Eric Cerny – Manager of Investor Relations Jonathan Ramsden - Chief Financial Officer Mike Jeffries – Chairman and Chief Executive Officer Brian Logan – Principal Accounting Officer

Dana Telsey - Telsey Advisory Group Brian Tunick – JP Morgan Barbara Wycoff – Jesup & Lamont Richard Jaffe – Stifel Nicolaus & Company Michelle Clark – Morgan Stanley Jeff Klinefelter - Piper Jaffray Jeff Black – Barclays Capital Edward Yruma – Key Banc Liz Dunn - Thomas Weisel Christine Chen - Needham & Company Adrienne Tennant - Friedman, Billings, Ramsey John Morris – Bank of Montreal Kimberly Greenberger - Citigroup Janet Kloppenburg - JJK Research Randy Konik – Jefferies & Company Paul Lejeuz - Credit Suisse Michele Tan – Goldman Sachs Lorraine Hutchison – Bank of America-Merrill Lynch Dorothy Lakner – Caris & Company

Welcome to the Abercrombie & Fitch first quarter earnings results conference call. (Operator Instructions) At this time I would like to turn the conference over to Mr. Eric Cerny. Mr. Cerny, please go ahead, Sir.

Thank you. Good morning and welcome to our first quarter earnings call. Earlier this morning we released our first quarter sales and earnings, balance sheet, income statement and an updated financial history. Please feel free to reference these materials available on our website. This call is being recorded and the replay may be accessed through the internet at Abercrombie.com under the investor relations section. 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. Today’s earnings call will be limited to one hour. We will begin the call with a few brief remarks from Mike, followed by a review of the financial performance for the quarter from Jonathan Ramsden and Brian Logan. 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 any many callers as possible. As a reminder, the after-tax operating results for Ruehl for 2009 and prior periods are now included in discontinued operations on the income statement and comparisons to prior-year generally exclude Ruehl. Now to Mike.

Good morning guys. Thank you for joining us. Looking back on the first quarter I would summarize it as one in which we continued to focus on the key long-term drivers of our business that we laid out in our least earnings call. We are pleased with the progress we have made but there is still much work to be done. First, we are pleased with the overall reported sales growth of 14% for the quarter and particularly with the international and direct-to-consumer sales growth within that figure. We continue to be very focused on achieving sustainable, profitable growth in both our domestic and international businesses. Internationally results for the quarter were very encouraging. We opened three new Hollister mall-based stores in the U.K.; in Aberdeen, Cardiff and New Castle and all three are doing very well and exceeding our projections. The three Hollister U.K. stores in the comp base each comped positively for the quarter. Domestically we have taken steps in the right direction and have seen some progress evidenced by our overall domestic business which was positive for the quarter including Hollister. The continued outperformance of the Abercrombie & Fitch Tourist and high volume stores domestically is a significant consideration in our review of the domestic footprint of the brand. Coming back to international and growth opportunity there, by the end of the year we expect to have 34 Hollister stores in Europe and we are working very hard to increase the pace of international expansion. We have been adding resources where we need to and are at various stages of laying the groundwork in more than 10 additional countries. Our intent is to ensure we can keep a steady pipeline of new openings and we remain very excited about the opportunities we see ahead of us. We are balancing this accelerated pace with ensuring we do not over-store particular regions or sacrifice quality and end up in locations where we don’t belong. We want to ensure the locations we choose make sense from a brand perspective, a location perspective and of course a financial perspective. We have made some tough decisions this quarter to pull back on a small number of locations that do not meet all of these criteria and we will be very disciplined in how we approach this. We will not sacrifice quality for a short-term sales opportunity if it doesn’t make sense for us in the long run. Turning to Abercrombie & Fitch we announced this morning we will be opening a flagship in Madrid in 2011. Beyond that, we are looking at around 15 additional flagship opportunities in Europe and Asia through 2012. Again, we will be diligent and disciplined in how we approach this but we are very excited about the opportunities ahead of us. We also announced today we will open our first international Gilly Hicks store in London later this year. This will be a great opportunity for us to see if the international reaction to the Gilly Hicks brand is as strong as the reaction we have seen for A&F and Hollister. With that I will hand the call over to Jonathan.

Thanks Mike and good morning everyone. For the first quarter the company’s reported net sales increased 14% to $687.8 million and comp store sales increased 1%. Our direct to consumer business was up 42% for the quarter and new international sales were the primary drivers of our reported sales growth for the quarter. International sales in total were $119 million and up 102% in the quarter. Combining domestic DTC and same store sales for the quarter our overall domestic like for like sales for the quarter were up 4%. Our gross margin rate for the quarter was 62.7%, down 70 basis points. The erosion of gross margin was primarily due to a 10% decrease in AUR for the quarter which was somewhat greater on a mix-adjusted basis. We expect some further gross margin erosion in the second quarter. MG&A for the quarter was $96.6 million up 12% from $86.3 million in the first quarter last year due primarily to higher legal expenses, incentive compensation accruals and marketing expenses. MG&A for the quarter included total equity compensation of $8.3 million as compared to $7.9 million last year; somewhat higher than anticipated at the beginning of the quarter. For the second quarter we expect MG&A to be approximately in line with the first quarter in dollar terms with roughly half of the increase over last year’s second quarter being driven by higher incentive equity compensation. As a percentage of sales, stores and distribution expense for the quarter decreased to 51.5% of sales from 54.9% last year. Store occupancy costs for the quarter were approximately $159 million or 23.1% of sales compared to $154 million or 25.5% of sales in the first quarter last year. For the second quarter we anticipate occupancy costs to be a little higher in dollar terms before increasing more significantly in dollar terms in Q3 and Q4. All other stores and distribution costs were approximately $196 million or 28.5% of sales for the quarter and we anticipate a similar or slightly lower percentage for the second quarter. Operating loss for the quarter was $18.7 million compared to a loss of $33.9 million last year. The tax rate for the quarter from continuing operations was a benefit of 39.5% compared to a benefit of 28.9% last year. The tax rate for the first quarter included a modest net benefit for both the settlement of tax audits and the net release of valuation allowances. The reported net loss for the quarter was $11.8 million or $0.13 per basic and diluted share compared to a net loss of $23.1 million or $0.26 per share last year from continuing operations. Our international stores performed strongly during the quarter. The three new U.K. Hollister stores are exceeding our projections and as Mike mentioned earlier the three U.K. Hollister stores on a comp base, each comped positively for the quarter. On an overall basis four-wall margins for international stores were over 30% for the quarter. Turning to 2010 store openings we remain on track to open A&F flagships in Fukuoka and Copenhagen as well as a Hollister Epic store on Fifth Avenue in New York in the fourth quarter. We now have confirmed plans to open approximately 25 international mall-based Hollister stores in 2010 skewed towards the end of the year. Additionally we anticipate opening one A&F store in Canada. As Mike mentioned earlier, today we also announced plans to open the first international Gilly Hicks store in London in the fourth quarter. Domestically, we expect to open three A&F stores, two kids stores, three Hollister stores and two Gilly Hicks stores including a prototype of the smaller sized store format we have been working on for some time. We also expect to open five outlet stores. This morning we announced plans to open an A&F flagship in Madrid in 2011 and we remain on track to open an A&F flagship in Paris in 2011. The Madrid store is a smaller store with a footprint of approximately 14,000 square feet. It is in a great location and we expect it to be a successful and profitable store on conservative volume projections. Mike mentioned earlier we are working hard to increase the pace of our international expansion while remaining very disciplined in our approach to this. Based on current store opening plans and other capital expenditures we now expect total capital expenditures for 2010 to be in a range of $200-225 million including $165-190 million related to new stores, store refreshes and remodels and approximately $35 million related to IT, PC and other home office projects. This is down from the prior estimate due to lower store construction costs than previously estimated, the lower number of expected 2010 openings, other timing shifts and foreign currency impact. During the quarter we opened three Hollister mall-based stores in the U.K. Domestically we opened two A&F stores, one kids store and one Hollister store. Additionally we closed three domestic stores including one A&F store, one kids store and one Hollister store. We continue to review underperforming domestic stores for potential closures and expect to have a clearer view on that by the end of the second quarter. More broadly, we continue to work on each of the margin improvement factors we outlined in our last earnings call and we will provide updates on the subsequent earnings calls as appropriate. Inventory for the quarter was up 17% on a cost per square foot basis excluding Ruehl. This was somewhat higher than anticipated at the beginning of the quarter partially due to timing of receipts and higher DTC inventory but was in line with the overall increase in sales. We expect a greater increase at the end of the second quarter in part reflecting we believe we were under-inventoried at the equivalent point last year. We ended the quarter with $600 million in cash and cash equivalents and outstanding borrowings, letters of credit of $95 million compared to $464 million in cash and outstanding borrowings and letters of credit of $143 million at the comparable point last year. Now to Brian who will provide some additional details on our first quarter performance.

Thanks Jonathan and good morning everyone. As reported, first quarter net sales increased 14% to $687.8 million and comp store sales increased 1%. Our direct to consumer business was up 42% for the quarter and new international stores were the primary drivers of reported sales growth for the quarter. For the quarter average transaction per store increased 16%. Average transaction value decreased 4% and average unit retail decreased 10%. All metrics reflect an increasing proportion of sales coming from international. Across all brands for the quarter the masculine categories continued to outpace the feminine categories as male comparable store sales increased by high single digits while female comparable store sales decreased by a low single digit. From a merchandise classification standpoint on a total company basis for the quarter male graphic tees was a weaker performer while woven shirts, knit tops and fleece were stronger performing categories. Female knit tops and sweaters were weaker performers while dresses, woven shirts and graphic tees were stronger performing categories. For the quarter, store gross square footage was relatively flat. We closed a total of three stores during the quarter including one Abercrombie & Fitch, one Abercrombie kids and one Hollister store. We opened a total of seven new stores including three U.K. Hollister mall-based stores and domestically two Abercrombie & Fitch stores, one Abercrombie kids store and one Hollister store. We ended the quarter with a total of 1,100 stores; 341 Abercrombie & Fitch, 205 Abercrombie kids, 507 Hollister, 16 Gilly Hicks domestically and 6 Abercrombie & Fitch, 4 Abercrombie kids and 21 Hollister stores internationally. For fiscal 2010 we now expect pre-opening rent expense to be slightly lower than the $35.4 million incurred during fiscal 2009. This concludes our prepared comment section of the call. We are now available to take your questions. Please limit yourself to one question so that we can speak with as many callers as possible. After everyone has had a chance we would be happy to take follow-up questions.

(Operator Instructions) The first question comes from the line of Dana Telsey - Telsey Advisory Group. Dana Telsey - Telsey Advisory Group: Can you talk a little bit about how you are feeling about each of the brands’ progress and the product on men’s and women’s and pricing?

Sure. I think that from a product point of view men’s is and has been very much on track. It is performing very well, especially men’s tops and we have been on a track that is a long one. I finally see that getting better. Our problem has clearly been female and within female we have had a female tops problem. I believe we are making progress in female. The comp gap is narrowing between men’s and women’s and I believe those of us who have followed our business for awhile can take a look at what we are doing in that business and how we are merchandising that business and how it differs from the recent past. I urge you all to go to the stores on Saturday. Take a look at the classification statements that are being made. We have spent a lot of time determining trend, getting on trend and then backing the trend up with merchandise. I think you will see more of that as we go into back-to-school. You clearly won’t see our back-to-school assortments as of Saturday but you will see a merchandising strategy that is very much in our DNA. Clearly Hollister is the brand that is the most sensitive that we believe will be most sensitive on an ongoing basis and we think we are getting smarter about how we are pricing that product. Pricing and promoting the product and you know promotion isn’t a fundamental strength of ours but we are getting much, much smarter in Hollister in terms of what we promote, how we promote it and where we promote it. You will see continued promotion in Hollister because that is the way of life but you will see less promotion and you can already see that in Abercrombie & Fitch and Abercrombie.

The next question comes from the line of Brian Tunick – JP Morgan. Brian Tunick – JP Morgan: A little more clarity on some of the international comments. You gave us the number of Abercrombie flagships you expect over the next two years. Can you maybe do the same for Hollister or maybe talk about the total number of Hollister’s you see maybe potentially internationally? And then secondly are we still on track for $200 million in revenues between the U.K., Ginza and Milan stores? Anything you have learned from the Ginza opening?

Just to take those three components separately, the A&F flagship number of 15 that is the flagships we are currently looking at. We are not necessarily saying we are going to commit to all of those but they are the ones we currently have where we are actively looking and we are reviewing locations. Some of them are at different stages than others but they are ones we have potential to do between now and 2012. In terms of the number of Hollister’s, we haven’t at this point spoken to anything beyond 2010. We have updated the number to approximately 25 for this year and clearly we have been speaking to the fact we would like to accelerate that in 2011 and beyond and we are working hard to add additional resources there and to get people on the ground, researching all of the real estate opportunities with the caveat that as Mike spoke to earlier on we are not going to sacrifice the financials of those deals just to get to a higher number of store openings. In terms of the overall aggregate volumes in the flagships we haven’t updated that number. We probably will at some point in the future. So there is nothing to add on that at this point. Then in terms of the question of anything learned from Ginza can you just be a little more specific on that? Brian Tunick – JP Morgan: Obviously there was some noise about the [pits] or sort of the marketing effort versus the customer base. I was just curious if there were any surprises there. I know you said you had a record opening in the beginning but it has been a couple of months now. Just anything you could add about how Ginza is tracking.

Ginza is tracking very well. As we say, we virtually sell the same thing around the world. We are selling an awful lot of [fierce] in that store regardless of what the noise was.

The next question comes from the line of Barbara Wycoff – Jesup & Lamont. Barbara Wycoff – Jesup & Lamont: Can you talk about how you are approaching new store opening criteria in the U.S. for A&F and kids? Presumably these will be offset by some store closings at the end of the year. Could you talk about new projections on that?

We expect to have very, very few A&F kids openings going forward. There are some number of locations where we think it is appropriate. To your point we are continuing to review our store closure plans and we certainly expect that overall size of the footprint of the brands in terms of store count will be reducing rather than staying flat or increasing. It is just the magnitude of the number of stores we are going to close which I think is yet to be determined. As we mentioned, we expect to have a much clearer view on that by the end of the second quarter. It will likely over time continue to be the occasional A&F and kids opening if we see an appropriate opportunity.

The next question comes from the line of Richard Jaffe – Stifel Nicolaus & Company. Richard Jaffe – Stifel Nicolaus & Company: A follow-up on the domestic closing plan and the declining occupancy expenses. I am wondering what we should anticipate in terms of store closings both this year and next year and how we should anticipate the occupancy expense to trend?

In terms of closings first of all any closings we make for this year are going to be heavily skewed right towards the end of the year given when our leases generally expire. So there is going to be a pretty limited impact in 2010 and then the impact in 2011 will clearly be a function of the number of stores that we end up closing. We have spoken in the past to the number of natural expirations we have between now and the end of 2012. So in terms of occupancy that is clearly going to be a significant driver of that in terms of percentage of sales. Domestic productivity is clearly another significant component of that so I think at this point it is hard for us to give terribly specific guidance about 2011. Richard Jaffe – Stifel Nicolaus & Company: Any push back on store closings or any support on the other hand from landlords?

I think it is probably premature for us to comment on that. We are working through a process and I think when we are more complete with that process we will speak to where we are.

The next question comes from the line of Michelle Clark – Morgan Stanley. Michelle Clark – Morgan Stanley: It sounds like from a sourcing standpoint at the very early stages of realizing efficiencies can you just discuss the opportunity there from a sourcing standpoint to lower costs and how much longer you think that can play out for?

Sure. I have had that conversation about the fact we are doing better in understanding the strength of our [inaudible] by category because we are category specialists. We are doing a much better job of bundling fabric, trim and make and seeing really good efficiencies from that. We are pushing for the best average unit costs we can achieve while maintaining our quality levels and we have seen results. We are facing a very serious problem in terms of increased cotton prices which is putting more and more pressure on us to achieve these AUC reductions but we are doing the best we can. So there is a fundamental reason for us getting better average unit costs. We probably have more headwind as we get into spring than we have had in the past but we are still doing what we should be doing to achieve that. Michelle Clark – Morgan Stanley: The opportunity on vendor consolidation putting more in the hands of your top suppliers, still opportunity there?

Absolutely. That is going on. We see an opportunity to do a little more consolidation. We have done quite a bit of that but there is also conversation about being with vertical factories who can serve us as well so there is work to be done on that part of the business.

The next question comes from the line of Jeff Klinefelter - Piper Jaffray. Jeff Klinefelter - Piper Jaffray: Can you repeat what you said about the gross margin going into Q2? I missed what you said. My question is really on Hollister. I understand e-commerce has been tracking much obviously much better than the absolute comp the last several months. Between that and what you are seeing in your international stores what are you learning about the brand online internationally that you might be able to cycle back into the stores to improve productivity?

On the gross margin point what we said is we were expecting further gross margin erosion in the second quarter. Then your question was about Hollister?

About Hollister and how it has outperformed the stores in direct to consumer and what we could learn from that. That is a very, very interesting question. We think it is being driven primarily by two factors. One, the breadth of the assortment on the website. We have put the Epic assortment on the website so the broader assortment is driving more volume and two, levels of inventory; both very interesting points for us in terms of how we are looking at the Hollister business. Very astute question.

The next question comes from the line of Jeff Black – Barclays Capital. Jeff Black – Barclays Capital: Can you give us some color on inventory? I would have thought unit costs are coming down and inventory levels would have been a little bit lower. Can you shed some light on where you are increasing inventory by category if that is the case? Maybe units versus cost. How does that really impact what is possible in 2Q? You said a little bit of erosion but what are your thoughts there specifically around gross margins in 2Q?

On gross margin again what we are saying is we do expect some further gross margin erosion with AURs likely continuing to be fairly down year-over-year and by more than the other cost reductions and the net effect of all of the other items that flow into gross margin. I think overall as we said inventory was slightly higher at the end of the quarter but if you look at it as a relationship to sales it is not too far off. There were some timing issues at the end of the quarter that made it a little higher than we expected. Particularly given what we are coming off from last year, on a 2-year basis we are still down 14% on a per square foot basis so inventory levels I think still are quite conservative but we have clearly been speaking for awhile to the fact we are looking to be somewhat less conservative as we came into this year and as we go through it.

The next question comes from the line of Edward Yruma – Key Banc. Edward Yruma – Key Banc: You had indicated you are lowering the amount of new international stores you are opening this year given your desire not to over-store. With returns in excess of 30% on a four-wall cash basis can you talk about why you have backed away from some of these locations and maybe additional scrutiny you are placing on new locations?

Jonathan and I will both talk about it. We have to protect the brands and they have to be positioned in places that are the right level to support the brand. We believe that we had 30 mall locations in Germany that would be brand appropriate in terms of quality level of demographics, etc. I took a visit to a mall that was number 28 on the list in Munich and it clearly didn’t meet our quality requirements. So perhaps the mall goal for Germany is 26 instead of 30. Those are the kinds of things we are going through. We want to make sure that we are positioning this brand around the world in the right quality locations because we will expand around the world but we can’t get greedy.

To speak to the financial part of it when we look at what is happening with the Euro and the Pound at the moment that reinforces the need from our standpoint or the importance of being very disciplined about requiring margins of 30% or greater when we are opening these new stores internationally so we give ourselves the room to absorb some currency fluctuation and volatility and we have spoken in the past to some of the stress testing we do when we open new stores. Clearly there is a temptation to start opening stores at lower margins but we think in terms of the long-term health and profitable sustainability of the profitability we want to drive we want to remain very disciplined and drive those higher returns.

I think this gets to the point of our conversation last time and the fact we have a lot of levers to push to get to our 15% plus operating margin. Let’s just talk about what they are again for a minute; improving domestic productivity which includes reviewing underperforming stores and this is very much a focus. We did open stores in the Abercrombie & Fitch chain that we shouldn’t have opened. We over-expanded that chain. We are not going to do that in the future. We can achieve international growth which we are talking about but at a reasonable rate. We can return and are in the process of returning gross margin to historical levels. That is third. We are maintaining tight expense controls. We are achieving the Gilly Hicks roadmap goals which by the way Gilly Hicks had a great quarter and as a testament to that we are taking it to international as a test. And we now see we can grow DTC at a faster rate. We have a lot of levers we can push to get to this 15% plus operating margin and we don’t have to be doing things in the short-term that are going to take us off track for the long-term. I think that is the point of this conversation.

The next question comes from the line of Liz Dunn - Thomas Weisel. Liz Dunn - Thomas Weisel: My question relates to the distance between Hollister and Abercrombie both on style and price. How do you think about that as you move forward with some of the pricing changes?

Hollister is clearly going to be highly, is and will be highly competitive on a retail basis in the mall. We are saying that A&F is not going to be at the same level. It is approximately 30% higher than Hollister and kids is a little bit higher than Hollister. From a promotional point of view there will be many fewer promotions in the A&F brands and promotions will stay pretty high level in Hollister because that is where we have to drive that business. In terms of style all brands are classic casual American. As always Hollister has a bias to Southern California and the Southern California lifestyle and I think that does clearly identify that brand as different from the A&F brands. Liz Dunn - Thomas Weisel: So you feel comfortable you have maintained that distance in terms of the price and with the style? A lot of these dresses it is kind of a young look. How do you differentiate?

We run a young business and our customers do cluster around the ages that we target. Little Abercrombie is 12 year olds who want to 17; Hollister 16 and A&F 20. There is a lot of business around each of those age groups. Of course it overlaps but we are in total a young business. That is what we do well. When we get off track is when we start to think we are not.

The next question comes from the line of Christine Chen - Needham & Company. Christine Chen - Needham & Company: You called out you are opening five outlets in the U.S. this year. I was wondering in this environment does it make you rethink your outlet strategy and as you expand your footprint internationally how do you think about outlets internationally?

We have never viewed outlets as being strategic. We have viewed them as a way of dealing with excess inventory from our full price stores. As of now that continues to be our point of view. The outlets we are opening are to absorb additional excess units in total in the system. There is a question about what we do in Europe for excess inventory clearance there that doesn’t sell through in the stores. We are still reviewing a number of options there and haven’t set a final course. We are concerned about opening up outlets frankly in Europe at this time and we are also doing a roll out of full price stores. So we have been very cautious about doing that so far. Christine Chen - Needham & Company: Can you share with us the breakout of the five outlets? Is it skewed towards one brand or the other?

We will follow-up with you on that.

This is a very sensitive question by the way. We are very, very sensitive to this. In fact, we are contemplating opening an outlet in Italy and with our success in Italy it came to our attention that a new hot brand would be looked at very negatively by having an outlet in that country. Our purpose was only to clear old inventory but we stopped it. We are being very disciplined about our use of outlets.

The next question comes from the line of Adrienne Tennant - Friedman, Billings, Ramsey. Adrienne Tennant - Friedman, Billings, Ramsey: My first is really a comment about the spring inventory. The spring seasonal looks great. I know at the beginning of February you had to ship out some goods. Did you feel you were a little bit sort of at-risk in terms of not having sufficient seasonal and are you at the balance you want? Really quickly for Jonathan on the overhead for international how should we think about the 30% four-wall? How much should we shave off for the overhead and do you need to make further investments in the international investment base or can you just leverage what you have?

Thanks for your comments. Yes we were light in inventory because I did send a lot of it to outlet because we didn’t want to sell it in regular stores and we have been pushing very hard to get into statements. I think they are getting better. Again, I hate to say this but go into the stores on Saturday. I think you are going to like what you see. Adrienne Tennant - Friedman, Billings, Ramsey: It has been consistently improving so good job there.

On the second part of the question we spoke on the last call about the flow through rates on incremental international sales being about 20% flow through to operating income for the year. We haven’t specifically updated that but clearly that was anticipating that four-wall margins would be roughly in the range we are seeing; north of 30%. Over time we think the MG&A or fixed cost component of that can decline as we start to lever DC costs and some of the other pre-opening store specific costs and new country costs that are baked in at the moment. There are some additional investments we need to make as we roll out but as we have spoken in the past what we have been trying to do is hold our overall home office infrastructure pretty much close to its current level going back a few quarters and fund additional international investments through offsetting efficiencies. For the most part I think we have been fairly successful in doing that. At the same time, as we have discussed earlier on we are very interested in putting the resources we need to behind accelerating the pace of international expansion given what we have been seeing.

The next question comes from the line of John Morris – Bank of Montreal. John Morris – Bank of Montreal: Can you talk a little bit about the learning’s you are seeing about the differences to the extent there are any between the European consumer and American consumer particularly as it relates to the Hollister brand? Learning’s you have seen. And maybe just a brief commentary about hearing it in your words I think would be helpful to assess the success of the gift card marketing campaign that you began about six months ago. Clearly you can see it in some of the metrics but thoughts with respect to how you plan to go forward with that and do you plan to anniversary that?

Let me take the first part, the difference between European and American customers. One, the European customers are just buying more of everything but it is pretty much in the same proportion as we sell product in the U.S. There are some categories that are skewed and some of that skewing has to do with a little more advanced fashion. We think Europe is giving us a great head’s up on next. It is more advanced in some categories. It is pushing us to be more advanced and getting us I think smarter on the curve in the U.S. Essentially when you look at how we sell product around the world; ratio, male/female, by category it is amazingly the same. Jonathan?

On the gift card, I think the first point to note is the gift card is just one of a number of things we have done over the last few months rather than being the only thing. I think it has probably got a disproportionate amount of attention perhaps in part because of the accounting consequences of it. Clearly we thought it was accretive to [likes] and gross margin back in the fourth quarter when we did it. So we brought it back. We also thought it was a brand appropriate way of delivering a lower AUR and was relatively brand positive. So it is certainly something that is in our arsenal going forward and we may use it again at an appropriate point but it again is just one of a number of different things we can potentially deploy.

The next question comes from the line of Kimberly Greenberger – Citigroup. Kimberly Greenberger - Citigroup: You talked about the 15% operating margin goal and part of it is to restore your gross margins to historical levels. I am wondering if you can look out this year and tell us when do you think you might be able to stop seeing some pressure on the gross margin and indeed start to see some of that recovery and if you could just share with us Jonathan the average unit cost savings that you were able to achieve in the first quarter that would be great.

I wish I could tell you the day. What I can say is that we are doing everything we can at this point to influence those levels. The first thing is average unit cost. As I have said we are putting severe pressure on average unit cost. We will see better progress this year versus last in the third quarter and then the fourth because as we start to anniversary better fourth quarter AUCs last year but we have less pressure on the AUR fourth quarter. So we are doing everything we can from a cost retail perspective. I think the other part of the equation is to make sure we are not over-inventorying the organization so that we are forced to liquidate goods which would be margin negative. I can’t answer the question in terms of specific date. I can tell you we are doing everything we know how to do to get there.

On the second part of your question we haven’t spoken specifically to the quarter but we have said in the past we expected approximately a 10% like-to-like reduction in average unit costs for the whole of the spring season and that still remains what we expect.

The next question comes from the line of Janet Kloppenburg - JJK Research. Janet Kloppenburg - JJK Research: First a clarification on the flagships. I think you said 15 flagships in Europe by 2012. That implies an acceleration in flagships perhaps in 2011 and 2012. Maybe you could comment on that. Also if you could comment on Gilly Hicks and if the merchandising approach to the brand remains the same or if you have shifted that approach to a younger customer or older customer, price points, categories, etc.? Also, for Jonathan if you could address any FX pressure we should be thinking about this year given the change in the value of the Euro.

I will start with flagships. We said 15 Europe and Asia and that is an escalation. Obviously we couldn’t feel better about our flagship performance. These are the most productive stores in the world. There are obvious cities where they belong. We are working very hard to make these deals and to build the kinds of stores that deserve to be built in these cities. Janet Kloppenburg - JJK Research: Does that imply there could be more than two flagship stores open in fiscal 2011? I think right now it is Paris and Madrid.

What should I say?

I think it is getting tight [inaudible] 2011 openings.

We are working hard. I have spent a lot of time on that airplane recently. There are exciting opportunities. In terms of Gilly, you heard me say Gilly had a great quarter. It did. I think that we are doing a lot right with Gilly. We have focused the customer younger. She is clearly 20 years of age. We are merchandising to that. The product is more fun. It is more colorful and there is a style emerging for Gilly that I think is pretty thrilling. The Gilly girl is appearing in front of us. That is the most important thing. We have made strides in terms of pricing. We are more competitive in key categories and we have made strides in terms of how we are marketing in-store and out of store. This is something we are very proud of. Obviously we are to take it to White City we are going to be there with the big boys but we think there is potential here. It is a test but I am excited about it.

On the FX component in the first quarter we actually got a small year-over-year benefit from currency given where the rates ended up for the quarter. It was pretty modest. For the balance of the year we are obviously very focused on what is happening with the currencies. We do have some hedging in place particularly in the second quarter and then to a lesser extent the back half of the year. So we have a degree of protection in the short-term which progressively diminishes over time. So it is something we monitor very closely and I think it goes back to overall the most important thing as we roll out internationally is that we have the operating margin strong enough to withstand the currency fluctuations. There are other things we can look at over time that would also be a way of mitigating a long-term erosion of currency in countries we are going to operate in.

The next question comes from the line of Randy Konik – Jefferies & Company. Randy Konik – Jefferies & Company: I want to focus on Hollister. If you look at the average number of transactions you have seen a nice positive pick up there and then the average transaction values moderating in negative trend. Obviously you are getting more people in the doors. You are at a point where you are getting that price elasticity and demand from the consumer, you think that you can pull off like you said pull off the promotions a little bit more? How do you kind of see the transaction, the number of transactions versus transaction value? How are you trying to balance those levers as we go through the rest of the year?

I think you have to look at the international and domestic businesses separately as clearly the dynamics between the two are quite different. The metrics we provide are on a consolidated basis and include both parts of the business. Maybe you could just elaborate a little bit more on your question? Randy Konik – Jefferies & Company: I guess if we think about the U.S. business in isolation do you think you are getting the corresponding price elasticity and demand from the consumer with your more competitive prices in the most recent couple of quarters and how do you see that playing out over the next couple of quarters especially as the average transaction value compares will get easier in the back half of the year?

I think it is a week by week proposition. I think we are starting to learn more of what works and what doesn’t. It wouldn’t be fair to say we are just on a straight curve. As I said in the beginning of the presentation this promotion isn’t in our DNA but we are learning what is working and what is not working. We are seeing more elasticity in what is working and I think we will do more of that. But it is a work in progress. Is that fair Jonathan?

Absolutely. We now have an 18 month period where we have done testing on pretty much everything we have done and we have seen what has worked and hasn’t worked as well. Typically any promotion we do we hold out 20 or 30 stores and we don’t do it there and we track their performance and we do various iteration testing. So as a result of all of that we have a much clearer view of the things that are effective and those which are not which we can apply going forward. Randy Konik – Jefferies & Company: Is there any particular category or type of promotion you are seeing or you think has been most successful for you that you can share with us?

We can’t really share that. We are learning.

The next question comes from the line of Paul Lejeuz - Credit Suisse. Paul Lejeuz - Credit Suisse: A little bit more on Gilly. Is there any way for you to quantify how much better of a quarter Gilly had? What was the drag on your EPS line first quarter this year versus last year? I am also wondering if you have any thoughts of putting Gilly product into mall-based Abercrombie & Fitch stores? Finally, you mentioned that adjusted for selling mix on the gross margin line adjusted for selling mix AUR decline would have been greater. How is that going to look going forward? Should we expect the same thing in future quarters?

Let me just start by responding to the distribution of Gilly product. You all know what we really do is specialize in categories. We are category specialists. We have added two categories to our list of categories in which we specialize; bras and underwear. So we are building what I think is a really strong bra and underwear business. We have in front of us a number of options in terms of what we can do with those categories and I don’t have to state them. We can build more stores domestically. We can build stores internationally. We could put product within our stores. We could brand that product our own. We could brand it Gilly. There are a number of options open to us in this category. That is what makes it so compelling and so exciting we are seeing such progress in developing that product. Now I will turn it over to Jonathan.

I guess on the Gilly impact on Q1 it was roughly comparable to last year for the first quarter on an operating income basis. The comp itself was a healthy positive number. We haven’t yet started to break that out specifically. In terms of the selling mix impact on AUR directionally what we have said is the 10% AUR decline for the quarter would have been greater on a like to like basis so that is the true comparison with that 10% like to like average unit cost reduction. Directionally we would probably expect a similar pattern in the second quarter.

The next question comes from the line of Michele Tan – Goldman Sachs. Michele Tan – Goldman Sachs: I was wondering if you could give us a little more color on the Hollister stores? You mentioned the ones you opened in the U.K. were above plan this quarter. Is there any update you can give us on where the volume is in these international Hollister’s versus the U.S. and also any sense of magnitude on how those three stores in the comp base are comping? Is it strong double digit? Single digit? What kind of comps are you seeing?

I guess firstly on the relative performance of the U.K. Hollisters, we spoke on the last earnings call to the average volume of the existing U.K. stores to our average U.S. store and we gave a metric I think of six times at that point. We haven’t specifically updated that. It fluctuates a bit with currency and other factors. We also said at that point that on average the stores we were in at that point were likely to be the relatively more productive stores than when we are completely built out with the chain in the U.K. The relationship remains extremely positive in terms of the performance of the U.K. stores. I don’t think we are at a point where we are going to break out the comp performance of those U.K. stores more specifically. They did each comp positively for the quarter. Frankly, if they had been flat or slightly down we would have still been pretty happy given the incredibly strong opening each of those stores had. So the fact they are comping positively we think directionally is a very positive sign.

The next question comes from the line of Lorraine Hutchison – Bank of America-Merrill Lynch. Lorraine Hutchison – Bank of America-Merrill Lynch: With the cash balance starting to build up on the balance sheet can you talk about your expected uses for that cash and if there is a specific cash cushion level you will wait for until you perhaps begin returning it to shareholders?

I will turn it over to Jonathan but I have a very strong point of view the use of our cash is going to be to build stores and we will all see the biggest return there than anywhere. That is my bias and I will turn it over to Jonathan.

I think we clearly to Mike’s point we certainly believe the best possible use for our cash today is to open stores. The strongest returns are there. That is why we are particularly interested in adding additional resources and accelerating the pace of international expansion. We have always wanted to operate with a healthy cash cushion. I think there may come a point or likely there will come a point when we feel we have reasonably satisfied both of those objectives. Then we will address that when we get there. In the short run our focus is on deploying our capital for internal growth.

The next question comes from the line of Dorothy Lakner – Caris & Company. Dorothy Lakner – Caris & Company: I wanted to ask if you could give us some update on the work you are doing on systems particularly on the international side?

There are a number of projects we have been investing in fairly significantly over the last couple of years that are varying stages. We had a very significant implementation last year of Oracle RMS. We have an [IPOS] system that is in place for our international stores that we are now retroing into the domestic stores. The overall infrastructure we are very significantly through that from an international standpoint. There is a lot of country specific work that has to take place on a country by country basis. We are working through that. Overall I think the investment we have made and the time it has taken us to get there and the capital dollars have put us in a very great position. Dorothy Lakner – Caris & Company: Do you feel like you are in a good position internationally obviously with this acceleration you are potentially looking for through 2012?

Yes I think we have the infrastructures in place. As I mentioned there are some country specific things we need to address country by country as we go and they are unique to each country but the basic infrastructure is in place. Dorothy Lakner – Caris & Company: So when you talk about adding additional resources that is getting people on the ground in order to make sure you have what you need to get the stores open?

I guess additional resources in terms of first of all getting the real estate pipeline full and making sure we have people on the ground in countries we want to be in 18 months, 2 years or 3 years time and so we keep that pipeline full. Then for each country there are some local country resources we need to have in place; finance, payroll, HR, for example which is not really IT related but there are some country specific resource we should have in place relatively modest frankly but again as Mike mentioned earlier there are a fairly large number of countries where we are putting resources in place and laying the groundwork.

I think you know how disciplined and paranoid we are about putting that infrastructure in place on a country by country basis. There is a whole bunch of conversation about China right now. I am surprised the question didn’t come up. Dorothy Lakner – Caris & Company: Would you like to comment on it?

Yes. We understand and I think everybody on this call understands that China is going to be a huge market for our brands. But it has to be approached in a very thoughtful, disciplined way for lots of reasons. I could put a push cart out on the [inaudible] road and start doing business tomorrow but that is not how we approach going into a country as I Think you know.

We do already have the horses focused solely on China even though we haven’t yet set an opening date. Dorothy Lakner – Caris & Company: So you feel you are set up then should you choose to accelerate the flagship openings in 2011?

I do want to come back to that point because the answer to the question earlier about where we are with regard to the 2011 openings was not meant to imply that it is out of the question we could open in 11. There are still some opportunities we could contemplate and would be in effect late in 2011 in addition to Paris and Madrid and then a larger number of opportunities in 2012.

Ladies and gentlemen, we do apologize. However, due to time constraints this will end our question and answer session and this will end today’s conference call. We do appreciate your participation.

Thank you.