my prepared remarks on the numbers. I will now turn the call over to George Zimmer, Chairman and Chief Executive Officer. George?

George A. Zimmer

Thank you, Neill. My remarks are going to be quite short although we are prepared to take your questions. The reason is that in real-time we have been working as many of you know on the acquisition or potential acquisition of Filene’s Basement and it is a work in process, a current negotiation. I have nothing further to say about it now nor will we be able to answer any questions concerning it later in the call.

Referring back now to our core business, The Men’s Wearhouse as well as Moores which often are parallel to each other I would describe it as we are satisfied but not thrilled with the results. Yes, we are beating plan but as we all know we are still running negative comps. Business remains tough. We are still concerned.

There is, however, a bright spot and that is as I guess we all saw K&G. For the first time in many times quarters K&G had a positive comp. Everybody is aware that that segment, the off-price segment has been outperforming the rest of the retail apparel segment and K&G is no example.

Now, there have been some significant changes to K&G to contribute to their positive numbers and must number one acknowledge our leader, Mary Beth Blake, who continues to do an outstanding job. We are for the first time showing significant increases in ladies wear now approaching double digits. We have launched a new marketing campaign with a new advertising agency, a campaign we refer to as “K&G fashion without the victim.” We think the preliminary results are good but certainly not great.