Leslie Neville - Director of Investor Relations Mike MacDonald - CEO Debbie Ferrée - Vice Chairperson and Chief Merchandising Officer Doug Probst – CFO

Jeff Black – Barclays Capital Chris Svezia - Susquehanna Financial David Mann – Johnson Rice Heather Boksen – Sidoti & Company John Zolidis – Buckingham Research Dana Walker – Kalmar Investments

(Operator Instructions) Welcome to the Second Quarter 2009 DSW Inc. Earnings Conference Call. I would now like to turn the presentation over to your host for today, Leslie Neville, Director of Investor Relations.

With me today in Columbus are Mike MacDonald, our CEO, Debbie Ferrée our Vice Chairperson and Chief Merchandising Officer and Doug Probst our CFO. Doug will begin the call with a recap of our second quarter financial results, and then Mike will review highlights of the second quarter performance and share some details about our plans for the remainder of the year and the longer term. Before we proceed please note that earlier this morning we issued a press release detailing the results of operations for the quarter ended August 1, 2009. Various remarks that 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.

We will begin with the financial performance for the second quarter and the update our outlook for 2009. Net sales for the second quarter increased 3% to $369.5 million. Same store sales decreased 2.9% for the comparable period versus a decrease of 6.9% last year. By segment our DSW business was down 2.1% while our lease business comps were -9.9%. As was the case in the previous two quarters the negative comp was driven primarily by a drop in units per transaction. Despite the negative comps total sales increased over $12 million because of an increase of 32 more stores over last year, including three new stores in the second quarter, and the addition of the DSW.com channel that was not publicly launched until June of last year. As expected, and as we stated in the first quarter earnings call, the merchandise margin rate for the second quarter decreased 130 basis points from last year to 43.1%. As you will recall, the rate for the first quarter this year increased 120 basis points and consequently the merchandise margin rate for the combined six month spring season was virtually flat to last year at 43.4%. The shift between quarters was due to the timing of clearance markdowns taken to support a sandal sale last year. The gross profit rate decreased 180 basis points to 26.5% due to the increase in occupancy expenses related to the negative comp. The SG&A rate was flat for the quarter at 23.4% as our planned increases in marketing, IT and depreciation were offset by a decrease in store expenses and overhead. The net result was a 180 basis point decrease in the operating income rate to 3.1% of sales. Net income for the quarter was $7.6 million compared with net income of $11 million last year and the diluted earnings per share were $0.17 compared with $0.25 a year ago. Throughout this difficult economic period our objective has been to maintain our strong balance sheet and we continued that trend into the second quarter. At the end of the second quarter inventories were down approximately 12% on a cost per square foot basis. We are comfortable with this inventory position as we have been building our inventory throughout August to support our fall selling season. We invested approximately $5 million of capital in the second quarter into new stores and our IT initiatives. Our cash flow from operations more then covered these investments and we increased our cash and short term investments to $179 million and no debt. Looking forward to the remainder of 2009 let me start by reminding you of our key assumptions for the year. First, we expect the economic and retail environment to remain difficult in the months ahead. This assumption is built into our annual guidance. Second, based on sales trends for the first six months our comp expectations for the year remain in line with our original annual guidance of negative mid single digits. Third, although we will continue to manage our expenses we expect our SG&A rate to increase over last year as we increase our marketing spend and our investment in IT. Given these assumptions and the performance through the second quarter reported today, we are raising our estimated annual diluted earnings per share guidance to $0.37 to $0.45 up from our previous range of $0.30 to $0.35. With that I will turn it over to Mike.

Let me first just add a couple of comments about the second quarter. I was somewhat encouraged by the modest improvement in our comp store sales performance particularly in the DSW segment where as Doug said comps declined by only 2.1%. As Doug also indicated, we continue to see a pretty challenging external environment for the balance of the year. Our operating philosophy is to plan sales, inventories and expenses prudently and then react to plus opportunities if and when they materialize. In terms of category performance, our best business was actually accessories. This is still a relatively small category but it is growing quite nicely. These results were a reflection of our strategy to grow our handbag and small leather goods businesses. We’ve invested in inventory and floor space and fixturing in support of those businesses and its paying off. Within the footwear area the strongest segment was the seasonal category driven by women’s sandals and good early reads in boots. We also had good results in certain classic product categories like plain pumps and comfort shoes. Men’s business remains soft, pretty consistent with our Q1 performance. We continue to believe that economic conditions are affecting the men’s business more then women’s. As for our lease business segment our second quarter sales were adversely affected by the disruption surrounding Filene’s Basement. As you know in late June Syms acquired most of the assets of Filene’s Basement. Syms also assumed the shoe supply agreement with DSW as a part of that transaction. It will take some time before that situation is entirely back to normal but we were pleased by the outcome. Despite the negative comps in our lease business we were able to meaningfully expand margins through careful inventory management. During the second quarter we celebrated the one year anniversary of the DSW.com business. Now that we have a full year’s worth of dot com purchase data we’ve been able to do some customer level analysis to understand where the business is coming from. Here are some interesting learning’s about our dot com business. First, about half of the dot com customers are new to DSW and half are existing DSW store stoppers. Second, we estimate that more then half of the sales recorded through the DSW.com channel is incremental business with the rest being transferred from the store channel. Third, we believe DSW.com has also stimulated some customers to buy more in the stores channel. We surmised that this is due to the fact that they can now do their pre-shopping online before they go into our stores to actually make their purchases. When you put that all together that’s a pretty good story about dot com. Over the course of the first year of operation we’ve also learned a great deal about preferences of the customers who utilize this channel. We believe that DSW.com has plenty of growth potential as we adjust assortments, promotions and the operating characteristics of the site itself. Let me now say a few things about what I’ve been doing for the last few weeks. You’ll recall that on the first quarter earnings call I’d been with DSW about 30 days. I’ve now got about 120 days under my belt and I believe I’m developing a deeper understanding of what makes DSW tick and what some of our opportunities are. That is not to say that the top 10 opportunities I discussed on the last call have faded away. They’re all still there but they now fit within a larger strategic context. Let me explain to you what I mean. Over the summer DSW senior leadership team engaged in its annual strategic plan update process. This year’s process took on additional significance because of my newness to DSW and because of the challenging environment. It turned out to be a very productive process because we were able to connect a lot of performance data with recent customer research data. That allowed us to develop some very important themes that will guide us as we take the business forward. Let me be clear, we will not be undergoing radical change here at DSW. In fact, I would say we intend to go back to those foundational roots that served this company so well for so many years. This company was built on a foundation of three basic principals. Those principals are: A breathtaking assortment of right brands, prices and style choices of current season first quality shoes. Irresistible value by virtue of our everyday discount pricing structure, our clearance offerings, and our DSW Rewards Program. A simple and convenient shopping experience based on well organized, easy to shop stores that provide a no pressure, assisted open cell shopping environment. Don’t get me wrong, we still deliver on these three principals today. However, we also recognize we have an opportunity to increase our focus and improve our execution on these three critically important customer choice factors. We also believe we can do a better job of more clearly communicating our formula to the customer so that we get full credit for what we really are and for our truly unique positioning in the market. As with any strategy the key to its success is the development of action plans that will turn that strategy into reality. We already have identified a number of those action plans and will be developing mechanisms and key performance indicators to evaluate our progress against those plans. I’m sorry to tell you it’s not my intent to divulge to you what those specific action plans are. I believe the customer will begin to see evidence of them beginning as early as this fall season. On my first earnings call when I talked about my top 10 ideas to drive sales I mentioned that the 10th item was getting everyone in the company aligned around the objective of growing top line sales. I believe that through our strategic planning process we’ve taken an important step towards achieving that objective. I’m still very excited about being part of the DSW team and even more excited about our future. With that I’ll turn the call back over to Leslie.

Now to the question and answer. Please limit yourself to one question and one follow up on the first round. This way we’ll have a better chance to get to every questioner. You’re definitely welcome to get back in the queue in the same manner as you did originally. Could you please instruct how the callers can indicate a question?

(Operator Instructions) Your first question comes from Jeff Black – Barclays Capital Jeff Black – Barclays Capital: On the marketing is there any indication that the marketing spend is really driving better traffic and could you give us some insight into how the comp fared on the UPT side? On the cost side, looking at the back half you mentioned you’re planning some in store reductions, could you just tell us a little bit more about where you’re finding the reductions and how to balance that with the marketing and IT spend? Is there a chance we see SG&A come down, maybe not in the back half but as we look out into 2010?

We put most of that incremental marketing spend into television advertising both in the spring and in the fall. We actually haven’t been on air since about the middle of May. I think on the last call we indicated that we believed there was significant incremental sales being generated by virtue of the TV advertising and we thought that the P&L impact of that was slightly positive. It was helping us generate market share increases. In terms of the second quarter our UPT performance was pretty much consistent with Q1 but again I can’t relate that back to marketing because there really wasn’t an incremental marketing spend of any significance in Q1. We’ll be back doing additional TV advertising starting in September and it’ll be a new campaign and we’re excited about the chances for it to drive additional awareness, additional traffic, and maybe even create some buzz in the process. In terms of the cost side of your question let me turn that back to Doug.

If you’re referring to our comments to our store expenses we leveraged to last year that was very good work by our field team. They’re working on a lot of different ideas and certainly our goal is to continue to leverage that part of our business operation. Certainly though as we said that we’ll still de-leverage SG&A for the year because of our increased spend in marketing and IT. If that doesn’t answer your question I can take a follow up.

Your next question comes from Chris Svezia - Susquehanna Financial Chris Svezia - Susquehanna Financial: Can you update us on what you’re doing on a systems in terms of sizing in store, I think you’re doing a test towards the tail end of the year and what you’re doing on the stocks locator within stores and kind of going back between the stores and can you update what’s going on, on the systems side where you stand right now?

First thing we’ve been working on is size enablement and the first capability that will give us starting this fourth quarter is to do replenishment at a size level. We’ll be testing a healthy number of skus in the fourth quarter primarily in the men’s zone and then expanding that elsewhere. Phase two of the size project is something we call size optimization. We’ve currently got that in the queue for 2010 and what that will allow us to do is to increase our understanding of size needs on a by store basis that we can then translate into more intelligent case packs on orders that even aren’t replenished. The first part of size enablement gives us that replenishment capability and intelligence that applies to say a third of our business and then the next phase of it which is 2010 will apply to the other two thirds of the business. We’ve also been working on our planning platforms both consolidated merchandise planning and store planning. The merchandise planning piece is working well and we are starting the store planning side of that. In terms of stock locator, three months ago that was an idea, today it is a project that we have just kicked off and we’ll be working on but probably not in a meaningful way until say first quarter 2010. Chris Svezia - Susquehanna Financial: Can you highlight at all, the direct consumer business, I think in the past, throwing out numbers roughly I think $60 million or in annualized revenue, anything you learned in terms of conversion, those targets, what you might need to work on and secondarily store productivity how that performed during the second quarter?

On the dot com business we’re learning all the time and I know we said that we just came on its first year anniversary from when we publicly launched. I would say the traffic has been decent. Conversion is our opportunity and I think some of the things that we’re doing are things that other channels have already done or other dot come sites have already done, we just have to execute them into our channel or our dot com business. Such as getting to shopping cart, we have a rate that we think we can improve, things like that tried and true measures that we just have to implement into our dot com business. As far as the productivity in our stores, I think the highlight within there is that we’re starting to see some of our more recent stores, the 2007 stores, start to have better comps then the chain. That is expected to some degree based on the maturity curves that we anticipated. Obviously with those stores improving that’s going to help our sales productivity on a per square foot basis. With the business being down negative comps obviously we’re going to have pressure on that number until we start getting positive comps.

Your next question comes from David Mann – Johnson Rice David Mann – Johnson Rice: Can you go into a little more detail about how you expect the shared services piece and lease department to impact the P&L for the year versus let’s say your previous guidance.

Actually there hasn’t been a huge change in those expectations. The reason we were a little uncertain going into this year is because we didn’t know how the Filene’s Basement transaction was going to turn out, we now know that. I would say the shared services can now be classified as transition services meaning that eventually the services that we’re providing to Filene’s Basement is actually providing them to Syms and over a course of time we’ll be transitioning service of finance, human resources, and then finally IT over to them which we would expect to be done early in 2010, IT may be the last piece that we transition. We anticipated that, it kind of went according to plan and any kind of planful change in that is always the most efficient way to do it. So we don’t expect any surprises in that relationship. Your second question I can’t recall. David Mann – Johnson Rice: On the lease department piece how do you envision that changing versus your previous comments?

With three business and we don’t break them down specifically but clearly Filene’s is a different part of it. Gordman’s and Stein Mart’s we’re operating those businesses as best we can and Filene’s Basement has gone through with difficulties in the adjustment of whether they were going to be sold or not and now they have been. As that business starts to steady and Syms gets that operation operating up to 100% it should be more predictable and we should be able to continue to improve our sales as well as improve our margins. I hope that point wasn’t lost during the script that despite the decreases in sales from the Filene’s Basement situation as well as the closing stores of Stein Mart that we were able to with the lease business team improve those margins significantly to nearly offset that decrease in sales. David Mann – Johnson Rice: In terms of shared service, can you just for housekeeping just give us an idea of what you think next year would go away versus this year, in terms of the amount?

There wouldn’t be much shared service dollars at all. David Mann – Johnson Rice: How much this year, what would be the compare this year versus next year. If next year’s not that much, how much will this year approximate?

I’m going to have to get back to you on that because there are some difficulties in trying to calculate that number based on what we charge and what we actually got paid for. As you’ll recall we probably did some shared services that we didn’t actually get paid for with the bankruptcies of Value City etc. I’d like to do some work on that before I answer the question. David Mann – Johnson Rice: Any additional lease department opportunities that might be on the horizon in the short term?

If we go back to the basic strategy that we’ve set up for the lease business the first was to segment that business and put a general manager in charge of that to operate the business and focus on that business and improve the results and we think we’ve done that. The second phase of that was to determine what the future was going to be with Filene’s Basement and we’re starting to learn that and we’re improving that relationship as it shifts over to Syms. Once those two pieces are in place we will start to look as Mike listed in his top 10 items for sales growth for future partnerships. Those first two phases are kind of underway and we’re starting to look on the horizon for opportunities down the road. We can’t say there’s anybody currently that we’re pursuing aggressively but certainly we have an appetite for doing that in the near future.

Your next question comes from Heather Boksen – Sidoti & Company Heather Boksen – Sidoti & Company: I was just curious if we could get maybe an update on where the loyalty program’s operations in the quarter, new sign ups, I guess also kind of the activity of the current members? Just curious if basically you’re still seeing an up tick in the new enrollees?

We continue to sign up new enrollees at the rate of 90,000 a week. We’re now up comfortably over 11 million and between 8.5 and 9 million of those are active within the last 12 months. They constituted a share of our total sales that was somewhere north of 80% which was pretty consistent with our Q1 performance. The only other flavor I’d give you on that is that we are now starting to mine that purchase data from our rewards program more effectively so that instead of using a sledge hammer to market to those customers where everyone of them gets the same communication we’re starting to slice and dice it more restrictively so that we can save money and also be more effective in our marketing to those very important customers.

Your next question comes from John Zolidis – Buckingham Research John Zolidis – Buckingham Research: I was wondering if you could talk a little bit more about the SG&A in the quarter. It looks like total SG&A dollars excluding D&A were down year over year with a 9% increase in square footage. That’s not consistent with the experience in the first quarter or really what you guys had talked about with the marketing spend going up etc. and your comments for the back of the year that you still don’t expect to leverage SG&A. Was there any one time movement of SG&A dollars out of the quarter or is there anything that you’re doing differently that is going to continue into the back half that we should know? Any help you can give on SG&A would be appreciated.

Just to clarify, our SG&A total dollars went up from $83 million to $86 million for the quarter so there was an increase in case I heard you wrong. One thing that may be a little different between the first and second quarter, our increase in marketing spend was certainly up in both quarters but as far as a raw dollar increase the marketing spend was closer to a $6 million increase in the first quarter and $3 million or so in the second quarter. That type of comparison is probably a little more even in the third and fourth quarters but that’s probably the one area that’s a little different between the first and second. As we go forward some of the IT projects and some of the spending will really start to grow more toward the end of the year as those projects start to get more and more involved. That’s probably another trend that’s underlying in the SG&A dollars, the IT spend relative to last year will start to spread a little bit more as we get toward the end of the year. I hope that provides a little color. We can certainly take a follow up. John Zolidis – Buckingham Research: Can you give us the D&A because that would be helpful? You said marketing spend even in the third quarter and the fourth quarter, I’m not sure what you mean there, do you mean that its going to be up about $3 million year over year in each of those quarters?

That’s right. As far as your depreciation question, in the second quarter depreciation was $11.6 million versus last year’s $8.2 million. In the second half we expect that to be similar we’ll have about $24 million in depreciation versus last year’s $20 million. John Zolidis – Buckingham Research: The depreciation increase really was all of the SG&A increase year over year, the second quarter?

We had improvements in store expenses and we had improvements in general overhead but depreciation was certainly a large part of the increase.

Your next question comes from Chris Svezia - Susquehanna Financial Chris Svezia - Susquehanna Financial: When you talk about product trends you kind of look to the back half through testing. On the boot side, I’ve been in your stores, there’s certainly a lot in them right now. Talk about what’s working, what’s not and maybe talk about just from average selling price trend what should we think about as we go into the back half of the year given maybe how boots might perform. Debbie Ferrée: I’m happy to report that the early indications of the boot to store shipment we talked about both at the conference and in the last quarter conference call is working well for us. There are many early things that are registering very nicely. Everything from sport boots to western and even some of our key basic items. I would tell you that we’re very pleased with the early indicators that it’s going to be a very sterling boot season for us. What was your next question? Chris Svezia - Susquehanna Financial: In terms of average selling price and around that in the back half of the year. Debbie Ferrée: As you know, the boot AUTs and AURs are significantly higher then the footwear so that should bode well for us because there was a distortion in the category. We’re seeing a little bit of an increase in AUR over last year and I think that that will continue, it’s nothing significant though. Chris Svezia - Susquehanna Financial: Last call you talked about your merchandise margin rate being down in the second and third quarters. Obviously I’ll focus here on Q2. Given where your inventory is, given how people seem to be shopping the clearance racks more these days is that still, how should we think about that merchandise margin rate going into the third quarter is that still going to be down pretty noticeably in the third quarter?

The main purpose of that comment in the beginning of the year was to remind people that our second and third quarter margin rates were over 44% which is historically very high for us. Clearly the second quarter was illustrating that comparison. You called it out exactly with the trends of the consumers buying a little bit more clearance we have to be cognizant of the fact that there may be pressure on that merchandise margin rate. The 44% being one comparison issue but also we just have to be realistic on the fact that we may have to be a little bit more promotional and we want to make sure our inventories stay clean. We certainly have with our inventory position a good start to where we want to be to help us improve margins but we have to be realistic that we have our most important selling season September and October in front of us and just being a little cautious right now. Chris Svezia - Susquehanna Financial: Looking further out when you guys think about store expansion when you guys sit down and talk to real estate firms about opportunities, just in terms of what you’re seeing out there, what’s available and you guys have cash just curious about from a growth perspective I know 2010 is out there. How should we think about that, is that potentially what you’re looking at enough to start accelerate growth or do you have to wait to see improvements in what the consumer trends are, what they’re buying things of that nature before you’re willing to step up a little bit?

I think we are seeing lots of real estate become available, not all of it is good which might be part of the reason that it’s available. The second thing is that we had a new store task force that finished its work earlier this year and they came up with a lot of very clear assessments about the kinds of situations where we thrive and the kinds of situations where we struggle. I think we’re going to apply that learning going forward and we’re going to be selective about the properties that we enter. Although there may be lots of deals out there they may not be the right deals at any price for us. We’re going to be selective. I think that perhaps in the past DSW may have been guilty of identifying a predetermined level of new store expansion and then they did what was required to achieve that objective. What I’d rather do is just say we’re going to open as many new stores as what we can justify and we can confidently predict success in. The company has proven in the past that it can open physically as many as 40 stores in a given year. I think if you were doing some modeling right now you’d probably model out something closer to what we’re going to do this year which is 10 new stores. We have the ability to go up and it’s going to be a function of just how many situations we can find that we’re confident will work for us.

Your next question comes from Dana Walker – Kalmar Investments Dana Walker – Kalmar Investments: If your same store sales were less down in Q2 and yet you were not on TV and you would hope to have the benefit of TV media in the second half, can you talk about why you believe your traffic and your outcome was so much better in Q2 then it was in the first quarter?

I think if you looked at our comps on a two year basis you’d find that our two year comps are nearly identical between Q1 and Q2 you just mathematically add them together its about down 10 so that’s kind of a level that we have included in our guidance going forward. Its not really a lot more scientific then that. If TV works that represents an upside but again we think we should anticipate more conservatively and then react as plus opportunities happen. Dana Walker – Kalmar Investments: Have you already tested some of the themes that will come out in your new marketing message in September?

No, we haven’t. I will say this, that we think the TV will be interruptive and memorable but it will also underscore some of the key principals of this business namely breathtaking assortment, irresistible value, and simple and convenient shopping experience. Dana Walker – Kalmar Investments: You’ve talked about store operating expenses being better controlled. How are you framing your gross margin and your merchandise margin expectations for the back half in your updated guidance?

That’s what we mentioned in the script. We had mentioned that the third quarter comparisons are actually pretty difficult and that’s why we reiterated what we said in the beginning of the year as it relates to third quarter. Specifically on merchandise margins if we could exit this year with a merchandise margin rate that’s somewhat flat to last year we would be fairly satisfied. Again, we want to leave our opportunities and our positioning very cautious as to what we have to do to make sure we’re selling the shoes in this very different consumer environment that may need a little bit more clearance sales then what we’re used to. We believe our inventories are in a good spot so that’s not going to be an issue but we just have to be realistic on the consumer environment for the back half of the year. Dana Walker – Kalmar Investments: Which I presume means Q3 is a challenging comparison and Q4 is an easier comparison from last year.

Obviously the third quarter margins traditionally have been higher then the fourth quarter margin then we expect that to be the same in 2009. Dana Walker – Kalmar Investments: On seasonality, the company more recently has had a tough time in its Q4. Does Q4 need to be a difficult quarter for you; does it need to be a loss quarter?

We obviously have had some quarters in the past where it hasn’t been a loss but with negative comps and with the fourth quarter in the DSW shoe business being our lowest quarter in volume. Last year our volume in the third quarter was $348 million and that was the lowest quarter yet again. I think with negative comps and the lowest volume quarter without a lot of additional stores unfortunately it looks like the loss that we had in Q4 is something that we’re going to be dealing with again in 2009. Obviously we’re looking to mitigate that as much as possible from a lot of different means and that margin and expenses. Hopefully some positive comps down the road.

At this time there are no other questions in the queue. I would now like to turn the call over to Leslie Neville for closing remarks.

Thank you very much for joining. We will be taking follow up calls at our home office all day today.

Thank you all for your participation in today’s conference call. This concludes the presentation and you may now disconnect.