Thomas D. Lennox - Vice President, Corporate Communications Michael W. Kramer - Chief Financial Officer, Executive Vice President Mike Nuzzo - Vice President, Finance

Liz Dunn - Thomas Weisel Partners Lauren Levitan - SG Cowen Jeffrey Klinefelter - Piper Jaffray Brian Tunick - J.P. Morgan Rob Wilson - Tiburon Research Group Randy Konik - Bear Stearns Adrienne Tennant - Friedman, Billings, Ramsey Margaret Mager - Goldman Sachs John Morris - Wachovia Securities Kimberly Greenberger - Citigroup Lorraine Maikis - Merrill Lynch Christine Chen - Needham & Company Barbara Wyckoff - Buckingham Research Paul Lejeuz - Credit Suisse Robin Murchison - SunTrust Robinson Humphrey Janet Kloppenburg - JJK Research Josh Schwartz - Flatbush Watermill

Good day and welcome to the Abercrombie & Fitch second quarter earnings results conference call. (Operator Instructions) At this time, I would like to turn the conference over to Mr. Tom Lennox. Please go ahead. Thomas D. Lennox: Good afternoon and welcome to our second quarter conference call. After the market close, we publicly released a quarterly 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 dialing 888-203-1112. You will need to reference the conference ID number, 5786431. You may also access the replay through the Internet at Abercrombie.com. With me today are Mike Kramer, Chief Financial Officer; Mike Nuzzo, Vice President 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 today are subject to the Safe Harbor statement found in our SEC filings. Now to Mike Kramer. Michael W. Kramer: Good afternoon. We are pleased to once again post record financial results. We delivered strong sales and earnings growth while enhancing our brand standards. We made excellent progress operationally by improving inventory levels, completing a major component of the refresh program for Abercrombie & Fitch mall-based stores, and by developing the international rollout of the Abercrombie & Fitch brand. This quarter’s financial and operational results are strong but it is the consistency of our business that underscores the high quality of our earnings. We have developed an organizational structure that thrives on and benefits from the sharing of information. We look at the business as a whole, with one branding and operational philosophy. While our brand share attributes, each characteristic manifests itself uniquely in each brand. From the merchandising standpoint, this approach helps us to better translate trend, thus driving higher merchandising margins. We also apply this philosophy to other major areas of the company. For instance, to become more skilled and efficient, we pull expertise and establish standards by discipline, and then apply these standards throughout the organization. Each standard is supported by a process that has been developed over time and is audited consistently. For example, brand standards are established at the home office by our merchant team, who work in conjunction with areas including design and sourcing. Processes are in place to ensure criteria are met, including high levels of quality, proper fabric, trim and dye constraints, and consistency of fit, to name a few. Each member of the team is trained and responsible for monitoring the process throughout production until received at the distribution center, where it is inspected by quality assurance as a finished good before transported to the stores. Similar standards are applied to every area of the business. As a company, improving even the highest standard is what distinguishes our approach from the competition and will be critical to driving profitable growth as the business expands significantly over the next several years. This mindset has enabled us to operate at high productivity levels compared to other retailers, which should support high margins both domestically and internationally going forward. In fact, we are pleased to have the opportunity to leverage our operational strategy by growing the business. In addition to rollout of our international expansion, our fifth brand is in the development phase, set to be introduced by the end of fiscal 2007. Although I would not regard the Abercrombie & Fitch brand as mature, we are starting to reach its domestic capacity of 400 stores. Regardless, five of our most recently launched A&F stores, including the one on Fifth Avenue and those in Canada and London, are among the most productive and profitable stores in our fleet. Each of these stores continues to generate substantial volume and four wall profit. Compared to U.S. mall stores, this larger and more productive format is somewhat of a new model to us. Once we adjusted to the new demands of running a high-volume store, we were able to standardize our approach, resulting in a valuable and profitable model. Based on this success, as well as on our receipts from our web business, we are now ready to expand throughout Europe and Japan. We are aggressively looking for real estate in Italy, France, Germany, Spain, Denmark and Sweden, with plans to identify additional key locations in the United Kingdom. As you may have seen, we recently secured space in the Ginza district of Tokyo. We are focusing our international rollout in heavily trafficked cities to enable us to generate strong returns with fewer stores. We are also very excited because we believe the flagship format provides us with an opportunity to generate strong returns on invested capital with Hollister as well. We are currently in the design phase with plans to open a Hollister flagship domestically. International rollout will follow. We have secured excellent locations for RUEHL openings this year at Natick Mall, Annapolis and Washington Square in Oregon. We are planning to open two kids stores in Toronto in 2008. Now I would like to update you on our IT initiatives, all of which remain on track. In the second quarter, we completed the rollout of the store replenishment system. This system not only provides significant process efficiencies for store associates but the handheld scanner minimizes in-store out of stock. This allows for more immediate and accurate merchandising restocking. We recently implemented our SKU level planning solution, which supports merchandise planning at a more granular level. By year-end, we plan to put into operation a new business intelligence system which will consolidate all company data and reporting on to one platform, allowing more comprehensive analysis by providing, as we call it, one version of the truth. We plan to be online with the visual merchandising system by mid-year 2008 as well. This system automates the visual floor set process by creating personalized documentation for all stores that are tied to a master floor set. This process ensures high floor set integrity, managed and approved centrally while being able to provide the stores with their adapted layout of the floor set. Finally, the initial phase of the retail merchandising system is planned to go live in early 2008, with the last phase implemented over the following year. This system serves as a foundation of our application portfolio with initial focus on compiling all foundational data to improve purchase order management and the integrity of associated data. There is no doubt that we have huge opportunities ahead of us to generate strong returns on invested capital. In addition to our plans for domestic and international growth, we are making operational improvements. We are becoming more efficient and therefore able to work smarter. We are applying high standards across the business, resulting in an organization that performs consistently well from both financial results and brand standards perspectives. This approach reflects our goal to share information based on experience to leverage the major areas of our company. Not only does this lead to increased efficiencies but running several businesses under one brand philosophy generates both diversification and consistency of results, which we believe is truly what differentiates our company. Going forward, we will continue to raise the bar by improving our standards and positioning the company for its continued leadership position. Now Mike Nuzzo will discuss the financial results.

Thanks, Mike. Good afternoon. Second quarter net sales for the 13 weeks ended August 4, 2007 increased 22% to $804.5 million from $658.7 million for the 13 weeks ended July 29, 2006. Second quarter direct-to-consumer net sales increased 66% to $45.6 million for the 13-week period ended August 4, 2007, compared to the 13-week period ended July 29, 2006. Total company comparable store sales declined 2% for the 13 weeks ended August 4, 2007, compared to the 13 weeks ended August 5, 2006. Second quarter gross profit rate was 68.8%, down 30 basis points compared to last year. The decrease in rate was due to a higher markdown rate, partially offset by higher improved initial markup versus last year. This gross margin result is consistent with a strong fashion tops business, which contributes to both a higher overall IMU and a higher overall markdown level. We ended the second quarter with inventories down 12% per square foot at cost versus last year. This result is attributed to lower levels of basic inventory and having lower spring merchandise carryover on a square foot basis versus last year. Going forward, third quarter inventory per square foot at cost relative to last year is expected to decrease at an equal or slightly greater level than in Q2. This expected result should also reflect a continued reduction in basic inventory levels. As we implement our supply chain technology solutions in merchandise planning and allocation, we seek to optimize the relationship between inventory levels and our sales expectations. Stores and distribution expense for the quarter as a percentage of sales increased 50 basis points to 41.6% versus 41.1% last year. The increase in rate is attributed to increased direct-to-consumer expenses resulting from robust e-com sales growth, and increased store-related expenses, including supplies and maintenance. We also continued to tightly manage store payroll hours to match sales trends, while absorbing the added expense of minimum wage and management salary increases. Our distribution center UPH increased 14% in the quarter, reflecting greater efficiencies in the operation of our second DC. For the second quarter, marketing, general and administrative expenses decreased 80 basis points as a percentage of sales from 13.0% to 12.2%. The reduction in rate versus last year resulted primarily from a decline in legal, travel, sample, and in-store marketing expenses, which were partially offset by increased home office payroll as a percentage of sales. Incorporating the resource demands of product development and new concept rollout efforts, we expect MG&A expense of around $105 million per quarter for fall 2007. For the second quarter, operating income increased 21% to $124.1 million, compared to $102.4 million last year. The effective tax rate for the second quarter was 36.6%, compared to 37.5% for the 2006 comparable period. The reduction in rate versus the prior period primarily reflects the favorable settlement of a state tax audit. Net income for the second quarter increased 24% to $81.3 million versus $65.7 million last year. Second quarter net income per diluted share increased 22% to $0.88, versus $0.72 during the same period in 2006. In fiscal 2007, square footage is expected to grow by approximately 10%, slightly lower than the 11% to 12% previously estimated. The change is primarily the result of the shift of Hollister and A&F new store openings originally scheduled in January to the beginning of February, 2008. We also look forward to introducing our fifth concept with the opening of four stores in January. For fiscal 2007, our planned capital expenditures will be between $395 million and $405 million, with approximately $220 million of this amount allocated to new store construction and store remodels. Approximately $60 million is allocated to refresh improvements and other brand-enhancing investments planned for existing stores, with the balance related to home office, information technology, and direct-to-consumer infrastructure investments. For the second half of fiscal 2007, net income per diluted share is expected to be in the range of $3.63 to $3.67. Based upon this guidance, full year fiscal 2007 net income per diluted share is expected to be in the range of $5.16 to $5.20. The low-end of this guidance reflects a flat comparable store sales scenario for the second half of fiscal 2007. Please note fourth quarter fiscal 2006 results included incremental net income per diluted share of $0.06 resulting from an extra selling week in the fiscal 2006 retail calendar and $0.07 resulting from the favorable settlement of tax audits. As Mike Kramer discussed, we are excited about the ongoing high levels of sales productivity, international growth prospects, new concept development, internal operating improvements, and disciplined financial management of the business. The combination of all these factors provides us with a substantial ongoing advantage in delivering consistent earnings growth regardless of the retail environment. Now I would like to turn it back over to Mike Kramer before we take questions. Thank you. Michael W. Kramer: Thanks, Mike. As you may have noticed, Mike Jeffries is not participating on the call and will not participate in the foreseeable future. As our company continues to grow, the demands on Mike Jeffries, our CEO, becomes more and more increasing. With the two growth initiatives, concept five and our international expansion, we believe Mike’s time is better served focusing on those areas. This does not mean you won’t be hearing from Mike Jeffries. In the future, as analysts, investors, potential investors come on campus to see our brand, see our culture, at that time, depending on his schedule, as his schedule allows, we will have one-on-one time and/or group-on-one time. Thanks. Now to questions.

(Operator Instructions) We’ll take our first one from Liz Dunn with Thomas Weisel. Liz Dunn - Thomas Weisel Partners: Good afternoon. Congratulations on a great quarter. You took down store growth for every concept by my count about 23 stores, or about two points out of your growth. I’m wondering if, from the prepared comments it appears that you are favoring quality over quantity in terms of where you are opening real estate. I guess a two-part question; first, how much did this reduction in store count take out of your internal model for the year? Second question, or second related question is I think that some in the investment community believe that there are concerns about real estate availability. Could you just address that? Because it sounds like that’s not what you’re saying here. Thanks.

I can start on that answer. First of all, there is no concerns about real estate availability for us for the current plans for the year. What I would really like to focus on is that change in the square footage from 11% to 12% to 10% growth. Really, as I mentioned in the script, that is caused by the focus on having those January stores open in the most perfect condition, both from an operations standpoint and from a merchandise standpoint. The second issue is obviously with the introduction of our fifth concept, we are focusing a lot of resource attention on those store openings. So we felt that it was prudent to move those openings, which really represent about 10 stores, from the January timeframe into the beginning of February. It does not materially affect our sales projections at all and does not affect our guidance. Mike, do you want to add to that? Michael W. Kramer: Yes, I agree with your quality over quantity comment but let me talk a little bit about real estate availability. There is absolutely no concern with regard to real estate availability, both on the international standpoint as well as the domestic standpoint. In fact, the majority of our 2008 anticipated store openings are already locked and loaded. Again, this movement is just exactly as Mike Nuzzo laid it out. We are very excited about our real estate opportunities, both on the domestic and international front.

Thank you. We’ll go next to Lauren Levitan with Cowen & Company. Lauren Levitan - SG Cowen: Good afternoon. Mike, you spent a lot of time talking about how some of the initiatives would contribute to positive returns on invested capital. I am curious if you would be willing to share any targets you might have for ROIC. And then, related to that, with the lower inventory levels, you’ve in the past given us a sense of weeks of supply targets that you run the business off of. Should we assume that the lower basic inventories will lead to different weeks of supply targets? Lastly, related to metrics, would you ever consider eliminating the reporting of same-store sales on a monthly basis? Thanks. Michael W. Kramer: Let me see if I can catch all that. It was a pretty long question, Lauren. In terms of our initiatives, no, I am not going to talk about a specific return on investment with regard to these. You are starting to see some of the return. You will continue to see the return. We monitor that very closely on a pre and post basis. In terms of inventory optimization, as we said, Mike and I have talked over the course of the six to nine months in terms of a lot of issues related to our supply chain, and with that comes more of an optimization on inventory, so we are very excited about the movement in which we are focused on in that arena. In terms of same-store sales, as of this point in time we have, we are continuing to talk about same-store sales on a monthly basis but we will let you know as we change our mind.

Thank you. We’ll go next to Jeffrey Klinefelter with Piper Jaffray. Jeffrey Klinefelter - Piper Jaffray: Just a couple of quick questions, one on the international markets; Mike, could you talk a little bit more about the lead time for opening these stores? We know you have an aggressive plan now in front of you but in terms of thinking about timing and how these sequence in over the next few years, what is a lead time for a store opening there versus in this market? Is it going to continue to be only flagships or is there an opportunity to do a little bit more of a hub-and-spoke in some of these major markets? And then just lastly would be on Hollister; how are you researching international demand or brand relevance on the Hollister brand? Michael W. Kramer: I’ll take the first part. In terms of the lead time internationally, yes, the lead time with regard to our store development internationally will exceed that here domestically, largely due to I guess the state of the real estate, the brick and mortar available there. Not to mention the fact that with regard to flagships and the uniqueness with regard to flagships, more of Mike Jeffries time is involved. In terms of specific timing, I don’t really want to go into that. I’ll just leave it at that in terms of it is a longer lead time. However, I will tell you that I am surprised that there are some lead times that are pretty consistent with domestic. Now keep in mind also that Europe is embracing mall-based retailing and that’s going to increase, so we don’t see any difference in terms of lead time with regard to that. In terms of the Abercrombie & Fitch brand, we’ve been very clear about our initiative in terms of the international aspect being more what I call high profile. Not necessarily flagship in size but high profile meaning very high profile locations, street locations, not mall-based. In terms of the Hollister brand, we will look at that in terms of a hub-and-spoke mentality. We are very excited about the Hollister brand. I’ll let Mike speak to Hollister as well.

It’s pretty similar to the way we approach Abercrombie & Fitch international expansion. Looking at DTC trends, looking at our performance in Canada, obviously feedback from our brand protection folks, but also we have a number of what we call tourist stores that now those areas have Hollister stores as well. And we get a read from those locations about the potential business for Hollister internationally. We are obviously very excited about that on par with Abercrombie & Fitch expansion. Michael W. Kramer: Interestingly enough, the international locations that we have put in Abercrombie & Fitch brick and mortar, we’ve seen sizeable increases on the Hollister side of direct-to-consumer as well, as compared to the rest of the community.

Thank you. We’ll go next to Brian Tunick with J.P. Morgan. Brian Tunick - J.P. Morgan: My first housekeeping question I guess on the other income line, could you just remind us what’s in other operating income and how we should think about modeling that? And then my question really is on RUEHL. Could you just maybe comment -- is there any change in how you are thinking about the dilution to 2007 earnings and any early reads of RUEHL’s new store format and how you think about rolling that forward?

Brian, other income is primarily from the aging of gift cards that we take into income on a pretty systematic basis. As far as modeling go forward, I think it would be easy to look at last year for Q3 and Q4 and use that as a basis for modeling other income for 2007. Did you want to take the RUEHL? Michael W. Kramer: Yes, and you can add on. In terms of RUEHL, you know, guys, we -- this consistently comes up. We are very, very excited about this brand. We continue to see profitability in Q4 of this year and obviously the dilution impact to our profit this year will be much less than it was last year. We are not going to quantify that amount but we are very excited about it. We are getting to a scale of stores to where gross margin is not an issue and parity will be consistent with our other brands and we’ve really done I think some really strong legwork with regard to the expense structure and the cost reengineering, as well as, quite frankly, the new store format. The issue right now is in terms of store productivity on a top line basis, but we are seeing continued momentum there. We are very excited about it. We believe there is a niche in the age group of 22-plus for casual sportswear and we’re very excited about it, particularly some of our most recent stores. We actually had some very good sites coming up in the fall with regard to the smaller footprint -- Natick Mall, Annapolis, Washington Square, Burlington Mall -- so we are very excited about it and I hope you stop by and see the store.

Thank you. We’ll go next to Rob Wilson with Tiburon Research Group. Rob Wilson - Tiburon Research Group: Thank you. Could you remind us the start-up costs for concept five? I believe previously you said $12 million to $15 million this year. Is that still an accurate number? Also, what is the share count that is implicit in your back half guidance, diluted share count? Thank you.

Rob, as far as concept five, we did give guidance that it would be $12 million to $15 million for 2007. The first two quarters of the year, we spent roughly $3 million each so we are looking at about $9 million in home office expense for the balance of the year. I want to say specifically that is home office expense. When we get to close to the opening of those stores, there likely will be some start-up cost. I don’t expect it to be in excess of $1 million, but there will be some additional start-up costs as we get to the time of opening. And then as far as share count, we don’t give guidance on share count going forward, so I think that you can -- Michael W. Kramer: But what we can say is that any potential purchases of stock are embedded in our guidance.

Thank you. We’ll go next to Randy Konik with Bear Stearns. Randy Konik - Bear Stearns: Thanks. Could you talk a little bit about the Japan flagship hitting in ’09, we saw a lot of pre-opening costs in first quarter ’07 for London. Would we expect to see as much pre-opening costs for Japan? And when could we expect that to hit? Are you seeing right now costs hitting the system for some of your systems improvements and before implementation, and when should we start to see those costs being levered -- in early ’08, mid ’08, et cetera? Michael W. Kramer: Yes, you should continue to see some start-up costs related to Tokyo, whenever it opens. We haven’t really indicated exactly when that store is going to be open for you to build that into your model, but suffice it to say it won’t be 2009. I would say the amount would probably be roughly the same as you saw with regard to London. In terms of the costs of systems before implementation, that has already been embedded in and has continued to be embedded in as we talked about our increased investment in terms of IT. I’m not going to go into specifics by initiative by initiative to tell you when you are actually going to start receiving the benefit. But what we have told you, and at length in terms of the beginning of the call, is when you might see these actually rolled out, and you should see -- you know, you are starting to see some efficiencies built into our system. I mean, hopefully I’m not calling this out and you guys looked at this but in terms of our ability to grow EPS at the same rate that we did top line with a negative 2 comp for the quarter, there is some leverage happening on a negative comp basis. And where are we getting that? We are getting that through optimization in our systems, as well as other optimizations in terms of our P&L. So you are starting to see it. You are going to see a little bit more as time goes on, I think at an increasing rate. But we don’t want to get into specifics.

Thank you. We’ll take our next question from Adrienne Tennant with Friedman, Billings, Ramsey. Adrienne Tennant - Friedman, Billings, Ramsey: Good afternoon. I just wanted to talk about the repurchase activity in the quarter and how we should think about that going into the back half. I think you still have about 4.7 million shares outstanding on that. And then just secondly, when you go into these international markets, what type of market research are you doing, kind of design changes or sizing changes for the different tastes and the body types?

Repurchase activity go forward, I can tell you that we do intend to get into the market and repurchase shares in Q3. We will not obviously give you color on how much but I can tell you that our earnings guidance does reflect that. Do you want to take the international? Michael W. Kramer: Yes, we’ve said many a time that our brand is global in terms of how we are treating it in the rollout. There will be no difference in terms of our product assortment in our stores in Japan as they are here in the United States. However, allocation and/or replenishment is done based on sales, so just by sheer nature of that, depending on the SKU with regard to sizing will fall out within that process. And in anticipation in new stores normally, particularly in new markets, we will start with a higher week of sales so that we anticipate not losing any sales based on differences in size selling.

We’ll take our next question from Margaret Mager with Goldman Sachs. Margaret Mager - Goldman Sachs: Hi, how are you, Mike and Mike, and tell the other Mike we’re sorry he’s not going to be with us anymore. Michael W. Kramer: We will. Margaret Mager - Goldman Sachs: Can you guys talk about bottoms and denim and what’s happening on that front in terms of business drivers, and how you are thinking about that? And then I’m just curious, on your run-through on your expense, which you did a great job managing overall, I’m just curious -- what is the increase in home office payroll? What is that attributed to? Thank you.

Margaret, what I can tell you about the bottoms business for the quarter -- and this should come as no surprise, we’ve been talking about it -- the shorts business was very strong for the quarter, and I can also tell you that the trend in denim improved over the course of the quarter. Now, what that means go forward, we really can’t comment on and again, overlaying that, our tops business has continued to be very strong across all categories -- fashion knits, fleece, just continued to be very strong but I don’t want to get into commenting about the back half of the business. Michael W. Kramer: In terms of the expenses, the increase in home office and payroll, a large portion of that is our investment in concept five, and then there are obviously other strategic initiatives, such as IT and so forth, that we have invested in as well. But keep in mind it’s at a lower rate than it has been historically. Let me tack on to the conversation, let’s talk theoretically about the business in terms of, you know, Mike Jeffries is very, very clear about the fact that we are building a consistent long-term business without losing focus of short-term, that our focus is long-term. And we’re not like any of the other retailers out there. We are building a business for long-term growth. What I can tell you in terms of we’re not going to talk about future trends, anything outside of the period that we’re reporting on. We’ve tried to not do so in the past and we will continue to not do so. We believe that the investor should be looking at certain things like who is the best at determining trend, who is the best potentially sometimes dictating trend, who is the best if you miss trend in terms of reacting and responding, and we believe the answer to that question is us. We are a very solid player in terms of the product and meeting trends. We are a very solid player in terms of our management team. We have the best CEO in the business. We have a strong operational team. We have a strong balance sheet and we have lots of growth initiatives. Need I say more? So it is not about whether we miss lace or whether we hit plaid on shorts. It’s really about our long-term ability to understand our customer and trends.

Next we’ll go to John Morris with Wachovia Securities. John Morris - Wachovia Securities: Thanks. A question about third quarter, Mike Kramer, I guess; some of the companies we’re talking to have, are indicating that there is a fairly significant calendar shift effect because of the 52/53 week and understanding you guys don’t -- you guys give us guidance according to season, are you -- do you see the same kind of shift out of Q3 and into Q2? And do you care to quantify that or give us some kind of color on it so it will help us model accordingly? Thomas D. Lennox: Well, the color -- I’ll start off with this and Mike Kramer and Mike Nuzzo can add to it, but I think that we’ve done a pretty good job of really clarifying some of the shifts with regard to what we posted in July and had the tax shift not occurred, what our likes would have been. So you could -- I’ll let you guys do the calculation and build that in and in terms of any other shifts, we’ve obviously built that into our guidance on the back half of the year. Now, the one thing that I want to point out -- which again, I don’t know that I need to point it out; I’m assuming that you guys are smart enough to calculate this -- with regard to the entire spring season, we grew our EPS 15%, and compare that with what we are guiding to on the back half of the year with our EPS guidance. It’s roughly 11% to 12% face value. But if you exclude the 53rd week, as well as the tax rate, and I’m not going to even talk about the salaries because salaries have been in there both spring and fall, that gets us to about 16% to 17% growth. So we are guiding to a higher growth in the back half of the year than we did the first half of the year. Mike.

Nothing to add.

We’ll go next to Kimberly Greenberger with Citigroup. Kimberly Greenberger - Citigroup: Thank you. Good afternoon. Mike, your commentary earlier about the drive for constant improvement was really helpful and I’m just wondering if you can talk about process, procedures, standards -- in what areas of the company do you feel most advanced in terms of that constant drive for improvement? And where do you see the most opportunity going forward? Michael W. Kramer: Well, I can honestly tell you that this drive for improvement is pretty evident throughout the company. Obviously we have some of the areas that I think are doing better in that arena and some that aren’t, and I think that you can tell by where we are putting our initiatives, you can tell where we think is the weakest link. But we are making great strides with regard to that. Now, I’ve said publicly before, you know, I have a CEO that is right-brain/left-brain and his focus and his constant pressure is setting standards, raising the bar, setting processes in place to make sure that we are meeting our standards and also auditing that. Why is this so important? It’s so important because guys, we’re almost -- we’re at a run-rate of a $4 billion company and these processes are so important for us to maintain as we grow to $6 billion, to $7 billion. They become more and more important as the business grows and you lose a little bit more touch to the front line. That’s just inevitable. There are a lot of retailers out there today that are in the ditch on the road to success because they didn’t focus on the processes. And this is something that Mike Jeffries talks about every Monday and we are focused on it. I know I answered your question more of in general terms, but I think you can really tell where we are focused on in terms of where we are talking about our initiatives going.

I would just add to that I think part of the benefit that we are going to get through our investment in technology is a very key piece of this whole puzzle, which is audit, and I think that the reporting that we are starting to see and starting to get over the reporting that we used to get is starting to pay dividends. I think the ability for people to look at summary information dashboards, I think has really helped with our business decision-making and I think that -- I think that you can come up with a process, feel good about it, but you sometimes get to the point where you just assume that it’s working correctly and the audit piece of it I think is going to be a real distinguishing aspect as we go forward over the next couple of years.

Next we’ll go to Lorraine Maikis with Merrill Lynch. Lorraine Maikis - Merrill Lynch: Thank you. Good afternoon. The progress on inventory was pretty striking this quarter. Can you just speak a little bit about how exactly you did it and how the new systems will help you make further gains? And then, how much free cash flow do you plan to generate for the year? Michael W. Kramer: On the inventory side, we have been driving the inventory performance in the basic categories for some time now, and that combined with some real strategic work on spring in managing the triggers and the receipts at the end of the season, and really just focusing on coming out of spring as clean as possible, but also really setting the stage for planning inventory flows for the back half of the year and then into spring ’08, we feel like the technology enhancements to the planning system are still yet to reap all of the benefits that I think we are going to see. Because we’ve worked so hard at a macro level that the benefit of the technology is going to be at the micro level, at planning individual key items and ensuring that the inventory that we buy into is right for the sales plan for each of those key items. We are obviously thrilled about the progress we’ve made but I guess what I’m trying to say is that we are really only just starting to, as I said, tie the inventory buys more to where we think the sales are going to go. So we are obviously very happy about that. Do you want to --

In terms of the free cash flow for the balance of the year, my answer to that is lots.

We’ll go to Christine Chen with Needham & Company. Christine Chen - Needham & Company: Thank you. I wanted to ask about RUEHL just as a follow-up. You said that it is really targeting 22 and up. What sort of is the average sweet spot age there that you are seeing shopping in the stores? And in the malls where RUEHL opens up, have you seen any impact at all on the core Abercrombie & Fitch stores, and then D&A and CapEx, since I think I missed it. Thank you. Michael W. Kramer: Well, for the most part with regard to RUEHL and the customer base that we are targeting, we feel strongly that the shopper that we are seeing, it represents a wide range of ages but it is really more centrally targeted on our target age group. As far as any sort of cannibalization on Abercrombie & Fitch stores in the same malls, we have not seen it. Again, it speaks to the fact that we feel like the customer age range is consistent with what we originally planned it to be. So I think we have not seen any issues there.

Thank you. We’ll go next to Barbara Wyckoff with Buckingham Research. Barbara Wyckoff - Buckingham Research: The new replenishment system you talked about, Mike, what does it do for you versus the prior system? Michael W. Kramer: Well, keep in mind that over the last year, we had implemented a manual replenishment system where there was a paper printed out every so often, and albeit we made great strides in terms of productivity but like what we are trying to drive throughout the organization is always raising the bar as we brought in IT and made this more of an electronic, to where you can actually have real-time information at any point in time. It’s been very successful for us, particularly in our large volume stores because it really is real time. They have handheld devices that enable them to review what was sold since we last replenished the floor and be able to get it out on a very timely basis.

Next we’ll go to Paul Lejeuz with Credit Suisse. Paul Lejeuz - Credit Suisse: Thanks, guys. Can you quantify the impact of having that extra week in August versus losing one in May? I don’t know if you do that in terms of basis points on operating margin or pennies per share. That’s one. And then second, with the low end of your guidance reflecting a flat comp, I’m just wondering what you are seeing in the business that justifies planning for flat, just given that you haven’t seen that in a couple quarters. Thanks.

I can answer that by saying that again, this is similar to an earlier question that was asked; we’re not going to get into trying to quantify the calendar shift that occurred, not the tax-free shift. We are going to assume that you guys have seen the 22% increase in sales for the quarter on a negative 2 comp is not what the go-forward relationship would be but you guys can do the calculation on that. As far as your point about not building the guidance on a flat comp and not having performed to a flat comp, I think the only thing I can say is what we disclosed in July, which was if you exclude the tax-free holiday shifts, the business was running up 2, and so that’s a point of data for you. But as far as the guidance, we have gotten into I think a good, consistent message by tying the guidance to a flat comp and then obviously just working through it as we get into the season. Michael W. Kramer: The only thing that I would add to that is historically, we are a very conservative company and we feel really good about our guidance and we believe it is conservative. We aim to beat it, as we always do.

Next we’ll go to Robin Murchison with SunTrust Robinson Humphrey. Robin Murchison - SunTrust Robinson Humphrey: Thanks. Most of my questions have been answered but I do want to ask you just a little bit in terms of your relationships with your overseas suppliers. There was an article in the Journal today that mentions you guys with one supplier, which is not terribly consequential to you at this point or anything, but is everything fairly stable? How do you feel about the relationship overseas and in pricing opportunities overseas? Thanks. Thomas D. Lennox: The interesting thing; the Journal article today that ran was actually from a vendor of a vendor of ours, so they were once removed. So obviously, as you said, there’s very small exposure there. As far as what’s going on in the greater landscape for relationships with vendor and pricing, I think that you would see in our most recent quarter that actually we secured IMU benefit. There is a lot of chatter about what is happening on a go-forward basis as far as inflation is concerned. I think it is difficult to understand. We have a very good handle on that. We’ve got great relationships with our factories. We are in probably north of 35 different countries and hundreds of factories, so I think that we’ve proven over the last -- I’ll just say 10 years at this point because Diane Chang continues to head up the sourcing area here that not only do we have good relationships but we secure the highest level of quality for the best price and we hope to continue to be able to do that. Michael W. Kramer: I’ll add to that. We have one of the best supply sourcing leaders in the business and she maintains a great relationship throughout those 35 countries. We are in lock-step with, you know, you have seen a lot of stuff in the press in terms of stuff coming out of China that is bad, or you have also heard about the earthquake in Peru and we actually have manufacturing in Peru. In conversations with Diane, we are seeing no inflationary impact and none of the things that you have heard in the press recently have impacted our supply chain.

Next we’ll go to Janet Kloppenburg with JJK Research. Janet Kloppenburg - JJK Research: Congratulations on a very good quarter. Mike Kramer, I was wondering if you could just talk a little bit about the spend on the new concept five and whether or not you thought that concept, I think it is coming out to about $0.06 a share, and whether we should sort of think of that as a hurt to your outlook, or was there something in last year’s numbers that was an investment spend as well that you don’t have this year? And with respect to the IT spend, I was just wondering -- are we seeing results in the operating margin now or are we -- is the investment still outweighing the incremental benefit that we should look forward to in the future? And lastly, if you could give us a back-to-school outlook. Thanks. Michael W. Kramer: With regard to the impact of concept five, we indicated to you the spending that was going on in terms of dollar amount and comparing that to the previous year, now keep in mind there was continued investment in RUEHL. We actually quantified to you the loss with regard to RUEHL last year. I said that it would be better this year. I mean, that’s the beauty about our cost structure and our ability to invest in future initiatives. And we are not investing in them all at once. And as we are seeing improvement in our investment in terms of RUEHL, we are able to afford continued investment in other areas without negatively impacting our business. On a side note, we are investing more in concept five than we did in RUEHL from an out front stage but hopefully that will secure quicker success. From an IT spend, we are seeing small results, as I said. We anticipate bigger and better results. From an investment, I think the investment today still is outweighing but we -- you know, in the near six to nine months, I anticipate seeing more results. In terms of back-to-school, we’re pretty clear about not talking about that. Our thoughts with regard to back-to-school are embedded in our guidance and you saw a little bit of the beginning of back-to-school in our July sales results.

We’ll next go to Josh Schwartz with Flatbush Watermill. Josh Schwartz - Flatbush Watermill: I just had two questions; Mike Kramer, just to clarify, when you guys first started, you embarked on all these investments in IT, your comment was that the objective was to leverage, get leverage from $4 billion to $5 billion in sales, not 3 to 4. I’m curious if -- I think you just in answering that last question, you alluded to wanting to see some incremental benefit six to nine months out, so that may be the case. But you had made a comment about $6 billion to $7 billion in sales, so was confused if there was a different thought today. The other thing is going forward, there’s been a lot of spend in the last two years on CapEx not related to store, new stores. I’m curious what you think that’s going to be like going forward, if there will be some fall-off in the non-store CapEx. Thanks. Michael W. Kramer: With regard to our investments in IT and the productivity or the enhancements that it’s providing for us, maybe it was misinterpreted but I think we are saying the same thing. I anticipate actually reaping some reward on these investments as they start to stagger into play. Now, keep in mind that the majority of the investments, as well as some of the bigger pieces of investments, do not really -- are not really implemented until 2008, 2009 timeframe. So from $4 billion to $6 billion, I anticipate some traction in that arena and I anticipate full traction from the $6 billion on. And again, there’s going to be continued investment as well as we grow our business.

Josh, you asked about CapEx not related to stores. I will throw in stores for a second but as you think about us going forward with CapEx investment, as you understand, there always will be that core CapEx investment in new stores. This year it was $220 million. Next year, you can probably think about it in the same context. Again, the wild card is flagships and international development. We will still be refreshing stores. We have done some catch-up over the last year or so, so the level of investment from the refresh standpoint is likely to not be as much, but on the home office side in terms of IT and core home office development, just to give you some color, I think that the investment there will be probably pretty similar to what we’ve been spending over the last year or so. Again, we’ll be providing pretty detailed CapEx investment expectations when we get around to the fourth quarter conference call, but maybe that gives you a little bit of color thinking about it go forward.

That is all the time we do have for questions today. That does conclude today’s conference call. You may now disconnect your lines at any time.