Robert Atkinson – Vice President, Investor Relations David F. Dyer – Chief Executive Office Kent Kleeberger – Executive Vice President and Chief Financial Officer

Brian Tunick - J.P. Morgan Lorraine Hutchinson - BAS-ML Adrienne Tennant - Friedman, Billings, Ramsey & Co. Janet Kloppenburg - JJK Research Margaret Whitfield - Sterne, Agee & Leach Kimberly Greenberger - Citigroup Tracy Kogan - Credit Suisse Stacy Pak - SP Research Tom Filandro - SIG Michelle Tan - Goldman Sachs Neely Tamminga - Piper Jaffray Jennifer Black - Jennifer Black & Associates Liz Dunn - Thomas Weisel Partners David Berman - Berman Capital Jeff Black - Barclays Capital Robin Murchison - Suntrust Robinson Humphrey Roxanne Meyer - UBS Elizabeth Pierce - Roth Capital Partners LLC Marnie Shapiro - The Retail Tracker Dana Telsey - Telsey Advisory Group

Ladies and gentlemen, thank you for standing by and welcome to the quarterly earnings call with Bob Atkinson. You may begin your conference, sir.

: CEO Dave Dyer and CFO Kent Kleeberger are with me here at our Fort Myers headquarters. Before Dave begins his executive overview, I would like to remind you of our safe harbor statement. Certain statements made this morning, including, without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the company or future results or events constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements involve known or unknown risks, including, but not limited to, general economic and business conditions and the conditions within the specialty retail industry. There can be no assurance that actual results, performance or achievements expressed or implied by such forward-looking statements will occur. Please note use of the forward-looking statements are encouraged to review the company's latest annual report on Form 10-K, its filings on Form 10-Q, management's discussion and analysis in the company's latest annual report to shareholders, the company's filings on Form 8-K and other federal security laws filings for a description of other important factors that may affect the company's business, results of operations, and financial condition. The company does not undertake or publicly update or revise its forward-looking statements, even if experience or future changes make it clear that projected results expressed or implied by such statements, will not be realized. The company reports its consolidated financial results in accordance with generally accepted accounting principals or GAAP; however, to supplement these consolidated financial results management believes that certain non-GAAP operating results, which include non-cash charges for impairments of select assets, may provide a more meaningful measure on which to compare the company's results of operations between periods. The company believes these non-GAAP results provide useful information to both management and investors by excluding certain expenses that it believes are not indicative of core operating results. A reconciliation of the second quarter and year-to-date earnings per diluted share on a GAAP basis to a non-GAAP basis is presented in a separate table within today's earnings release. Please note that it has been our recent practice to file an 8-K with the SEC that will include a transcript of today's conference call and webcast. With that, I'll turn it over to Dave Dyer for his executive overview. Dave? David F. Dyer: Great. Thank you, Bob, and good morning everyone. We're certainly pleased with our second quarter results. With our comparable store sales increase of 1.3%, we've reversed a trend of 11 straight quarterly comp decreases. We delivered a 230 basis point improvement in gross margin. We reduced SG&A as a percentage of sales by 260 basis points. We've managed our inventories well and are building on the strength of our balance sheet. We've more than doubled our earnings per share from continuing operations. However pleased we are with our second quarter results, I assure you we're not satisfied. We know we still have a long way to go. We have made tremendous progress within our four key initiatives, especially regarding fixing the Chico's brand. Cinny Murray and her design team and merchandising teams have made the necessary corrections to the spring merchandise assortment, all while simultaneously creating what we believe is the best fall line that Chico's has presented in many years. Fixing Chico's not only involved merchandising but also included the need for more effective marketing. Under the creative direction of Lee Eisenberg and Rochelle Udell, the recent catalogs have captured the spirit of the Chico's customer and provided a crisp, clean editorial presentation of the product. Yesterday on the Today Show Chico's launched its first television ad campaign since August of 2006. Again, we believe that these spots capture the essence of our customer - her confidence, her spirit and, of course, her good taste. The television ads will run through the end of October on network and national cable programming favored by women viewers. We're also augmenting the TV campaign with a very compelling print media campaign. Chico's ads are currently running in the September issues of O and More and many other national periodicals. Regarding our growth initiatives, White House | Black Market and SOMA are both poised for growth. Both White House | Black Market and SOMA had positive comps for the quarter and we expect this momentum to carry forward into the fall season. With regard to growth in the second half of the year, Chico's FAS plans to open 19 new stores, expand 2 existing stores and relocate 4 stores. Another key objective is to grow our direct-to-consumer channel. During the quarter Chico's and White House | Black Market had marked improvement in their direct-to-consumer businesses, each having over a 50% increase in sales via that channel. I'd also like to note the accomplishments of our COO, Jeff Jones, and his distribution, logistics and IT teams. During the second quarter we moved our DTC operations into a new 300,000 square foot facility adjoining the store distribution center in Winder, Georgia. This will initially increase our daily order capacity from 7,500 orders to over 75,000 orders. Additionally, the distribution team has initiated zone skipping, which ensures a maximum three-day ground shipping from our Georgia facility to all our stores throughout the country. I'd also like to note that we have successfully implemented the SAP core systems and the JDA allocation system for our White House | Black Market brand. We're on schedule to implement the JDA allocation system for SOMA in September - they're already on SAP - and both the SAP core system and JDA allocations for the Chico's brand in November. Along with these core systems come powerful business intelligence analytics tools to help determine a more precise merchandise procurement and allocation. Additionally, we're piloting the JDA work force management system to more effectively schedule our store associates to be there when the customers are. We expect to roll the system out for most of our stores over the next few months. We'll soon have broadband communications in every store, which will greatly add to our online communication with each store, and an online training for our store associates. ATG software has been implemented for the DTC, which gives more features on our websites and more efficient and effective systems to our customer service operators. In September we will implement SAS tools for database analytics and management of our catalog and e-mail distribution. I am really very proud of the accomplishments of the Chico's FAS team over the last eight months. Together we've made great progress but, again, there is much, much more to do. We remain focused on the job of returning our company to exceptional operating results. Now I'm going to turn it over to Kent for his financial overview.

Thanks, Dave, and good morning everyone. We believe the operating results for the second quarter illustrate our ability to drive higher merchandise margins with well-controlled inventories, more effective marketing and an increased emphasis on amazing personal service. We also believe we have made significant strides in improving our cost structure, investing in infrastructure to support future growth, and improved asset management throughout the organization. But there's still much work to be done in order to achieve operating results that are closer to 2005 and 2006 performances. Total net sales for the second quarter of 2009 increased 3.6% over the comparable period to $419.9 million. Total net sales for stores increased by more than 2%, driven by a 1.3% comparable store sales increase, while our direct-to-consumer or DTC sales increased by 46% on top of the 37% increase achieved in the first quarter. The combined comp for Chico's and SOMA Intimate brands was plus 0.4%, while White | Black delivered an increase of 3.7%. Gross margin expressed as a rate of net sales increased 230 basis points to 55%. The increase was primarily attributable to a higher merchandise margin resulting from a significantly lower markdown rate at the Chico's brand and, to a lesser degree, a higher initial markup for both the Chico's and White House | Black Market brands. The Chico's brand gross margin also benefited from higher margins at their outlet stores as a result of greater penetration of the successful made-for-outlet product additions by Chico's, which carries a higher margin than the typical clearance product received from frontline stores. The higher merchandise margin was partially offset by an investment in merchandise personnel, which includes the ramp up of our planning and allocation functions that support new inventory initiatives and systems applications. On a GAAP basis, selling, general and administrative expenses increased from $205.5 million in the second quarter to $207 million in the quarter. This amount includes $5 million in non-cash impairment charges that I'll describe in a moment. Excluding the non-cash $5 million charge, SG&A decreased $3.4 million or 260 basis points compared to the second quarter of 2008. The lower SG&A is attributable to expense reduction measures implemented over the past 15 months, partially offset by the accrual for performance-based compensation based on improved year-to-date results which amounted to $4 million or approximately $0.015 a share for the quarter. Of the 260 basis point reduction in SG&A, 210 basis points equated to $2.8 million is attributable to reductions in store operating expenses. Store operations are reductions in payroll expense, supplies and shipping costs, and over $600,000 in rent concessions during the quarter. Coincidentally, marketing expense in the quarter decreased more than $600,000 compared to a year ago, primarily because of reduced direct mail advertising. You may recall from first quarter that we planned to reduce marketing expense in the first half of 2009 in order to fund what was expected to be an increased marketing effort in the second half of the year, including the campaigns at Chico's and White | Black that Dave has described. While we had planned an overall reduction in marketing expense of about 5% for the year, we had also planned for a disproportionate amount of the savings to come in the first half. The income statement shows year-to-date marketing down $5.6 million or 14%. Shared services expense, which includes the corporate level and store support functions, including IT, was flat in the second quarter last year. Again, included in '09's expense is approximately $4 million in incremental performance-based compensation over last year. Now regarding the impairment charges totaling $5 million pre-tax, about $1.2 million of the pre-tax impairment is related to underperforming stores as a result of our ongoing analysis in order to upgrade our stores' portfolio. The remaining $3.8 million of the $5 million impairment relates to the writedown of a note receivable on real property in Fort Myers not connected to our business operations. Two years ago the company sold the land and took a note receivable secured by a purchase money mortgage. Today the obligor is unable to pay off the note and related interest as originally agreed; thus, we conducted an evaluation of the underlying land value and decided to writedown the note by $3.8 million and reclassified the note to other long-term assets. We expect to take title to the property some time during the third quarter. Additionally, the accrued interest foregone on the note is netted against our interest income on the statement of income for the 2009 periods, resulting in net interest expense for the second quarter. We expect the annual holding cost of the land until it is sold to be nominal. The company's effective tax rate for the latest quarter was 37.9% compared to an effective tax rate of 31% for the 2008 period. The increase in the current period tax rate was due primarily to a greater level of pre-tax income, a reduction in the benefit recognized for tax exempt interest income, and reduced charitable donations of inventory. Completing, then, the look at the income statement, on a GAAP basis net income for the '09 second quarter more than doubled to $14.9 million or $0.08 a share compared to net income of $6.7 million or $0.04 per share for the like period. However, on a non-GAAP basis, which excludes impairment charges, net income was $18 million or $0.10 per diluted share. The earnings improvement came from higher net sales, improved gross margin rate, and lower SG&A, partially offset by lower interest income and a higher income tax rate compared to the prior year. Looking at our balance sheet, cash and marketable securities as of August 1st totaled $377.5 million, reflecting more than a $108 million increase in cash from the end of the prior fiscal year and nearly a $100 million increase over the end of second quarter 2008. We are continuing to forecast modest additional free cash flow for the remainder of 2009. We continue to tightly manage our inventories, particularly within the Chico's brand, while maintaining an appropriate level of in-store merchandise and product assortment to support sales. Total inventory at the end of the second quarter was $50 per selling square foot, reflecting a decrease of approximately 10% from the $56 at the end of second quarter last year. Quarter end inventories for the Chico's brand decreased by 5% per square foot, which includes about $5 million of incremental in-transit inventory. Excluding that amount, the Chico's brand inventory would be down over 10% per square foot at cost versus second quarter last year. Quarter end inventories for White | Black decreased approximately 18% per square foot compared to the prior year. We also improved our accounts payable leverage by approximately 17.5% to 63.6% at the end of second quarter 2009 versus last year. From a cash flow perspective, depreciation and amortization approximated $48.6 million year-to-date. We expect D&A to drop to about $45 to $46 million for the second half. Our capital expenditures for the capital expenditures for the 26 weeks ended August 1st approximated $36.2 million versus $69.5 million for the like period last year. Costs associated with systems upgrade and new software implementations approximated $16.3 million. The purchase of the land and building in connection with the expansion of our distribution center in Winder, Georgia was about $10.5 million. Other miscellaneous CapEx, which includes some improvements related to our headquarters, accounted for about $2 million, with the balance or $7.5 million representing amounts attributable to new stores and relocations. Looking at the third quarter 2009, while not providing specific earnings guidance we are operating under these assumptions: We believe that the retail environment, while recently showing some signs of improvement, remains uncertain as we anniversary the collapse of the financial markets in mid-September 2008. Accordingly, we are planning the Chico's FAS comp store sales to be low single-digit positive in the third quarter, which should compare favorably to the 13.4% decrease for third quarter 2008. We are targeting DTC sales to increase at a rate similar to that for the first six months of 2009 or about 40%. We expect gross margin improvement will come from a combination of higher sales and IMU, coupled with lower markdowns resulting from ongoing control of our inventories. SG&A will continue to reflect the cost savings measures taken over the past 15 months, but those savings will likely be offset in the third quarter by increased marketing expense and accruals for performance-based compensation. We look for third quarter marketing expense to increase by at least $4 to $5 million above the $26 million expended last year, so total SG&A dollars are expected to be up in the third quarter. We think interest income will decline year-over-year, reflecting the comparative drop in interest rates, despite having more cash invested. Further, our tax rate should remain in the 37% to 38% range. With that, I'll turn it over to Bob to introduce the Q&A portion of the call.

Thanks, Kent. Before Cynthia gives us the procedure for queuing for questions, I would ask that each questioner limit themselves to one question and one follow up. In this way we will be better able to accommodate as many questioners as time permits. You are welcome to get back in the queue in the same manner you did originally. Cynthia, how many security analysts indicate a question?

(Operator Instructions) Your first question comes from Brian Tunick - J.P. Morgan. Brian Tunick - J.P. Morgan: I just wanted to know maybe some more color on the comp metrics, maybe at both divisions? Can you talk about what categories at Chico's were responsible for the big comp improvement and how inventories are aligned with them?

Let's see, you wanted comp metrics and color on inventory. Let's talk about the color on the inventory performance first. In the Chico's brand we saw exceptionally good performance relative to the non-apparel side. The accessories category is doing extremely well. We also some nice performance in denim as well as the jacket category, including denim jackets and vests. And also active wear continues to remain a hot category. And typically, Brian, our inventory investment pretty much coincides with the performance of those categories. From a metrics perspective, we had some significant increase in the average unit retail for the Chico's brand and transactions per average store was down about roughly around 5%. In the White House | Black Market business we average unit retail was about flat with last year, but units per transaction were up as were transactions per average store.

Your next question comes from Lorraine Hutchinson - BAS-ML. Lorraine Hutchinson - BAS-ML: I was just looking for some color on how you're planning inventory going into the back half given the positive sales outlook but also some of the efficiencies that you've been able to generate through your planning and allocation system. How should we expect to see inventories in the third and fourth quarters?

Well, we think there still exists significant opportunities to manage our inventory levels better, so we're planning inventories to be down on a per square foot basis for both the November BOM and the February 2010 beginning of month. David F. Dyer: And I think the systems will help us as we move forward, but there is a learning curve as we go through them. They are very rich with features and different ways that we can use them to allocate and procure more effectively, but there is, again, a big learning curve as we go through it. So I don't think you're going to see anything immediate; I would look to it more for the results to be seen probably next spring and certainly next fall.

Your next question comes from Adrienne Tennant - Friedman, Billings, Ramsey & Co. Adrienne Tennant - Friedman, Billings, Ramsey & Co.: My question is on the more recent catalog drop. There's been a significant change in the way that they look so I was wondering if you can talk to us a little bit about the predictability of the response rate on the newer catalogs, the July and the August drops, and have you been able to return to your historical predictability and response rates? David F. Dyer: Well, I would say the customer has embraced the changes that we've made in the catalog drop. We talked about from the quarter we saw our sales improve as we got into July and in the July period we had our early fall mailing, which really drove a lot of the full-price sales in that quarter. Not only have we seen it in the business but in the way that we measure customers and listening to the customer through customer panels and research that we have done. We have seen a great reaction. People feel that Chico's is back. It is where it was, but perfect for today. The customers are engaged and excited and are voting with their pocketbooks.

Your next question comes from Janet Kloppenburg - JJK Research. Janet Kloppenburg - JJK Research: I was wondering if you could discuss the opportunity for IMU improvement at both Chico's and White House | Black Market as we work through the second half and also the outlook for next year. I don't know if Cinny's had an opportunity to take advantage of some of the lower-cost opportunities we're hearing about from other specialty retailers.

Well, Janet, I think the fall season at this point is pretty much bought. The IMU improvement that we've baked into our projections is real. On the other hand, I think that I'm more interested in on the go forward basis. We have some significant opportunities in sourcing on a go forward basis. We're basically putting a plan in place to take a look at the sourcing side of our business, where we can really control the piece goods in a more efficient and cost-effective manner. We're also looking at opportunities to both change some country of origins around. I think we've said before we have a little bit too much penetration in our business from China; we'd like to move some of that business around, perhaps to Sri Lanka, India, Indonesia, places like that. And then our FOB business, where we're basically the importer of record, is under penetrated and we think that not only can we do more FOB business but we're also interested in doing more factory direct relationships as well. So that's really more of a longer-term time horizon that we're going to start implementing late this fall. Janet Kloppenburg - JJK Research: And the effect will take how long?

I'm sorry? Janet Kloppenburg - JJK Research: How long will it be before we see the benefits of that program?

I expect to see some of that benefit in 2010. Janet Kloppenburg - JJK Research: In the first half? David F. Dyer: Second half.

Second half.

Your next question comes from Margaret Whitfield - Sterne, Agee & Leach. Margaret Whitfield - Sterne, Agee & Leach: I was curious what the initial response to your fall lines were at Chico'§ I know you had two incremental promotions here in August. And if you could provide us with your expectations by the three major brands for Q3 - are they all expected to be up low single digits? David F. Dyer: We don't give guidance for Q3, but let's just say that the momentum from the second quarter has carried into fall and we certainly are hopeful that we will continue positive comps for all brands.

Your next question comes from Kimberly Greenberger - Citigroup. Kimberly Greenberger - Citigroup: It seemed to me that you were pleasantly surprised by the strength of your business through July. Obviously, it differed from the outlook that you had issued at the end of June. I'm wondering if you can comment on whether you're expecting that momentum to slow down in the third quarter because your comp guidance would just seem to be a big conservative.

Well, I think when we're going through a period of course correction, Kimberly, there's really a high degree of uncertainty and the predictability becomes very difficult. While we're encouraged with the momentum from July that continued into August, we think that there's also opportunity in September especially, when the markets crashed, if you will, in the latter half of September. But from where we've been and where we're headed I think it pays to be conservative in our outlook for now because we don't want to get ahead of ourselves.

Your next question comes from Tracy Kogan - Credit Suisse. Tracy Kogan - Credit Suisse: Two questions: First, if you could talk a little more about the SOMA stores within the Chico's stores and what the overall productivity of those stores is, and then secondly if you could just remind us of how much of your merchandise is still shipped via air freight and where that number can go. David F. Dyer: The air freight number is actually very small, one of the things that we have done, both incoming and outgoing. Obviously, where we have trends that are happening or particular items that need to go by air from either the Far East to the States or from the distribution center to the stores we would use it, but I would say that it's probably less than 30% air coming in from overseas; about 70% is coming in by boat. The other thing that we've done is we've just implemented in our distribution center through zone skipping methods to deliver every store in the country within three days via ground shipping, which actually, when you really think about it, is probably only a day longer for some of the West Coast stores than they would get by air. So we're really working on getting back to very, very quick delivery from our DC to the stores and managing the categories and items that need to be air specifically and articulately as they come in from the Far East so we don't overspend on air freight. And there was another question in there somewhere, too, I think.

Yes. The question was how are sister stores performing inside - in other words, SOMA inside Chico's. I guess I'd have to caution you and say that we really only have a couple of data points right now and it's really very early in the process. But the takeaway is that we're seeing so far it's probably in the range of 20% to 25% incremental volume. Tracy Kogan - Credit Suisse: And how many of those do you plan on putting in through the end of this year?

It's a moving target. I'd say less than a handful for the balance of the year. And we're looking into next year somewhere in the neighborhood of 6 to 10.

Your next question comes from Stacy Pak - SP Research. Stacy Pak - SP Research: Can you just tell us what the occupancy leverage was or leverage, whatever, in Q2 and thoughts there for the back half? And also, Kent, can you talk about core operating expenses and just kind of quantify the potential opportunity there going forward? I'm talking about beyond Q3 and Q4 into '10.

Sure. On the occupancy line as a rate of sales it actually went down versus last year. The dollars were almost flat, which is kind of surprising. We still added a few new stores and some carryover from the expense of stores that were added in 2008. The thing that we're especially pleased about is the work that the real estate team has done in trying to get some concessions as well as in cooperation with our field organization, doing some co-tenancy enforcement, getting rent reductions there. In terms of the operating cost structure, we believe there's still a good $50 million at least to take out of it. I think the predominant portion of that is going to be in the stores area. And we're not going to get it by arbitrarily reducing hours. Right now we've put in a few initiatives in order to bring the rate per hour down at various levels within the organization. We've adjusted new hire rates. We're taking a look at the management structure within the store. We think we're a little heavy in terms of the manager and assistant manager level. We're trying to get to something a little bit closer to more toward the hourly side, if you will, and thereby a lower rate per hour. But I think that there's a significant amount of opportunity for increased efficiency that we're looking at both in terms of product flow and systems, so we think $50 million over the next 18 months or so is very doable.

Your next question comes from Tom Filandro - SIG. Tom Filandro - SIG: Recognizing that you only had one day since the launch of the Chico's TV campaign, which does look phenomenonal, and given Kent's comments that marketing spend - I think, Kent, you said it was up $4 to $5 million in the third quarter - can we look forward to a holiday TV campaign and can you give us some guidance on the fall holiday catalog circulation, either compared to prior year levels or the first half? David F. Dyer: Well, let's just first talk about the TV campaign. Yes, we are considering and will most likely add a small television campaign for the fourth quarter which would probably go from the time this one ends up until Thanksgiving. We have increased our prospecting for the fall with our catalogs and are really going after adding new customers. And circulation, I think we're really focusing on the reactivation and the exact numbers of circulation very similar to last year but just more on prospecting.

I think that in the first part of spring our circulation was down. We probably cut too deep. We went back and revisited that. We put more money into reactivation. And then in the fall season we're going to be putting more money into prospecting. David F. Dyer: But I would say the early reaction from television on the Today Show yesterday only, from what we saw not only in online but what we saw with our phone centers, was almost overwhelming yesterday. And so one day doesn't make a trend or a forecast, but it certainly was encouraging to see that our customers are responding and reacting strongly to our fresh creative.

Your next question comes from Michelle Tan - Goldman Sachs. Michelle Tan - Goldman Sachs: I was wondering if you could talk about the markdown rate in the fourth quarter. It's been very high for the past several years versus the norm in the rest of the year. It seems like a lot of the opportunity in getting back to historical profitability is getting that fourth quarter markdown rate back in line, so I was wondering if you could give us any color on how to think about the timeframe of getting there, how far we could potentially get this year or next year, and any hurdles to kind of culling that back to a much more normal rate?

Well, I prefer not to disclose what the markdown rate was in fourth quarter for the last two years because it would be embarrassing. We were basically very much focused on trying to reduce inventory levels not only closer to trend but even below trend, if you will. I look back on even fourth quarter 2007, where the merchandise plan was bought to a 5 comp and I think we delivered a negative 17, so you've got 22 points of comp to take care of. And it's not like it's fine wine, it gets better with age. So we really took some significant markdowns in 2007 and, quite honestly, 2008. We just basically bit the bullet because we focused on starting 2009 as clean as we possibly could and so we took significant markdowns. So I think you'll see a nice improvement in the markdown rate in fourth quarter this year. David F. Dyer: I would just say, as we've said on previous calls, our goal in the fourth quarter is not to lose money. We want to reverse the trend of the last several years.

Your next question comes from Neely Tamminga - Piper Jaffray. Neely Tamminga - Piper Jaffray: Just one clarification and then a question. I'm just trying to reconcile Dave's earlier comments. Is the Chico's brand comping positive in August? Because there was an indication that SOMA and White House continues to carry the positive momentum, but Chico's was not included in that original commentary. And then just, if I can, the real question - occupancy leverage then in the second half, are you expecting it or was what we saw with the concession somewhat of a one-time offset in Q2 and we should continue to expect deleverage on occupancy? David F. Dyer: Well, let me make it clear. To date Chico's is comping positive in the month of August, as are the other two brands. Kent?

Yes. We're expecting to continue to see the occupancy rate decrease for the balance of the year.

Your next question comes from Jennifer Black - Jennifer Black & Associates. Jennifer Black - Jennifer Black & Associates: I wondered if you could talk about jackets as a category in more depth - what styles are you getting more traction in? You have some leather jackets at close to $100. Is it leather, is it zebra, is it denim, is it the boyfriend jacket? I just wondered also if there was price point sensitivity at any price point. David F. Dyer: I don't think we've seen a price point sensitivity yet. Really, our customer is responding to fashion. And we were always known for novelty jackets and accessories and those have been two categories that we have really concentrated on as we've moved into fall. And the interesting thing is the more fashion we give her, the more she wants. There have been not too many misses, I would say, if you've got the most recent catalog, which we call The Jacket Issue. We certainly are having great response to all of our jackets. We've had response to denim, we've had response to the leathers, to the animal. We've had response to vests. So all those classifications are working for us. Jennifer Black - Jennifer Black & Associates: As a follow up, can you talk any more about denim? You've done an amazing job with your denim. How much more do you think you can do? David F. Dyer: A lot more and I wish I had more on hand right now.

Your next question comes from Liz Dunn - Thomas Weisel Partners. Liz Dunn - Thomas Weisel Partners: Can you update us on thoughts about use of cash? You seem to be stockpiling quite a bit. Clearly you want to have some cushion, but what are your thoughts about what you'll do with all that cash?

Right now I think for the near term we're just going to, quite honestly, hoard it. We don't have any plans for a repurchase. It doesn't make sense to even entertain the idea of a small tuck-in acquisition right now. We're still in a break-fix mode for the business and trying to drive efficiencies and investment systems, and I don't think we need a distraction. But maybe down the road we might take a look at something that's in line with what currently is in our fleet of brands. David F. Dyer: I will tell you that it's regularly discussed by the Board, and we are on top of what our best use capital would be. And I would say that we believe that there's certainly a lot of growth, as we've said before, in our White House and SOMA brands and in the repositioning of some of our stores in Chico's, so that would be one use. And as we get down the road we probably would be looking for another growth vehicle. So I think that we will have ongoing discussions as to how to use it, but we are very conservative and like being in the position right now of having no debt and lots of cash. It gives us the ability to really react to our business and react to market trends, we think, more forcefully and aggressively than others. Liz Dunn - Thomas Weisel Partners: Do you think if we were to fast forward a couple of years and the environment's better, hopefully, would we see a reacceleration of CapEx to the $200 million plus range? David F. Dyer: Oh, I hope not.

I don't think so. I think the business grew too fast, and I think that's where we got in trouble. I think, first of all, if you have an aggressive appetite for new stores you actually play right into the developers' hands and really don't get that great of economics. So we're going to be very meticulous and thoughtful in terms of our store growth.

Your next question comes from David Berman - Berman Capital. David Berman - Berman Capital: A quick question here on the inventories. One of the things I noticed, for example, is your payables were up about 28% and I was wondering if that was a change in terms or was it just that the inventory is sort of very current? And relatedly, your note says that your merchandise margins were partially offset by continued investment in merchandising payroll, including support for planning, and I was just wondering, since you had such a big improvement in inventories if you could talk about who came onto payroll and sort of helped get all this done?

Well, that was a lot, David. I think from the inventory payables perspective it's really two things. We have been getting better terms with some of our suppliers, and so there's a little bit of that that's happening. But I think the other thing you seized upon is that if your inventories are down and there's less carryover and more current than you would expect your payables to be higher. On the merchandising side of the business, the most significant item that comes to mind right now is really on the planning and allocation side of the business. We've made investments across all three businesses really because I think we were, first of all, under invested. But secondarily I think we learned a few years back when we tried to put SAP in SOMA that we didn't appropriately staff up. So I think with the opportunities not just about putting in a new software application for planning and allocation also basically looking at additional methodologies, additional metrics, intelligent clustering, all of these take an investment in human capital in order to figure these strategies out. So the planning and allocation teams have really received the bulk of the investment. And then, of course, we've been upgrading talent in some of the merchandising organizations and, in addition to that, we've also invested in design in some of the organizations as well.

Your next question comes from Jeff Black - Barclays Capital. Jeff Black - Barclays Capital: So if we have a flat SG&A dollar grown in 3Q, that's going to imply, I would think, to hit your 30 to 40-some, more significant reductions in 4Q. First, are we on track for the 30 to 40? And second, as you guys look at the base, is the 35 to 40 closures over the next three years the correct number or do you think we need to go deeper, can go deeper, on that?

Yes, I think that we're still on track for the 30 to 40. We're actually going after the next 50, to be honest. In terms of store closures, I think 35 is probably about right because when we embarked on our store-by-store reviews in the first quarter for Chico's and White House and in May for the SOMA, we really looked at a three-year outlook because we had, you may recall, some of you, that we had 320 leases that were coming up for renewal over the next three years. And so we think we've been very aggressive. In fact, we've even earmarked some stores that are even marginally profitable where we don't think we can move the top line to close. I was just going through some of the four-wall contribution reports for the brands and the number of stores that have a negative four-wall contribution continues to decrease for each of the brands. I believe that in Chico's case, I think it's under 20 now; it used to be like 25 or 30. In White House it's less than 15. So we've been making a lot of progress on the underperforming stores. But I think roughly 35 or so is probably the right number on a go forward basis each year to close.

Your next question comes from Robin Murchison - Suntrust Robinson Humphrey. Robin Murchison - Suntrust Robinson Humphrey: I wanted to ask you about jewelry and SOMA. Cinny made a big presentation and emphasis with jewelry during the June analyst's meeting. I just wondered if you could kind of update us on that as a category? I do see on the web where a lot of SKUs within that category are specially priced right now, so it looks like you're making a big push with it. But margins in that category and then percentage-wise if it's growing, if you expect it to trip up as a percent of total mix. And then regarding the fourth quarter holiday business, if there are any changes in your approach to the holiday business, understanding that the fourth quarter is usually pretty similar to the other quarters in terms of revenues, but if you're planning anything special in terms of trying to ramp up December? David F. Dyer: Well, just a little bit about the categories. The two categories that we've traditionally been know for have been novelty jackets and accessories, and I think that we had let the penetration of accessories go a lot lower than it should be for our business. What you saw and what you're seeing in the stores is a reinvigoration of the accessories trend. We're now probably 13% penetration in accessories. We think we can be 15% and higher as we move forward in the year. So we believe there's a lot of room for accessory growth. Again, some of the new things, the big bold jewelry that we're doing, what you're seeing in the advertising, the customers are, again, voting with their pocketbook, we feel very good about. I think that also, you asked about the fourth quarter, this is a very unusual company for me. I've never seen an apparel company that has its smallest quarter as the fourth quarter. So we've analyzed it and looked at it and I don't think we're going to - we don’t accept it, but we do acknowledge that it has been the smallest quarter. And I think what you're going to see in fourth quarter is we're going to try to do marketing that makes us more a giftable and I think you'll see accessories as the star.

Your next question comes from Roxanne Meyer - UBS. Roxanne Meyer - UBS: Just on the payroll in the gross margin that is allocated for planning and allocation, are you able to quantify the impact that had to your gross margin and what you're expecting that to weigh down the gross margin going forward?

I think overall just planning and allocation isn't as significant on a go forward basis. But if you look at what the trend has been for our business from a merchandising payroll perspective, we've been investing something in the order of magnitude of maybe 30 basis points or so. Roxanne Meyer - UBS: And then just as a follow up, clearly you're benefiting from lower markdowns but obviously the environment's tough. In your catalogs you still do have the coupons, the $25 off a $50 purchase. I guess I'm wondering over the longer term what your strategy is as it relates to couponing and how important that's going to be and whether you think it's going to stay at historical levels or if there's an opportunity to reduce it or just how you're thinking about that. David F. Dyer: We think there's an opportunity to reduce our dependency on coupons. We've seen it in several businesses, for instance, White | Black, where we have not anniversaried some events. We are also able to do smaller percentages or dollars off with our coupons. So we're doing both and, again, while I think that they're an important part, I think that we can manage them better and more effectively. When you have the right product you don't have to give it away.

Your next question comes from Elizabeth Pierce - Roth Capital Partners LLC. Elizabeth Pierce - Roth Capital Partners LLC: Just briefly on the outlets, how much is now specifically made for the outlets?

We're targeting by the end of fall to be somewhere in the neighborhood of 60%, Liz. Elizabeth Pierce - Roth Capital Partners LLC: And then in terms of your sourcing, when you talked about more direct are you talking about some kind of joint venture with agents - because that's what we've seen with other retailers - where you're really partnering with them?

I wouldn't necessarily say a joint venture although recently we've reached out to William E. Conner and they're going to help us. In addition to lining up some factories from a sourcing perspective as most agents, middlemen, do, we're going to have them help us in our quality inspection overseas by adding the QA component overseas. That way we can be a little more preventive as opposed to detective when it hits our distribution center and then we can't react.

Your next question comes from Marnie Shapiro - The Retail Tracker. Marnie Shapiro - The Retail Tracker: My questions are all around the direct marketing and just some clarification on the direct business. You said that you took down the number pretty significantly and probably too deep. Was that within any segment specifically? Was it prospecting or was it also to your list, and was it mailing or was it also e-mailing? And then if you can also, just following up on that, are you e-mailing and mailing to lapsed shoppers and are you seeing them start to come back into the store? Just a little bit of color around all of that. David F. Dyer: Well, yes, we are mailing and e-mailing to lapsed customers. And we think that with the new assortment a lot of the people that we have lost are probably one of our greatest opportunities to bring them back and to excite them with the product again. We did I'd say over the past year or so cut out a lot of the prospecting which, you know, when you cut prospecting out it's kind of a short-term gain because you really depend on the new customers coming into the brand to continue to populate your customer file. I guess reactivation is plus 6.8%.

We've look at the results in terms of the first quarter and we're seeing a significant lift in the number of reactivated customers that are coming into the store or are on DTC and contributing to the overall sales number. So I think that it's a strategy that we'll do to try to - some of the customers that, from a merchandise selection, we may have disappointed over the last two and a half years or so, to go back there because we do know it's a very loyal customer and we're going to try to woo her back. David F. Dyer: And not only have we put in new software, we've brought in additional staff and actually have a gentleman from Land's End and L.L. Bean who's now heading our database management and he certainly knows how to prospect.

Your next question comes from Dana Telsey - Telsey Advisory Group. Dana Telsey - Telsey Advisory Group: Can you please chat at all about IMU by division? How do you see that opportunity? Whether it's White House | Black Market or Chico's or SOMA, is it changing and how are product costs playing a part in that?

I think there's opportunity in IMU across all businesses. I think that at least when I first arrived on the Chico's scene a lot of people were asking about the White House | Black Market margins because they were below Chico's and I believe that the way the White House brand is positioned I think they'll not only catch up to Chico's they could quite easily surpass them from IMU. And the SOMA, it's really one of leveraging. It's a small business. We currently have about 75 stores and obviously in the purchasing game and production runs, especially in the foundations area, you need to buy a lot of units. And so when you're only ordering minimum quantities, there's a significant portion of your costs that's in development and over time, as you ramp up in terms of volume, it drives the cost per unit down. So SOMA probably has the biggest opportunity.

Your final question comes from Janet Kloppenburg - JJK Research. Janet Kloppenburg - JJK Research: I just wondered if you guys could talk - it sounds like the White House | Black Market inventories are pretty light. Maybe there's a comparison that I'm forgetting about from last year, but it sounded like they were down more than I expected them to be. If you could just discuss that?

Actually, last year we were probably a little over bought in White House | Black Market going into the third quarter. We took some pretty significant markdowns. So I wouldn't be quite as alarmed about being down 17% or 18% at all; it's because we had too much inventory last year.

Thank you all. Please note that Kent and I will be participating in the Goldman Sachs retailing conference on Wednesday, September 9th in New York. Also, we have moved up the date of our third quarter sales and earnings release to Wednesday, November 18th, with a conference call planned for 8:30 a.m. Eastern Time that day. Thank you all for joining us this morning. We appreciate your continuing interest in Chico's FAS.

Ladies and gentlemen, this concludes today's conference. You may now disconnect.