Leslie Neville - Director of Investor Relations Debbie Ferrée - Vice Chairman and Chief Merchandising Officer Doug Probst – CFO

John Zolidis – Buckingham Research Chris Svezia - Susquehanna Financial David Mann – Johnson Rice Jeff Black – Barclays Capital Jeff Mintz – Wedbush Patrick McKeever – MKM Partners

(Operator Instructions) Welcome to the Third Quarter 2008 DSW Inc. Earnings Conference Call. I would now like to turn the presentation over to your host for today’s call Ms. Leslie Neville, Director of Investor Relations.

With me today in Columbus are Debbie Ferrée our Vice Chairman and Chief Merchandising Officer and Doug Probst our CFO. Earlier today we issued a press release detailing the results of operations for the quarter ended November 1, 2008. Before we proceed please note that various remarks we make about the future expectations, plans and prospects of the company constitute forward looking statements. The actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those listed in today's press release and in our public filings with the SEC. With that, I will turn it over to Doug.

My comments today will start with detail around the third quarter and then move into our outlook for the balance of 2008. As previously released net sales for the third quarter increased 6.5% to $391.4 million. Same store sales decreased 4.1% for the comparable period versus a decrease of 3% last year. Like most retailers traffic was down in the quarter, however, we are pleased to report that our conversion rate on the mall traffic was up, resulting in a net increase in comp store transactions. Inventory levels entering the third quarter were positioned appropriately relative to the anticipated comp store sales decline resulting in a 44.1% merchandise margin rate, a 10 basis point increase to last year. The gross profit rate dropped to 27.9% due mainly to a 100 basis point increase in occupancy expenses related to the negative comp. As expected the SG&A rate increased 290 basis points in the quarter to 22.5% due mainly to the decrease in same store sales, the increase in IT and e-commerce spend and the reversal of the year to date accrual for bonus in 2007. For the quarter the net result was a 270 basis point decrease in the operating income rate to 3.4% of sales. Net income for the quarter was $13.2 million compared with net income of $22.4 million for last year and diluted earnings per share were $0.30 compared with $0.51 a year ago. We are pleased with how we managed the business in the third quarter and we are especially pleased with the customer’s response in what continues to be a difficult economic environment. Excluding the incremental inventory investment for DSW.com inventories we essentially flat to last year on a cost per square foot basis entering the fourth quarter. While this is inconsistent with our previous trend of being down entering the quarter inventory levels were mainly attributed to accelerated receipt to support two merchandise strategies, a large opportunistic athletic buy and an incremental boot inventory designed to increase boot penetration for the fourth quarter and first quarter next year. Debbie will provide more details on these strategies in her merchandise commentary. Despite the current inventory position we expect end of year store inventory levels to be less than last year. We added a record 21 DSW stores in the quarter ending with 295 DSW stores and 380 leased departments. At the end of the quarter the square footage for DSW stores was approximately 6.7 million square feet. Today we expect to open our 41st and final new store in 2008 an increase to our previous estimate of at least 35 stores. Based on the environment we anticipated that a few of these stores may have been delayed until 2009. Consequently because of the incremental openings in 2008 we are now expecting only 10 to 15 stores in 2009. Now I’d like to provide our outlook for the remainder of 2008, based on sales trends for the first three quarter of 2008 our comp expectations for the year remain in line with our original annual guidance of negative mid single digits. Our sales expectations also include our e-commerce channel that is expected to contribute approximately 2% of DSW stores sales for fiscal 2008. For the year, if we achieve our sales targets and manage inventory we would expect an improvement in merchandise margin that can mostly offset the expected de-leverage in occupancy. As we have mentioned before our expense rate for the year was planned to increase significantly as we de-leverage expenses on negative comp store sales while continuing to invest in growth initiative such as IT and e-commerce. At the beginning of the year we expected to receive approximately $12 million for IT, finance, HR and distribution services provided to Value City Department Stores. As of the end of the third quarter DSW has only recorded $3 million of these fees. Due to the recent bankruptcy of Value City Department Stores, DSW expects to absorb nearly all of the remaining $9 million of expenses in 2008. We will seek payment for the full amount of past services in bankruptcy court. Since the petition for bankruptcy, DSW has an agreement to provide service which Value City Department Stores pay for in full on a weekly basis. We will also take a pre-tax charge of just under $3 million in the fourth quarter to recognize severance and other expenses related to the workforce reduction that was executed on November 5th. As you know we reduced our home office and field leadership work force by 98 positions or approximately 13% which included 82 current positions and 16 vacant positions that will not be filled. Based on the additional expenses related to Value City Department Stores the severance charges just mentioned and our expectations for continued decline in consumer spending, estimated annual diluted earnings per share are now expected in the range of $0.62 to $0.72 for fiscal 2008 revised from our previous annual EPS guidance of $0.75 to $0.85. Now a few words on the balance sheet, as planned at the beginning of the year we expect our capital expenditures for 2008 to be approximately $85 million to open 41 stores and to invest in our systems infrastructure. This is in addition to the $102 million spent in 2007 that included the development of our e-commerce channel. Despite the weakening environment we have been committed to investing into our long term growth while sustaining a significant cash balance to weather this economic storm. Entering 2008 we had $132 million in cash and short term investments and no debt. Nine months later we are pleased to report we have virtually the same amount of cash and short term investments and we still have no debt. While there is much uncertainty surrounding the economy and the consumer’s willingness to spend we believe DSW is well positioned. The decisions we have made and will make will be made from a position of strength and not from weakness or desperation. Given the economic uncertainty we are not providing specific guidance for 2009 at this time however we will share some of our expectations for next year. We expect the consumer to remain weak. We expect to reduce our capital expenditures to be approximately half of 2008 because we are opening fewer stores and the majority of our IT infrastructure spend is behind us. We expect to continue to gain market share and we expect to preserve our balance in cash and short term investments. With that I will turn it over to Debbie. Debbie Ferrée: In these unprecedented economic times DSW’s strength lies in our ability to do what we have always done best, offer our customers the right assortment at a compelling value. Given the economic headwinds that we and all retailers are facing, we were pleased with how we managed our business in the third quarter. First I will give you some detail on merchandise performance and then I will move on into other aspects of the business. Our assortment is more customer centric than ever before. We are keenly focused on the brands and product our customer wants and are committed to delivering her the fashion and newness she demands at a price she can feel good about. In Q3 we again saw double digit comp gains in better brands. The customer’s desire for these brands has not diminished and DSW offers them at a value that is critical to her today. As a result, we are experiencing increased market share in the better category as customers continue to trade down from other channels. We are also experiencing strong results in fashion trend products. It is impulse driven and less price sensitive. Even in these economic times if the fashion and the value is compelling she is still motivated to buy. In the seasonal area customers are buying closer to time of need and responding well to the new fashion offering for fall. As we mentioned in Q2 we strategically shifted receipts for both boots and sandals to support the customer behavior. We have seen solid performance in both categories as a result. In boots we adjusted receipts to support fashion trends early in Q3 and slowed basic items later. Customer response to new casual fashion looks such as slouch, Western and riding, and flat boots exceeded our expectations. Results will continue to flow to capitalize on boots in fourth quarter as well as extend boots into Q1 of ’09 in select markets on specific items. By supporting fresh receipts and a buy store strategy and sandals we extended the sandal season into Q3 and saw a strong comp performance in this category. As Doug mentioned we were able to take advantage of the large opportunistic purchase in the athletic category and created an event that is running in the stores now. The promotion is compelling athletic brands for men and women at $29.95 to $39.95 at savings from 40% to 60% off. This is another example of our ability to pass great value on to the consumer. Our team remains agile and committed to managing inventory as needed to maximize margins and mitigate risk. Careful review and merchandise assortment edit not only ensure that our content is relevant to the customer but also enable us to deliver profitable performance in this environment. We drove margin in the third quarter by diligently managing inventory to sales levels and focusing on maintaining an optimal balance between regular price and clearance merchandise. As Doug mentioned we accelerated receipts in merchandise to support our athletic event and increased boot penetration. These were strategic investments in inventory that were designed to drive sales and pass additional value on to the customer. As always, there are areas we will be watching closely. For instance, the economic downturn appears to be impacting the men’s business to a greater degree than women’s. As a result we are making adjustments in inventory to more closely match the sales trends. Now on to DSW Rewards and dot com. Our core Rewards customer continues to demonstrate loyalty. This was a tremendous asset for us as Reward members still account for over 70% of the sales. In third quarter we focused on driving traffic into the stores through several additional communications including double points offer, a $10 coupon and a gift with purchase. In total, these efforts succeeded in driving traffic, conversion and additional spend. Our store teams have done an excellent job of continuing to sign up over 65,000 new members each week bringing our total so far in 2008 to over 10 million members. In fourth quarter we will continue to communicate regularly with these members. Our relationship with our customers is one of the most critical components of DSW’s success. Our goal is to continue to enhance that experience to always be her footwear retailer of choice. Our DSW.com site is in the middle of its first full season. We are gaining valuable insight into our customer who shops online. The sharing of information between the channels has been beneficial to our entire organization. As we continue to learn, we will make adjustments to our online assortment, types of marketing and online offers. Let me end by saying we will focus on what we do best, offering our customer the best selection at a compelling value. We will accomplish this by: Pursuing every opportunity to pass great value on to the customer. Maintaining a complete and deliberate focus on offering the customer the assortment she demands. Aggressively managing inventory. Maximizing the loyalty of our DSW Rewards members. We’re confident in our ability to execute to these objectives, support long term growth at DSW and gain market share. With that I will turn it back over to Leslie

Now on to the Q&A. Please limit yourself to one question and one follow up on the first round. You’re welcome to get back in the queue in the same manner that you did originally. Could you please instruct the callers how to indicate a question?

(Operator Instructions) Your first question comes from John Zolidis – Buckingham Research John Zolidis – Buckingham Research: A clarification on the guidance, the original guidance did anticipate I believe some loss in receivables or revenues from Value City related to a potential bankruptcy. What I’m wondering is in the revised guidance what is the incremental loss that’s been now factored in with respect to Value City? In addition to that you did keep your full year comp guidance in tact, however, with only one quarter left to go it could be that you’re expecting the fourth quarter to be weaker now than you previously did. I was wondering if you could comment on the extent to which changes in your assumptions for fourth quarter sales trends affected your full year guidance change.

On the guidance, yes we did contemplate at the beginning of the year and as the year progressed that we would not be receiving the Value City payment in full. In fact, there is still a range of what we expect to collect from them. The bankruptcy court is going to have a say in that. We are collecting some fees from them on a weekly basis. We don’t know how long they will continue to operate or need our services. There is still a range involved with the Value City. As the year progressed we got more realistic as to the prospects of them filing bankruptcy and we continue to evaluate what that risk was. There was a range with that. The other components of our range also considered the severance charges we mentioned and also the performance of the business in general. Throughout the first three quarters the DSW store business has been stronger from a margin perspective but the reduction in guidance is purely an expense driven adjustment. Yes, there are some additions so far and there is some additional risk in the fourth quarter as we look at the landscape for retail spending. We’re not the only ones that are looking at the fourth quarter and seeing a potential downturn. We’re a few weeks into it; obviously a big week coming now and we just see the consumer confidence being weaker and some potential lower spending as well. All that’s baked into the expectations for the balance of the year. The comp range, it may be a little weaker but that’s again built into our range. I hope that answers your question. John Zolidis – Buckingham Research: You mentioned that expenses being at the high end of the range in the previous guidance. In the third quarter I believe you said there was a bonus accrual reversal could you quantify that for us?

Last year’s bonus reversal was significant because it was a year to date reversal and that equated to approximately 140 basis points of unfavorable comparison to last year. John Zolidis – Buckingham Research: Can you quantify that in dollars how much has been reversed from previous quarters?

Yes, about $6 million last year in the third quarter was the reversal, $6 to $7 million.

Your next question comes from Chris Svezia - Susquehanna Financial Chris Svezia - Susquehanna Financial: First just to touch on the inventory levels, what you’re seeing here and the references you made with regard to being down at the end of the year. Can you clarify is that down in total dollars or down on a per store basis?

On a cost per square foot basis excluding DSW.com inventory. Chris Svezia - Susquehanna Financial: You expect to be down?

Yes. Chris Svezia - Susquehanna Financial: When you guys look and talk about your merchandise margins you actually saw some level of improvement. I know in the fourth quarter you’re against a very favorable comparison on the merchandise margin. Should we still anticipate significant improvement year over year or has that in your internal models as the assumptions come down slightly just because you may be anticipate that you might be a little bit more promotional in this environment. You referenced men’s and I would say it seems like in general you seem to be a little bit heavier on the inventory side relative to when you went into the third quarter. Can you clarify how we should be looking at that?

As far as the comparisons in the fourth quarter, if you remember our second and fourth quarters last year were depressed merchandise margins to put it lightly. Last year in the fourth quarter we had a 38.7% merchandise margin rate and to your point and to your question, we do expect significant improvement in that merchandise margin line even with a more promotional environment out there. That’s mostly because it was so low last year. We had 600 basis points of improvement in merchandise margin in the second quarter. We don’t expect that kind of improvement but we do expect improvement greater than what we had in the third quarter for sure. Chris Svezia - Susquehanna Financial: When you guys talked about the pricing environment and in the past I think we’ve talked about the 3% to 7% or so pricing inflation on average, can you talk about the success you’re having in terms of passing that on, it started obviously in the third quarter but obviously continues into the fourth quarter and does that pressure continue obviously as you go into 2009? Maybe just talk about what you’re doing to maybe offset that pressure. Debbie Ferrée: As you remember in the last earnings call we talked about the increases out of China being at a range of 3% to 7% they actually came out at 7%. We’re not actually seeing any more pressure on the cost right now. As a matter of fact we’re hearing from the market is we may see that going down a little bit. We may see some prices pulling back and going a little bit lower right now. We’ll learn more about that once we get to the December show. Some of the advantages that we do have though looking forward as we mentioned to you before we’re looking to try to incorporate an FOB initiative into our costing model which means we’re going to try to take advantage of opportunity to take possession of the goods across the water in China so we can better control our deliveries and lower the cost a little bit. Those initiatives are just in the very preliminary stages and I have nothing to report to you right now. We are having success with the manufacturers we’ve been working on. As far as the last part of your question is this really impacting customer and are we passing it on to the consumer. We actually have been able to control the cost increases. Right now not seeing them go any higher. As a matter of fact, we may be able to pull them back a little bit lower. It’s interesting what’s happening in the core product. We’re trying to maintain our strong value proposition and sharp price points there where we’re not getting any kind of pricing pressure at all is on the fashion product which tends to be more impulse and less price sensitive. I think the balance of those two components are going to make it easy to continue to pass value to the customer and I don’t think we’re going to see a lot of pressure there.

Your next question comes from David Mann – Johnson Rice David Mann – Johnson Rice: In terms of the workforce and expense reductions you’ve taken can you give us a range of how much the savings will be and how much should we expect in the fourth quarter and subsequently in next year?

As far as an annualized basis we expect the range of savings to be $10 to $15 million on an annual basis. The reason that range is pretty broad is that we’re still looking about what’s the best way to efficiently operate the business and hopefully keep that to the high side of that savings. As far as the fourth quarter is concerned, there would be some savings for the people are no long here. It’s not nearly enough to offset the severance charge that we have to take. David Mann – Johnson Rice: In terms of what you’re paying on occupancy expense can you give a sense with all of the likely store closings and pressure on rents that should happen that we’re hearing is starting to happen is there any opportunity there for you on some of your older stores?

Yes, the opportunities come up occasionally and as you know our model helps us to avoid many losses in stores. There are very few stores that operate at a loss or that don’t generate cash. We have taken a few impairment charges over the last couple quarters and perhaps may take another one in the fourth quarter depending on how the sales trend out. There are some opportunities. There are some kick outs that we are pursuing and maybe executing to either renegotiate or just kick out of our leases so there will be some opportunity for us but right now there’s no quantity as to what that’s going to equate to.

Your next question comes from Jeff Black – Barclays Capital Jeff Black – Barclays Capital: On the $0.13 drop in guidance in 4Q how much of that is due to the severance fees and the uncollectible fees from bankruptcy can you tell us that?

The majority of it. Jeff Black – Barclays Capital: Is that $0.12, $0.11, $0.10?

We collected a little bit of it. We anticipate to collect some of it. As I said in the script we expect to absorb the majority of that remaining balance. We don’t expect to be paid much through the bankruptcy process. We’re going to pursue it strongly but I would say the majority of our reduction is due to that. There is some from the severance and is some because of the falling sales going into the fourth quarter although we’re not necessarily predicting that final yet. I would say the $0.13 drop the majority of it is due predominantly due to the Value City changes. Jeff Black – Barclays Capital: Are you still thinking that ’08 is a peak year for SG&A or do we have another layer to add next year? Where’s that put us as we look to next year in terms of your ability to get some leverage on your expense structure. What kind of comp you think you need for the model?

It’s going to come down to our comp expectations and I don’t see unfortunately a robust comp year in 2009. We’re not giving a lot of guidance in 2009 but not many people out there are expecting a robust retail year. I would expect as comps remain flat to down that SG&A will likely increase. We’re doing all we can to mitigate that and as we said way back when to leverage this model we would need about 2% comps so if we could achieve a 2% comp that may be where the leverage starts to happen. That all depends on where we come out in 2009 but we are planning conservatively so we can mitigate that increase in SG&A rate.

Your next question comes from Jeff Mintz – Wedbush Jeff Mintz – Wedbush: On your store opening guidance reduction can you talk a little bit about what you’re seeing in terms of are opportunities just going away because centers aren’t opening or they’re being pushed out or is this more based on your decisions to pull back on openings?

A little bit of both. We’re always going to keep to our internal hurdle rate and based on the co-tenancies and the locations that we’re being served up there’s a lot of opportunities with retailers going out. If there are not right co-tenancies and it doesn’t meet our internal hurdle rate we’re not going to take that deal. We just realistically think that there’ll be 10 to 15 deals that we’ll want to open next year. If the right location with the right co-tenants, the right size, meeting the internal hurdle rates we’ll open more. We just don’t realistically think those opportunities are going to be there for us. Although there are a lot of retailers dropping out and there may be some more opportunities presented to us but at this stage we believe 10 to 15 is the appropriate estimate. Jeff Mintz – Wedbush: In terms of the inventory and how you’re getting there are you seeing the need to cancel orders in order to achieve your inventory goals or is it more just slowing down deliveries. How are you getting there on inventory? Debbie Ferrée: First of all as we have said on the past few earnings calls inventory management is critical to us so I think what I would tell you is we are constantly aware of matching the inventory levels to the sales. We put backup plans in place on cancelable backups and have great relationships with our vendors so we’re working very closely with them to most closely match the receipts that are coming in to the sales and the kinds of styles that are selling right now. It is a combination, we have open to buy liquidity number one but we number two have cancelled backups in the system and number three I’m working with current on order to work with the vendor on bringing the goods in that we think we need and canceling goods that we think that we don’t need so its really a combination of those three things.

Your next question comes from Patrick McKeever – MKM Partners Patrick McKeever – MKM Partners: On the athletic shoe buy just wondering if you could talk about how big a buy that is for you, how much that plays into the change in the inventory per store dynamic? Also, how has your athletic shoe business been trending in general? The last part of my question is from a seasonal standpoint is this a good time to be making a big investment in athletic shoes? Debbie Ferrée: Let me respond maybe not in the order that you asked the question but I’ll make sure I cover everything. How big is the athletic buy, let me talk to you about how the business is trending first of all. The business the comp decreased for third quarter was just a little bit worse than the overall comp decrease. It really came out of two things, number one the men’s area is pretty much flat with last year, and it’s trending down about 1%. It’s the women’s athletic piece that was trending down about 7% and what we see here is really a shift from some of the fashion. You remember fashion is about 50% of our women’s athletic business, a shift from fashion into a little bit more technical. That’s the biggest change that we’re seeing right now in athletic. As far as this athletic promotion yes you would say that typically this isn’t the peak of the season of athletic that’s really in the spring season. We do rely in great part to closeouts and opportunistic buys. As we go into the fourth quarter it’s always been how we’ve planned our receipts and its part of our business model. It’s not out of the course of seeing that we really are doing nothing different than we normally do in terms of how we buy receipts. The only thing that was different this time is we distorted a little bit more money into those closeouts than we did fourth quarter last year. The scope of this athletic promotion is really only in 150 stores. It had about six or seven vendors and what this was in response to is this is part of our business model in terms of how we buy receipts fourth quarter. We also saw a lot of closeout lists coming out that had very, very strong product on it and it was a great opportunity to take advantage of buying some great product at a very, very good price. It’s about 150 stores and its 40% to 60% off and we’ve only been in the event since Thursday of last week. The early results were encouraging and its only three days. We saw in some stores selling just in those three days on that athletic product up to 20% sell through in those three days. We are encouraged but we’re going to have to let this play out for six weeks. In terms of where we’re going to end our inventories in athletic for the end of the year we will end them below last year. While we accelerated receipts to cross third quarter into fourth that was purely positioning inventories to mark them and stage them in the stores. Our overall position in athletic inventory at the end of the quarter is to be below last year. Patrick McKeever – MKM Partners: Can I ask a quick question on the e-commerce business and that is I know it’s still pretty early but what is selling best on the web? How does it differ from what sells best at the stores?

Clearly we’re seeing a little bit different customer on the web than what we anticipated. A little bit more fashion oriented, boots certainly is a much more higher penetration than what we would see in the stores. Of the top 25 sellers online 24 are in the boot category. It’s about 50% of sales. I guess maybe I answered that just as well. Debbie Ferrée: We’re really seeing on the channel, the dot com channel is more of a distortion towards fashion. In every category we’re seeing fashion really outpace more of the core basics business than what we have in the stores. Right now what we’re seeing is a big distortion towards the boot business, significantly higher than what we’re seeing in the stores and I think that’s really how we position the homepage and how we direct the customer into what’s hot. We’re having a great deal of success in the boot category on the site.

Your next question comes from John Zolidis – Buckingham Research John Zolidis – Buckingham Research: I’m wondering if you can give us the D&A in the quarter and then also could you please provide the e-commerce sales in the quarter?

I didn’t hear the second part of your question. John Zolidis – Buckingham Research: The e-commerce sales in the quarter.

We don’t break that out to that detail but we’re still giving that perspective that it’s about 2% of DSW store sales. The annual depreciation is about $35 million at my fingertips I don’t have the quarter depreciation but we’ll get back to you on that. John Zolidis – Buckingham Research: That’s been nine months to date, the $35 million.

$35 million would be the annual depreciation, nine months to date is $24.4 million.

Your last question comes from David Mann – Johnson Rice David Mann – Johnson Rice: Can you give some update on the CEO search please?

It is progressing and I know there has been a lot of activity but we have not talked to anybody individually but we know its progressing and originally we had thought that it would be a nine month process that’s the input that we got. They’re still thinking that would be the timeframe. I would think sometime in 2009.

That concludes the Q&A session. I would now like to turn the call back over to Ms. Leslie Neville.

Thank you very much for joining us this morning. As always we will be taking follow up calls at our home office all day today. Again have a Happy Holiday.

That concludes the presentation thank you for your participation you may now disconnect. Have a Happy Thanksgiving.