Tom Lennox - CC Mike Jeffries - Chairman, CEO Mike Kramer - CFO Mike Nuzzo - VP Finance Brian Logan - Controller

Jeff Kleinfelter – Piper Jaffray Margaret Mager – Goldman Sachs Stacy Pak - Prudential Kimberly Greenberger – Citigroup Jeff Black – Lehman Brothers Meredith Kent - UBS Paul Lejeuz – Credit Suisse Lauren Levitan – Cowen & Company Janet Kloppenberg – JJK Research Christine Chen – Pacific Growth Equities Lorraine Maikis – Merrill Lynch Marne Shapiro – Retail Tracker Dana Cohen – Banc of America Securities John Morris – Wachovia Securities Robin Murchison – SunTrust Robinson Humphrey Dana Telsey – Telsey Advisory Group Josh Schwartz – Flatbush Watermill Jeff Feinberg – JLF Asset Management Rob Wilson – Tiburon Research Barbara Wyckoff - Buckingham Research Brian Tunick – J.P. Morgan

Good day, everyone, and welcome to the Abercrombie & Fitch second quarter earnings release conference call. (Operator Instructions) At this time, I would like to turn the conference over to Mr. Tom Lennox. Please go ahead, sir.

Good afternoon and welcome to our second quarter conference call. After the market closed, we released second quarter sales and earnings release, balance sheet, income statement and an updated financial history. If you haven’t seen these materials, they are available on our website. This call is being taped and can be replayed by dialling 888 203 1112. You will need to reference the conference I.D. No. 8591489. You may also access the replay through the Internet at abercrombie.com. With me today are Mike Jeffries, Chairman and Chief Executive Officer; Mike Kramer, Chief Financial Officer; Mike Nuzzo, VP of Finance and Brian Logan, the company’s controller. Today’s earnings call will be limited to one hour. After our prepared comments, we will be available to take your questions for as long as time permits. Please limit yourself to one question so that we can speak with as many callers as possible. Before we begin, I remind you that any forward-looking statements we may make are subject to the safe harbor statement found in our earnings release and SEC filings. Now to Mike Kramer.

First off, let me start by saying that we’re very proud of our company’s 14-year history of delivering leading financial results. As our press release indicates, our company generated double-digit sales and earnings growth for the second quarter of fiscal 2006. In addition, not only do we consistently deliver a high quality of earnings, but we are steadfastly committed to invest prudently across the organization to ensure that we deliver strong results in the future. Now for the numbers: Net sales for the second quarter were $658.7 million, increasing 15% over last year’s second quarter sales of $571.6 million. Comparable store sales were flat to last year for the quarter, versus a 30% increase for the second quarter of fiscal 2005. Second quarter comps by brand were as follows: In the adult business, Abercrombie & Fitch, comparable store sales decreased 4%. Men’s comps decreased by a high single digit, and women’s decreased by a low single digit. In the kids business, Abercrombie, comparable store sales increased 11%, with boys’ comps increasing by a mid single digit and girls increasing by a low double digit. Hollister comparable store sales increased 3%, with Dude’s comps declining by a low single digit and Betty’s increasing by a mid single digit. RUEHL comparable store sales increased 24%, with men’s comps increasing by mid 30s and women’s increasing by a high single digit. By region, comps were strongest in the North Atlantic and weakest in the South. The second quarter gross profit rate was 69.1%, 90 basis points higher than last year’s rate of 68.2%. The increase in rate primarily reflects a lower markdown rate combined with a slightly higher initial mark-up versus last year. We ended the second quarter with inventories up 9% per gross square foot at a cost versus last year. This is consistent with the past guidance we provided on our first quarter conference call when we said that we expected to end the second quarter of 2006 with a lower increase per square foot at cost when compared to the 38% increase reported at the end of the first quarter of fiscal 2006. Going forward, we are planning for inventory levels to continue to moderate, ending the third quarter of 2006 with the lower increase per foot at cost when compared to the second quarter of fiscal 2006. Stores and distribution expense as a percentage of sales increased 50 basis points, to 41.1% versus 40.6% last year. The increase rate resulted primarily from expense related to improvements made to existing Abercrombie & Fitch stores, including the right sizing and refresh programs partially offset by leverage in store payroll expense as a percentage of sales. For the second quarter, marketing, general and administrative expense increased 110 basis points as a percentage of sales to 13% from 11.9% last year. The increase in rate versus last year results are primarily from the expense related to FAS 123(R). Expense attributed to IT-related projects also contributed to the increase in rates. For the second quarter, operating income increased to $102.4 million compared to $91.1 million last year. Net income for the quarter increased 14% to $65.7 million versus $57.4 million last year. Second quarter net income per share on a fully diluted basis was $0.72 versus $0.63, representing an increase of 14% versus last year. We ended the second quarter with 351 Abercrombie & Fitch stores, 164 Abercrombie stores, 355 Hollister stores and 10 RUEHL stores. For fiscal 2006, we now plan to open eight new Abercrombie & Fitch stores, 18 new Abercrombie stores, 74 new Hollister stores and seven new RUEHL stores, for a total of 107 stores. We plan to end the year with 363 Abercrombie & Fitch stores, 177 Abercrombie stores, 397 Hollister stores and 15 RUEHL stores, for a total of 952 stores. Total square footage is expected to grow by approximately 11% to 12% in fiscal 2006. For fiscal 2006, we expect planned capital expenditures will be between $400 and $420 million. Approximately $260 million of this amount is allocated to new store construction, remodels, conversions and improvements to existing stores with the remainder related to home office, IT and distribution center investments. The new distribution center, which is located in New Albany, Ohio, is ahead of schedule and expected to be completed in November. I would like to finish by discussing our profit outlook for the fall season. At this point, we expect net income per fully diluted share for the second half of fiscal 2006 to be in the range of $3.15 to $3.20, including a charge of approximately $0.02 attributable to expense related to FAS 123(R). Included in our guidance is an estimated $0.08 of incremental, fourth quarter net income per fully diluted share resulting from an extra selling week in this year’s fiscal calendar. Now Mike will comment on the business.

Good afternoon. I’m obviously pleased with the record sales and profit that we achieved this quarter. Enhancing the quality of our brands and increasing the bottom line are our top priorities. To generate strong sales, gross margin and earnings reflects the strength of our business. Our brands are well-positioned. Each one makes a contribution to the overall success of the company. To continue with our success and meet the objective of being recognized as the coolest brands for each of our targeted age groups, we have taken steps over the past two years to improve the primary method of communicating with our customers – our stores. We’ve enhanced the store environment in four major ways. They are: 1. Better inventory levels. There are no more empty wall bays, especially in our lower volume stores. To ensure selection integrity at all times, we increased minimum stack heights and size runs. As we continue to see blue jeans and other basic categories, we will maintain more moderate inventory levels. 2. More newness. We update our stores weekly. We are driving the business with new styles in key categories. We are focused on merchandise flow and the processes that support presentation updates. 3. Store payroll. We increased store payroll hours to bring back the environment, attitude and proper presentation standards. We adjust payroll hours constantly. The process is managed centrally. Each store is allocated base coverage and hours flex based on a variety of factors. 4. Store design. We are well underway with the Abercrombie & Fitch store refresh program. The objective is to have A&F stores look and feel like the Fifth Avenue flagship store. From a merchandising standpoint, we changed our method of clearing through older items by eliminating the first of what used to be two seasonal sale events. We cleared through the spring season merchandise effectively, ending the quarter with spring season carryover levels below last year while maintaining a full-price store environment. The transition was also successful in achieving a lower markdown rate compared to last year, which contributed to a higher gross margin for the quarter. We intend to employ this strategy in the second half of the year. In terms of the program’s success, we applied this method of clearing through inventory to each of our brands. This is consistent with our management philosophy, which involves utilizing similar practices across brands. From a management, merchandising and systems point of view, this is extremely beneficial because we can employ the same techniques across the business. Stated another way, we do not have to reinvent ourselves for each brand and we are seeing productivity gains from each of our businesses. The bottom line, we have a proven model that generates strong productivity and profitability per sales dollar. Abercrombie & Fitch stores made a significant contribution to the company’s productivity increase for the first half of the year. A contributing factor in this regard is the Fifth Avenue flagship store. Also supplementing strong new store contribution are our Canadian stores, as well as the newly opened flagship store located at The Grove in Los Angeles. The Grove is off to a great start and we see opportunity for solid returns. We are on schedule to open our first European location, the London flagship store, in the spring of 2007. The Abercrombie & Fitch Canadian stores continue to outpace their domestic counterparts and over the weekend we opened our third Abercrombie & Fitch in Canada at the Eaton Centre in Toronto, which will be our highest volume store in the Canadian market. Like the A&F stores, Hollister’s Canadian locations are also exceeding expectations, with productivity three times that of our average U.S. Hollister stores. Hollister is now generating sales per square foot of $546 for the trailing 12 months. The business recently eclipsed the Abercrombie & Fitch store base and now stands at 355 stores, on its way to between 600 and 800 stores domestically. We also see Hollister as having additional international expansion opportunities as the brand continues to attain widespread recognition. As we have often noted, Hollister has emerged as one of the key drivers of our company’s growth and has become a highly recognized and sought-after brand by consumers and landlords. You will see also real estate expansion in the kids business, Abercrombie. We are planning to open 12 new Abercrombie stores during the second half of the year, all of which will be located in highly productive centers, including San Francisco Center and Topanga Plaza on the West Coast, and Tyson’s Corner in metropolitan D.C., Mall of Millennia in Orlando. The business is generating roughly $485 on a sales per square foot basis, which includes an increase of approximately 23% for the first half of fiscal 2006. With the strength that we are seeing at RUEHL, we believe the brand has opportunity for similar success. The progress made over the past year reflects its more casual assortments, which builds on our organization’s strength. This brand is now properly positioned from a pricing and product standpoint. We continue to make progress from an initial mark-up standpoint, where initial mark-up improved by approximately 10 percentage points compared to last year. We are on target for RUEHL to be profitable by the end of fiscal 2007. By the end of this year, we plan to open five new stores, including locations in Roosevelt Field on Long Island, San Francisco Center and Aventura Mall in Florida. In closing, our second quarter performance was solid and due to the unique positioning of the company, I am optimistic about the future of our business. From a growth standpoint, we have opportunity to domestically expand our established brands and with the progress made with RUEHL, we have another growth brand. These opportunities, combined with our planned entrance into select international markets, makes me confident that we can continue to deliver strong results both in the near and long term. Now, we’re available to take your questions. Please limit yourself to one question so we can speak with as many callers as possible. After everyone has had a chance, we will be happy to take follow-up questions. Thank you.

Thank you. (Operator Instructions) The first question will come from Jeff Kleinfelter with Piper Jaffray. Jeff Kleinfelter – Piper Jaffray: Yes. Congratulations, guy, on a great first half of the year. Question is on the store refresh program. Could you tell us again how many stores currently have been refreshed with the new flagship package? Is there anything you can tell us in terms of dollars per store, cost in terms of productivity gains that you’re seeing initially as you implement this, and kind of what are your plans to roll it out through the rest of the chain?

Yeah, Jeff, this is Mike. I can answer that. In Q2 we completed five major remodels of adult stores. We completed 13 refresh projects at adult stores, which included the selective replacement of fixtures and finishes to ensure that all of our stores represent the brand well and are consistent with Fifth Avenue. In Q3, we are planning 35 more adult refresh projects. We improved 112 adult storefronts with the addition of the louvers that are similar to our New York flagship design and we’ll add louvers to 52 more stores in Q3. In terms of the quarter and the dollars spent, in the quarter we spent from a Capex perspective $10 million on what I just talked about, and roughly expensed another $2 million in terms of labor, maintenance and write-offs relating to the same thing. In terms of productivity with regards to this, we’re not going to answer that. Jeff Kleinfelter – Piper Jaffray: Okay. Thank you.

Thanks, Jeff.

The next question comes from Margaret Mager at Goldman Sachs. Margaret Mager – Goldman Sachs: Hi.

Hi, Margaret. Margaret Mager – Goldman Sachs: How are you?

We’re good. How are you? Margaret Mager – Goldman Sachs: Good, and congratulations on great results and strong outlook for the second half. That’s terrific. I know I only have one question so I wanted to maybe ask about the outlook for store payroll and your whole plan there as far as making it more efficient. You talked about every store has a base level of hours then you add flex hours due to a number of factors. Maybe you could describe a little bit what those factors are and how you manage the whole process of payroll and the goals there. Thanks.

Well, Margaret, I don’t know that I really want to get into a lot of detail here but we definitely have our stores grouped in bands, revenue bands, and we have what we call base hours, which would be minimum levels of coverage and minimum levels of what I would call operational people that would move product from the back to the front. We have minimum levels of standards of really what we want our stores to look like. That’s our base case and then from then on, there is flex related to sales, traffic, and there are other factors. Now, in terms of what the investment that we’ve made and in terms of where we’re at with regards to that, we feel really good about our payroll but we’re continually optimizing our payroll at a store-level basis. It will be a project that is ongoing as business changes, as, you know, there are new needs to the business, we will obviously adjust accordingly.

The next question will come from Stacy Pak with Prudential. Stacy Pak - Prudential: Hi, thanks. Great job.

Hey, Stacy. Stacy Pak - Prudential: A couple questions. One is, just on the business given, you know, given what happened in July in the whole industry, I was wondering if you would comment on whether the business in August has sort of – if you don’t want to tell us what it is month-to-date, just whether it’s sort of built, you know, like you would anticipate with the later start to back-to-school? Then second of all, on the expenses, I’m kind of curious about how we should model store and distribution and marketing and G&A expenses given the growth we saw this quarter in those extra things, the store refreshment and the info technology programs?

I’ll answer the first part of the question, Stacy. Nice try. Stacy Pak - Prudential: You knew I’d try.

I’m becoming increasingly fond of you. Mike will take your second –

Secondly, the second part of the question, with regards to expense, yes, Stacy, in terms of stores and distribution, we are targeting to leverage that line item. Now, in terms of Q3 we will continue to have some write-offs related to the store refresh and with regards to MG&A we will not be leveraging that line item as we continue to invest in future growth initiatives. What I can do is tell you that if you compare it to last year’s growth rates, sequential growth rates, that it will grow at a lower rate than what you saw last year.

Thank you.

Thank you.

With Citigroup, the next question comes from Kimberly Greenberger. Kimberly Greenberger - Citigroup: Oh, great. Thank you. I was wondering if you could, in your stores and distribution line where you’re showing 50 basis points of increase, if you could just talk about what’s going on in the distribution portion of that and what you’re seeing from a productivity perspective and then, if you gave – I didn’t get the Abercrombie & Fitch trailing 12 month sales per square foot and the RUEHL trailing 12 month sales per square foot. If you’ve got those, that would be great. Thanks.

I’ll start with the – with regards to the stores and distribution expense, specifically on the distribution center, we’ve indicated that we’ve been seeing negative productivity with regards to our distribution center as we’re looking very much forward to the opening of our second DC which will allow us to get back to the gains that we saw, or the productivity levels, that we saw and we’ll continue to improve that as well as be able to position us for even future growth of the business. Then we’ve also indicated what were the other factors in terms of the store refresh and resizing initiatives that will indicate everything else. In terms of sales per square foot, in terms of – RUEHL is $330 and A&F is $439.

Now we have a question from Jeff Black with Lehman Brothers.

Hey, Jeff. Jeff Black – Lehman Brothers: Yeah. Good afternoon. I guess I had a question on pricing and you know, after the 1Q call it seemed like there was a lot of fear around some comments that Hollister was getting more aggressive on pricing, you know, you were eliminating the Ezra Fitch line so I guess Mike Jefferies if you could tell us, you know, are there any notable changes in pricing strategy you want to talk about and, you know, is there a change in pricing to go after some traffic here? Thanks.

The answer is no and, if you took away the comments from the first quarter to believe that we were aggressively pricing, that’s not true. We adjusted the Hollister prices in a few categories to be just a little more competitive. It wasn’t really even to drive traffic. It was to position the brand against a major competitor, and the adjustments were slight. Just miniscule. Had no effect on volume, gross margin, at all. We constantly look at pricing just as a positioning device. We eliminated the Ezra Fitch line because the name Ezra Fitch was not very compelling to our customers. We replaced that business with Abercrombie & Fitch at the same price points. So there is not a pricing concept in this business to drive volume at all. Thanks.

Next is Meredith Kent with UBS. Meredith Kent - UBS: Hi, good afternoon. My question is about the IT initiatives. Can you just give a little more detail on some of the key processes and how you think that will contribute to profitability in the next 6 to 12 months?

Well, I think I’ve given quite a bit of flavor with regards to our IT initiatives. I don’t know that I really want to get into more detail. Suffice it to say that we are taking a look at all of our processes and trying to make them a little less manual and more scalable in terms of the growth in the future. You know, as most people know, retailers in general don’t do a lot of investment in IT and we’re different. We’re going to grow this business and we’re going to grow it at a scalable rate and that’s why you’ll see significant IT investments, both in the last quarter and, you know, here in the near future.

We now have Paul Lejeuz with Credit Suisse. Paul Lejeuz – Credit Suisse: Hey, thanks. Kind of a big picture question. In the past, Mike, you’ve kind of perceived some trends out there, thinking about the end of 04 and 05, and you really went for it. There were times in the past where business wasn’t as robust and started managing inventory down and managing payroll down in the stores. I’m wondering, you know, where we are now as you see it? If you look at the macro, if you look at your competitors, where do you see the business going? Are you more in the, you know, trying to knock the ball out of the park mode or are we at a point where you’re starting to manage inventory down, starting to pull some expenses out of the business?

Well, I think the answer to that question, I could turn it over to Kramer, is that we’re looking for efficiencies in every part of the business. We’re looking for efficiencies in terms of inventory management, in terms of expense management. I think that we are a highly developed business in terms of dollars per foot and I think that our business is very sophisticated in terms of how we do manage it. I do not believe that this is a business that’s going to see huge, high increases in likes or decreases. I think it’s stable and growing in a very stable way. That’s how we’re viewing the business in our developed brands. We clearly have room to develop likes on a large basis with RUEHL because it’s a developing business. So I would say we’re looking at it as a very, pretty sophisticated, stable, growing business but I would not expect to see huge likes on a positive basis and I certainly wouldn’t look to see any on a negative basis.

Yeah, let me add to that. I mean, I don’t necessarily think of our strategy as whether we’re looking to knock it out of the ballpark or to be conservative. I mean, I think our business model, as we’ve indicated on several – the reason why we did so well and are doing so well is because we’ve hit trend right on the top side and because of our strengths in terms of getting the product to market and our flexibility, we’re able to capitalize on that. Secondly, what we’re trying to do is manage the expense side of our business, very similar to how we manage the merchandising side of our business. We’re monitoring our business every day and one commitment that you have from us is we will not cut into the bone of the business. This is not about where I’m looking to cut expenses for the sake of cutting expenses. I’m looking at being able to provide the same amount of services to the rest of the organization and enable growth with less dollars, and the only way that I can do that is through some investment spending. So I think that we’re very well-positioned with regards to our strategy and you’ll see continued momentum.

And I have to comment on the trend part of the question. We look to maximize every trend that comes out there and we look to knock ourselves, the trend, out of the ballpark for everything that comes down the line. Having said that, that’s part of the operation of the business and that’s in our statistics so it’s a little more difficult to go from $500 a foot to $1,000 than it was from $200 to $500. Having said that, we work ourselves silly every day to make that happen.

Next is Lauren Levitan with Cowen & Company.

Hey, Lauren. Good morning. Lauren Levitan – Cowen & Company: Thanks. Wow. Thanks. Good afternoon, everyone. I was hoping you could update us on your thoughts on the balance sheet given the very strong performances contributing such solid cash flow generation. If you could update us on those targets you’ve given in the past and how much cash you’d want to maintain for future investment and what that might mean for both dividend growth and repurchase and then separately, Mike, some of those numbers you gave for RUEHL are very impressive. You said you feel really good about the progress you’ve made in terms of pricing and product. Can you compare this to where you were at a similar stage in Hollister and give us some sense of where you might feel comfortable accelerating the square footage growth of the concept? Are there still major things that you want to learn and explore with that customer before you would go through the kind of growth that we saw in Hollister back in 01/02/03? Thanks very much.

Let me take the first part of that question. We ended the quarter with roughly about $330 million of cash. Our position with regards to this is the same as it’s always been. We continue to look at opportunities to opportunistically buyback stock. You know, but we’re committed to maintaining our $300 million cash cushion balance. So having said that, keep in mind, the Capex this year is a much higher Capex than you’ve seen in the past and probably what you’ll see in the future due to the distribution center and some other costs. So we are – remember, our No. 1 focus is still the best brands in the business and we are looking at long-term initiatives here and we believe strongly that these investments that we’re making, while maintaining the $300 million cash cushion, are vital to the business versus some of the things that you’re talking about in terms of dividend or stock buybacks. Again, we’re going to be very opportunistic about it.

I think we said historically between $300 and $350.

Right.

And that’s because that’s my phobia. Sorry, guys. That’s Mike speaking. The second part of the question, RUEHL, I feel great about RUEHL and I think those of you who’ve been in the stores share my enthusiasm. The stores look, feel great and are just growing at a terrific pace. I’m ready at this point to be aggressively going after the RUEHL business. We are signing leases very aggressively for this brand. We think that – I projected and I think I said this to everyone when we gave birth to RUEHL that it would grow at a slower rate or start at a slower rate than Hollister and I think the primary reason for that is that it’s an older customer. This customer isn’t in the mall every Saturday and the exposure takes a little bit longer than that brand. Also, I think we got off to a slower start in terms of the initial assortments. I feel great about the assortments, the positioning now and we’re ready to go. I can’t comment about the number of stores versus Hollister on a yearly basis. I will say that RUEHL will not achieve the same kind of store count as Hollister because of its price points. I think the RUEHL store count would end up being approximately where kids ends up. Thanks, Lauren.

We now have Janet Kloppenberg with JJK Research. Janet Kloppenberg – JJK Research: Hi, everybody. Congratulations.

Thanks, Janet. Janet Kloppenberg – JJK Research: A couple questions. Mike, last fall there was a lot of strong trend in the business. I’m wondering if you could compare the strength of trend in the business? Also if your determination to curtail clearance events or eliminate clearance events will continue to influence the gross margin favorably, and lastly, on the square footage, it sounds like you’re becoming more aggressive, particularly with the success of RUEHL and maybe Concept 5 being launched at some point in the future and I’m wondering if we should look for the annual square footage growth rate to start to increase again? Thank you.

Okay. Let me comment on each of them. One, trend. I think we have very strong trend in the business right now. I think three’s always strong trend; you’ve just got to find it and jump on it. But as everybody knows, we’re battling a lack of trend in denim so we’re seeing major decreases in the denim classification and we’ve been successful in making up that decrease primarily in the top classification so you can see that in our AUR, you can see that in the transaction count. We’re driving the business with fashion tops. I think there’s always fashion top trend and I think we’re getting better at capturing that. I really view this season and this last quarter as a victory in terms of looking at a huge hunk of business that decreased and everybody listening to this call was totally concerned about that and being able to overcome this with fashion classifications at, what I might say, are higher margins than the denim. Two, the question about gross margin improvement in terms of no clearance events. There’s only one more that we’re not going to anniversary and that’s the week after Christmas, that we’ll take a lower profile. It won’t influence the gross margins dramatically because of the size of the fall season. I’ll let Kramer talk about the square footage growth.

Yeah, with regards to square footage, we are not going to become more aggressive. I would say that real estate is going to – quality real estate is going to drive these numbers. We are aggressive as we are always aggressive in terms of getting quality real estate. But I would still look to the 11% to 12% in the future. Again, we want to make sure that our growth is very – we’re going to be very cautious in our growth because we want to make sure that our – we have quality growth.

Thanks, Janet.

Next is Christine Chen with Pacific Growth Equities. Christine Chen – Pacific Growth Equities: Congratulations on the great quarter, everyone.

Thanks, Christine. Christine Chen – Pacific Growth Equities: I wanted to ask about the tax rate. I think you had guided first half to come in at around 39% and it came in below that and wondering what we should expect to use for the second half, and why the tax rate came in below 39%?

Well, the answer with regards to this is consistent with the first quarter. I mean, first of all, in terms of guidance for the back half of the year, I would look at the 39%. In terms of the second quarter, again, we’ve been really aggressive in terms of trying to resolve the state tax audits and when we’ve been able to finalize those and reverse some reserves related to those. I wouldn’t anticipate or expect those in the future. I mean, our tax group – we’ve got a great tax group and they are constantly focused on that so we’re very aggressive with that, so we’ll see, you know, in the future. But right now I would definitely take a look at 39% for a future tax rate.

Next is Lorraine Maikis with Merrill Lynch. Lorraine Maikis – Merrill Lynch: Thank you. Good afternoon. You were mentioning before that you don’t think that RUEHL’s target age group spends a lot of time at the mall. Has this caused you to reconsider street locations? Also, with regards to RUEHL, I know you’ve been tweaking prices a little bit; do you feel like you have the product priced correctly at this stage?

The answer is, I think we’re dead on in terms of prices at RUEHL. The first part of the question, they don’t visit the malls as often as their younger counterparts, but that’s where they shop. We are a mall-based business. Street locations are not meaningful to our business at all and I don’t anticipate that they will be.

Next is Marne Shapiro with Retail Tracker. Marne Shapiro – Retail Tracker: Hey, guys. Congratulations.

Hey, Marne.

Hey, Marn. Marne Shapiro – Retail Tracker: You guys have dabbled in all your businesses, in intimates and accessories and belts, and we have seen some success here and there. Could you just talk about the outlook across the businesses for those ancillary categories going back into the year?

Yeah, I guess you’re growing tired of me saying that we have potential in accessory business, but we do. We have potential in both the masculine and the feminine accessory business and I think we’re laying down the foundations to go after those businesses more aggressively. The reason for the potential in the business in the strength of our brands and strong brands carry good accessory businesses. Our personal care business, which is a function of the strength of the brands, is up roughly 40% on a likes basis, has been running for a couple of years. Our accessory business has been more erratic in terms of its growth. I think what we’ve learned about the accessories business is if you don’t dabble, you own it by classification. You’ve got to hit the right classifications and have dominant presentations. I think you’re starting to see that in our assortments. If you look at totes, currently, we’ve gone after them aggressively, the brands and spaced them properly and believed in them and gotten the business. That’s the model that we built and I believe that the accessory business will grow at a greater rate than our total business. Good question.

Yeah, let me add to that. I mean, just to reconfirm, you know, when Mike says laying the foundation, we are investing in our accessory business and secondly, as the CFO, I’m very excited about this business as it’s incremental business.

Now with Banc of America Securities, Dana Cohen. Dana Cohen – Banc of America Securities: Hi. Good afternoon, guys. Mike, going back to RUEHL for a second, obviously men’s is doing a lot better than the women’s, you know, just what’s going on there is because you’re farther down the road on men’s versus women’s or, and then second, for Mike Kramer, last quarter you gave us some helpful guidance that you thought you could lever on SG&A or expense line one at a zero to three comp. Is that sort of what we should think for the back half?

Let me answer the question about men’s versus women’s in RUEHL. Yes, men’s has comped at a better rate than women’s in RUEHL, but RUEHL women’s is climbing. So I think we’re on track with both men’s and women’s and we’ll see a closer parity in terms of likes in those businesses as we go forward. Something that we’ve not done well with, and I think we’ve said this, in the women’s classification has been the handbag category. We’ve struggled to find our handwriting there. I’m really pleased with the assortment that is in the stores right now. They are more casual than they have been and better related to our casual assortments, and we’re starting to sell those handbags. But again, the handbag business in a business that is something that we’re just giving birth to. We are sportswear specialists and we’re just having to learn that business so that business has the longest growth curve of any in the company. But we’ll get there. Mike?

Yeah, let me – I’m glad you asked this question because it gives me an opportunity to confirm something that hopefully is obvious to you. Yes, in terms of forward looking we will look to leverage the stores and distribution expense on a zero to three comp. That’s consistent. But the one thing that I wanted to point out was, we’re ending a quarter here with flat comps and yet, on a percentage basis, our payroll was lower. So not only in terms of leverage, but obviously we’ve found efficiencies in there. I would not count on efficiencies in the future but I would count on leverage.

We now have John Morris with Wachovia Securities.

Hey, John.

Mr. Morris, your line is open. John Morris – Wachovia Securities: Oops, there you go. Hey, guys.

Hey, John. John Morris – Wachovia Securities: Good afternoon. Question, I think, for Mike Jefferies. You know, there’s a little bit of criticism that we heard out there about the wear-now aspect of adults, Abercrombie adults heading into the fall, or the lack thereof. Can you – do you have any comment on that? Were there any classifications you’ve seen here in early going that maybe more prone or conversely, have proven that wrong actually?

No, I – yeah. I can hardly comment. I think we were properly positioned for back-to-school. We’re selling all of the categories well. I can’t comment on that. Maybe people saw that we opened with fur, which I thought was a terrific thing to register early and we sold it, so I – you’d have to be more specific about the criticism. I thought our assortments were balanced and where they should have been. John Morris – Wachovia Securities: Well, maybe another way to ask it, Mike, to the extent you want to give a little bit more color, you know, on some of the early fall like classifications, hoodies, for example, where we’ve, you know, had mixed reads out there. How do you feel about the classifications?

Fleece is and was one of our biggest and best performing categories in the company, in tops and bottoms. So I’d love to put that to rest. I think women’s fleece had the highest comp in any of the categories in the business and clearly our business is being driven by tops, so you can kind of figure out that kind of number. So, what’s – so I have no other comment than that. Thanks, John.

Now it’s Robin Murchison, SunTrust, Robinson Humphrey. Robin Murchison – SunTrust Robinson Humphrey: Hi, good afternoon. Congratulations.

Hey, Robin. Robin Murchison – SunTrust Robinson Humphrey: Dana asked my question but I’ll elaborate and piggyback off of that. Handbags, not doing well. You said they’re beginning to – they are beginning to sell. Having not been in the store recently at RUEHL, have you changed the price point structure and what’s going on with that store, the standalone store in Manhattan? Thank you.

Interestingly enough, that little store in Manhattan is doing and has done just great since the day we opened. But that doesn’t represent America. It’s there to be a laboratory for us. It’s not there to produce anything but inspiration and be a laboratory for what’s selling. The handbags are very different from where we have been. They are more casual. Price points are pretty similar to where we have been. What’s different is that we changed the look of the bags. So it’s a growth category for us. It’s insignificant in terms of our total at this point, as a corporation, but we’re investing a major amount in the category because we see a huge future there.

We now have Dana Telsey with Telsey Advisory Group. Dana Telsey – Telsey Advisory Group: Good afternoon, everyone, and congratulations.

Thanks, Dana. Dana Telsey – Telsey Advisory Group: Hi. So, I’ve been to the new flagship in Los Angeles and noticed some differences between New York and Los Angeles. What are you learning from the changes to the flagship being made and how are they being appointed to the remodelled stores? How are the remodels doing with the vitrines on the front and just lastly, Mike, you talk about newness in tops. Is the pace of newness like you’d wish in tops? Thank you.

Okay, flagship. You were in Los Angeles. It’s very similar to New York. I think the most interesting thing about the flagship business is that we are selling the same classifications in the same strength almost to a tenth of a percentage, Los Angeles to New York, which is very interesting to me. The vitrines in the – that we’re putting in the chain, people are really commenting. They love them, and they really are kind of attention grabbers. I thought that they’d be very decorative but I think people are kind of fascinated by them. So as you see, they have gone into our Tier 1 stores. We will put them into stores where we can afford them. They’re very expensive. The shutters that have been put on the stores have also caused a lot of really positive comment. So we think the strategy of making the chain look like Fifth Avenue is on its way. In terms of tops, yeah, that’s a daily thing. It’s a weekly thing for us, and I think the thing that people in the industry have to understand is that we’re committed to the flow of newness so you must really look at us on a weekly basis in terms of how we look. We do not deliver a whole assortment at the beginning of a season and live with that until we mark it down and deliver a new one. Our customer demands newness and the reason that our top business is as good as it is is that we flow newness on a weekly basis. Do we have enough? I have never said that we’ve had enough and we continue to push – on an hourly basis, Dana, I think you know that.

Next is Josh Schwartz with Flatbush Watermill. Josh Schwartz – Flatbush Watermill: Hi, guys. Good afternoon. Mike, I just had a question for you on RUEHL. You have changed a lot of the product and you’ve talked about it extensively, but there has been, as far as I know, no real change to the way the store looks. I’m curious if you could just explain where your thinking is now in terms of the image or the lifestyle that the brand ultimately is going to represent? You know, I think with Hollister, for me, it’s easy – and with Abercrombie & Fitch, you discussed it at length, about an Ivy League, privileged, northern image. Hollister, the beach in California seems to jump out. But with New York, there’s 10,000 lifestyles. I’m curious –

I think – what we want to capture in terms of New York lifestyle for RUEHL and I think we’re doing that is the great American kid who moves to New York to be successful. The kid from the Midwest who dreams of success, goes to New York to become successful. It is not an urban business. I don’t want us to feel like an urban business and I don’t think it feels like an urban business. I think it feels like a cool urban environment for great American kids and that’s the niche, and I think it’s really playing there well. I’m really happy with it. I think the photography has caught up with that. The models in the store have caught up with that. The energy level in the stores have caught up with that. I think as you walk into RUEHL, you really capture that and I think that is a niche that nobody else is occupying. So I couldn’t be more pleased with where that is, and I’ve been in all of the RUEHL stores over the last summer and I just couldn’t feel better about how they feel and look. But thanks, Josh.

You now have Jeff Feinberg with JLF Asset Management. Jeff Feinberg – JLF Asset Management: Congratulations.

Hey, thanks, Jeff.

Hey, Jeff. Jeff Feinberg – JLF Asset Management: Very impressive throughout the cycles. Tremendous performance. The question that I wanted to ask is I’m listening to some of the things you’re doing in distribution, store refresh, investment in RUEHL which will turn a profit, looking out into the future, and getting the inventories where you’d like them, it seems like you’ve sort of been in what I’ll call operating margin consolidation period and not that there’s, you know, tremendous opportunity to increase, but it does seem like directionally we’ve gone through those investments and we’ll be able to leverage those and get the paybacks that you’ve alluded to in a lot of your comments. Am I thinking about that correctly?

Kramer?

Well, yeah, I mean I think that there are some investments that we’re starting to get payback on and I think that there are some investments that are still in the investment stage and the paybacks, you won’t be seeing those until the near future. But I can assure you that we’re monitoring to ensure that we are getting payback on our investments. I mean, this is not a stage for us. This is ongoing. I mean, it’s built into our culture to constantly drive the business.

And improve the business.

And improve the business. So this is something that we’re penetrating, you know, from the CEO down in terms of having everybody think in that fashion. You know, the bar just continually rises. The bar continually rises. Jeff Feinberg – JLF Asset Management: Wonderful. Thank you for the terrific performance.

Thank you.

Next is Rob Wilson with Tiburon Research.

Hey, Rob. Rob Wilson – Tiburon Research: Thank you. Could you help us understand the $3.3 million other income for the quarter and also can you give us directionally a sense for transactions versus transaction size in the quarter?

With regards to the other operating income, roughly $2 million of that was insurance proceeds related to hurricane and – what was the second question? Rob Wilson – Tiburon Research: Transactions.

For average transaction value at adult, they were up 2; at kids they were up 3; at Hollister, they were 5 and at RUEHL, they were down 11. I would not necessarily look at it from an average transaction value. Our AURs are relatively flat across all brands with the exception of RUEHL, which is consistent to what Mike had indicated in terms of the pricing there. Again, you see in Q2 the growth coming from transactions which is what we’ve been saying and it’s going to continue – it will continue. You will not be seeing growth from AUR. Rob Wilson – Tiburon Research: Thank you. Appreciate it.

Next question is a follow up from Kimberly Greenberger with Citigroup. Kimberly Greenberger – Citigroup: That was my question. Thank you.

Next question? Is that it?

It’s Barbara Wyckoff with Buckingham Research.

Okay. Barbara Wyckoff - Buckingham Research: I queued up.

Thank you. Barbara Wyckoff - Buckingham Research: Hi. Good job, guys. It was terrific. A couple questions. Men’s in A&F and Hollister were slightly negative. Is this denim or tops related and if so, should we expect the trend to pickup in the fall and then I have just a question about IMU.

Clearly, denim was severely negative in all the brands in both sexes. We are having better tops likes in women’s than in men’s. Can I tell you what’s going to happen as fall progresses? I can’t, except to say that I don’t believe that the denim trend is going to get better. We’re just working as hard as we can to make the top trend as good as we can make it. But that’s really the bottom line. It seems to be easier to sell more tops to make up for the bottoms in the female businesses than the masculine businesses. But thanks for the question, Barbara.

Brian Tunick with J.P. Morgan is next. Brian Tunick – J.P. Morgan: Hey, thanks, guys. You covered a lot. Just two quick housekeeping. First off, when exactly does the Fifth Avenue flagship come into the comp base? Then, on option expense guidance, it seems low for the second half? Is there any change to your full-year option guidance?

No, the option guidance, $0.10 for the year, was in our filings. It’s in the Q1 filing. It’s approximately $0.04 and $0.04 for the first half and $0.01 and $0.01 for the three and four. As far as Fifth Avenue is concerned, we opened that store last year November 7 so you should expect it to enter the comp base on the 8th. Brian Tunick – J.P. Morgan: Terrific. Thanks, and good luck.

Excellent.

Is that it? From the Q&A? Thank you all for calling in.

Thank you.

This will conclude today’s conference. Thank you all for joining us today.