Joseph Teklits - IR Dennis J. Wilson - Chairman of the Board, Chief Product Designer Robert Meers - CEO, Director John E. Currie - CFO

Margaret Mager - Goldman Sachs Paul Lejuez - Credit Suisse Howard Tubin - RBC Capital Markets Sharon Zackfia - William Blair and Company Liz Dunn - Thomas Weisel Partners Michelle Tan - UBS

Good afternoon. My name is William, and I will be your conference operator today. At this time I would like to welcome everyone to the Lululemon Third Quarter and Fiscal 2007 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer period. And now it’s my pleasure to turn the floor over to Mr. Joe Teklits. Please go ahead. Joseph Teklits - Investor Relations: Thank you. Good afternoon. Before we get started I would like to remind you of the company’s Safe Harbor language. The statements contained in the conference call which are not historical facts may constitute forward-looking statements within the meanings of the Private Securities Litigation Reform Act from 1995. Actual future results might differ materially from those projected in such statements due to the number of risks and uncertainties, all of which are described in the Company’s filings with the SEC. And now, I would like to turn the call over to lululemon’s Founder, Chairman and Chief Product Manager, Chip Wilson. Dennis J. Wilson - Chairman of the Board, Chief Product Designer: Good morning, and thank you for coming. We’ve got a great quarter, and I think it’s definitely our great team and our wonderful product. And we are very proud of what we have done. And with those results, I’llI just pass it on to Bob Meers. Bob. Robert Meers – Chief Executive Officer, Director: Good morning. Thank you all for joining us to discuss our third quarter results. In addition to Chip this morning, I am joined by John Currie, our CFO and my group of other senior managers in the company. Following my opening remarks, I will turn the call over to John to review our financial highlights. We will then open the call up to questions. Before I address the progress in the third quarter, I would like to briefly reiterate my comments on recent news article regarding the contents in our VitaSea product line. We believe that we have earned an excellent reputation, and the brand loyalty of our guests by consistently providing high quality innovative merchandise. We believe that this is paramount to our Company’s success. To ensure that we live up to these high standards that we have set and that our guest have come to respect, we extensively test our product for content, using a leaning independent testing facility. Based on these standards and practices, we stand behind the integrity of our product and processes, including VitaSea. And I am pleased to report that we have experienced very few returns, and we did not believe the media coverage has negatively impacted our VitaSea or our business in general. Now I want to briefly highlight the results of our third quarter. We are pleased to have once again delivered strong top and bottom line performance. Sales exceeded our expectation, with revenue rising 84% to $66.2 million on a 36% increase in comp store sales for the quarter. Operating income increased 152% to $11.8 million, driven, obviously, by strong sales, gross margin expansion, as well as SG&A leverage. Along with our strong store comp sales increase in the quarter, we successfully opened 10 new stores, including eight in the United States, one in Canada, and one in Japan. Since the end of the third quarter, we have opened an additional eight new stores including six in the Untied States, one in Canada, and one in Australia. And we expect to open three additional stores in the balance of the fourth quarter, brining our year-end total to 81 stores worldwide. We expect to open 27 stores in North America this year, up from our original plan of 25. We will now be growing our store by 59% in ’07, and I am proud of the team’s ability to exceed our expansion goals this year. We are also pleased with the productivity level of our newest stores, which have exceeded our internal hurdles. And we believe that the success of our recent stores openings further demonstrates affordability of our brand retail concept into the United States. We continue to expect to open between 30 and 35 stores…. new stores in North America in fiscal 2008, with new markets including Hawaii, Maryland, Georgia, North Carolina, Philadelphia, Washington DC, Connecticut, New Jersey, and Eastern Canada. And we will also fill in existing markets in Northern and Southern California, Massachusetts, New York, Texas, Florida, Illinois, Denver, and Ontario. Looking ahead, we are beginning to establish our presence in new markets for future growth. We opened four new showrooms during the third quarter in Atlanta, Georgia, Austin, Texas, Charlotte, North Carolina, and Philadelphia, in additional to our existing showroom locations, which are open and already seeding the new markets for us. We are building brand recognition in these markets in preparation for retail store openings in 2008 and beyond. We are very pleased with our initial response to these marketing efforts, and look forward to expanding our relationships with local yogis and fitness instructors in these communities. Another focus for us on the operation front has been supply chain enhancements, which are allowing us to flow enough inventory to meet the demands of our expansion efforts and our strong comp store sales growth. Since the last quarter, we have been successful in repositioning our inventory stock to include more men’s products as well as more core sizes, and in our core styles, in our women’s business. We are in a good position to the third quarter and are currently in a very good position inventory-wise for our holiday season, with our inventory up over 80% over last year. This just does not happen by chance. Over the past year, we have added senior level executives, additional support in Asia, via our own sourcing office in China, and two new larger, more efficient distribution centers, one in Canada and one in the United States. We are also implementing a new ERP program. All these efforts combine to solidify our sourcing efforts and to shorten the product development and supply chain cycle, ultimately speeding up the product flow to our stores. On the product front, we are experiencing strong reception through our winter outer wear collection that we introduced this year, and we fully expect to have full sell through of this collection within the next three to four weeks. In summary, we are very pleased with our third quarter performance. We are executing better than ever thanks to all of the dedication and hard work of everyone in the entire organization, including our management team that continues to gel as a cohesive unit. I believe the strong results in the third quarter demonstrate that a distinctive community based approach to retail, and the innovation and product quality we offer, create tremendous brand loyalty and continue to attract new customers to our brand. We are very pleased that both our comp stores and new stores are exceeding our expectations. Whether in some of our original markets, such as Southern California and British Columbia or our new markets like New York and Northern California, in reaction to our product, our culture, store experience and lifestyle driven brand keeps us extremely excited about our future. I would like now to turn the call over to John Currie to discuss the financial details of the quarter. John E. Currie - Chief Financial Officer: Thanks, Bob. We are very pleased with our Q3 results especially continued strong sales momentum, and our ability to source and execute effectively providing products to meet this above planned demand. Beginning with revenue, our total net revenue was $66.2 million for the third quarter, an increase of 83.9% over the third quarter of 2006. Our corporate owned store sales represented 90.6% of this total, at $59.9 million, an increase of 105.6% over 2006. This increase is driven by a combination of a 68% increase in our corporate store base from the third quarter of ’06 comparable to a reported comp store sales increase of 36%. The strengthening of the Canadian dollar against the U.S. dollar contributed 10% of this comp store sales growth meaning that on a constant dollar basis, our comp store sales increased 26%. Non-comping stores are also performing well above our expectations for the quarter. Other revenues which includes franchise, wholesale, home sales and showrooms totaled $6.2 million and represented the other 9.4% of total revenue. Decline in other revenues of 8.9% from 2006 was a direct result of the buyback of our three Calgary franchise stores on April 1st of 2007. Gross profits for the third quarter increased 91.5% to $35.9 million and gross margin expanded by 210 basis points to 54.2%. Strong merchandise margins coupled with leverage of our design, production and occupancy costs due to higher sales have contributed to the increase. SG&A expenses were $24.1 million for the quarter or 36.4% of total revenues versus 39.1% in the third quarter of last year. This 270 basis point improvement was primarily driven by leveraging administrative costs and depreciation. This is partially offset by increased store expenses related to higher concentration of new store openings during Q3. The result of our gross margin expansion and SG&A leverage was an operating margin expansion of 480 basis points to 17.9% or to $11.8 million for the quarter versus $4.7 million a year ago. Tax expense was $4.8 million for the quarter or a rate of 38.9% versus 66.1% last year. During the third quarter, we worked with legal and accounting advisors to make adjustments to our inter-company transfer pricing rates, which has historically inflated our tax provision. This adjustment is reflected in our Q3 tax provision and earnings year-to-date. Resulting net income, available to common shareholders was $7.6 million or $0.11 per share. Our weighted average diluted shares outstanding for the quarter were 71.7 million. Turning to the key balance sheet highlights, we ended the third quarter with… we ended the third quarter with cash and cash equivalents totaling approximately $36.3 million. Inventory at the end of the quarter was $49.7 million or up 80.4% from the end of the third quarter last year and in line with our sales growth expectations for the quarter. We are very pleased with our current inventory positions prior to this holiday season. We have the right amount of products to meet the inventory demands associated with our rapid store rollout and strong comp store sales. Capital expenditures for the third quarter were $8.8 million. The expenditures relate to our new store build out costs and costs related to the implementation of our new ERP system, which will become operational in February of 2008. Now let’s turn to our updated outlook for fiscal 2007. We now expect fiscal 2007 net revenue to be in the range of $255 million to $260 million, which incorporates a comp store sales growth in the high 20s for the full fiscal year or in the low 20s on a constant dollar basis. Our operating margin for the year is expected to be approximately 18.5%. Also for the year, we are projecting an effective tax rate of approximately 41%, leading to diluted earnings per share in the range of $0.40 to $0.42. We also anticipate diluted weighted average shares outstanding of approximately 70.3 million for fiscal 2007. This updated outlook for 2007 incorporates a fourth quarter comp store sales growth of approximately 30% on a reported basis or approximately 15% on a constant dollar basis, plus 10 new store openings in North America in Q4 bringing our total for new store openings to 27 for the year, or two ahead of previous guidance. We anticipate that our Q4 tax rate will be approximately 36%. As in the third quarter, the company will experience costs relating to our new public company status that were not incurred in the prior year. The fourth quarter also incorporates our plans change of our fiscal year from the calendar reporting periods to the 52, 53 week fiscal year on a Sunday… Monday to Sunday basis. As a result of the plan change, our fiscal 2007 year will end on February 3, 2008. The impact of this change is expected to be immaterial to our fiscal 2007 results. We plan on giving fiscal 2008 guidance when we report our fourth quarter and 2007 year end results, but we want to reiterate. We continue to expect 30 to 35 new store openings in North America in 2008. We expect our leverage point on non-merchandized cost of goods sold and SG&A, to be at a constant dollar reported comp increase of approximately 10%. As well due to planned amendments to our purchasing processes and transfer pricing policies, we expect our reported tax rate to be approximately 34% beginning next year with some seasonal shift to the rate depending on the mix of Canadian and US profits in each particular quarter. Again, we’ll offer more detail on our 2008 fiscal year and color on the seasonality of the business when we report Q4 results. With that, I will turn it back to Bob. Robert Meers – Chief Executive Officer, Director: Thanks, John. Before we open the call to Q&A, I would like to reiterate how much this management team appreciates all the hard work and dedication of our Lululemon team of employees. There has been a tremendous amount of hard work performed at this company over the past few years to position it to maximum success, as we identify and exploit the many growth opportunities that are out there. I am extremely proud of this organization’s ability to grow our store base and drive significant comp store sales growth this year. And while we have executed of these above planned results, we also continue to build upon the infrastructure that is in place to provide similar success for the long-term. We see the health and fitness trend that are building momentum. We see customers gravitate to our brand, product culture and service levels. And we see a tremendous amount of white space for our stores, both domestically and internationally. And when we put all this together we are excited about the future prospects for the company. With that I’ll open the call up to questions. Question and Answer

Thank you. The question and answer session will be conducted electronically. [Operator Instructions]. And we’ll go to our first question from Margaret Mager from Goldman Sachs Margaret Mager - Goldman Sachs: Hi, it’s Margaret, and congrats on another excellent quarter. I have a couple of questions, Bob. First of all, on your new product category initiatives you mentioned outer wear was a good performer in the quarter. Can you talk about any other areas that… what’s happening on the development front on the product categories, be it men’s or accessories et cetera. And then on the VitaSea product, good job addressing that, I thought, head on. But wondering, what is the consumer’s reaction to that? Are you seeing a drop off in the sales of that product or just, what’s been the reaction by the consumer? Thanks. Robert Meers – Chief Executive Officer, Director: Okay. I’m going to make sure, I remember that, Margaret. First of all, on the product front our running business continues to grow very rapidly and we will continue to introduce new fabrics and styles in the line, as we enter into the Christmas and spring season. We have continued to experience very strong growth in our Men’s business, both in terms of our core business as well as our Silverescent product and again, VitaSea by the way. Our bra business, which had been lagging last year has really started to catch up, as we've introduced some new innovative strong bra program into our stores. And the introduction of a broader sitting line of women’s apparel continues to grow our core business. On VitaSea we have not seen a fall off. But I want to remind everybody, it’s about 1% of our sales and we, as a company will continue to push the innovation in fabric that our customers expect to see from us. And the reaction to the customers have been one of support and pleasure with the product that we have brought to market. And just like you said, we thank you for saying it, they appreciate us handling the issue head-on and being very diligent about our reporting, our research and our testing results. Margaret Mager - Goldman Sachs: Very well. Good luck going forward, and I wish you all the best, Bob and Chip and everyone. Take care. Robert Meers – Chief Executive Officer, Director: Thanks, Margaret. Dennis J. Wilson - Chairman of the Board, Chief Product Designer: Thank you.

And we’ll turn to our next question from Paula…

I have a couple of questions .One is with regards to the outerwear. I think you said that you expected full sell through in three to four weeks. Does that mean that you're not going to have winter outerwear left in three to four weeks? Robert Meers – Chief Executive Officer, Director: Yes. It looks like we're going to be able to sell it all the way through, but as we said in the last conference call, because this was a new introduction for us, any excess winter outerwear we will move into our resort stores such as Whistler and Boulder, Clorado. But right now it looks like the demand for our product is slightly ahead of our expectations.

But is that about when you would like to be out of outer wear or it’s a little earlier than you would have liked. Robert Meers – Chief Executive Officer, Director: No, it’s exactly what we are looking for. We did not want to get into a mark down situation and chase the last sale. So this is right on our plan.

Okay, great. And then just out of curiosity, did anyone at all take you up on the offer to return the VitaSea product? Robert Meers – Chief Executive Officer, Director: If they did, it didn’t show up… the answer is I’m sure somebody did, but as we have monitored it, candidly, it turned out to be a non-issue.

Okay, great., And thanks a lot, and good luck this holiday. Robert Meers – Chief Executive Officer, Director: Thank you.

We’ll move to our next question from Paul Lejuez from Credit Suisse. Paul Lejuez - Credit Suisse: Hi, guys. Paul Lejeuz. Can you talk about the percent that men’s represent in the U.S. versus Canada? Second, just want to understand the inventory plan, going forward, how do you plan to end the year from an inventory perspective and how should we think about it going into next year? And then last, just wondering how much did earnings benefit this quarter from the Canadian dollar. Robert Meers – Chief Executive Officer, Director: Okay, so and… could you repeat the first question? Paul Lejuez - Credit Suisse: Men’s, percentage of the business in the U.S. versus Canada. Robert Meers – Chief Executive Officer, Director: In the U.S. it runs just under 15%; in Canada just over 10%. And I think that’s really a function of the exceptional performance of our women’s business in the Canadian market, which will include our culture product which is to and from [ph]. But our men’s business is very strong in the United States, and was held back by size limitations, which no longer restricts it. John, would you take the balance of the question. John E. Currie - Chief Financial Officer: Yes, I mean, regarding inventory as we have said, if you recall from the last conference call in Q2, one of the concerns was our ability to keep up with demand. We are very happy with where we are at Q3 with the right inventory levels to take us through the holiday season. I think your question was, at year end and going forward, I mean, we are watching the inventory, monitoring it to metrics such as inventory turns, and we’ll strike that right balance between being in stock and making sure we don’t have excess inventory. In terms of the Canadian dollar impact, as I said it impacted our comp store sales. It contributed 10% of the comp store sales increase. So that shows you the impact on revenue. Of course, there’s a significant element of our cost structure that’s Canadian dollars. Now, I haven’t reduced the calculation to exactly what the earnings impact is, but again, don’t just look at the revenue line because the bulk of our G&A is in Canadian dollars. So overall, the impact is less than you might expect. Robert Meers – Chief Executive Officer, Director: Just on the inventory side, I want to make sure that you understand we felt as though we had tightened the inventory screws too tightly at the end of Q2, and pushed ourselves to be out of stock in core styles and sizes in the woman’s business and the men’s business as well. And by putting less emphasis on inventory turn, we were able to create these Q3 results. Now that does not mean we won’t have inventory run away; if anything, we watch it tightly. But our stores want to continue to perform above plan and we don’t want to hold them back by being too diligent on the inventory side. Paul Lejuez - Credit Suisse: That certainly makes sense. What are your goals in terms of the turn, if you can share that? Robert Meers – Chief Executive Officer, Director: We typically look for turns of 3 or a bit higher. Paul Lejuez - Credit Suisse: Okay, great. Thanks, and best of luck.

And we move to our next question from Lorraine Makis [ph] from Merrill Lynch.

Hi, this is Seema Shanghai [ph] for Lorraine. I was wondering if you could talk a little bit more about how new door productivity has been trending? And any regional differences you are seeing there? Thank you. Robert Meers – Chief Executive Officer, Director: Yes, I’m going to have to ask you to repeat the question, you broke up.

Sorry. I was just wondering if you could talk a little bit more about new door productivity and any regional differences you are seeing there. Robert Meers – Chief Executive Officer, Director: Well, we actually have not seen any regional differences in new door productivity. I would say that one of the things that we keep reaffirming to us on the operations side is when we can pre-brand a market, open a showroom, get our community educators in there, make contact with yogis and fitness instructors and build the demand between six and 12 months before a store opens. The store opens, they open very, very fast and they had a very nice rate. And where we lag behind, we have to build. And so, I would have to say that if I pointed to any area that we need to continue to work hard on, it would be in the Southwest Texas and in the Washington DC market. And that is not pointing out a problem, it is really pointing out that our business will continue to build there because of the showrooms.

Thank you.

And we’ll move to our next question from Howard Tubin, RBC Capital Markets. Howard Tubin - RBC Capital Markets: Thanks, guys. Great quarter. Can you just talk a little bit about the new store opening pipeline for next year and how many leases you have already signed and how many are close to being signed? Robert Meers – Chief Executive Officer, Director: We have 26 leases either signed in LOI form or in final negotiations. And we have all the other stores identified and working towards finalizing the priority of our program. So we feel very good about ’08. Howard Tubin - RBC Capital Markets: Great, thanks. And John, do you think the tax rate will be 34% starting next year in 1Q and for the whole year or will it kind of ramp itself down? John E. Currie - Chief Financial Officer: It will vary based on the seasonality of our business. So 34% overall for the quarter but a higher productivity before that, first in Q4 is going to be lower than say, Q1. Howard Tubin - RBC Capital Markets: Got it, great, thanks.

And we’ll move to our next question from Lynn Walter [ph] from Wachovia.

Hi, thanks and congratulations, guys. A couple of questions here. If you could just talk about the merchandise margins during the quarter, what drove the improvement? And is it something we should be looking forward to continue into Q4 and next year. Robert Meers – Chief Executive Officer, Director: Okay, our merchandise margin was strong 70%, 71%, impacted of course by… I mean there’s some benefit from the fact that the larger sales are in the Canadian dollars with U.S dollar pricing, and improved purchasing, because we have bolstered our sourcing and production team and we are starting to see the results there. And yes, we would expect to see similar margins, going forward. And Lynn, just to reiterate, we have said early on that we were looking at potentially 200 to 300 basis points south of our starting 51 point margin, and I don’t want to encourage you to think that we are going to have runaway leverage on the margin line.

Okay, thanks for clarifying. And then, you also mentioned the leverage point for ’08 being at 10% comp. I think we were assuming close to a high single digit for next year. Can you just talk about the change there? Robert Meers – Chief Executive Officer, Director: Yes, with our sales ahead of plan, we are really looking at building… everything is really accelerating in the company. So for example we’ve bolstered, as I said, our sourcing and production team. We’ve opened an office in China. So investments like that are really building further out into the future that are being put in place now and will annualize in 2008, and maybe contributed to a little bit of an adjustment to that leverage point. But it’s all building to the future.

Okay, thanks. And then finally, can you just talk about international, what’s the timeframe for rolling out Europe. Have you thought of that? Robert Meers – Chief Executive Officer, Director: Probably not till ’09. We have made some adjustments in our Japanese business, put a new general manager in place, moved one of our senior executives to Hong Kong to oversee the development of Japan, the Hong Kong marketplace and Australia. And we are identifying joint venture partners. But key to us is making sure we have the supply chain and pipeline for the U.S. and North American growth, and we don’t want to our frighten out [ph] our efforts by moving into Europe too rapidly and stretching our supply chain.

Okay, thanks, guys. Good luck.

We will now move to our next question from Barbara Gray [ph], Blackmore Capital.

Good morning guys. Fabulous result. Couple of questions. First, what are you running in terms of sales per square foot right now? Robert Meers – Chief Executive Officer, Director: At the end of Q3, on a trailing basis, we’re at $1,526 per square foot for our comp stores.

Okay. And second, is there any difference in performance in your US versus your Canadian stores? Robert Meers – Chief Executive Officer, Director: Yes, John, take that one. John E. Currie - Chief Financial Officer: Of course, we don’t break out Canada and the US. Measuring it based on comps, as has been our experience in the past, we would expect the stores in the newer markets, a lot of those are in the US to show the strong comps that we’ve been experiencing. And then the more mature Canadian markets have pleasantly surprised us by showing similar comps. So, basically, there is not a lot of difference regionally, Canada, US. Robert Meers – Chief Executive Officer, Director: We still haven’t found the top.

Great. In terms of new store openings, initially you said 300 to 500, and now you are at 200. Given the huge acceptance of the product, are you considering increasing the number of new store openings? Robert Meers – Chief Executive Officer, Director: You mean on a yearly basis?

No, in terms of your potential in the US for new stores. Robert Meers – Chief Executive Officer, Director: Now, we have identified the 300 locations in the key markets, and want to make sure we get those opened. There may be more upside. I think we have said that we will test opening some resort stores in 2008, and we have also looked at filling the market in 2010. But probably no more than a 50 to a 100 stores in the central part of the US.

And one last question, do you any products lines that are coming out, given that outer wear was such a success? Robert Meers – Chief Executive Officer, Director: Well, we’re always pushing that. I mean Chip and his team are constantly looking at new categories that fit our business. And while our focus is on yoga inspiration, the fitness and exercise market and healthy living is our key. So we are looking at cycling. We are looking at swimming. We are looking at more running gear and general exercise gear. Outer wear continues to be a strong focus for us in terms of going to and from the marketplace. And then in the accessory business, we’re bringing in some key exercise products to continue to grow our accessory business, which is a record growth area for us and strong margins.

Great. And I just have one last question. In terms of the VitaSea controversy, you said you are going to be testing, or doing a review of your other products’ therapeutic attributes. Do you have the conclusions of that review? Robert Meers – Chief Executive Officer, Director: Yes. We are in good shape. We have completed analyzing all of our fabrics and making sure that our test results are up to speed, that our suppliers have complied with their reports and test results to us and that our factories are compliant and making sure that the products are being made to our specifications. And that is done and we’re very satisfied that everything’s on stream [ph].

Okay. You’re going to put out a separate press release or not even bother? Robert Meers – Chief Executive Officer, Director: No.

No? Okay. Thank you so much.

And we’ll move to our next question from Brad Corrigan [ph], Goldman Sachs.

Yes, could you just give us a little bit more insight into what you had to do operationally to get your inventories back in line? I mean can you talk about what you had to do much in the light of air freighting or whether that sourcing is coming from local markets in Canada? Robert Meers – Chief Executive Officer, Director: Well, at the end of the our last quarter conference call, I think we just completed our manufacturing summit that we ran in Vancouver. And we had brought in our key factory suppliers from China, Indonesia, Vietnam, Cambodia, Israel, Peru and Canada. We have since put on a quick trend [ph] factory in Los Angeles. All of our factories gave us not only the ’07 manufacturing capacity that we wanted but also brought into our ’08 and ’09 projections and made sure that we have the capacity both in terms of fabric availability and manufacturing capacity. And yes, we have been able to get them to be very responsive to our replenishment and to make sure we stay in stock. Yes, we do use a substantial amount of air freight amounts built into our margins. So, there is no negative impact in doing that, keeping ourselves in stock.

And as you have to reacted to this sell throughs in your stores, I mean, is that I guess, excess capacity going to come out of that Los Angels relationship now. And I guess can you just talk about the cost implications of that? Presumably it’s slightly incrementally more expensive there. Robert Meers – Chief Executive Officer, Director: No. Because it’s replenishment, actually we have all of the machines set at one tension so that we are using only two fabrics. So, there is no breakdown and there is no setup of a machines and the labor is relatively a low cost piece of our U.S and Canadian manufacturing. So, it’s one of the big negative impact to domestic manufacturing as long as you keep it only for quick replenishment. And, yes, we have use the LA facility to use excess manufacturing capacity. They had to get us back in stock in Q3 and in key core styles for Q4.

Sounds great. And then on the stores, the 27 new stores in North America, just so I’m clear, does that include or exclude the three Calgary stores that were converted from franchise to owned? Robert Meers – Chief Executive Officer, Director: No, those… that is not part of the 27.

Got you, okay. And on the currency front, just given the movement that we’ve seen in the Canadian dollar versus the U.S dollar, have you guys updated your thinking around potential hedging policies? John E. Currie - Chief Financial Officer: Yes, we have said this before, but even more so, we are analyzing it in depth. I’m glad to see the dollar’s kind of come back to a more normalized level, close to par. That of course has benefited us. And yes, we are looking hard at whether we should move ahead with hedging. I see the exposure of the Canadian dollar being an ’08, maybe as far as an ’09 topic. Because of the fact that we get more of our revenues are in U.S dollars. I think our Canadian dollar revenue and our Canadian dollar expenditures will be more balanced. So, yes, States, it is something we are looking hard at.

Okay. And then finally on your IT systems in the February rollout, is that still on track? And can you just give us some update on testing of that system and what you’re doing to ensure that that will be a smooth transition? Robert Meers – Chief Executive Officer, Director: Well we're… because we moved it from an October implementation to a February implementation, we are currently in the testing phases of many of the first phase systems we bring on line. It has also bought us some time to put some enhancements there. And as we had said before, we will double track, parallel track once we split the switch in February. But right now, the testing is going very, very nicely. And this is on top of two warehouse moves that are behind us now and the warehouses are functioning beautifully to get daily deliveries into our stores. So, I’m quite optimistic that we've got one major domino down and another one being in the testing phase.

Okay, great. Well done. Thank you, and good luck.

Our next question from Sharon Zackfia from William Blair. Sharon Zackfia - William Blair and Company: Hi, good morning. I wanted to follow up on the inventory question. I guess with much better in-stock position, wondering if there might not be the opportunities for constant dollar comp to actually accelerate this quarter rather than decelerate, and what your thought are surrounding that. John E. Currie - Chief Financial Officer: Well, I think in Q3, you were seeing certainly towards the second half of October you saw a little bit more on what we can achieve when we are in stock. I guess my only conservatism on Q4 is because so many of our stores are so productive in the holiday season that to show aggressive comps on top of stores that are very, very busy, just isn’t quite logical. And that’s why I’ve always expected slightly lower comps in Q4 than what you have seen in a less busy quarter. Sharon Zackfia - William Blair and Company.: Okay. And then secondarily, when you have the ERP system in place, I’m just curious from a consumer proposition, whether or not at the store level the employees or partners will be able to kind of track down sizes that other stores in the region or salon so that if someone sees a style they like and the size isn’t there, they can get it shipped to them. This is something that I see constantly happen at the stores. Robert Meers – Chief Executive Officer, Director: We don’t have that capability, yes. Sharon Zackfia - William Blair and Company: Okay. And then lastly, the store openings for next year, are they going to be back-end weighted like this year?

Yes. They will all be back-end weighted, in a similar profile to this year. Sharon Zackfia - William Blair and Company: Okay, thank you.

And we’ll take our next question from Liz Dunn, Thomas Weisel Partner. Liz Dunn - Thomas Weisel Partners: Hi, Good morning. Congratulations on a great quarter. First question relates to store openings. Last quarter you talked about some lease negotiations and just sort of issues with timing and store openings. Were your Q3 openings on plan with what you’ve anticipated? And then of the 10 openings anticipated for the fourth quarter, are any of those opened yet? Robert Meers – Chief Executive Officer, Director: Yes, the answer is yes. We have readjusted our model to take into consideration lease negotiation with independent landlords. And so we will be able to better project it in ’08. Three, Q3 stores did open on time. But as you remember, at the Q2 release that we said that we had pushed some into Q3. So we didn’t have any negative impacts there. And yes, we have opened two new stores in Q4 already. Liz Dunn - Thomas Weisel Partners: Okay, great. In terms of the events that you host in your stores, can you just give us some sort of thought process on how do those impact comps and what does the schedule look like for the fourth quarter versus last year in the fourth quarter? Are you hosting more events or about the same? And what type of impact did those events have on comp store sales results? Robert Meers – Chief Executive Officer, Director: I don’t know how to quantify it as it relates to comp store sales results. What I do know is that our strategy is to become part of the community. And one of our key marketing initiatives is to highlight local fitness heroes, the people who are in and around our store and they use our store as that center for a gathering place. So the activities have always been pretty robust and will continue to be robust. We do know that it builds a loyal customer base. We certainly see at the end of all of the classes, our sales bump up as people take products home. But we do not measure it is part of what it does to our comps. Liz Dunn - Thomas Weisel Partners: Okay. And then final question relates to inventory. Understanding that you are, I know, in a bit better position heading in to the fourth quarter. But how do you feel about the sort of size ranges in each individual store, and the optimization of your inventory by market? I know that will get better over time with systems. But how do you feel about it right now? Robert Meers – Chief Executive Officer, Director: I feel very good. I thought we caught up in Q3 ’06 as we said we would. And although nobody in the company is modeling 36% comps, we do a very good job of getting back in stock and we have, with our new warehouses, well, even our old warehouses, but our new warehouses, able to get daily deliveries into the stores all over North America. Liz Dunn - Thomas Weisel Partners: Okay. Robert Meers – Chief Executive Officer, Director: So with the increased sales it is a challenge but I feel very good to be able to get daily deliveries into the stores all over North America. Liz Dunn - Thomas Weisel Partners: Okay. Robert Meers – Chief Executive Officer, Director: So with increased sales, it is a challenge, but I feel very good about… when I go visit the stores all over North America, looks pretty good to me. Liz Dunn - Thomas Weisel Partners: Okay, great. Congrats again. Robert Meers – Chief Executive Officer, Director: Thank you. We have time for one more call.

Our last question will come from Michelle Tan, UBS. Michelle Tan - UBS: Thanks. A question on tax rate. Looking at 34% starting in 2008, it has obviously normalized faster than we thought, given the strong U.S profitability. 34% is a little lower than we would have expected as the long-term tax rate. Is that because you are using up NOLs in the U.S.? And kind of what should be we thinking about in the out years for a truly normalized tax rate? John E. Currie - Chief Financial Officer: No, that doesn’t reflect the utilization of our NOLs in the U.S. In fact that is the potential for a one-time sort of benefit. The 34% is a blend of Canadian and statutory tax rates. And recently Canada announced reductions in the tax rate tier. And so that’s brought our forecast rate down. Michelle Tan - UBS: Okay, great. So we should expect 34% or potentially a little lower as a one-time going forward. John E. Currie - Chief Financial Officer: Yes. Michelle Tan - UBS: And then, also to clarify one of the comments on the U.S versus Canada stores… or, sorry, the newer versus older stores, I think you said they were comping at a relatively smaller rate, which is pretty impressive. Is that without the currency benefits to the Canadian stores? John E. Currie - Chief Financial Officer: Yes, on a local currency basis. Michelle Tan - UBS: On a local currency, so the older stores are comping similar to the newer stores on a local currency basis, right. John E. Currie - Chief Financial Officer: Yes. Michelle Tan - UBS: Very good. Thank you very much, and congratulations. Robert Meers – Chief Executive Officer, Director: Good, thank you. Dennis J Wilson - Chairman of the Board of Directors and Chief Product Designer: This is Chip Wilson. Again, I would just like to thank everyone for coming and again, would like to thank John and Bob for the great job they did, and the support staff to get them here. So, take care, everyone.

And that concludes our conference for today. Thank you for your attendance, and have a good day.