Good day, everyone. Welcome to the BJ's Wholesale Club Incorporated first quarter earnings results conference call. There will be formal remarks made by the company and then we will open up the call for questions. At this time, I would like to turn the call over to Ms. Cathy Maloney, Vice President of Investor Relations. Please go ahead.

Thank you, Felicia. Before we begin, let me remind everyone that the discussions we are having today include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual results and/or performance to differ materially from those indicated by such statements. The risks and uncertainties include, but are not limited to, economic, regulatory, and weather conditions, competition, litigation, and other factors outlined in the company’s annual and quarterly reports which are on file with the SEC. While the company may elect to update its forward-looking statements, the company specifically disclaims any obligation to do so, even if the company’s estimates change. Now I’ll turn the call over to Frank Forward, BJ's Executive Vice President and Chief Financial Officer. Frank D. Forward: Thank you, Cathy. Good morning, everyone. With me this morning are Herb Zarkin, Chairman and CEO; and Laura Sen, President and Chief Operating Officer. For the first quarter ended May 3, 2008, net income was $17.2 million, or $0.29 per diluted share. Comparatively, for last year’s first quarter ended May 5, 2007, net income was $13.7 million, or $0.21 per diluted share. Last year’s first quarter results included post-tax income of $0.6 million, or $0.01 per diluted share, related to the closing of our pharmacies. Adjusting for the unusual income last year, on a non-GAAP basis EPS was $0.29 this year versus $0.20 last year, a 45% increase, and net income was $17.2 million this year versus $13.1 million last year, an increase of 31.5%. The percent growth in earnings per share is greater than net income growth due to the high level of share repurchases we made in 2007. On the same non-GAAP basis, excluding the unusual income from last year, first quarter operating income as a percent of sales was 1.29% in 2008 versus 1.10% in 2007. This earnings growth was driven by strong increases in traffic and comp merchandise sales, higher merchandise margin rates, and good control of club expenses, partially offset by an unfavorable mix impact on margins from an increased contribution of low margin gasoline sales. The strength in merchandise sales and traffic reflects the operational improvements we made in the business versus a year ago and our members increased appreciation of BJ's value proposition during tough economic times. Our sales also reflects some benefit from inflation, probably worth about 1% to 2% to our comps. The increase in merchandise margin rates reflects a favorable mix of sales, with strong sales of high margin perishables. It also reflects last year’s first quarter being affected by markdowns taken in February and some unfavorable issues in perishable salvage that we now have under better control. In detail, total sales for the first quarter increased by 12.3% to $2.26 billion, compared with $2.01 billion last year. First quarter comparable club sales increased by 9.6%, which included a contribution from gasoline sales of 3.9%. Comp merchandise sales excluding gasoline increased by 5.7%. Total comp sales were favorable to our guidance of 7.5% to 9.5%, mostly due to the higher-than-planned gasoline sales. Our comp merchandise sales excluding gasoline was at the high end of our guidance of 4% to 6%. Next, I’ll break out comp club sales by major markets, including the impact from sales of gasoline. There will be three columns. I’ll begin with the region, then comp club sales, and then contribution from sales of gasoline -- New England, 6.9%, 260 basis points; Upstate New York, 14.7%, 720 basis points; Metro New York, 8.6%, 80 basis points; Mid-Atlantic, 10.2%, 450 basis points; Southeast, 9.7%, 650 basis points; and total comp, 9.6%, 390 basis points. Excluding the sales of gasoline, first quarter traffic increased by approximately 3% and the average transaction increased by approximately 3%. The 3% increase in traffic is our strongest result since the first quarter of 2004 and is a very encouraging sign of the strength of our business. We estimate the negative impact in comparable club sales from new competition and self-cannibalization was worth approximately 1.4% in the first quarter, a level similar to the fourth quarter of 2007. During the first quarter, comp sales of food increased by approximately 8% and general merchandise sales increased by approximately 1%. Departments with strong first quarter sales included juices, coffee, frozen, milk, dairy, produce, fresh meat, paper products, health and beauty aids, household chemicals, and toys. A number of departments benefited from price inflation but in many cases, we also saw nice increases in unit sales, leading us to believe that our members are increasingly attracted to the strong value proposition we deliver. Our best estimate is that inflation is adding somewhere between 1% to 2% to our overall comp sales. Departments with weaker first quarter sales included cigarettes, pre-recorded video, tires, sporting goods, apparel, jewelry, storage, furniture, and summer seasonal goods. Now let me go through some of the first quarter income statement detail -- MFI and other increased by 1.4% in dollars versus last year. Cost of sales, including buying and occupancy, decreased by 13 basis points. SG&A expense decreased by 19 basis points and pre-opening expense was approximately $0.5 million, versus $1.3 million in Q1 of 2007. MFI and other dollars increased by 1.4% over last year. First quarter MFI growth slowed relative to last year’s growth because we have now fully cycled the two-year benefit from the $5 MFI increase made in January 2006. Additionally, MFI growth was affected by the lower number of new club openings in 2007. Membership renewals in the first quarter were slightly favorable to plan, which for the full year assumes an increase in renewal rates of 0.5% to 1.0%. In March and April, we also saw strong increases versus last year in paid new member sign-ups, which we attribute to the success of our moms converting people to paid memberships during our spring trial membership program. Cost of sales as a percent of sales decreased by 13 basis points due to the following: merchandise margins excluding gasoline increased by about 30 basis points. This was driven by a favorable mix of sales in high margin departments such as perishables, which had a comp sales increase of Q1 of approximately 10%. Last year’s merchandise margins were also unfavorably affected by a higher-than-normal level of markdowns taken in February and some issues in salvage that we now have under better control. More than offsetting the merchandise margin increase was the unfavorable impact of strong sales of low margin gasoline, which was worth about 43 basis points. Buying and occupancy expense as a percent of sales decreased 27 basis points versus last year. Due primarily to expense leveraging from the strong increases in both merchandise and gasoline sales. SG&A expense decreased 19 basis points versus last year due to the following -- expense leveraging from strong sales growth, including gasoline sales, had a significantly -- that were significantly above last year. For example, club payroll expense decreased 16 basis points versus last year, reflecting a 7.5% increase in club payroll dollars being leveraged by 12.3% sales increase. Credit expense was favorable three basis points versus last year. We have seen a small shift away from credit cards to lower cost debit cards and cash and check. These factors were partly offset by an increase in bonus expense of eight basis points due to the strong first quarter earnings. Pre-opening expense was $0.5 million this year versus $1.3 million last year. Interest income was $0.1 million this year versus $0.2 million last year and the income tax rate for the first quarter was 40.7% versus 41.0% last year. Moving to the balance sheet, inventories were in very good shape at the end of the quarter. Average inventory per club increasing only 0.6% versus last year. This reflected the benefits of our SKU reduction efforts versus last year. The accounts payable to inventory ratio at the end of the first quarter was 73.4% versus 66.3% last year. Strong sales and good control of our inventory levels generated much-improved inventory turns, which led to the increased accounts payable inventory ratio. In Q1, we repurchased 925,000 shares of common stock at an average cost of $31.95 per share, for a total expenditure of approximately $30 million. As of May 3, 2008, we had approximately $145 million remaining of stock buy-backs under existing board authorization. Now I’ll turn the call over to Herb Zarkin. Herbert J. Zarkin: Thank you, Frank. Good morning, everyone. I am very pleased to be able to provide you with some additional color on our strong first quarter performance. Our sales results for the first quarter demonstrate that BJ's low price, high value business model is one that works well in good economic times and in bad. As our members focused on trying to make their dollars go further during the first quarter, BJ's offered a compelling alternative to more expensive and less efficient retail channels for food, fuel, and general merchandise. Our outstanding results also demonstrate great teamwork throughout the company. As an organization, we are more unified in our objectives and strategy than any time since I’ve been with the company. Congratulations to our team members and thank you for a great quarter. Comp club sales of food reached a four-year high of 8%, driven by increases in perishable foods of approximately 10%. Traffic increased by 3%, another four-year high, and gasoline sales hit an all-time high, both in frequency and in comp gallons -- comp station gallons sold. While everyday low prices were the main driver of our sales in Q1, like all other channels we are consistent with the CPG data we received, coupon redemption increased over the course of the quarter as consumers reacted to mounting inflation in food and consumables. Second, steadily rising prices triggered an 18% increase in gasoline transaction and an 8% increase in comp station gallons. But it wasn’t just a more challenging economic environment that drove our strong sales results for the first quarter. Compared to where we were in late 2006 and early 2007, our merchandise quality and value were significantly improved. Earlier last year, our management team made some strategic investments and decisions that paid off in increased sales this year. Laura is going to go over some of those changes in more detail in a few minutes. Better than planned results for the first month of our spring members acquisition program also contributed to our strong first quarter sales results. At the end of the quarter, trial member sales, trial member conversions to paid membership and new member sales were all running ahead of plan and ahead of last year. These results were driven by improved execution by our team members, including a fully staffed -- fully staffing our members and acquisitions and retention managers versus a partially staffed, less experienced team last year. Moving now to chain expansion, we opened our first club of the year last weekend in Manahawkin, New Jersey. The remaining three clubs for this year are Millsboro, Delaware, Revere, Massachusetts, and Richmond, Virginia, and all are scheduled to open for the fourth quarter. We completed two of our four planned club renovations during the first quarter and we continue to renovate the restrooms as we talked about in the past. We are on track to accelerate club growth next year by opening seven to nine new clubs. And with that, I will turn the call over to Laura to talk a little bit more about our strategic focus and priorities for next year. Laura J. Sen: Thanks, Herb. Good morning. As we said in previous conference calls, BJ's perishable food, grocery, and consumable goods divisions each represent about 25% of our total sales. Consistent with our 2007 results, food and consumables were the primary drivers of our strong club sales increase for the first quarter as BJ's members were drawn by the compelling values we offer. In certain departments, such as paper goods, household chemicals, health and beauty aids and commodity food items, we experienced stock-up purchasing with increased foot traffic to the club. But I think it’s important to point out that consumers also spent freely on non-essential or discretionary purchases when they found the right items at the right prices. I would like to give you some examples from four of BJ's destination departments -- perishable foods, consumer electronics, seasonal, and baby. Perishable foods represent our highest margin area. We create excitement and differentiation in this area with quality that is superior to our grocery competitors and variety that is greater than our wholesale club competitors. For example, BJ's offers great value on a wide assortment of quality prepared foods and restaurant branded foods from [Panera], Legal Sea Foods, Chili’s, Boston Market, and Macaroni Grill. As casual restaurant dining continued to decline nationwide during the first quarter, our sales of home meal replacement items continued to grow. We also saw increased sales of European cheese, natural chicken, beef, and pork, as well as organic produce, including salads, carrots, tomatoes, and spinach. These are premium quality products that most people might consider discretionary, yet they consistently generate strong cost of sales increases for us. Consumer electronics is another department where our members spent freely on discretionary purchases during the quarter. Our high definition television business has been consistently strong for the last 14 months, driven by great values on premium brands, such as Sony, Samsung, and Sharp. In our seasonal department, sales of our $1,000 patio sets were strong throughout the quarter. $1,000 is a high price point but when you compare these to similar sets from specialty retailers, such as [inaudible], Front Gate, or Restoration Hardware, you can easily appreciate the exception value on these high quality items. And last but certainly not least is BJ's baby department, where our wide assortment of diapers and other baby products are a key differentiator versus our wholesale club competition. Whereas grocery and other channels focus on value diapers, BJ's carries premium and super premium diapers because our members want the best quality and they are willing to pay a bit more for it. While on the topic of strong sales, I would like to recognize the contribution from our team members in operations. Investments in payroll, training, and member awareness resulted in a better in-club member experience versus last year. The improvements they made in club conditions, merchandise presentation, and member interaction contributed to the increased frequency and basket size, higher level of new membership sign-ups, and the increase in membership renewal rates. Another area of strategic focus for BJ's is operating efficiency. I would like to give you a few examples of the progress we are making in this area. During the first quarter, we implemented a new ordering system in our produce department that yielded better freshness, better in-stock, and reduced salvage. This department achieved an 11% comp sales increase following a 10% increase in last year’s first quarter. The improvements we’ve made in our supply chain will result in an estimated savings of 6% to 8% on our outbound transportation costs in 2008. We’ve also significantly reduced merchandise handling and storage of globally sourced seasonal merchandise. And as Frank mentioned, we increased our AP ratio -- AP to inventory ration from -- to 73.4% from 66.3% last year and our average inventory per club only increased by 0.6% against a comp merchandise sales increase of 5.7%. We ended the quarter with about 7,300 SKUs, down slightly from the end of last year’s first quarter. In summary, we are constantly looking for opportunities to improve efficiencies in our business and we are committed to reinvesting the savings to sustain long-term growth. And with that, I will turn the call back to Frank to discuss our outlook for the second quarter. Frank D. Forward: Thanks, Laura. Before I get into the details of our guidance for the rest of this year, I would like to make a few comments on our approach for the developing and planning assumptions. First, we have very good momentum starting out in the second quarter. We are expecting the May merchandise sales to be at the high end of our second quarter guidance of 5% to 7%. Based on this, we feel like we have good visibility to the factors affecting the second quarter and how they might play out into the P&L. As I will discuss in more detail shortly, we are planning for the second quarter to show continued strong earnings growth. But looking beyond that to the second half of the year, at this time it is difficult for us to confidently predict what might happen. While so far this year BJ's has benefited from the macroeconomic environment, there is a potential for higher inflation and volatile gasoline prices to create unprecedented impacts on the economy. This could affect not only our sales and margins but such factors as the profitability of our gasoline business. Given this degree of uncertainty, we believe it is prudent to be cautious in the second half guidance until we have more visibility into it. Thus we are projecting the second half earnings at about a 10% increase versus last year in diluted earnings per share. This reflects both the uncertainty in the macroeconomic environment, as well as the expense impact of the various investments we are making in the business as I discussed at our last conference call, including our roadmap technology initiative, club payroll enhancements, and club renovations. The expense impact of these investments is worth approximately $0.07 to $0.09 per share and is primarily weighted to the second half. For the full year, we are raising our guidance to $2.04 to $2.14 per diluted share. This is $0.06 per share higher than our prior guidance of $1.98 to $2.08 per share and includes the $0.04 upside from the first quarter, plus raising the rest of the year by $0.02 per share. So with that said, in modeling for the rest of this year, please take the following factors into account. For the second quarter, we are planning comp sales to increase 10% to 12%, including a favorable contribution from gasoline sales of 450 to 550 basis points. Comp merchandise sales excluding gasoline are planned in the 5% to 7% range. We are planning for a total sales increase in Q2 of about 13% to 14%. For the second half of the year, we are planning for our comp sales increase in the 6% to 7% range, including a contribution of 150 to 200 basis points from the sale of gasoline. We are planning for second half merchandise comp sales excluding gasoline to increase 4% to 6%. This is slightly lower than our current trend but given the uncertain economic environment, we think this is the prudent thing to do at this time. As for gasoline sales, while it is difficult to predict, we are planning the TY OI impact to be lower in the second half than in the first half. This assumes that second half gasoline prices will not increase dramatically above current levels. We are planning for a total sales increase in the second half of 8% to 10%. We expect membership fees and other income for the full year to increase 2% to 3% in dollars versus last year. We expect the second quarter will increase 3% to 3.5% and that the second half will increase at slightly below 3%. For the second quarter, we expect cost of sales as a percent of sales to increase 18 to 20 basis points versus last year. We assume high gasoline prices in Q2 will generate an unfavorable margin impact from gasoline that will be more unfavorable than it was in the first quarter, due to both to lower gas margins than last year when we had unusually high gasoline margins and the unfavorable mix impact from higher gasoline sales. But we also expect that the Q2 merchandise margin excluding gasoline will increase at a level similar to the first quarter, again driven by a favorable mix of high margin perishable sales. I should mention that in the second half, we expect the unfavorable impact from gasoline sales will moderate somewhat as we cycle last year’s increase in gas prices, to the point where it essentially offset merchandise margin improvement. Thus for the second half, we are planning for cost of sales as a percent of sales to increase about 3 basis points, give or take 5 basis points. We are planning for SG&A expense as a percent of sales to decrease 30 to 40 basis points in Q2, to increase 5 to 15 basis points in the second half, and to decrease 3 to 13 basis points for the full year. This first half versus second half shift is due to a combination of the assumed moderation of second half gasoline sales growth generating less SG&A sales leveraging and the higher second half expense impact of the various investments previously mentioned. For the full year, we are planning pre-opening expense to be between $3.5 million and $4 million. This assumes opening four new clubs this year. We expect full year interest income to be approximately $1.5 million to $2 million, and a full year tax provision of about 40.5%. We are planning capital expenditures for the full year of $150 million to $170 million. We expect to be capital self-sufficient in 2008 and generate net cash from operating activities of about $250 million to $270 million, and we expect to repurchase about $100 million of BJ's common stock, but as usual we reserve the right to reevaluate this as market conditions warrant. So based on the factors I just outlined, our second quarter plan is as follows: total sales to increase 13% to 14%; comp sales to increase 10% to 12%, including a 450 to 500 point favorable impact from gasoline sales and comp merchandise sales excluding gasoline to increase 5% to 7%; MFI and other to increase 3% to 3.5% in dollars; cost of sales to increase 18 to 28 basis points; SG&A to decrease 30 to 40 basis points; pre-opening expense to be about $1.3 million to $1.5 million; interest income to be about $0.8 million; and income tax rate of about 40.5%; and earnings on a GAAP basis of $0.53 to $0.57 per share and net income of $31.5 million to $34.0 million. For 2007, second quarter GAAP earnings of $0.55 per diluted share included $0.09 per share of income from unusual items, comprised of $0.05 per share of favorable income tax audits and $0.04 per share for Pro Foods lease reserve adjustment. This unusual income totaled $5.9 million post tax. Adjusting for the unusual income in 2007, on a non-GAAP basis and using the midpoint of our 2008 Q2 guidance, Q2 EPS would be $0.55 per share in 2008 versus $0.46 per share in 2007, a 20% increase, and net income would be $32.8 million versus $30.3 million in 2007, an 8% increase. And for the full year, we are planning total sales to increase 10% to 12%, comp sales to increase 7.5% to 9.5%, including a 250 to 350 basis points favorable impact from gasoline sales, and comp merchandise sales excluding gasoline to increase 5% to 6%. We expect MFI and other to increase 2% to 3% in dollars. Cost of sales to increase 3 basis points, give or take 5 basis points. SG&A to decrease 3 to 13 basis points. Pre-opening expense to be about $3.5 million to $4.5 million. Interest income to be about $1.5 million to $2 million, an income tax rate of 40.5%, and earnings on a GAAP basis of $2.04 to $2.14 per diluted share, and net income of $121 million to $127 million. This is $0.06 per share higher than our prior guidance of $1.98 to $2.08 per diluted share, reflecting the strong first quarter results and our revised guidance for the remainder of the year. The 2007 full year GAAP EPS of $1.90 per share included $0.10 per share of income from unusual items, comprised of $0.05 per share of favorable income tax audit settlements, $0.04 per share for our Pro Foods lease reserve adjustment, and $0.01 per share from the sale of pharmacy assets. This unusual income totaled $6.5 million plus tax. Adjusting for the unusual income in 2007, on a non-GAAP basis using the midpoint of our 2008 full year guidance, the full year EPS will be $2.09 per share in 2008 versus $1.80 per share in 2007, a 16% increase, and net income would be $124 million versus $116.3 million in 2007, an increase of 6.6%. With that, I will turn it back over to Herb for closing remarks. Herbert J. Zarkin: Thanks, Frank. Our results for the first quarter indicate that BJ's is in a position to benefit when the economy is weak or as well -- as well as when the economy is very strong. We have a flexible business model that allows us to adapt quickly to the changes in the consumer demand. We are also fortunate to have a team that is deeply experienced in managing through fast-changing economic times. With that said, our message to consumers is the same whether the economy is weak or strong -- BJ's offers the lowest price on highest quality merchandise so our members don’t have to sacrifice quality to save money. With that, I’ll open it up for questions.

(Operator Instructions) We’ll go to Bob Drbul of Lehman Brothers.

Good morning. A couple of questions; first, can you maybe talk a little bit more about the new member sign-ups and just some of your membership sign-up initiatives and sort of any progress or challenges that you are seeing with that? Herbert J. Zarkin: Just in global and anecdotal type activity, we have said clearly that the historical way we approach to get new members is through our programs that we run in the spring and the fall, and we’ve seen very good results from people coming in and using the trial membership. But particularly we’ve done a wonderful job in converting those people to paid members right away, which is something we haven’t been able to really do as well as we would have liked in the past. So that’s had a really dramatic impact and will continue to have a dramatic impact on going forward business for us down the road. We are seeing a lot of people come in the club. We are getting a lot of traffic in the club. We are very pleased about that. The traffic was particularly strong, as you’ll recall, in our numbers that we gave out in the month of April and those people are becoming more members quicker, so we are very pleased with what we’ve done. As far as who we do it, it’s really -- the clubs are doing a great job in executing it. We have a terrific program with the moms leading that program. Everything in how we go out and reach the people is stuff that we don’t really talk about in any great way but we are pleased with the overall approach to how we’ve gone to market this year, what we’ve learned from doing things last year and we are taking advantage of those customers that are trying to find ways to save money that have not shopped us regularly in the past and we are getting a lot of those people we believe also coming into us to sign up as new members just off the street, so to speak. So we are very pleased with what we’ve seen so far.

Okay, and Laura, could you maybe just talk a little bit more about good, better, best price point mixes and sort of how consumers are reacting in the environment and what you are seeing in different categories? Laura J. Sen: Yes. I would say that we have seen, especially in categories where there is significant inflation, the customers trading down within the category sometimes, so rather than, for example, buying the bounty premium level, they might be buying bounty basic, so -- although with that being said, we are seeing an increase in units in overall in those categories, so I guess we are seeing a trade-down to a certain degree in quality but we are still benefiting from the extra traffic and the extra unit velocity we are getting from it.

Okay. Thank you.

We’ll go next to Charles Grom with J.P. Morgan

Thanks. Good morning. Just to follow-up on Bob’s question, was there any hard numbers you could provide on the success of the membership acquisition retention specialists? My understanding that you guys are targeting roughly a 33% hit on free trials. Is there anything -- you know, we’ve talked about this for about a year. Is there anything that we can kind -- that we can see above and beyond what you guys are disclosing? Herbert J. Zarkin: I can’t quantify or qualify or talk about any of the comments you just made. I don’t know where you get your information from and it’s -- we have not historically ever talked about it. The trial membership has been on for about a month. We are pleased with the beginning of it, excited about it, we think it’s going to be terrific for us. We hope it’s going to be better than we’ve ever done in the past. We have reason to believe that’s going to be the case but beyond that, I --

Okay, fair enough. And then based on some price work that we’ve been doing for a couple of years, the spread between yourselves and Costco and Sam’s really tightened last year but the past few months, it’s widened considerably, in you know, a somewhat obviously price inflation. Just wondering, as you continue to pass on the price increases that you are receiving from your vendors, Laura, could you talk to the elasticity that you are seeing in terms of consumer response from those products? Herbert J. Zarkin: We do an in-depth pricing analysis against our competitors that covers a thousand items on a given month or so, and so that’s our bible that we use. We don’t look at a particular moment in time on 25 or 50 items that we could have raised our prices and the competition hasn’t done it year or they have not raised their -- they’ve raised their prices, we haven’t. We haven’t seen any diminution of our skill set of being very close to them as we want to be within the 100 basis points, 150 basis points that we’ve talked about, based upon our in-depth research of many, many items, as I said. I think what Laura was talking about with the bounty items, which is a good example, elasticity of what happens is we’ve seen some modest dropping off of the number one bounty and we’ve seen, because there is switching off, and we’ll see a much bigger increase in units coming out of the less expensive bounty basic item, if you would. But in all, the category is up substantially both from price inflation and units. It’s up very, very substantially. Do you want to add anything to that? Laura J. Sen: Yeah, well, I guess I would add to that, not to add to the confusion about the remarks but we added a super premium bounty called Bounty Extra Soft, and that is a homerun SKU. So there is a segment of the population who wants the very, very premium level and we are extremely successful at that tier of merchandise. But to answer your second question, we continue to take our price increases as they come and as the market moves, we build that into our pricing. It’s a necessary part of running the business.

Okay, and then just Frank, could you just remind me exactly when and maybe the number of stores a year ago that you did reduce the store hours of operation? I believe it gave you some financial flexibility on the SG&A line through labor. I’m just wondering going forward, are there any wholesale changes that you guys are going to be adopting in the stores? Obviously last year was a big year of change. I’m just wondering what else you guys may be tweaking this year. Herbert J. Zarkin: We changed all the store hours very early on in the season, January, February, March, in that period of time, pretty much. We took all that money and put it back into the clubs. We did not save any of that money. That money went back into better payroll, it went back into better training, better results, better pay, and we continue to do that. Every time we do something, we continue to do that, so there’s no really -- no savings on the operational part of the business in that regard at all. We are constantly looking to do and operate better. One of the [visions] that are incorporated into our going forward plan is that we just told our clubs this week we looked at our mid-manager level of management. These are the key people, 10, 12, 14 people in every one of our clubs and we are in the process now of changing their salary grades, upgrading them dramatically, putting them on bonus plans in a more formal way, things like that are being done over the course of the next couple of weeks. So we are investing that way in it but there’s no -- we’re not looking to cut anything out. We are looking to just be direct and make it more [inaudible].

Congratulations, Herb. You’ve done a great job since coming back.

We’ll go next to Dan Binder of Jefferies.

Good morning. A couple of questions; first, on the cash flow, there’s an other item that saw a big use of cash this year. I’m just wondering if you could give us a little more color on what that pertained to. That was the first question. Second question is on the remodel activity that you did in Q1, was it disruptive in a way that was meaningful to numbers at all? I realize there was only two closes, but maybe -- even if you can talk about how disruptive it was to those clubs, it might be helpful. Herbert J. Zarkin: It’s actually when you start the process, it creates a lot of excitement in the club and you do a little more business and then as the club going through the process, it hurts the business a little bit and as you get close to getting it done, it obviously helps it a lot. But since it’s done all in the course of one year, it’s minimal. It’s nothing that we can really measure or pay much attention to. The only thing that is disruptive to a club, when we do a bathroom, that’s a little disruptive because the women have to go to a different bathroom and the men have to -- move them around, but that takes about a week to 10 days and that doesn’t have any big disruption to our business either. I’ll turn the first question over to -- Frank D. Forward: On the cash flow in the other line, it’s all related to how we pay our income taxes, particularly our federal taxes. The complicated answer, I’ll try to make it quick, is you always are paying your taxes based upon how much income you made the prior year and last year, we were paying our taxes based upon two years ago when we didn’t have as much earnings as we otherwise would have liked to have. So this year we are making the tax payments based upon last year, so the TY difference is we are paying a much bigger portion of it earlier, if you will, in the first quarter versus last year in the first quarter.

Okay, and then just a follow-up, on the remodel discussion, if it’s not terribly disruptive over the course of a year, is there any reason why you couldn’t accelerate the remodel program? Herbert J. Zarkin: First of all, it’s an expensive program, and when I say expense, you can spend anywhere from $2 million to $3 million to $4 million to do a major remodel in the club. And you need manpower, thought process, et cetera to get it done. There’s only a few windows of opportunity we want to do it in. We only want to do it early in the year or during the summer months so we can be ready for the Christmas season, so that has some impact on it as well. And we want to see, engage now and see how well these results benefit us down the road. We are really looking at a small number of clubs that really require this. These are the clubs that opened in ’84, ’85, ’86. These are the clubs that have been around, most of them have been around a long period of time and we just can’t operate our business from a space display point of view, so there’s a real benefit of how much inventory we can put out, how we can place it, things like that. So it’s not a huge list. We don’t have a list of 50 clubs that we want to remodel. The list is maybe six or eight more, 10 we might get done. So if we are happy with this this year, we’ll probably do -- step it up and do the other four or five next year. And then I’m sure in two years, we’ll have some more that we want to do. That’s just the nature of the business, as you see benefits coming in. But we have no interest right now in rushing to do something because the permitting process, everything takes a long time to get these things done. You really just -- you just can’t wait one day and say let’s step it up. You have to go to permitting today and bringing things up to date, and if a club was open 20 years ago, a lot of changes to the code, the municipal code has a big impact on it. So it’s slow but we’ll get it done.

And then just a final question, a merchandising question for Laura -- the apparel area has been tough for a while. Is there anything that you can do there or anything that you have in the pipe that could sort of spruce that category up, whether it’s the product or the presentation? And then also if you could speak to what’s going on with tires, that’s also been a soft category for a while. Laura J. Sen: I think that in apparel, our goal is always to access the better brands and the better values. That’s what the members want. I would say that in terms of presentation, we certainly want to look at children’s because it’s a destination category for our members but it’s very difficult to shop and we are looking at some alternatives there. I think that our trend in apparel is probably about what the world is doing right now, which is not that great. But I think we are getting our fair share. In tires, I would say that we have made some progress this year but it is certainly not where we want to be yet and the work kind of continues over there as well.

Great. Thanks.

We’ll go next to Deborah Weinswig of Citigroup.

This is actually Nathan Rich filling in for Deb. My first question is I was just wondering if you could provide some color on what drove traffic in the quarter and how we should think about traffic trends going forward. Herbert J. Zarkin: That’s a good question. I think a lot of the traffic was helped ratably by the promotions that we do in terms of reaching out to try to bring trial members into the clubs, the marketing programs that we do. I think also traffic was helped by the consumer or brand companies in the couponing that we have done historically, although we’ve held it down. We think that gas has been a big impact in helping traffic to the clubs, not necessarily profitable in terms of the gas but getting traffic into the clubs, we’ve seen a correlation there. We’ve done some things that we haven’t done in the past -- our journals, the BJ's journals are sent out to a lot more people than they have been historically. I’m sure their clubs are better in stock, look better, better condition, better [packed out], we’re cycling and doing more of that and we are seeing some terrific results there. We’ve made a lot of progress in our perishable department to make an improvement. There’s a lot of good things. Now with that said, I don’t believe that we are going to -- in the month of April when we adjust it on a non-GAAP basis, everything, I think we said traffic was up around 6%. I don’t believe that we are going to sustain truthfully a 6% traffic increase every single month. I think something more in the low 2%, 3%, 4% would be something that we would be very pleased to see on a regular basis, so probably 3% is not unreasonable to expect from us if things continue to go that. If things get really bad out there, it may increase more. We may see a -- where we are located makes it -- we are not far away from any of our potential customers and our current members. We have our whole approach to how we went to market and put our clubs in marketplaces was to make it very convenient to come to a BJ's. That’s one of the reasons our BJ's average volumes are smaller in most locations than some of the competition because we have several clubs in a geographic area where the competition may have one or two, we’ll have maybe four or five. So I think the distance to get to them is not very expensive and when they start thinking about what it’s costing to shop at the supermarket versus spend a gallon of gas, it may cost me $4, but I can save that and a lot, lot more versus shopping in the supermarket. So we think all of these things are adding to what people are seeing and doing. It’s not just one item or one entity.

Great, thanks. And then my second question is do you expect to continue to be able to pass along the price inflation that you are seeing? Herbert J. Zarkin: I think this is an issue -- we actually see deflation in some categories, price inflation in others. Yes, I think we will have to be able to pass it along and I do believe we will, within reason. We don’t necessarily always look at the -- it goes by item and classification of merchandise, where it fits into the category, how important it is to us. What are the other options the customer has to shop. It looks -- we do it by every single classification of merchandise and it also has to be somewhat of a natural price point. You can’t just arbitrarily charge somebody $6.09 or something. That’s not an -- that’s an abnormal price point, people rebel about it, they don’t understand it, so sometimes you will get a little less on the margin, sometimes you’ll make a little more. But on balance, we believe we have to pass it along.

Great. Thank you. Congratulations on a great quarter.

We’ll go next to Todd Slater of Lazard Capital.

Good morning and kudos to all of you. I’m just wondering, because I didn’t hear the number, maybe I missed it, if you could estimate the average inflation you are seeing in sort of the average ticket? Herbert J. Zarkin: Approximately 1% to 2% on an overall balance for the whole club, but in some classifications, we see 9% or 10% increases and some we’ve seen deflation. But on balance, our best guess is it’s helping us around 1% to 2%.

Okay. And then could you guys talk about the private label programs you have running and sort of the penetration you are at now? Where could it go, how is it performing, and what influence that has on the margin? Herbert J. Zarkin: I’ll let Laura touch that one. Laura J. Sen: We’ve rationalized the private label programs dramatically year over year, so we’ve actually cut about 200 SKUs. With that, our penetration dropped from 13.7% last year to 12.2%. There are certainly opportunities. I think that there was a rush and a real push on to add a tremendous amount of products that was not necessarily strategic and I think that what we are trying to do is create products that have a destination appeal that will bring people to BJ's. I think our earth pride organic line would be a great example of that. We are selling organic milk in huge quantity. Our members totally get it. They love the quality, they love the shelf life, they love the value. And we’ll go item by item and add the right things versus a lot of things.

Has that rationalization influenced or changed or affected the margins in that business? Laura J. Sen: No.

Okay. Could you talk at all about any of the new markets you are targeting for expansion? Herbert J. Zarkin: We said historically we are going to stay -- over the next year or two we are going to stay in our current marketplaces or natural expansion. We are spending a considerable amount of time looking at every place that we think that makes sense for us to look at, up and down the east coast and going further west than that, out towards -- within areas where our distribution networks can comfortably support it, so you can draw a line I guess through Indiana, Illinois, down through Tennessee, down to Alabama. That’s kind of the marketplaces we are looking at now. But we think that we -- we continue to find tremendous opportunity within our own existing marketplaces, even though every time we get to a point we think we can’t put another club in there, somehow we find an opportunity comes up and we can add another club, and that’s true in New York City or it’s true in upstate New York. So we believe over the next two or three years, we’ve got an opportunity to open seven to nine clubs, give or take, in existing and current marketplaces. But eventually we’ll move out to another marketplace and that’s -- we are doing that work now because it will take us three years, probably, by the time we decide where we want to go to really get enough clubs ganged together to open in a reasonable power in a given marketplace. So it’s probably three years away.

Okay, Herb, and what’s the size that you are contemplating of the newer clubs? Are they changing at all, getting larger? What is sort of your average club prototype now? Herbert J. Zarkin: The prototype is about 115,000 or 119,000 feet, depending upon the actual physical configuration of the building. We have some smaller kind of clubs that we are looking at, 85,000. We have a bunch of clubs that are 70,000 feet, 18 of them that are in a lot of small towns around New England, upstate New York, Pennsylvania and New Jersey, which we’ve done really nicely with. They are very high returning clubs, they do very well. So we are looking at an 85,000 foot model that might fit into an urban location for us and we have seen a couple of locations come by that we are going to take advantage of that. We’re not announcing it today but I think an 85,000 foot store would give us a very good return on our money and satisfy the membership. So we are not -- in New York City, obviously we want to be the biggest club as we can put in, service the market as good as we can, but in a smaller town we’d be happy maybe some places to have a lower than 85,000 foot club.

Okay. Thank you. That’s very helpful. And then my last question is about gas margins, just understanding a little bit more about what influences those margins. I think last year in the second quarter, they were unusually high and what are the issues that either increase or decrease the margin on a quarterly basis? What should we be focused on and also, have you been able to measure the rub-off from gas? Herbert J. Zarkin: We’ve seen it -- the clubs that have gas absolutely do better. We’ve seen that benefit, we’ve seen more traffic, more volume, so it’s very good for us. You’ll be able to predict our gas profitability within reason if you follow the following -- if you see the price of gas going straight up for 60 days in a row, you can assume that we are not making very much money in gas. If you see the gas go down 60 days in a row, you can assume that we are making too much money in gas. You see up and downs, then you can say that we are going to make approximately the same kind of margin money in gas that we’ve made historically. And that’s been our -- we’ve been able to do that. We just cannot predict in any given month what’s going to happen. We’ve seen some months go up and down this year and we’ve seen last month or so just straight escalation up. But history says that the balloons burst, things do go down every once in a while, so as long as we see some movement up and down, we can manage that gas mileage reasonably well and it will be okay. But the time we are in today, the straight up model, so we are being a little conservative, as Frank has mentioned, in the second half of the year because it’s pretty hard to determine what is going to happen to the gas. But it is -- if I had a choice and I could get gas into all my clubs, I certainly would put it into all the clubs because I think it is a wonderful benefit to the members and it’s a wonderful benefit to driving members to us to shop.

So in the second quarter last year, do we have a sustained decline in gas prices? Is that what happened or -- Herbert J. Zarkin: I think if I remember correctly, we were up and down, so -- Frank D. Forward: Certainly the margins were very strong in the second quarter last year. Herbert J. Zarkin: Once you get them mountain/valley, mountain/valley, because we saw gas -- we buy gas every day, so if the price is going down, we take advantage of that. The guy sitting with gas at a higher price, he can’t drop his price, so our spread is greater. So we offer better value to our member and we make money. When the price goes up, it’s just the opposite. It’s a business we understand very well but it’s not predictable except on a global basis or a year-on basis. And there’s going to be a year like this may be the year where gas will go to $200 a barrel and it will never drop. I mean, there’s plenty of people to support a lot of different -- this morning I read in the paper about the Goldman Sachs analyst coming up again being convinced it’s going to go, and so he may be right, who knows.

Well, let’s hope they are wrong and best of luck over the course of the year.

We’ll go next to Chuck Cerankosky of FTN Midwest.

Good morning, everyone. Great quarter. Herb, did you actually talk about or Frank talk about gas profitability in the first quarter, where it was relative to the -- Frank D. Forward: We really try to stay away from going into product profitability, but we recognize gasoline has a big impact so we just try to give changes from quarter to quarter. Generally, you don’t make a lot of money on gasoline, remember, but certainly as Herb was just describing, there is pluses from quarter to quarter where -- and certainly we’ll be up against that in the second quarter this year when we did have pretty high margins.

And with what Herb described in his answer to the previous questioner, one would have to conclude that first quarter gas profitability was a little bit of a drag. Frank D. Forward: It was pretty much equal to last year. I mean, it wasn’t -- it was a little on the low side but it was the prior year to. Again, we don’t make a lot of money here, so we’re not talking $2 a share flux from gasoline.

Okay. When you look at membership fee revenue only increasing 1.4% in the quarter, yet you said -- you seem to sound happy about the trial program, without putting any numbers around it. Does it have to do better, that trial program? Does something else have to kick in or are you going to be happy with that kind of rate or a little more over the course of the year? Frank D. Forward: Remember membership fee income, the cash that comes in gets deferred and brought into income over a 12-month period, so there’s lags in how we see some of the detriments. I mean, last year our renewals weren’t as high as we would have liked them and we are planning for them to be back up to two years ago level, so up half a point to 1%. But the P&L impact of that is on a lag, so in essence, almost 50% of the MFI for this year is already in, if you will. So it’s going to take a bunch to really change that on an accounting side, but again -- so that’s why we tried to give you the color. We are very happy with how the renewals are coming in, very happy with how the paid memberships have been coming in, at least through the beginning of this trial program. Herbert J. Zarkin: Chuck, just to help you, the benefit really is the person becoming a member. They start spending and that money is reflected the day they spend the money. Just look at it that way -- when they give you the money to buy a membership, that money is spread over a 12-month period of time from the time that they actually become a member, so it can go into next year if it starts now, some of the benefit will be in next year. And so the driver for us is really to get more new members and get those renewal rates up. That’s where the stress has been on the organization. That’s where we’ve been trying to make it happen and we said at the beginning of the call, I think Frank mentioned that we are slightly ahead of our planning on the renewals, so we feel good about that in the first quarter, and we feel very good about anecdotally and in reality, what we are seeing in terms of the paid members and the trial members and the conversion of certain trial members to paid members right off the bat. So today we feel very strong that this will all be very helpful for us down the line.

Laura, when you look at your private label sales trends, and that is where, you know, the categories where you really want to have a strong store brand presence, how did those do in the quarter and can you talk about it between food categories and general merchandise categories? Laura J. Sen: So you’re saying of like items, how did they perform year over year?

How is the consumer behaving in those categories? Are they trading into more private label in food, which I wouldn’t necessarily consider trading down? And is that also occurring in general merchandise or are they adding more towards say the value price point in a branded product as in the paper towel example somebody gave earlier? Herbert J. Zarkin: Let me just -- our private label in the paper category is also doing extremely well. So there’s a case where we have a quality product that matches the number one manufacturer’s quality product and we are getting a greater share of that, if the customer is trading from the top line to this particular one, or to the manufacturers label down. Where we are seeing terrific benefit I think is in -- really Laura started to talk about it, maybe she’ll spend some more time on it, on the organic and natural kind of products and we gave a couple of examples of milk, but that’s where the product, the quality, and the label all come together. Laura J. Sen: Right, I mean that’s -- Earth Pride is a relatively new brand for us. It’s only been around for about a year but I would not say, if what you are looking for is the member trading into private label across the club. I would say I don’t believe so. I think that we are seeing similar increases in those lines as we are seeing in the branded lines. I would to say that that’s a wholesale movement to private label but I would have to really study comp item for comp item and all the key commodities. What I know, they are probably increasing at a similar rate as brand. Herbert J. Zarkin: The one thing I will tell you is we get a lot of people that haven’t shopped us before and they see our branded product at prices that they are not -- have not been exposed to before, so they are saving a lot of money there. That’s a benefit to them. And then they see our private label -- we don’t just do a private label for the sake of doing a private label. We do it because it has a real destination point of view for the consumer. It brings some value to the consumer, it’s something she can’t get someplace else. Go back to this Earth Pride -- this product is such good quality and it sets us apart and it’s something she can only -- once she gets used to drinking Earth Pride milk, she’s going to stay with Earth Pride milk and we see the business building dramatically in the milk category. Remember, we sell a half a gallon of milk for around $2.99. We sell a gallon of regular milk for around $2.99 also, so she’s getting half the amount of milk but she’s paying a premium in her mind because this is important to her children or this is important to her family. We see that. So that’s -- Laura J. Sen: That’s a trade-up, not a trade-down. Herbert J. Zarkin: We see trade-ups happen all the time.

Agreed, yeah, it’s good to see that occurring. That says a lot about the demographics of your member. And final question, any new categories you might be adding as you look at the overall category management within the clubs? Say, for example, if you decided to do something different with the space allocated to tires in some clubs, what might replace it? Herbert J. Zarkin: We’re not interested in replacing the tire business. We are interested in trying to find a way to run the tire business really efficiently, effectively, and really do a good job with it. We cannot do everything at one time. You have to understand this, and the tire fix is a lot longer fix because it involves not just making sure we have the right tires, the right price, but the right service and the right sales capacity and right payroll and all these things. So we are paying attention to it and we are working at it now, but I don’t expect to see a dramatic switch on our tire business right away. That’s going to take a period of time to get it but we are committed to that. The business that we are excited about, and I can’t believe I’m saying this because I was very slow to get to this on my own, is the web business. Our BJ's dot-com business is starting to blossom a little bit. We haven’t spent much time talking about it. Laura [is involved in it]. Chris Neppl, who runs the general merchandise, is obviously involved in it. Laura, do you want to add something about that? Laura J. Sen: Yeah, we’ve sort of come up the curve quickly with a great merchant in charge of the business and we are seeing our members really respond to a lot of the offering. It appears that the ticket will be high and our competition sells high ticket merchandise online. Our orders are increasing dramatically year over year, volumes and so on. And we do really see the discretionary spending there. They are buying fun stuff online. It’s not a huge part of our business but we feel that it will be a growth part of our business, so I would say in terms of a new business, of something to talk about this year, that is actually having a nice amount of traction with the members and we think we will see some good growth there. But in terms of new business in the four walls of the buildings, it tends to be within categories, so GPS has been a business that’s grown year over year for many years. Electronic photo frames is a relatively new business that’s been a nice growth for us, but it’s a sub-category level. It’s not that we are all of a sudden going to start selling motor boats or something. Herbert J. Zarkin: We were very pleased, for example, our cheese business has been very powerful for us, but we decided it wasn’t powerful enough still, so we made a major change there. It’s going to be a lot more European cheeses. We only had 10 or 15 imported cheeses. We’ll probably have considerably more now and we are making that whole presentation of it becoming a much more powerful statement and we are taking the basic cheeses and moving them to other places. We are in the process of doing stuff like that now. So we are always refining a category or -- no matter how well it does, it gets the scrutiny.

All right, excellent. Again, a very nice quarter. Thank you.

We’ll go next to Mark Wiltamuth of Morgan Stanley.

This is actually Joe Parkhill in for Mark. I have two quick questions for you -- when you give guidance for your second half ex-fuel, the comps are about 4 to 5, which is a slight deceleration from the 5 to 7 ex quarter. Is that mainly due to maybe perhaps lower discretionary buying or do you think that the traffic might not hold up, the recent patterns of traffic hold up as they are right now? What’s going into that guidance? Herbert J. Zarkin: I just think it’s caution. I don’t think it’s -- in this environment, it’s very hard to predict. We feel reasonably comfortable of post predicting, looking backwards and saying what happened. We feel pretty good close-up on the second quarter what’s going to take place. We just -- you know, we just like being a little cautious. I’ve always said before and I’ll say it again, that this business has tremendous capacity, there is no restraint whatsoever to make it to go 7, 8, 9, 10 comps. It’s got nothing to do with the inventory flows, nothing to do with what we present, how we do all that stuff. We can certainly handle the crowds in the clubs and all that sort of interest, but we just are prudent. You know, we got banged pretty good by a number of analysts saying how could you possibly predict 6% three, four months ago in the first quarter? And the guy said why are you doing that, why are you getting carried, what’s happening with you? Well, we feel pretty strong about that now but we are just -- in this case, truthfully we just say, not that we -- we think we are going to do very well, all things being considered but who knows what’s going to happen out there. Things are really going on that are quite nutso and I think [inaudible] we’ll just say we’ll plan for prudence and we have the ability to flex it up or flex it down. So we’ll be disappointed if we don’t do better. That’s our major. We always want to do better and we have the power, the horsepower to do better. Today we’re just not prepared to say hey, we’re going to book it and give you confidence that that’s going to happen automatically, that’s all.

Great, thank you. And also, is there any difference that you are seeing between your business customers versus regular customers, and is the mix of business staying consistent? Herbert J. Zarkin: Business customers have gotten better because we are out there driving to get more business customers in and to romance them more in terms of having communication with them and trying to satisfy them, and we’ve done a good job of doing that as we talk about bringing the circle members in, but the business members are still [inaudible] [popular] and they are getting better. So no, we haven’t seen any real drop-off from them. Their share of business has continued to be strong and they are buying items for themselves and their families, as well as the do for the businesses, because they have other people on the list. A business member can add people to their count -- employees who shop in a circle member, so that’s important to us as well.

Okay, great. Thank you.

We’ll go next to Joseph Feldman of Telsey Advisory Group.

Congratulations on a good quarter and just a quick question on the inventory -- you guys did a very good job controlling inventory and managing it through the quarter. Just any areas where you feel that you might be too light and could have lost sales, or any areas where you may be still heavy, despite the overall number looking pretty good? Herbert J. Zarkin: I think we saw a great run on our business in April and we responded immediately, as soon as we saw the business click two days later, the levels had moved up. Remember, most of our merchandise is reorder-able and it comes through the manufacturers of the United States and there’s plenty of supply available to us on that kind of stuff. So I don’t think we’ve lost any sales on those kind of areas. The only place we can lose sales that bother us is the back of the club perishable area. If indeed produce skyrockets ahead and on a weekend and we didn’t expect it to happen, we could leave some sales on the table. We’re not happy about that. We worked very hard on it. We’ve had several meetings and we continue to have several meetings every week on this subject to make sure we have stock right through the weekend and with [perishable merchandise]. Occasionally there will be an item like rice -- somebody made a big deal about rice. It affected us very minimally. We didn’t have much of an issue with it for us. I think it was more of a -- I don’t want to talk about it. Anyhow, it wasn’t a big deal for us. We do have some inventory that we wish we didn’t have. If you want to buy some jewelry, we’d be glad to sell you some jewelry. That’s been [inaudible] for us for some period of time. We’ve worked on it, it continues to be a pain but that’s a small part of our business and we’ll work hard on it but other than that, we keep our inventories unbelievably fresh and clean. We take our markdowns. We are constantly making sure that we are competitively priced in this merchandise and we understand that having merchandise sit there and not selling is not a good thing to do, so we’d rather mark it down, get rid of it and bring in some fresh goods and try to make our money that way. And we have plenty of resources to do that and we are doing it. So I think our inventories are pretty good. Laura J. Sen: I would just simply chime in and say that it’s worth recognizing how costly inventory is, not to carry the inventory per se, although there is a cost obviously, for the clubs to handle excess inventory that we don’t need, and we make every effort to put our inventories on the proverbial just-in-time basis because that is a much more efficient way to run the model. With that being said, our systems are not prepared to handle the demand when it surges into double-digits in certain categories and we have to sort of do some extra work to make sure that we are following the demand as closely as possible, and as Herb points out, we are very good at that. You know, we may have had an incident here or there where we are not happy that, you know, the rice publicity blew the rice out but fine. That’s a relatively minor and rare sort of circumstance.

Thanks, and then the one other quick follow-up, sort of related -- within the electronics categories, are you guys seeing any supply issues, whether over or under supply in any of the categories? And as you think about the holiday season, is there going to be an excess supply of TVs, as we keep hearing? Laura J. Sen: We have not had any supply issues to date. This is the time of year when we change models, so that does become a bit of a balancing act of moving out of the inventory you have and moving into new SKUs. The conventional wisdom is that the manufacturers of glass drive the production and pricing of television, so to the degree that the supply is being used up by the manufacturers, prices hold. To the degree that the supply has exceeded the demand, the prices fall and I think that we’ll see as Christmas comes, I mean, based on what we are hearing out there, there is some softening in the market so I would expect that we are going to see prices decline and some extra supply. But that really remains to be seen.

Thanks very much and good luck on the next quarter.

We’ll go to Peter Benedict of Wachovia.

Thanks for taking the question. I apologize for going back to the gas issue, just real quickly -- maybe Frank, could you split the 42 basis point negative impact on gross margin from gas between the mix impact and the year-over-year margin rate change on the gas? Was it 50-50? Was one more impactful than the other? Frank D. Forward: Well, the first quarter the margins -- you’re talking about the first quarter, Peter, or the second quarter?

First quarter. Frank D. Forward: First quarter, there wasn’t that much of a margin -- I mean, we’re not -- I really don’t want to go down the path of giving that out on a quarter to quarter basis. Again, we really want to try to avoid doing profitability by product but generally to try to answer your question as best I can, for the first quarter the margins on gas were about the same this year versus last year, so almost all of it was the price inflation.

That’s great, thanks. On the 7300 SKUs at the end of the quarter, can you remind us where you were at the end of the fourth quarter? Is this kind of a level we are going to sit at now going forward? Herbert J. Zarkin: It’s about the same to where we were. Laura has said a number of times that we -- SKU reduction is not the goal. The goal is to justify and rationalize and really make sure you have the right SKUs in every classification. You don’t want to have a lot more SKUs but in doing that, we end up with 100 less SKUs some time down the road, that’s fine. If we end up with 50 more, we’re not going to go nutso on it either, so it’s really a question of making sure we have the right SKUs now. Before we had so many SKUs we literally could not operate the business. We peaked at Christmas a couple of years ago at 8600 and it’s very difficult to present the goods, show the goods, get the goods out. It was very, very difficult for us.

Agreed, makes sense. And then just lastly, Frank, on the IT roadmap spending, is that -- are we right to understand that there was really none of that of any materiality in the first quarter and that’s going to start to accrue in the back half? I just want to make sure that I heard you right on that. Thanks. Frank D. Forward: Yes, that’s correct. It’s more back half weighted. We certainly have started the process. We’ve been working with consultants to set the process going. Certainly there’s some specific systems that we’ve been starting to take a pretty detailed look at but most of this expense is going to be in the back half.

Great. Thanks so much.

We’ll go next to Adrianne Shapira of Goldman Sachs.

Thanks. Herb, you mentioned inflation, you are seeing about 1% to 2% lift because of inflation. Can you talk about in any sense what you think that will track as we head into the back half? Herbert J. Zarkin: There’s no doubt that the price of gas and fuel surcharges are on every single product are going to have some impact on just rising costs across the board, more so -- if this price keeps on going up, more so than -- and will offset some of the deflation that we’ve seen, so if gas keeps on going up at that high level, I imagine we might -- and we don’t -- because all prices will now move up because everything is moved by a truck sooner or later, than I think that our inflation rate might move up slightly. It might go to 2 to 3, I don’t know. We’re not an expert in that. We have to kind of like ex post facto to some degree. Laura J. Sen: We have already heard from manufacturers that there will be more price increases in the fall, so we’ll see how broad that is and how much volume that affects. But I would also say that we have yet to feel the inflation of products from the far east, though we know that inflation is coming on that whole stable of goods but we really won’t see that until maybe fourth quarter or next year. Herbert J. Zarkin: Yeah, because all of the inputs we purchased this past year.

Sure, and being from the firm that predicts the 200 oil, I can understand obviously that inflationary pressure but can you give us any sense, Laura, in terms of apparel versus hard lines, what that -- how that’s shaking out? Laura J. Sen: It’s across the board. I think that there are -- the pressures overseas come from a bunch of different factors, as much as domestic are. I mean there it’s labor, government regulation, raw materials, certainly local demand. You know, I’m seeing anything from the 5% to 15% range on imports that we’ll be seeing for next year.

Okay, and then just near-term, you shared with us the second quarter comps that you are looking for, but I’m just wondering, any early reads in terms of check impacts? Are you seeing any of the -- perhaps stimulus benefits yet? Herbert J. Zarkin: We don’t cash -- we don’t take the checks. Some companies do. We didn’t offer people you know, if you cash your check with us, we’ll give you a $50 credit or whatever it might be. We didn’t do any of those things. We don’t -- when we -- last time we had something like this, it didn’t make much difference to us. We didn’t notice anything. We don’t see it now in our numbers. We haven’t heard about it. Nobody is mentioning it but you know, you put more money into the market and it will cycle around and maybe we’ll get some benefit of it but we haven’t seen that. We tend to have a higher income member who gets very -- you know, as the number went up, once you got to a certain number, you don’t get anything. Come to think of it, I didn’t get anything. But by and large, I’m sure this will help some of the retailers that cater to a little lower income customer, hopefully.

Right, okay and then lastly, just on the inventory, I mean a lot of retailers are obviously trying to work down. They’ve got those inventory overage situations. Anything you can call out in terms of some opportunistic buys, getting your hands on some merchandise that heretofore you had trouble accessing? Herbert J. Zarkin: We’ve had some vendors that we never talked to in the past. I didn’t really want to talk to other than to say hello, start communicating with us now. But it has to be the right item. It has to be the right item, it has to fit for us, it has to fit into what we are looking for, and especially with name brands -- Laura J. Sen: Right, there’s no question as demand softens in the world, we become a more appealing destination. I think that will certainly continue to play out over this year but we don’t have any huge news right now.

Okay, and as you say, they have to make sense for us, are there categories that you are focused on and looking to get a brand infusion? Herbert J. Zarkin: I think when the brand is the right thing, the right reason to have the brand, if the category has a brand that is well-respected and it’s got a vision about it and people want it, then we should try to get that brand as best we possibly can. Laura J. Sen: It’s our job to continue to talk to manufacturers who don’t want to talk to us because eventually we found they talk to us and that’s how we entered into a lot of new businesses with various manufacturers and our members totally want that stuff. I would say one brand that is really working well for us right now is Legal Sea Foods. It’s a great East Coast, high quality restaurant brand. We are talking to them about some other possibilities. Years ago we had no relationship with [Bow’s]. They are our neighbor down the street here and we have a wonderful business with them at this point. So you know, those things do develop and it’s our job to pound the pavement every day and ask and ask and ask until we get what we want.

Thank you.

And at this time, I will turn the conference back to management for any additional remarks. Herbert J. Zarkin: Thank you very much. We’ll talk to you again soon.

That concludes today’s conference. We thank you for your participation. You may disconnect at this time.