Tim Johnson – VP, Strategic Planning & IR Steve Fishman – Chairman, President & CEO Joe Cooper – SVP & CFO Chuck Haubiel – SVP, Legal & Real Estate, General Counsel and Secretary

Jeff Stein – Stein Research David Mann – Johnson Rice Paul Trussell – JPMorgan Peter Keith – Piper Jaffray Joe Feldmen – Tesley Advisory Group John Zolidis – Buckingham Research Group Patrick McKeever – MKM Partners Ronald Bookbinder – Global Hunter Securities Stacy Widlitz – Pali Capital Ivy Jack [ph]

Ladies and gentlemen, welcome to the Big Lots fourth quarter 2008 teleconference. (Operator instructions) At this time, I would like to introduce today’s first speaker, Vice President of Strategic Planning and Investor Relations, Tim Johnson.

Thanks, Lashonda. And thank you everyone for joining us for our fourth quarter conference call. With me here in Columbus today are Steve Fishman, our Chairman and CEO, Joe Cooper, Senior Vice President and Chief Financial Officer and Chuck Haubiel, Senior Vice President, Real Estate, Legal and General Counsel. Before we get started I’d like to remind you that any forward-looking statements we make on today’s call involve risks and uncertainties and are subject to our Safe Harbor provisions as stated in our press release and our SEC filings and that actual results can differ materially from those described in our forward-looking statements. As discussed in detailed in this morning’s press release, our 2008 results include discontinued operations. Our 2007 results include discontinued operation as well as items including and continuing operations that are not directly related to the Company's ongoing operations. Therefore, we have provided supplement on non-GAAP fourth quarter and full year financial statements for fiscal 2007 that exclude these items. A presentation of the most directly comparable financial measures calculated in accordance with GAAP and a reconciliation between the GAAP financial measures and the non-GAAP financial measures are also included in our press release from this morning which is posted on our Web site at www.biglots.com. We believe that these non-GAAP financial measures should facilitate analysis by investors and others who follow our financial performance. The discontinued operations activity in the fourth quarter and full year fiscal 2008 results reflect these indemnification obligations related to KB Toys, a former division of the company. In the fourth quarter fiscal 2008, we reported a loss from discontinued operations of $3 million compared to income from discontinued operations of $6.4 million in the fourth quarter of fiscal year 2007. The loss from discontinued operations for the fourth quarter of 2008 of $3 million net of tax relates to 31 KB store leases, where we believe we may have liability as a result of KB again filing for bankruptcy protection in December 2008. The income from discontinued operations for the fourth quarter of fiscal 2007 is principally comprised of $5.3 million net of tax due to the release of KB bankruptcy related indemnification reserves and a KB bankruptcy trust settlement of $1.1 million net of tax each of which were related to KB's 2004 bankruptcy filings. The items excluded from continuing operations in the supplement or non-GAAP disclosures represent net income of $3.1 million or $0.04 per diluted share for the fourth quarter of fiscal 2007 and net income of $6.1 million or $0.06 per diluted share for the full year fiscal 2007. The nature of these non-recurring items is detailed in our press release. So, since we do not view discontinued operations or non-recurring KB and Hurricane proceeds as relevant to ongoing operations to the business, the balance of our prepared comments this morning will be based on results of continuing operations for 2008 and related to continuing operations on a non-GAAP basis as adjusted in the supplemental schedules when we refer to or compare to 2007 results. With that, I would like to turn it over to Steve.

Thanks, T.J. And good morning everyone. Since launching our win strategy in late 2005, we've accomplished what we set out to achieve and more. We've taken a business that was marginally profitable to new heights with record income and record EPS performance. We've executed improved merchandise offerings, better brands and values, a leaner and more productive real estate portfolio and today, we are more efficient operator with a lower overall cost structure, both in dollars and as a percent of sales. I couldn't be any more proud of this organization and all that's been accomplished to position our business along side some of the more successful retailers in the marketplace. Like most businesses, the global economic crisis over the last several months kept us from performing as well as we could have in 2008. However, we've always believed that if we improved on merchandise offerings, made good real estate decisions and relentlessly attacked our cost structure, good things could happen for our business. Pure and simple we remain focused on our strategy and what was within our control. We offer the customer tremendous value, new brands and better quality. We managed our inventory wisely, and generated record turnover. We controlled our cost to the lowest expense rate in our history. We opened 21 new stores, we invested for the future of the business by completing our point-of-sale register system rollout, and we began the process of designing and installing a new core IT infrastructure through SAP. Bottom line, 2008 was a record year for operating profit dollars and EPS. Speaking briefly to Q4, our sales comps were down in the 3% range which was right in the middle of our guidance. This was a continuation of the trends we first experienced in the latter part of September and October. Consistently across discount retail, you are hearing that the customer is focused on need-based product right now and it's holding off until the last possible moment on bigger discretionary purchases. We are experiencing that in our business as well. For Q4, consumables in hard lines, particularly electronics, were the best performers. Consumables, which is roughly 30% of our business has been our most steady category and comped up mid single digits in Q4 and for the year. Need-based product, great branded closeouts and unbelievable value. Electronics is not necessarily need-based, but is an area where customers are still spending money. The environment for deals in electronics is better than I've seen in my time here at Big Lots and we see these opportunities continuing as we head in to the new year. On the flip side, in the more discretionary categories like seasonal, home, toys and even furniture in Q4 business was much more challenged. When I evaluate our merchant performance, I look at category level performance. Did we execute against the strategy? Are we offering better quality and better value than last year, or last quarter? How are we performing relative to the competition? My assessment on Q4 is that our merchants did execute fairly well. Better in some areas than others, but overall, we offered better quality and better value than this time a year ago. In fact, when you look at comps by merchandise category, you'll find that our results were every bit as good if not better than our competitive set. If you look only at total comps and do not understand the categories, you're missing this very key element. This is important to understand for comparative purposes because to look at other retailers, who have anywhere between 45% and 65% of their mix in consumables and then compare their total comp to ours, is like apples and oranges in this environment. Our merchants manage inventories effectively by shifting receipts from slower moving categories to winning categories or to fund special deals. I feel very good about our inventory levels and content, as we begin this spring season. Now, Joe will give you some of the financial details and I'll be back to talk about '09 and provide some commentary on longer term opportunities.

Thanks, Steve and good morning, everyone. Sales for the fourth quarter were $1.367 billion, compared to $1.412 billion for the fourth quarter of last year. Comparable store sales decreased 3.2% as strength in electronics and consumables was offset by softness in more discretionary categories as Steve just mentioned. Q4 sales comps remained very consistent across the income demographics of our store base, and we are also fairly consistent on a regional basis with the exception of the southeastern region, which trailed the company average. Our Q4 operating profit dollars increased slightly over last year, even though total sales were up about 3%. Growth in operating profit dollars was possible due to expansion in the operating profit rate which finished at 9.7% of sales or 30 basis points higher than last year. This expansion in the operating profit rate was driven by an increase in the gross margin rate, partially offset by slight SG&A deleverage. The fourth quarter gross margin rate of 40.4% was 70 basis points above last year's rate of 39.7%. The increase to last year was due to a higher receipt IMU, lower freight cost and a lower Q4 shrink rate year-over-year, partially offset by an unfavorable mix impact as a result of higher sales and lower margin consumables and electronics categories. Total SG&A dollars were $419.4 million or down 2% compared to last year. The fourth quarter SG&A rate of 30.7% was 40 basis points above last year. This increase in the SG&A rate was expected and consistent with our guidance from early December as the deleveraging impact of our comp stores sales decline was partially offset by efficiencies in stores, distribution, transportation, and depreciation. Net interest expense was $1.1 million for the quarter compared to $2.0 million last year with the improvement of result of this year's cash flow. Our tax rate for the fourth quarter of fiscal 2008 was 38.1% compared to 36.8% last year. The variance for last year is primarily related to evaluation allowance for the capital loss in our Top Hat investments, along with no tax exempt interest income in '08 compared to '07, given we were in the net debt position throughout 2008. For the fourth quarter of fiscal 2008, we reported income from continuing operations of $81.8 million or $1 per diluted share, compared to income from continuing operations of $82.5 million or $0.93 per diluted share a year ago. Our Q4 result of $1 per share was better than our guidance which call for earnings of $0.90 to $0.99. The majority of the favorability was in gross margin with maybe a penny or so coming in the tax rate as our 38.1% rate was at the low end of our guided range principally due to tax benefits realized from statute of limitation lapses and settlements. Gross margin favorability was largely due to better sell through in seasonal goods at lower mark downs, lower overall freight costs and favorable early shrink results. IMU remained healthy which has been the case for most of the year. Our company remains in a strong financial position. Inventory into the fourth quarter in fiscal 2008 at $737 million compared to $748 million last year. Average store inventory was relatively flat year-over-year and for the year we achieved record inventory turnover of 3.6 times compared to 3.5 times last year. Cash flow which we define as cash provided by operating activities, less cash used in investing activities was $123 million for fiscal 2008 which was approximately $22 million below our last forecast. The variance was attributable to an $8 million pension plan contribution which was not included in our original guidance, as well as lower than expected AP leverage. The lower AP leverage was a direct result of reallocating open to buy and receipt dollars towards categories like consumables and other closed out opportunities where terms are shorter and cash discounts are offered. We ended the year with debt of $62 million, down $102 million to last year, but more importantly as we sit here today we'd now paid down our credit facility to zero and are in a net cash position. For the fourth quarter capital expenditures totaled $13.2 million, down $7.8 million compared to the fourth quarter of last year, primarily related to our new PLS rollout which was completed in Q2 of this year. Depreciation expense for the quarter was $19.8 million or $3.9 million lower than last year. For the year, CapEx totaled $88.7 million, and depreciation expense was $78.6 million. During the fourth quarter, we opened one new store and closed 28 stores leaving us with 1339 stores and total selling square footage of 28.7 million at the end of the year. For the year we opened 21 new stores and we closed 35 stores. Moving on to 2009 and guidance. Overall, we are planning 2009 EPS to be in the range of $1.75 to $1.90 per diluted share compared to 2008's income from continuing operations of $1.89 per diluted share. Our 2009 plan calls for comparable store sales to be flat to down 2% with total sales dollars up 1% to down 1% compared to fiscal 2008. At this level of sales we expect the operating profit rate to be in the range of 5.2% to 5.5%. The gross margin rate for 2009 is expected to be similar to 2008 and essentially flat comps as a point where the SG&A rate would be flat to 2008. At flat comps, we expect to deliver an operating profit rate similar to last year. Leverage and distribution and transportation and depreciation expenses is planned to be offset by occupancy and insurance increases. Distribution and transportation as a percent of sales is expected to be down to 2008, due to consolidating our Columbus furniture DC in to our regional DCs mid year 2008. Lower fuel cost and new transportation initiatives. Overall depreciation expense is expected to decline in 2009, and merit increases in store payroll are expected to be offset by new initiatives to improve labor efficiency. Filling out the rest of the P&L for 2009, net interest expense is estimated at approximately $2 million, and the affective income tax rate is planned in the neighborhood of 38% to 39%. For the year capital expenditures are expected to be in the $80 million to $85 million range. Maintenance capital is estimated about $40 million. From a real estate perspective new store capital is estimated at approximately $20 million. During 2009, we anticipate opening 45 new stores and closing approximately 40 stores resulting in a net increase in our store base for the first time since 2004. Strategic initiatives will represent approximately $20 million to $25 million of CapEx in 2009 and we'll be focused on our continued SAP implementation, retrofitting and refreshing a portion of our store base continuing to invest in energy management systems to save on utility costs and other smaller projects. Based on these capital assumptions, depreciation expense is estimated to be $70 million to $75 million. This level of performance is estimated to generate $145 million of cash flow and we're estimating our diluted share count to be in range of 82 million shares to 83 million shares for fiscal 2009. Moving to the first quarter, comp sales are planned to be in the range of negative 1% to negative 3%, based on our assumption that this challenging retail environment will continue throughout the quarter. Quarter-to-date through the first 4.5 weeks our comps are within this range. We expect our Q1 gross margin rate to be slightly down to LY, as shift in mix towards the lower margin consumables and electronics will only be partially offset by an estimated decline in overall freight costs. We also expect slight SG&A deleverage as a negative low single-digit comp, will be partially offset by supply chain savings and expected lower bonus expense. Based on these assumptions, Q1 earnings or estimated to be in the range of $0.34 per diluted share to $0.40 per diluted share, compared to $0.42 per diluted share last year. Steve?

Thanks, Joe. You can see from our guidance that we are planning Q1, down 1% to 3%, which acknowledges that there will be challenges. I know there are some very bearish views about our potential, given the difficult comparisons of the last couple of years. Although we are still early in the quarter, we've been encouraged to date with changes in the sales trends of certain of larger categories, particularly in the home and furniture areas. There seems to be a pretty consistent theme developing, and that most retailers, analysts, investors and economists well anticipate the first half of 2009 will continue to be a difficult environment for retail. But as we move into the second half of the year, we should see some stabilization. We are planning our business in a similar way with comps down 1% to 3% in Q1, and flat to down 2% for the year. We realize 2009 will be a challenge and nothing will come easy. But hopefully we've demonstrated to you over the last three years a very solid credible track record of delivering on what we set out to accomplish. We've built a solid foundation of the business model for the company, are well positioned to weather the storm in fiscal 2009. And with the strategies and initiatives, we will be focused on over the long-term, we will be better positioned to benefit when the economy does start to see some improvement. I've mentioned on previous calls that we were working on our next long range plan, and I think it's important to spend a few moments talking about it before we take your questions. The key elements of our win strategy, merchandising, real estate, and cost structure will remain the same. Although some of the strategies and initiatives will be different. From a merchandising perspective, our goal will continue to be to provide unmatched value, better quality, and better brands. That's what our customers are asking for and what we need to do to deliver. Our major merchandise categories will remain the same. We are not planning any big shifts. From an availability of merchandised standpoint because of the deep, long standing relationships we have with our vendor partners and the continued struggles of other retailers, we anticipate more deals will be available to us at savings that we can then in turn pass on to our customers to create excitement in our stores. So, our merchants have their road maps and marching orders, and I'm confident they will execute. Now there are two other areas that can also impact merchandising and sales, and those are marketing and stores. From a marketing perspective, you will start to see a heightened focus on value and savings, which is very top of mind right now with the consumers. Our in-store signage has been overhauled. Our print advertising already has a different message, and the message of our new television commercials will be focused on real savings, real value, Big Lots, the real deal. The marketing efforts and in-store presentation will be more focused on categories that our customers are interested in, categories like consumables and electronics or categories where we are clearly differentiating and have a great value in the store, like furniture and seasonal. I'm also very encouraged about the path we're taking from a store operations perspective. We've taken some heat over the years about our stores and what they look like. I've been very open and honest that our focus has been on improving the merchandized assortments and lowering the overall cost structure, because I firmly believe that if we don’t get those to objectives accomplish that ultimately it wouldn’t matter if our stores were pretty or not. Our approach has worked this evidence by our record performance of the last two years, and our record EPS in the last nine consecutive quarters. But now is the time to address stores. With new leadership in store operations, our team is focused on a program we're calling Ready For Business. It's aimed at improving the consistency and timeliness of our in-store execution and raising customer service standards in our stores. We see this as a big opportunity for Big Lots, but please remember, this will take time, it won't happen overnight. I am sure I could go visit stores for the balance of this week and find some I like and some I don't. But the team knows, over the next few months that I expect to see fewer and fewer stores I don’t like. The level of accountability will be very high on these initiatives. So we'll continue to be relentless on merchandizing and changes are coming in marketing and stores, all with a goal of moving the needle on the top line. Now Chuck is going to give you an update on our real estate progress and plans for the future. Chuck.

Thanks, Steve. Perhaps the best way to describe our real estate strategy is that we seem to have moved with the rest of retail. Over the last two to three years, property owners, real estate developers and most of retail were chasing rooftops to build out space and grow selling square footage. During that same timeframe, we didn’t believe real estate was valued appropriately. Rents were simply just too high for us. So instead of growing for gross sake, we paired down our fleet and focused on improving our productivity and operating profit performance. All with the belief that someday lease rates would subside and space will become available for us to grow again profitability which is where we are today. Joe mentioned earlier that we expect to open 45 new stores this year which is more than we've opened in the last three years combined. Openings will be throughout the country but the largest concentration of new stores will be focused in more costal areas in the Northeast, Carolinas, Florida and in the west primarily in California, Oregon and Washington. I mentioned these markets specifically, because historically these have been some of the more difficult areas to find store leases in our price range. This just further emphasizes for you how the real estate market has changed in the past 6 to 12 months. As we mentioned on prior calls, during 2009 we will also be testing a smaller sized store to better understand different store layouts and the impact on sales productivity and ultimately profits of carrying that assortment of merchandise. We will test the smaller store concept for the better part of 2009, before making a determination. The importance of the test centers on the fact that there is a large amount of real estate available that we were not previously considering in the 20,000 square foot range, if successful a small store concept could go a long way to accelerating our footage growth, if we can figure out how to make it work profitably and still provide our customers with a great shopping experience. We also expect to close some stores again this year, which we believe is a healthy practice. We have roughly 260 stores that will be up for lease renewal in 2009 and our best estimate at this point suggest we could close up to 40 locations. Some of the closings are likely to be stores are not performing and quite frankly with some of the locations were out of options and the landlord may have plans that don't include Big Lots. The bigger opportunities, and believe me we do see this as an opportunity is to close stores what we think we can reposition a store in to a better center or location that allow us to grow share or profitability in a given market. We've spent considerable time reviewing available space and bumping those sites up against existing stores with leases expiring over the next three years. As you may expect this not only allows us to make strategic decisions about our locations but also provides just another bargaining tool for discussing our renewal options with the landlords of our existing locations. Simply stated our patience along with the softness in the overall real estate market could allow us to relocate and we think upgrade our positioning in some key markets during 2009 and beyond. On the topic of renewals or renegotiations, there has been a great deal written about cost reductions and what the opportunities may be for retailers. We attempt to renegotiate every lease that’s up for renewal. Our point of view is that just because we have a unilateral renewal option built into our lease that included a rent step increase with each new option that doesn’t necessarily mean that the rent step is appropriate now five years, 10 years or sometimes 15 years later. Centers, neighborhoods and traffic patterns change over time and the space may not be worthy of the same rent or more rent. In 2008 alone in the majority of stores that were up for renewal, we ended up agreeing on an occupancy cost that was lower than the lease option would dictate. In fact in roughly a third of the locations that were re-negotiated we will be paying the same amount or less in the new lease term than we paid in the old lease term. Looking past 2009, we should be able to open more than 45 stores a year in 2010 and for this foreseeable future. Our patience and further approach to real estate is beginning to pay dividends as we've seen more closings of Big Box retail than in anytime in recent history. In 2008 alone over 2,500 stores in our size range were closed which is over 2.5 more times than in 2001 which was the largest amount in the last ten years or so. It's important to recognize that the large majority of those 2,500 plus stores will not work for us because of size, location or excessive occupancy costs. But even if 5% of the vacancies work for us, it would be a big tail win for growth over the next couple of years. It has to work financially, just because now there is space, does not mean that we are going to compromise our model and over commit. We'll stick with our list to approval disciplines. So, we believe now is our time and new store openings and repositioning of stores should help to strengthen market position. We also would be investing more time, energy and capital in our existing fleet of stores than we have in the last three or four years. First, as Steve mentioned earlier, there is a new direction our stores organization at a much higher levels of expectations going forward in regards to store standards, cleanliness, recovery and overall merchandise presentation. We would expect to see a noticeable difference in stores by the end of the first half of the year. Second, as most of you know consumables and food in particular is very tough buying now for consumers. Our food business is one of the largest departments in our store at 10% of the mix. Based on feedback from our customer base, we believe there is still room to grow this category and potentially even increase the frequency of visits from our customers. We will be embarking on a program that we are calling Food Refresh. The food department should be the cleanest best presented section of the store with the best texturing available to service to customer and give them confidence in the quality and freshness of the offering. We will be launching new marketing both signing and shelf labeling, we will be assigning ownership to associates for this section of the store and approximately half of the chain, we will be delivering either new fixtures or refinished texturing that has been restored from the stores that were previously closed. In the past, many of our fixtures were refreshed by simply hand painting them, our new process uses a third party to recondition the shelves and truly make them look like new. And last but, certainly not least, we will be testing a new store layout in the Columbus market and then in a group of approximately 60 stores in 2009. The layout is a project that’s evolved over the past several months, but at its core it is designed to improve the shop ability to the store. It builds on the elevated standards that we're instilling in the business. It features consumables more prominently in the store and improved sight lines, front-to-back and side-to-side. The overall cost is not significant, at less than $20,000 per store and we are aiming to learn what the overall impact to sales could be in a given store. The initial customer reaction to the one store we've been experimenting with has been that the store feels better organized, is cleaner and wider aisles and better presentation of value and name brand product. The Columbus market should be related by the end of the first quarter. I'll end between the food refresh initiatives and testing store retrofits. Our capital outlay is approximately $5 million of the capital plan for the year that Joe covered moments ago. With that, I'll turn it back to Steve.

So hopefully, you have a feel for our merchandising strategies, and how some of our marketing efforts and concentration on improving store execution should ultimately help sales. Chuck gave you some good information on real estate and our expectations for growth along with how we’ll be reinvesting in the existing fleet of stores. The final key element of our strategy has been our relentless focus on the cost structure and our never ending goal to become more efficient in everything we do. We are proud of those efforts and our expense rate is the lowest it has ever been. But we are not satisfied. Our SG&A is still just too high. The good news is that we have opportunities to become more efficient in our store operations, supply chain, advertising and with the overall investment of our capital to ensure returns are appropriate and we are holding the stakeholders accountable. In store operations, I'm excited about the direction the team is headed and the energy with which they are attacking costs; scheduling at the store level, beefing up our training programs, recruiting talent and raising the bar on consistency of in-store execution and presentation. Our supply chain costs have declined and will continue to do so for the foreseeable future through transportation initiatives, lower fuel costs in the near term, closing our Columbus furniture operation and the natural benefits of continued focus on inventory management and flow of goods. Our advertising spend has remained relatively stable while investing in our website and building our Buzz Club membership to now nearly 4 million customers. The overall dynamics of how customers wish to receive their information continues to move from newspapers to the internet. We will continue to move of our circulation distribution to the internet via the Buzz Club and create leverage of our online investments. Capital deployment has been very diligent and business leaders have been held to a very high standard to ensure return requirements are achieved and leverage is created. Lowering cost is ingrained in our culture. Our past successes have given us the confidence that anything is possible. So we've given you a tremendous amount of information this morning around 2008, 2009 and the future. Hopefully, you have a better idea of our key business drivers and how we intend to execute over the coming quarters. As CEO of this Company, I am accountable for the execution of our strategy and results, and it’s a responsibility I take very seriously. Our team firmly believes that the repositioning and improvements for the last three years have left us in the unenviable position of being able to take advantage of deals whether merchandized or real estate like never before. We can assure you our shareholders that we are ready to execute in whatever economic climate lay ahead, whether that means weathering challenging times or chasing upside opportunities.

Thanks, Steve. Lashonda, we would like to go ahead and open up the lines now for questions at this time.

(Operator instructions) Our first question comes from Jeff Stein. Jeff, go ahead. Your line is open. Jeff Stein – Stein Research: Sure. Thank you. Good morning, Steve. Just a couple of questions. First, given the pressures in the vendor community, do you guys have any interest in purchasing any brands that you would basically own and have on an exclusive basis?

We take a look at that Jeff all the time. We've done it before in the past and clearly whenever there is a brand available, we take a look at it, the question is, is there value in that to us? But we are constantly looking and chasing that, because that's our strategy, brand strategies, and if there were good brands available for purchase, we absolutely will look at them. Jeff Stein – Stein Research: Okay. And just a couple of cash flow questions. I'm wondering, have you started negotiating your new credit line yet, which expires, I guess in October, and secondly, if you can comment on perhaps an expected pension fund contribution for 2009?

I'll speak to the pension fund contribution first. We did fund about $11 million in 2008. We do not have a required contribution in '09 based on that funding. However, we look at that annually. Right now on our cash flow, we do not have a funding, but as the year goes on, we will look at the return performance in the fund, as well as the tax deductibility of a contribution. And then we will make that decision later in the year, Jeff. Regarding the bank facility, we have been in consistent dialogue with our banks through last year. So that's an ongoing process. At this point, we've had very good support from our lead banks. Of course the merging of some of the banks has dropped some of our capacity, so we are in dialogue with some new banks. Consistent with what we talked about on our last call, we are still confident in being able to execute a new bank facility. Our facility expires at the end of October. We are looking for a goal of completing this somewhere in the second quarter. We don’t anticipate moving it in to the third quarter. And currently we are in unsecured line of $500 million, we might pair that down somewhat, part of that is capacity in the marketplace, but part of it is, our debt is about $100 million down than a year ago. And now we can operate very effectively on a lower line. Of course the cost of that debt and the tenure of that will be shorter tenure probably a three year deal instead of five that might have a 365 component in it, and the spread will be higher than our current spread. Jeff Stein – Stein Research: Great. Okay. Thanks a lot.

Our next question comes from David Mann. David, go ahead, your line is open. David Mann – Johnson Rice: Yes, thank you. Congratulations on a great year.

Thanks, David. David Mann – Johnson Rice: And in this environment, I guess my first question, Steve, can you clarify on the merchandise strategy. A lot of your competitors are going more aggressively towards what's working and consumable, so can you just talk about in little more depth your thoughts about pushing more in to consumable food and some other faster moving categories even if it was at the expense of giving up margin.

Well. I've always said that we're concerned about gross margin dollar contribution not a margin percent. So, clearly we wouldn't be afraid to push the consumables business at a higher level. There are just great deals out there in consumables if you walk through the stores even today, we profess and have worked very, very hard to show value to our customers, both in health aids, beauty aids, paper goods, plastics, chemicals, I'm sure one of my buyers is going to be offended by the fact that I didn't mention them and of course the food parts of our business, which alone is about 10% of our business that being the consumables part and especially food part of the business. We like that business. We haven't held back. We are more free open to buy dollars currently in that area than we do in any other one of the other areas in the company. And we absolutely wouldn't be afraid to grow that business and as I have indicated already or Chuck indicated, actually we're investing in the infrastructure of our business to make sure that we think we still have an upside. A lot of our customers tell us they love what we offer but, they'd even be encouraged to buy a little bit more if we freshened up our stores. So we are investing capital to make sure we can optimize that volume. That saying that, there is still a lot of other businesses that are very, very important to us. And I think it's important to understand and we have a model of six separate businesses, and although discretionary purchases are extremely challenged right now, it is engrained in our culture in a very part of our business that we want to continue to be successful and run each and everyone of those businesses. There are just a couple of things and I'm probably giving even a little bit more than you asked for, that the home business has been a very important part of this company's business from a gross profit dollar standpoint for a number of years and frankly has lagged the overall top line sales performance of the rest of the company, saying that we are starting to see some life in that business into the first quarter right now. In the other parts of our business in seasonal and toys, we've been recognized for seasonal has done very well until the fourth quarter of this year and clearly I think I have indicated, I think we will be a little more challenged into the first half of this year although I think our offerings are second to none, if you walk our stores. Also, talking about that, the toy business has been very challenged for last couple of years, but frankly into January and February the toy business is running better than it's run in two years and I think that's a mix of our continued focus of our relationships of branded closeouts with manufactures who we do business with and the fact that because of the disruption in the market of some of the bankruptcies, some other guys who we’ve never done of business with or done small amounts of business really wanted to do a lot more business for us. So between the trip overseas and the toy fair that we just came out of, we are really growing our business with some people and getting great closeout we never got before and first line goods at great values that we've never gotten before. So it's not just about the consumable business it's about all of our businesses. David Mann – Johnson Rice: And then in terms of the IMU comments you are making going forward, how much of that is sort of the global sourcing and lowering some of the import costs or how much of it is more coming out of lower deal pricing in the market place?

As far as that our performance has been better than expected, or that we had talked about being challenged in to the first quarter. David Mann – Johnson Rice: Actually both if you could?

Okay. Alright, that's fair. Clearly the first quarter is going to be mix. And that's just the fact that our lower margin businesses are performing better and at a faster rate and we are not turning away deals that are really good for us although they may be better than the overall markup of the average department, which we believe they are. They are not as consistent with the overall average markup of the company. I think the margins were better last year and they continue to grow for the reasons that you picked out. We are second year into our third year of our global sourcing initiatives, we have a dedicated office in Shanghai of over 60 people, and we have dedicated office in India, although it's very, very small, but they are starting to understand our business and our merchants are executing in a much better level than ever before. A piece of it is that costs are coming down, but more importantly, we have consistency of quality, of what we are buying and offering. So more than anything, our mark downs are coming down in those areas. So our margins are going up. That’s a piece there. Secondly, from a deal environment, clearly we do make more money on closeouts than we do on a traditional in-and-out deal or a basic never-out deal, and we are and have focused on very hard concentrating on not only negotiating even harder than ever before, but getting more value out of it compared to competition. So our margins have increased because of that too. David Mann – Johnson Rice: Thank you.

Our next question comes from Charles Grom. Charles, your line is open. Paul Trussell – JPMorgan: Hi. Good morning. Actually, this is Paul Trussell on for Chuck. Just a question on expenses. SG&A dollars were flat year-over-year in the fourth quarter. Could you just talk about how you feel about your ability to maintain that trend or do better through 2009. And also in regards to the hurdle rate, if you can just help us think about the hurdle rate of zero in '09, which I believe would be lower year-over-year despite more stores? Thank you.

Sure. SG&A dollars are down in '08 versus '07 on a slightly positive comp. So we were very pleased with that performance, along with 20 basis points of SG&A leverage. Moving to 2009, we are forecasting – our guidance is for slightly negative comps. So, the leverage point is about a flat, what we talked about as a flat comp. So anything positive we would expect to be leveraging SG&A. The initiatives that we talked about continued efficiencies and distribution transportation costs, principally transportation, and also the consolidation of our Columbus furniture distribution center in to our regional DC's will anniversary it at the middle of 2009. We are getting some leverage off of depreciation, and then of course we talked about our store payroll initiative that we expect to add benefit in 2009. Did I answer your question, Paul, or go ahead and follow up if I did not? Paul Trussell – JPMorgan: No. No. Those categories are helpful. Just in regards to it, but do you expect SG&A dollars to be down in '09 as well, just to be clear?

Paul, this is T.J. A couple of things to think about, I guess overall, SG&A dollars as Joe mentioned, we've got some initiatives that were starting to anniversary mid-year, and some new ones that will come on. So, on a quarterly basis, the up or down to LY can vary. Now, clearly here in the first half of the year with the furniture initiatives, we've got a better opportunity for dollars to be down here in the first quarter than we would have as we moved through year. But I think it's important to keep in mind that there are two or three things that will be occurring as the year goes on that really should focus you more back on the SG&A leverage point, rather than overall dollars. For instance, adding 45 new stores this year, clearly that's going to add SG&A dollars to the occupancy cost, payroll lines, really every line of operating a store, SG&A dollars would go up there. Additionally, when we open a new store, we spend about $100,000 of pre-opening expense per store. So, 45 new stores versus 21 last year, there's a couple of million dollars that of SG&A growth. If you are just focused on that line item, you are going to notice. So that’s why, when we evaluate performance and really set targets to operate the business for the coming year, we are very focused on SG&A as a percent of sales, and always come back to that flat comp to start to leverage SG&A at better than a flat comp. I think you are going to find it's a pretty powerful model and compare those very favorably to whoever you want to compare us to out there in the discount sector. Paul Trussell – JPMorgan: I appreciate the color. And then just one other question, moving to the top line, could you provide any more color on your expectation for how the comp could trend by quarter this year? Thanks.

What we are providing is, the answer is I guess no, not on a quarterly basis. We are providing guidance for the first quarter and for the year. So you can see that, when the first quarter, we are talking negative one to negative three, and for the year flat to negative two, there is a implied improving trend from the second quarter through the balance of the year. But at this point, we don't calendarize that out for you. Paul Trussell – JPMorgan: Okay, thank you.

Our next question comes from the line of Peter Keith. Go ahead your line is open. Peter Keith – Piper Jaffray: Hi. Thanks. Good morning. It's Peter, calling in for Mitch. Also, I like to pass on congratulations for a solid execution in tough environment. I wanted to ask about gross margin. It sounds like it will be flat for the year, but slightly down in Q1. So how should we think about the drivers through the rest of the year, but it sounds like in certain quarters you probably have gross margin up. What might be driving that?

Peter its T.J. I'll start and ask Joe and Steve to chime in. Q1, you'll recall last year, we had pretty favorable gross margin results in the first quarter of last year. As Steve, mentioned consumables and particularly electronics I know you had watched very closely our ads, so, you know that our electronics presence has been pretty strong here to start the New Year. Each of those categories, while they are good margin, if you want to compare it to others with consumables margins or electronics margins, you're going find are so higher, it's still going to be below our company average of roughly 40%. So, that mix pressure in categories that we really expect to drive the comp, is something that we'll present a challenge in first quarter. Additionally, you'll recall from last year we did have little bit of favorability in the first quarter on the shrink side that is not assumed at this point. Partially offsetting those challenges as Steve mentioned our IMU continues to be very strong, and then freight savings year-over-year is something that us along with every other retailer out there should benefit from and should be talking about. I mean the price of diesel is down, close to $1.50 a gallon or so year-over-year. So that's a big savings in the first quarter. As we move throughout the year, the IMU and freight savings we expect to continue, some of the mix pressure we don't know at this point. As Steve mentioned, some of our more discretionary categories we are starting to see more life out, particularly in home and toys. And those two come in at a little better margin. So, we would expect as the year goes on that some of the first quarter hurdles might come down little bit and we might see little bit of improvement on a rate basis if you're just focused on rate. Peter Keith – Piper Jaffray: Okay. Thanks for the color. That's helpful. I guess just one quick housekeeping question. You guys had the total advertising expense, as well as the distribution and outbound transportation cost for the quarter?

Yes, I do. Distribution and transportation $46.3 million, that’s 3.4% of sales, down 50 basis points to last year. Advertising for the quarter was $38.8 million that’s actually 2.9% of sales, and that’s actually slightly up to last year. As you will recall we talked about on previous calls beefing up our television spend a little bit here in the fourth quarter and additionally we did run one additional ad circular in that week of Christmas, because of the way Christmas fell on Thursday that really gave us almost a full week of shopping to run an ad circular. So that's why about the, both the dollars and the rate of sales for were up a little a year-over-year in advertising in the fourth quarter. Peter Keith – Piper Jaffray: Okay. Thanks a lot. Good luck in 2009.

Our next question comes from Joe Feldmen. Joe go ahead, the line is open. Joe Feldmen – Tesley Advisory Group: Yes, thanks guys. Also congratulations on a strong quarter and year. To the real estate, thank you for the pretty detailed analysis. I guess a couple of questions I had, if you were to find some more favorable locations this year, incremental to the 45 new stores that you have already talked about. Should we expect more of those to be relocations at this point or is there an opportunity to have incremental new stores beyond the five net new stores that you are already planning?

I think it's likely that they would be net new stores rather than relocations. What we are trying to do is focus not just in '09 but for the next couple of years looking to markets and see if we would anticipate finding a better location in existing market. But if there will be incremental store count above the 45 I would think probably at this point all of them would be new.

I jumped in Joe to, just so you're kind of inside my head. 45 stores in one year is more than double what we've opened last year and more than what have opened in 3.5 years and I want to make sure that I have an organization that’s ready to handle that many more stores. Joe Feldmen – Tesley Advisory Group: Okay. That makes sense. And then you also mentioned you guys, you are in the process of renegotiating a release that is possible to renegotiate at this point. I am curious how you are finding the reception to that. I mean, I would imagine in this environment you guys are definitely in the upper hand position as our most other retailers and is that the case, and are you getting concessions or are you getting, well we reduced the cam charge or reduced other types of charges as opposed to lowering the actual rent?

Well, I guess in two different situations, the reception is all of a sudden we've gotten a lot more attractive if you will, because we are one of the few retailers that are going to conferences and sitting down with portfolio reviews with real estate professionals, that have investment grade, credit and cash in the bank, so all those things are very favorable when people want to sit down with us. A lot of the renegotiations quite frankly haven't been as much around cam charges and so forth. They've really been more about just a base rent. And it depends on the developer too because, unfortunately a lot of developers are strapped for cash. So on new sites when we are negotiating it's having the ability to take the site kind of as it is if you will and build it out on our own dime versus expecting the construction expenses to come or the landlord, or come from the landlord. Joe Feldmen – Tesley Advisory Group: That's helpful. Thanks. And if I could sneak in one more quick one, the test that you are expanding in Columbus, with relaying the stores, I know it was just one store that you tested initially, but did you see like a measurable impact in terms of comps relative to the controlled stores in the area or any other comment you could give on it? I'm just trying to sneak that in.

You know what, Joe, I mean it's so early on its performance, and I think we are all kind of internally questioning, was it the relay, was it the execution at store level, was it the fact that we have new management in the store. There is a lot of different issues. Clearly, we wouldn't be moving ahead with testing the entire marketplace in upwards of 60 locations if we weren't encouraged by the performance. But we've always been very reserve in trying to quantify what we are doing from a testing base until we really have good information to give you. But we would invite you into the Columbus market by the end of the first quarter if you want to see the entire market or clearly, you can come anytime you want to, we would love to have you. Joe Feldmen – Tesley Advisory Group: Sure

In the sawmill store, I think a number of people have already seen a sawmill store. It's not breakthrough thinking here. It's just continuing to allow the consumers to be able to shop the store front-to-back, side -to-side and give them the kind of merchandise that they recognized and really a looking for day-in and day-out from us which is basically the consumable parts of the business front and forward. Joe Feldmen – Tesley Advisory Group: Great. That's helpful. Thanks. Good luck with the quarter, guys.

Thank you.

Thanks, Joe.

Our next question comes from the line of John Zolidis. Go ahead, John, your line is open. John Zolidis – Buckingham Research Group: Hi. Good morning. Can you hear me?

Yes. Good morning, John. John Zolidis – Buckingham Research Group: Okay. Good morning. Just wanted to ask about, in an improving economy, if that were to occur at some point, do you think the company can retain recent improvements in IMU, and how do you think that comps would fair assuming a less robust environment for closeouts in the events that things get better at some point. Thank you.

Yes, I guess, I will start and ask Steve to chime in. From our perspective, John, quite frankly, I know a lot of people focus on consumables as a percent to total in our store relative to other discounters, and right now, yes, that does present some challenges for us. And in particular, we are trying to address those through marketing and some of store level initiatives we talked about. I guess in reverse, which is what really your question kind of centers around, then 30% mix, 70% discretionary, that becomes very much an asset for us we think, because the discretionary nature of a lot of our product in an improving economy, we think could be very good for our business. And because some of those are some of our better margin categories, I think the answer to your question is probably yes, that would be, I think we would see that more as a mix enhancer so to speak going forward, till the economy starts to improve. We start to sell more of our better margin category.

I'll tell you, I will add to that too, John. One of the things that I've mentioned on a number of occasions and the question has been asked many, many times. A better environment actually produces better closeouts for us. The better the environment, the better the economy, the better the capital spend of the people who we do business with, which really translates to change, and we still find even today, even in the difficult environment, the best deals we are getting are from the companies whose business is the best, because they are constantly investing in their company and the future of change and capital investments, in differentiating and making things happen. So, when they do that, there is lot of inventory available to us. So, boy, I would love the economy to get better, the consumer to spend a little bit more on a discretionary basis, and I would think the deals would even get better for us in some of the other areas that are a little bit more challenged right now.

Okay. Our next question comes from the line of Patrick McKeever. Go ahead, your line is open. Patrick McKeever – MKM Partners: Thanks. Good morning everyone.

Hi, Patrick. Good morning. Patrick McKeever – MKM Partners: Steve, do you think all the liquidation sales that are taking place right now in retail, do you think that’s having an impact on your business, thinking linens and things, circuit, some of the others, I mean do you look at stores that are Big Lots stores that are close to some of those stores that are closing and see an impact or is it not a huge…

First and foremost, we are not as close to most of those locations in our real estate portfolio. Although, we'd like to think that we will be moving forward into the future. In fact, some of those locations we're opening this year are ex-linens and things locations. So, we are going to upgrading our locations in some spots. I would tell you though, we don't really see a big difference in those liquidations affecting our business, either from a negative standpoint. And frankly, I indicated one, the electronics business is one of the better businesses and we believe will continue to be. And the home business, as challenged as it's been not only for us, but everyone probably, outside of furniture for most of the industry, the worst single businesses that most retailers have talked about, we've seen some signs of life in the last 30 days to 45 days for the first time, not only reduction in comp store decreases, but in a couple of businesses that are actually comping up. So, I'm not sure that I equate that to the liquidations that are going on right now other than maybe there will be fewer and fewer options out there. There have been other retailers that have already indicated on some of conference calls that their growth in the home is going to be (inaudible) in fact intentionally at the expense of some other businesses. We don't look at it that way, we look at it as a great opportunity still to grow the business. Patrick McKeever – MKM Partners: Okay, sounds good. And then second question, I guess its similar question in a way. But you've done over the past couple of years, you have done some sizable closeout buys, made some sizable closeout buys in the furniture space and so forth and I'm guessing those are still out there because I know you've got another furniture buy from the same one of the manufacturers that you bought from before in the stores right now. But just given the environment and the fact that your core customer and just consumers in general are shying away from higher price points, I mean does that limit, does that reduce your appetite for doing some of these bigger deals that you have done in the past which have had a meaningful impact on both the top and bottom line in any given quarter.

No, we have an appetite for small deals and we have an appetite for big deals and we'd like to continue to find those big deals, we haven't lost our appetite for anything whatsoever. Remember, we don't view it maybe the same way that you were discussing at about higher price points. We view it as great value, those price points are 40% and 50% below what the consumer could find similar merchandise in similar locations and or upscale locations across the United States. So, as long as we continue to offer unparalleled value as a comparison to everyone else out there, we have a huge appetite for deals whether they are higher end tickets or a lower end tickets and in between and that deal was doing just fine this year by the way. Patrick McKeever – MKM Partners: Good to hear. That’s great, certainly great merchandise. It looks like maybe even a bit better on the quality side than, I mean last years is a great quality too but this looks like a much higher.

Yes. We think that the offering this year is even better than last year, I'd agree with you. Our customer seems to be reacting that way too. Patrick McKeever – MKM Partners: Okay. Thank you, Steve.

Our next question comes from the line of Ronald Bookbinder. Go ahead your line is open.

Good morning, Ron. Ronald Bookbinder – Global Hunter Securities: Good morning and congratulations also.

Thank you. Ronald Bookbinder – Global Hunter Securities: You've talked about how you are getting the IMU, but how do you balance that with your comments about the customer wanting value. When do you pass the savings onto the consumer?

Well, we think we do it every day and we think it's immediate, and it depends on merchandised category and it depends up on where we are at. Look, we don't go into any deal without understanding where the lowest price is and has been run in a similar type competitor out there. And, we start from that point. So we believe everything in our store is of great value. We have no problem you or anybody else doing a market basket with our merchandise compared to anybody else out there who operates similar type of retail.

And next question comes from the line of Stacy Widlitz. Go ahead your line is open. Stacy Widlitz – Pali Capital: Thanks. Just a quick question, you mentioned the execution can you just give us an idea of the percentage of your stores that you think need to be touched and also just talking about the general retail environment are you seeing about enough retailers that are in your real estate locations closing around you that’s affecting your traffic as a destination? Thanks.

No to the second question. Traditionally we are in strip malls with similar type retailers and or dollar stores. Now there has been some level of closing and bankruptcy of other closeout retailers that whether you're referring to that or not, but that absolutely has negatively affected our business and it's predominantly on the east coast at this particular point and that’s just offers us I think even more of an opportunity. We really think we are getting market share right now and it's very difficult to see that and believe me, it's tough to say that on a comp store drop. But we think that we're actually going to be the strong survivor in what's going on here. As far as the stores being that need to be touched, we have a complete program that we are taking a look at this particular point, that we've ask for every elements of every single solitaire store and it wouldn't be number of stores that I wouldn't even give you a number on it would be pieces that need to be refreshed on a individuals store basis. There are some stores that we'd like refreshed and painted; there are some stores that the floors don’t look as good as we like there. Some stores that the lighting isn’t as good as we'd like to be there, some stores the bathrooms aren't as clean as we would like them to be and don’t look as presentable, which is a really important issue that I take on a personal nature in the stores know that I have a thing about bathrooms for every reason that you might think, when our customers come in and shop and take their kids in there. And we are reviewing that piece of it right now and were more than willing to spend the right amount of capital this year and infect and the overall capital from a store standpoint investment is really probably up about $10 million this year and $10 million higher than what we've had in our plan for the last three years.

Yes, and if I can just add a couple of things. One of the things that we are doing right now with respect to making sure we understand what the stores need is we have a new program where, we used to ask the stores what do you need to really look the we want you to look, and frankly you can imagine, it's pretty subjective. With our new stores team, we've got a method in place now where when we ask and survey what the stores need to make sure they look the way we want them to, they are backed up quite frankly with pictures. And I know that kind of sounds just kind of childish if you will, but it really helps us get a better understanding of what they need to make sure that the stores are in the condition that we want, and look the way we want. And the only thing I would add is, we are not really in a lot of centers where we tend to be losing tenants, but I will tell you, as we go forward, we are spending a lot of time looking at centers and making sure that we like the tenant mix and making sure at least we believe that those tenants are going to be there going forward for repositioning and for opening stores in new centers that we haven't been historically opening in.

I just want to add one more thing. When you talk about what do stores need, I know you are focused and we are answering from a capital basis, but we have initiatives going on in the stores already for business initiative. It's dealing with recovery and proper execution and consistent execution, and that's not related to capital needs. So, there's a lot of initiatives going on in the stores this year with our new head of stores that will really improve the look, as well as the operation of the store.

Our next question comes from the line of Ivy Jack [ph]. Go ahead, your line is open.

Thanks, guys. Thanks for taking my question, and great quarter. My question; about three years ago or so you exited the Frozen Food business, now that the environment has become challenging and there is a focus on consumables, do you still think that was the right decision?

For us it was absolutely the right decision.

Yes, wait. Ivy, I'll just add on that.

I don't know what needs to be added to it.

A lot of analysis on the long-term cost of the Frozen Food business and it gave us a pop initially, but long-term the distribution costs and maintenance costs outweighed the return, and the space could be used better and we decided to exit it, and we've never regretted that.

Never looked back. In fact, one of the key decisions too was expanding the PET category, which as you know from following other retailers is a very hot category. It's a very good category for us.

It's comped up. Double-digit every year.

Frozen gave us an opportunity to expand that category. I think too, it's important to keep in mind the way our customer shops our store, often times we are a first shop, and then they go fill their basket elsewhere with things they may not have the opportunity to find in our stores. So, to be the first shop, ask them to buy Frozen and leave in their cars, while they go shop elsewhere, didn't feel right and didn't work very well either. So, given all that and the thinness of the margins to start with, we are very confident that was a good decision for our business. It might work for others, but not a good business for us to be in.

Okay. Our last question comes from the line of David Mann. David Mann – Johnson Rice: Yes. Thank you. Now that you're in a net growth mode, especially with the number of stores you're opening, can you give us a sense on what a store level pro forma might look like, in terms of sales relative to the company of average, and what kind of store contribution margin might be reasonable?

Well, David, our required contribution hasn't changed. The reason we haven't grown to the level we would have liked really had to do with the cost structure, the occupancy cost. So we still require a five year IRR to hurdle above our rack, which we've estimated about 12%, and that hasn't changed. Now going into newer markets or higher demographic markets, what that requires is a higher year one sales and higher top line expectation, because that needs to hurdle the higher occupancy costs. So we are still opening a diverse portfolio stores each year. Higher occupancy, higher sales, lower occupancy, lower sales, but what this gives is the opportunity to do is just open more stores and hit some of the markets that were just priced out of our range, and that was the coast as Chuck talked about, the coastal markets, west coast and up in the northeast.

And that concludes our Q&A session.

Thank you, Lashonda, and thank you everyone for joining us. We look forward to talking to you after the first quarter.

Ladies and gentlemen, a replay of this call will be available to you within the hour. You can access the replay by dialing 1-800-207-7077, and entering pin 6852. Again, that phone number is 1-800-207-7077, pin number is 6852. Ladies and gentlemen, this concludes today's presentation. Thank you for your participation and you may now disconnect.