Jean Fontana - ICR Chip Wilson - Founder and Chief Product Designer Christine Day - President and Chief Executive Officer John Currie - Chief Financial Officer Sheree Waterson - Executive Vice President of General Merchandise Management and Sourcing

[Rick Batel] - Merrill Lynch Michelle Tan - Goldman Sachs Paul Lejuez - Credit Suisse Howard Tubin - RBC Capital Markets Sharon Zackfia - William Blair Janet Kloppenburg - JJK Research Richard Jaffe – Stifel Nicolaus Liz Dunn - Thomas Weisel Partners Dana Telsey – Telsey Advisory Group

Welcome to the lululemon athletica second quarter earnings results conference call. (Operator Instructions) At this time for opening remarks and introductions I’d like to turn the call over to Jean Fontana of ICR.

Thank you for joining lululemon athletica’s conference call to discuss second quarter results for fiscal 2008. A copy of today’s press release is available in the Investor Relations section of the company’s website at www.lululemon.com, or alternatively, is furnished on Form 8-K with the Securities and Exchange Commission and available on the commission’s website at www.sec.gov. Today’s call is being recorded and will be available for replay for 30 days shortly after the call on the Investor Relations section of the company’s website. Hosting today’s call is Chip Wilson, Founder and Chief Product Designer, Christine Day, the company’s President and Chief Executive Officer, and John Currie, the company’s Chief Financial Officer, and Sheree Waterson, the company’s Executive Vice President of General Merchandise Management and Sourcing. All participants on today’s call are advised that the discussion may include forward looking statements reflecting management’s current forecast of certain aspects of the company’s future. In many cases, you can identify forward looking statements by terms such as will, expects, plans, believes, potential, or the negative of these terms or other comparable terminology. These forward looking statements are based on management’s current expectations but they involve a number of risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward looking statements as a result of such risks and uncertainties which include those described in the SEC filings. You are urged to consider these factors carefully in evaluating the forward looking statements herein and are cautioned not to place undue reliance on such forward looking statements which are qualified in their entirety by this cautionary statement. Now I would like to turn the call over to Chip Wilson lululemon athletica’s Founder and Chief Product Designer.

Thanks for joining us to discuss our second quarter results. Christine and John will talk later about the details. I wanted to take a minute to talk about our first year as a public company which is now we’re into that and very proud of what we’ve done and accomplished in the last year. I’m thrilled about Christine Day as our CEO; we just couldn’t have anybody better. Thanks for being with us Christine. As Christine will discuss we’ve done incredible things, great strides this year on our key initiatives that we outlined at the beginning of the year. What I hope you take away from this call and seeing our results for the coming year is that we’re on a nice steady pace of expansion. We want to really build a world class infrastructure which I think we’re well on our way to doing and to match that with our world class product and our incredible in store experience that our guests love. I’ll pass it on to Christine, she’s sitting right here beside me.

Thank you for joining us to discuss second quarter. Following my opening remarks I will turn the call over to John who will go over the financial details of the quarter. We will then open the call to any questions. We have a lot of exciting things to celebrate this quarter in addition to delivering strong financial results. As Chip mentioned we are beginning to fill in some keys areas that will support our future growth. We’re implementing systems, hiring great people and executing well against our key strategies. We’re also proud of our second quarter results particularly in light of the challenging retail environment in the US. Our revenue and profit performance was driven primarily by a combination of our comparable store sales increase of 13% on the constant dollar basis and 32 net new store openings during the past 12 months. As we enter the third quarter we are very pleased with the content and level of our inventory and our new fall products have seen strong guest response since its recent arrival in our stores. Before I speak about some of our key initiatives I’d now like to invite Sheree Waterson our talented new Executive Vice President of General Merchandising Management and Sourcing to give a brief update on products. Sheree’s role is to oversee the entire end to end business process for product.

I am so excited to be here. Time has flown; I’ve been at lululemon for almost three months now. My first 30 days were spent working in the stores. The store experience was an invaluable part of my on boarding process, it’s allowed me to fully understand and appreciate the culture, community and the guest experience. I’m thrilled to be joining the lululemon team at such an exciting point in its growth and I’m even more excited about delivering inspiring product. Speaking of product, one of our core competencies is black stretch pants and the legend of the grooved pant continues. Just as our bottoms business remains strong our jacket business is stronger than ever. When we flow the product to the store the guest is really responding and buying. In addition to core styles our new novelty jacket including the new [shivakna] wrap, the corset jacket and the [zans] jacket are all top sellers in our initial fall collection. Outerwear has also gotten off to a great start. Our pocket puffy, our offer yoga jacket and the soft shell jacket for both men and women were strongly received by our guests. This is only our second season doing true outerwear pieces and we believe it represents a great revenue opportunity and growth potential for the brand. Another trending category for us is running. Our ability to combine femininity and fashion with technical fabrics and construction has resulted in the success of our running line this year. In the past seasons we treated it as a seasonal category and our guests are telling us that she wants running year round. I am very confident that if we scale our business we have the ability to continue to deliver amazing product and create a great guest experience.

To continue with product for a moment, another key initiative for 2008 was to update our strategy for clearing seasonal inventory to scale with our retail store growth. Historically we mark down our gross supplies on seasonal items in store or consolidate them for two events; our January warehouse sale and the in store post holiday markdown. After analyzing the scalability and the cost of these strategies we’ve made the decision this year to split the warehouse and markdown sales to two periods July and January. This reduces handling and clears the store for the new season. For our US business we will test two temporary outlet stores which are more cost effective and require less diversion of key resources than the warehouse sales. Consistent with this strategy we opened a temporary outlet in Mt. Vernon, Washington in late August and plan to open an additional temporary outlet in Florida in October. For the next years clearance strategy we’ll be using a combination of warehouse sales, limited in store mark downs and temporary outlets. It is important to stress that these refinements continue to support our gross margin strategy and that there’s no change in the business model. As Chip mentioned in his opening remarks, we continue to increase our execution capability in key areas. We have refined our real estate strategy and for opening process with the addition of new tools such as demographic mapping and impression analysis and a successful outsourcing of our construction management process. We have seen a smooth integration of our key executives in merchandising and logistics as well as advancement in key system enhancements this past quarter and are moving forward with our e-commerce strategy. Now some key points on each starting with what we accomplished during the quarter and what we have to look forward throughout the rest of the year and into 2009. The second quarter we opened 10 new stores in Canada and the United States. We continue to be pleased with our new store openings and our store productivity. Our Chinook center store in Calgary which opened on July 16 is trending to be one of our top 10 stores and our Troy, Michigan and Halifax stores which opened the beginning of May continue to perform exceptionally. We also entered into a joint venture agreement with our Australian franchisee during the second quarter. We have opened two additional stores in third quarter already including our 66th and 3rd Avenue location in New York City which has been a huge initial success in spite of the rain. We expect to open 22 additional stores this year for a total of 35 stores in North America during fiscal 2008. As I stated in our last conference call our goal for this year is to focus on in filling our current market such as New York, Southern California, Texas, DC, Chicago, and Seattle. We are beginning to benefit from the increased clout that our growing store base and brand equity bring to us both existing and new markets. Even so we will continue to refine our real estate selection process to ensure that we are maximizing the productivity and return potential of our [inaudible], meaning that we open the right stores in the right markets with our optimal patience and store opening sequences. We have added more signs to our real estate process. For example, to our under aggression, models and demographic mapping tools we have learned that we are most success when we penetrate the hardest city or regions and hip urban areas and then work our way out to the suburbs and will apply the strategy more consistently to our store openings in the future. For 2009 we’ll target the best locations and best field possible in this environment. As landlord adjusted changes in the retail environment we are provided with opportunities to reduce our initial investment, improve on these terms giving us more flexibility and reduce the cost structure in the future. We are closely watching the closures of other retailers and its impact on trade areas and malls and ensuring we have co-tenancy occupancy rates and other protective clauses to protect our portfolio. Moving on to new hires in July, we hired a new head of logistics, [Richard Kopkey] who has helped us make good progress towards the end of the second quarter in our supply chain visibility and distribution center and productivity. Richard comes to us from Chico’s FAS and has more than 30 years experience in the retail industry including previous jobs at Abercrombie and Fitch, Footlocker and Broadway stores. Under his leadership we have already made improvements in the DCs productivity through system enhancements and physical layout changes. We are thrilled with Richard as an addition to our team and we look forward to seeing continued benefits from our efforts and logistics throughout the remainder of the year. We are prepared to make an offer for the head of planning and allocation and are very excited about the prospect of filling this role. We continue to see major opportunities from strengthening our execution and ensuring that we are getting the right product in the stores at the right time in order to maximize guest experience and our store productivity potential. We believe this hire will optimize our allocation process substantially. For my former role, EVP of business units we are taking time to find the right candidate to compliment the skills of the existing management team. Next, our implementation of new systems is progressing very smoothly. Our new merchandise and warehouse management system which was implemented in the first quarter is live and performing well. In addition, our new POS system was successfully installed in all of our stores in the US during the quarter and the Canadian rollout remains on plan for 2009. We have begun our [inaudible] to a lot of advanced allocation systems which we will plan to have completed before the holiday season. Our maple lake merchandizing planning system is scheduled to go live in October and will enable more precise planning and forecasting for our fall 2009 line. Finally, I’m excited to say that we are officially moving forward with an e-commerce strategy which we plan to launch in the second half of 2009. We’re developing and e-commerce business with the help of a consultant that will combine internal web development, merchandising and call center service with an outsource platform and facilment. We have assembled our internal staff which is being led by Lee Stanley an exceptionally talented former general manager and remain on track to launch the site in the second half of 2009. In summary, e-commerce is just one of the tremendous opportunities we see for lululemon brand in the future as it will enable us to reach incremental markets, generate new demand and convenience for our guests. In spite of this very challenging macro environment we continue to be excited about our tremendous growth potential and we’ll be ready to execute at all levels. We are very pleased about our continued top line momentum as well as the people and processes that have added to the business in a short period of time. We want to assure our shareholders that we are making the right decisions consistent with the long term health of the business and brand. Now John can give you some details on the second quarter and our outlook for the rest of the year.

As Christine indicated we’re very pleased with the results we achieved in this second quarter 2008. After addressing our results in more detail I’ll provide guidance for the third quarter and the full year. Second quarter total net revenue increased 48% to $85.5 million as compared to $57.9 million in the second quarter 2007. This increase was driven by a combination of 32 net new stores opened since the second quarter 2007 including 10 new stores in the second quarter 2008 coupled with the comparable store sales increase of 13% on a constant dollar basis including the impact of the stronger Canadian dollar comparable store sales were 18%. As of the end of Q2 there were 49 stores in our comp store base, 35 of those in Canada and 14 in the United States. Our corporate owned store sales represented 92% of the total sales or $78.3 million versus 90% last year. Franchise and other revenues which include wholesale, phone sales and showrooms totaled $7.2 million and represented the other 8% of total revenue in the second quarter. We ended the quarter with 92 total stores versus 60 a year ago, 80 of which we own. During the second quarter we closed three stores in Japan and opened one additional franchise store. Our new stores not yet in the comp base also continue to perform in line with our expectations in the quarter. Gross profit for the second quarter increased $13.6 million or 44.4% to $44.4 million. Gross margin declined as a percent of revenue by 120 basis points to 51.9%. Merchandise margins improved during the quarter, in part due to refunds of excess duty payments and in spite of markdowns from the clearance activity in July that Christine spoke to. However, higher occupancy and depreciation costs related to new stores opened during the quarter and those scheduled to open in Q3 contributed to the gross margin decline. Remember accounting rules require that rent and depreciation on new stores must be expense commencing on the possession date even if there’s a free rent period and even though the stores generate little or no revenue during this pre-opening period. Higher costs associated with our production, merchandising and distribution departments also reduced gross margin as we continued to invest in people to enhance our capabilities. SG&A expense increased 40.7% to $28.8 million for the quarter or 33.7% of total revenues compared to $20.5 million or 35.4% of total revenues in the second quarter of last year. The 170 basis point reduce in SG&A as a percent of sales is due primarily to lower options expense and leverage on corporate headquarters expenses versus last year. Overall, operating income increased 51.7% to $15.5 million as compared to $10.2 million last year. Operating margin leveraged year over year with operating margin of 18.2% this year versus 17.7% in 2007. Our tax rate for the quarter was 21.7% versus 46.5% in the same quarter a year ago. As discussed in our previous call, last year our tax rate was inflated by our inter company transfer pricing structure which we amended at the end of 2007. In addition, during the second quarter the rate was favorably impacted by the recognition of deductions for stock option expense and for tax savings associated with the US company’s NOL. All these deductions were anticipated in our guidance for full fiscal year tax rate in the low 30’s. The benefit was fully recognized in our second quarter as opposed to the expectation for more even recognition throughout the balance of the year. Just to clear, this shift in timing which added approximately $0.02 earnings per diluted share in Q2 does not represent a change in our tax rate or earnings per diluted share expectation for the full year. Net income from continuing operations rose to $12.3 million versus $5.5 million a year ago or $0.18 per diluted share versus $0.08 per share a year ago. Our weighted average diluted shares outstanding for the quarter were $70.4 million versus $68.9 million for the same period last year. During the second quarter fiscal 2008 we incurred a charge of approximately $1.2 million or $0.02 per share for discontinued operations resulting from the company’s closure of our stores in Japan. Net income after deducting this loss was $11.1 million or $0.16 per diluted share as compared to $5.1 million or $0.07 per diluted share in the same period last year. Turning to the key balance sheet highlights, we ended the second quarter in a healthy cash and cash equivalent position totaling approximately $44 million and as before we continue to have no debt. Inventory at the end of the quarter was $43 million or up 82% from the end of the second quarter last year. We’re very pleased with the content and the quantity of our inventory as we enter the fall season and are confident that we’ve struck the right balance between planning for our growth and planning conservatively given the economic environment. Capital expenditures were $19 million in the second quarter and primarily related to our new store build out costs and IT capital expenditures. I’ll now turn to the outlook for the outlook for the balance of 2008. For the full year we continue to anticipate comparable store sales growth of high single digits on a constant dollar basis. We now expect reported comparable stores sales growth of low double digits versus our previous expectation of low teens for the year assuming that the Canadian dollar continues to be weaker in the second half of the year. We continue to plan 35 new store openings in North America for the year and are maintaining revenue guidance of $380 million to $385 million. We continue to expect diluted earnings per share for fiscal 2008 to be in the range of $0.68 to $0.71 per diluted share. Fiscal 2008 earnings guidance includes the $0.02 loss per share recorded in the second quarter resulting from the company’s closures of its four stores that operated in Japan. The closure of Japan has been fully reserved for in Q2 and so there is no further earnings impact anticipated for the rest of the year. As I mentioned in my earlier remarks, we expect the full year fiscal tax rate in the low 30% consistent with our previous guidance. Finally, we expect $71 million diluted shares outstanding for the year. For the third quarter 2008 we expect comparable store sales growth in the mid to high single digits on a constant dollar basis and low to mid single digits on an actual reported basis plus 15 new store openings in North America during the quarter. We expect diluted earnings per share between $0.11 and $0.13 per share in Q3 which compares to $0.11 in the third quarter fiscal 2007. In our third quarter we’re opening a greater number of stores versus last year. The majority of these openings are expected to take place in the third quarter which causes us to incur nearly a full quarter of occupancy and other store related costs with less than a month of sales from those stores. While the timing of new store openings and related store expenses will cause fluctuations in our quarterly earnings guidance over the balance of the year it averages out and we remain on plan. Our fiscal 2008 guidance remains above the company’s previously stated long term growth targets of net revenue growth of approximately 25% and diluted earnings per share growth in excess of 25%. With that we’re ready to turn the call back to the operator for questions.

(Operator Instructions) Your first question comes from [Rick Batel] - Merrill Lynch. [Rick Batel] - Merrill Lynch: Can you quantify some of the metrics that caused the gross margin to drop in the second quarter specifically the depreciation and higher occupancy and then perhaps comment on the implications for merchandise margins?

Gross margin declined in spite of strong merchandise margins. As I indicated there was a benefit from excess duty repayments but overall merchandise margins were strong and that we true in spite of the mark down activity in Q2. Our merchandise margin is solid it really is primarily the occupancy and depreciation costs related to the new store openings because those costs do reside in our cost of sales. There’s a bit more detail of that de-leverage in the 10-Q which was issued this morning. The other piece being increased costs in production, merchandising and distribution. Those really represent the strengthening and deepening of the teams in those areas so that we’re improving the supply chains.

That was in our LOL office in Hong Kong which is where we’ve now moved closer to the market through our quality control and manage our factories which will benefit us long term. [Rick Batel] - Merrill Lynch: As the new stores come online in the second half should we expect to see a gradual improvement in the gross margin?

What you’ll see is, in my remarks I alluded to this. The timing of new store openings especially a high number of new store openings against a fairly low base has quite an impact on the timing of incoming expense. In Q3 for example there are a very high number of store openings. As well several of the Q3 and early Q4 store openings are some of our higher productivity New York and other strong market locations. What you’d expect to see in Q3 would be the same or more negative impact on gross margin coming from the timing of those new store openings.

Your next question comes from Michelle Tan - Goldman Sachs. Michelle Tan - Goldman Sachs: Is the new store productivity, what are you seeing in terms of trend there. It looked like it ticked down quite a bit from the first quarter and then secondly, on the inventory position I know you mentioned at the outset it was clean but you did also take some additional markdowns in the quarter the inventory position relative to sales looks higher than it was in the first quarter, a little additional color there.

In terms of new store productivity as I said we continue to see the new stores performing pretty much in line with our plan. There were six new stores that ended the comp base in Q2 so that’s the best measure of new store productivity because they’ve got a whole year now under their belt. On average they were well above the minimum of 750 per square foot that we discussed in the past. Stores that have been open less than a year of course it’s too early to get specific about their performance. In general, on average, in line with our expectation. In terms of our inventory level, as we said we’re very comfortable with our inventory level at the end of Q2. It is up about 82% over inventory at the end of Q2 a year ago though as you’ll recall last year in Q3 we were continually out of stock and I think the Q2 ’07 inventory position was a little bit low and that’s part of what resulted in those other stock positions last year. The clearance activity that took place in July I think has freshened up our inventory so we’re comfortable with the content of the inventory and I think we’ve got a good balance of being prepared, positioning ourselves for growth but protecting the down side in generally tough economic environment.

Your next question comes from Paul Lejuez - Credit Suisse. Paul Lejuez - Credit Suisse: Can you refresh our memory about when you bought back those three Calgary franchisees because I think that’s been affecting, at least on the surface, the new store productivity number in previous quarters and make it look like it’s a big decline this quarter? Maybe you can share with us what the dollars were associated with those three stores. Also, just a question on Japan, how did that factor in in terms of the total sales number? Were Japan sales included in the prior quarters in the store revenues and the second part is are they now no longer included in that number, can you give us some color on the new store productivity?

You may a good point, we bought back the three Calgary franchise stores at the start of April last year and those are of course very high productivity stores in the Canadian market where the brand is very well established and in Alberta where the economy is very strong thanks to oil. Those are high productivity stores and I think it’s possible that some people would have been confused by average new store productivity if they failed to recognize the volumes of those stores. Paul Lejuez - Credit Suisse: Can you share with us what those volumes were to help with the calculation?

We don’t comment on specific store productivity but they’re well above our overall average. Paul Lejuez - Credit Suisse: How about on Japan?

The revenue is really immaterial, well below $1 million last year I believe. It was in last years numbers. This year, because Japan is in discontinued operations what you see is just the net revenue less expenses on one line item which is discontinued operations. Overall it really isn’t material. Paul Lejuez - Credit Suisse: On expenses it looks like in dollars expenses were lower in the second quarter relative to the first. I’m trying to tie that together with how many stores you guys have open or have opened during the quarter. I’m sure there’s some currency impact but maybe just comment on how expenses would be down sequentially and how we should think about expense dollar growth as we go into the back half of the year.

I assume you’re referring primarily to the SG&A. Probably the most significant timing shift that you saw from Q1 to Q2 was in stock options expense in particular Bob Mears performance vested options which previously under accounting rules were being expensed each quarter over the expected time to vesting. As you’ll recall those options vested in the first quarter and as a result the stock option expense related to that was fully recorded in Q1 and therefore there’s no further ongoing expense in Q2 or beyond. That was a large item and then… Paul Lejuez - Credit Suisse: How big was the dollars there?

That was about $700,000 additional expense in Q1. Generally there were across the board a variety of areas where spending was just more disciplined then in the past. Paul Lejuez - Credit Suisse: Can you talk about the promotional cadence throughout the quarter? What was planned at the beginning of the quarter versus how it played out in terms of promotions that were taken in stores? I believe, Christine, you mentioned the warehouse sales did that all go according to plan, just trying to dig down into the promotional cadence a bit.

What we recognize is the stores weren’t clearing as they normally had in the past some of their end of seasonal mark downs and so they were getting DC and we kind of sorted up which is why you don’t see over the quarter any real degradation of the margin. The other thing that historically we’ve done is we’ve moved the product to the warehouse and held it particularly in Canada and with Richard coming on we’ve seen the opportunity to reduce one of our secondary warehouses and bring the goods straight in to reduce our cost structure but that meant then that we had to move the clearance items instead of holding them until January which was costing us money in July so we did the breakdown of that. It also allowed us to really prepare to flow the goods for holiday with everything that’s coming in with the high volumes that we see. Those were some of the inputs into the decision making process that we made to go ahead and pull the trigger to clear the goods in July and do the warehouse sale then.

Your next question comes from Howard Tubin - RBC Capital Markets. Howard Tubin - RBC Capital Markets: Can you piece out the inventory build or maybe give us an inventory per foot or how much of the inventory relates to new stores and how much relates to sales plan.

To be honest, our store model really, it’s not an in store inventory management model, it’s mostly a DC based model. If you’re asking about in store inventory versus overall inventory its not really meaningful. It’s also very difficult to talk about metrics of inventory per square foot when the growth in square footage is so dramatic. What I can say is what you’re seeing is an inventory build that takes into account the expected sales in the existing store base and sets us up for a significant new store openings. As I said for Q3 and early Q4 several very high productivity, high expectation stores. Howard Tubin - RBC Capital Markets: Are the comps in Canada running consistently the comps in the US, are they kind of mirroring each other or has there been any change there?

They are actually very close. It’s continued as it has in the past. Very slightly higher comps than the US I think because of the stronger economy but again they’re very close to each other.

Your next question comes from Sharon Zackfia - William Blair. Sharon Zackfia - William Blair: Do you have what the inventories were up on a comparable store basis?

I don’t have that handy. Maybe we can follow that up on subsequent calls. I don’t have that information handy. Sharon Zackfia - William Blair: I think you mentioned build out costs and better lease terms going forward. Is there any way you can put some kind of quantifiable metric behind what you’re expecting going forward on build out versus historically and how the lease terms are trending?

On the build out, even though we’re going to more street locations, which are typically more expensive because you’re not getting a clean vanilla shelf from your landlord. We’ve been reducing our cost structure pretty dramatically overall on the store costs basis by going to outsource construction. One of the things I worry about is what if there is a slower economy and we don’t see the growth rates, how do we make sure that we can keep our cost structure in line. We’ve been doing everything we can on both the lease costs and the construction costs to make sure that we have a really healthy cost structure in case that does happen even through I will again say we see no signs of that for us. It’s been a key focus of ours and I don’t think John’s going to let me give you an exact number. It’s well below our historical run rate in the past year. Sharon Zackfia - William Blair: On e-commerce it’s good that you guys are going forward. I’m wondering at this early stage do you think as you look out to ’09 is it a relatively neutral impasse to earnings or should we expect the e-commerce initiative to be diluted a bit again in ’09?

It’s really early to be giving, I’m not giving any ’09 guidance yet. We really don’t want to go so far as to try to give revenue or earnings guidance on e-commerce. We’ll add additional information and guidance on e-commerce over the coming quarters as we move further.

We’re getting all of our final proposals in right now so we’ll have a better idea of the costs going forward probably for the next call. Sharon Zackfia - William Blair: I heard what you were saying on currency. Is there any thought about hedging the profit impact at this point or do you think you’re pretty naturally hedged?

It comes up every call we think about hedging a lot. The impact of currency on us is overall the biggest impact is on the Canadian company’s profit which is something I never look at hedging. If we were to hedge and what we’ve considered hedging is the Canadian dollars exposure to US dollar purchases. The policy on hedging would be when the Canadian dollar is trading above it’s expected near term level then that’s the amount we would consider hedging. We’ve haven’t put any hedging contracts in place so far. With hindsight that has probably benefited us. We do continue to look at it. The other thing I’d spend in hedging it’s like an insurance policy it might smooth your very very short term earnings but it has no real impact on the long term viability or health of the business model.

Your next question comes from Janet Kloppenburg - JJK Research. Janet Kloppenburg - JJK Research: Did you say that the comp outlook has changed just a tad I think from low teens to double digits?

I only changed it to take into account that the Canadian dollar is running a little bit lower. Janet Kloppenburg - JJK Research: Lower than you had expected it.

Yes, it had been running very close to par and it’s a little bit lower the past month. That’s the only change on a constant dollar basis we’ve not changing our outlook. Janet Kloppenburg - JJK Research: That’s reflective in the third quarter comp change as well from, did you go to mid single digits for the third quarter, and I’m confused.

It is reflected in our comp guidance for Q3 and for the balance of the year. Janet Kloppenburg - JJK Research: What is the comp guidance for third quarter?

The third quarter comp store sales in mid to high single digits but because of the currency level versus a year ago on a reported basis it would be low to mid single digits. Janet Kloppenburg - JJK Research: I was wondering if the amount of store openings that you’re going to incur in the next few months, I think there’s 22 more to go is that right. Will that give you any incremental benefit on the gross margin line in the fourth quarter as you leverage some of these rents that you’re paying for or should we look for this pressure on the occupancy line to continue to hurt the gross margin.

The bulk of the timing fluctuation related to these new store pre-opening costs you’ve seen some in Q3 and you’ll see it’s already in Q2 and you’ll see it in Q3. Q4 the stores are open, revenues coming in and of course it’s the highest period of the year. The direction would be higher gross margin due to leverage in Q4 and without a distortion from these new store opening costs. Janet Kloppenburg - JJK Research: We get it back in the fourth quarter what we might be pinching the gross margin line right now we get it back then.

Right. Janet Kloppenburg - JJK Research: That’s a fair way of looking at it.

Yes it is. Janet Kloppenburg - JJK Research: I don’t think this occurred with you guys but for a number of specialty retailers during July and August their Canadian business began to slow we think because they were up against tough comparisons. I’m wondering if you are seeing, it sounds like it’s still very strong and during the quarter matched the level of the United States comp growth or was it even a little better. I’m wondering if you’re seeing any deceleration there because I am seeing it at a number of other players in the business.

Not yet. We watch that everyday. We see what’s happening. Our variance in sales I’ll honestly tell you is still related to whether or not we get the deliveries to store on time and we’ve working on smoothing that with our carriers and going to everyday deliveries and we’re seeing positive results from that in the business. Janet Kloppenburg - JJK Research: On the inventory front if there are new categories of business or a level of investment in new categories of business that weren’t reflective or were at lower levels last year at this time that might be affecting the inventory numbers. In other words, the assortment. [Inaudible] investment is higher this year than last.

Yes, some of the value of the inventory is higher because we’ve leveraged more which I think we’ll see reflected in the next quarter as we brought in the sales for the outerwear garments. Janet Kloppenburg - JJK Research: I see more outwear in the stores right now than I did last year at this time.

As we mentioned it is performing. This is only our second season of the outerwear business so we are looking at this and obviously this is a really positive response from our guests. Janet Kloppenburg - JJK Research: I also wanted you guys to know that the new store on 3rd Avenue looks fabulous.

Thank you.

Your next question comes from Richard Jaffe – Stifel Nicolaus. Richard Jaffe – Stifel Nicolaus: Regarding the clearance stores, the temporary locations, will those be simply a pop up store for 30 days or we have an ongoing location, a continuing lease in those two locations?

We’ve been able to work with the landlords there is that we have the right to operate it up to six months but to close it at any time that we want to. Richard Jaffe – Stifel Nicolaus: More of a month to month relationship?

Yes, so what we’ve done is we’ve taken over, like the first one is a former J. Crew and we left the fixtures that they had in there and brought in rolling racks and some great seats for the men to wait in. It’s been very popular. There’s no incremental build out cost for us doing those and we treat them almost more like we’re doing an in place warehouse sale and creating the same kind of energy and fun we did. It really takes far less resources as we looked at trying and scaling warehouse sales across the US. We’re really trying to create the same level of energy in just a very efficient way. Richard Jaffe – Stifel Nicolaus: A question on some of the enclosed mall locations you’ve opened recently in the past year, how you’re seeing them perform both in terms of sales but also in terms of their product needs the differences between those stores and some of your highly successful street locations.

That’s tough; I would tell you we also have malls that are in the top of our productivity range particularly where there is inclement weather. I think it’s hard to generalize that power. I think it’s also where you have a successful brand and where we built it the right way you really see the malls then performing. Lessons we’ve learned from the real estate strategy is when we go to suburbs and we open the mall they’re a little bit slower to ramp then what we’ve done to penetrate the cities faster. By going in and re-penetrating those cities we see those pop and the ramp changes. We know we’re doing the right thing from a real estate strategy. It’s less I think to do with anything that we’ve seen from a product mix or really even weather.

Your next question comes from Liz Dunn - Thomas Weisel Partners. Liz Dunn - Thomas Weisel Partners: My first question I don’t know is Chip still with us on the line.

Yes I am. Liz Dunn - Thomas Weisel Partners: My question related to your plans, you own a lot of stock. I see that you’re transferring some to some employees and understand that but do you have any plans for the balance of your holdings to sell at this point?

No. The real thing is that I probably took a couple hundred million selling to private equity people and then a little bit at the IPO. I don’t what I’d do with the extra money. I’m in the company everyday. I’m in Washington today. I went to three stores yesterday and took all the educators out for breakfast and design meeting last night. It’s what I love to do. I don’t know what else I would do in the world. If we have all our goals set up around our company for every employee and minor out there loud and clear that I’m in it. I’m a neophyte at this to a great extent, definitely my wealth investors are telling me that a smart person would diversify and I think at some point in the future maybe I will listen to them but I don’t see anything for the next three years anyways.

Just to clarify on that point is hopefully most of you saw there was a second press release issued today that did talk about the transfer by Chip of some shares. To be clear those related to stock incentive programs that were put in place by Chip back in 2005 before the private equity investors came in, before the IPO and this is simply fulfilling on those plans. Liz Dunn - Thomas Weisel Partners: My second question just relates to the markdown versus occupancy pressure. Is there any way you can provide specifics on how much pressure was in the second quarter and how much to expect in the third quarter. With the change in promotional strategy did that mean that some markdowns shifted into the second quarter from the third quarter?

If you look at last year really the bulk of markdowns took place in Q4. What you saw is a shift of those annual markdowns from Q4 into Q2 and I think you’ll see that in the future Q2 and Q4 will be where you see some markdown activity but more evenly spread between the two of them. In addition to that, more of a level markdown experience throughout the year through these temporary outlet locations. Having said that, the overall approach to markdowns and clearance of excess inventory even though we’re evolving the strategy it doesn’t change our expectation for overall markdowns. It doesn’t change our target or expectation on our overall annual gross margin.

Your last question comes from Dana Telsey – Telsey Advisory Group. Dana Telsey – Telsey Advisory Group: Can you talk a little bit about in terms of John and Christine, John in developing the business what are the key metrics that you’re monitoring as a growth company to make sure you’re on track and Christine now that you’ve been there a while what new processes have you put in place as the business grows and what metrics do you see them impacting, how has it evolved relative to your initial thoughts?

My team would probably tell you too many. I really do believe in financial discipline and rigor and business processes. We’ve been doing a lot of work around that as a team. A lot of bottom up forecasting. We’ve gone through a very detailed strategic planning process as a team and including all of the initiatives, program costs and details for really the next anticipated three years because you can plan three years and you get enough to do for five is the way that I ways look at that. Managing the timing of those investments and spending against the revenues I feel very comfortable with where we are with our strategic plan and how we’ve built the numbers going forward. In terms of the monthly business disciplines we’re busy reinventing all of our internal reports so that we’re really watching the business in the right way and I can tell you watching Sheree work over the last three weeks I’ve found my soul mate in that in Sheree. She’s putting a tremendous amount of rigor and discipline around managing the inventory, the sales reporting, how we manage our flow of goods to store and Richard has already brought a whole new set of KPIs and reporting to the warehouse and given us a tremendous amount of visibility all the way back in the supply chain to where the product is flowing and what date things leave. We’ve had just remarkable improvement in our financial metrics and clarity to look at what it’s doing in the last quarters. I’m really proud of where the team has come with that.

In terms of metrics, no surprise of course we look at comp store sales growth as a measure on the overall health of the business year over year. What we focus on more than most retailers and most of the market is the importance of the new store ramp rate productivity because our comp store sales again they are important but so much of the story even on a quarter to quarter basis is how well are the new stores going. Of course longer term it’s the successful execution of the new stores that are going to drive our growth. We monitor gross margin leverage because as I’ve talked about before there are several positive and negative levers. Everything from making sure that our production and sourcing team are getting the best possible product costs to managing the occupancy and deprecation charges on stores that are coming through in the comp to sales line. We’re at a point now where as we’ve talked about we do see us generating leverage on SG&A. We’re at a point where that’s really got to be the focus. We continue to build the team both at the executive level and down through the ranks and we’re increasing our efficiency and it’s important to make sure we’re pacing the growth in the platforms and the G&A spend that drives but packing it with the growth of the company and getting that positive leverage. Dana Telsey – Telsey Advisory Group: How many new stores are flowing into the comp base in the third quarter and fourth quarter?

That’s a good question that I don’t think I’ve got on my cheat sheet. I do have it. Q3 there would be 12 new stores in the comp base and Q4 there will be a further six in the comp base.

The other metric that we talked about in the past and that is really the people at the store. We have already completed all of our hiring through the balance of this year even including down to assistant managers and the program we put in place has put us in the position where even through Q1 we have most of our people in place in the system through the assistant manager rank program that we’ve done for opening our stores for Q1. We feel really good about our people pipeline as well.

This does conclude our Q&A portion.

Thank you for joining us on the call this morning. We just want to reiterate again that we have tremendous confidence in where the business is. The infrastructure that we are building the results that we are seeing, the guest response to our product and I think we stand in the quarter more confident than we’ve been in any quarter about our ability to grow this company into a tremendous brand and business that we can all be proud to be a part of. Thank you for joining us on the call.