Paul Marciano - Vice Chairman and CEO Dennis R. Secor - Sr. VP and CFO Carlos Alberini - President and COO

Jeffrey Klinefelter - Piper Jaffray Eric Beder - Brean Murray, Carret & Company John Rouleau - Wachovia Capital Markets Gabrielle Kivitz - Deutsche Bank Brad Stephens - Morgan, Keegan & Company Holly Guthrie - Janney Montgomery Scott Christine Chen - Needham & Company Dorothy Lakner - CIBC World Markets Unidentified Analyst Betty Chen - Wedbush Morgan Securities Janet Kloppenburg - JJK Research

Good day and welcome to Guess Second Quarter Fiscal 2008 Conference Call. Before we get started, I would like to remind you of the Company's Safe Harbor language. The statements contained in this conference call, which are not historical facts including statements regarding future plans and guidance for current and future periods maybe deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those suggested in such statements due to a number of risks and uncertainties as described in the Company's most recent annual report on Form 10-K and other filings with the SEC. Now for opening remarks and introductions, I would now like to turn the call over to Paul Marciano, Chief Executive Officer of the Company. Please go ahead. Paul Marciano - Vice Chairman and Chief Executive Officer: Good afternoon and thank you for joining us today to discuss Guess financial results for the second quarter of fiscal year 2008. Also joining me Maurice Marciano, Carlos Alberini, and Dennis Secor. We are extremely pleased with our second quarter financial performance. We set another record for this period with revenue growth of 48% and earnings growth of 82%. Once again, all business segment delivered strong top line growth and bottom line earning was material. Earnings per share reached $0.40, an 82% increase from $0.22 last year. This is our 16th consecutive quarter of earnings growth. During the period, we delivered 250 basis points improvement in operating margin as a result of stronger gross margins across all of these net units. We closed the quarter with a significant momentum worldwide. To start with retail, our North America business continued to exceed expectation. Total revenue increased 21% this quarter. The same store selling, our retail stores increased 16.2% in a quarter. This was on top of 13.7% same store increase for last year second quarter. August also had a double digit increase. Each category growth for the quarters. We experienced a very positive response to our young contemporary and our Marciano line. These businesses were driven by strong sales of dress, short women tops and denim products. Online customers reacted positively to the line, key performers, included menÕs top, denim and shorts. Accessories and footwear continued to be our star performers. During the quarter, with an exceptional business in handbag, watches, and shoes. We believe we have the best product in each of these of category for target customers. While retail business was strong across all regions, Canada, once again, have the top performance for this period. During the quarter, we opened 12 stores in North America. These include five G by Guess stores, our newest retail concept. We have now total of 25 G by Guess. We plan to open another 10 new G by Guess by the end of this year for total of 35. At the end of the first quarter, we will have six month business and back to school behind us. At that point, we will have a better picture of this new concept to present to you. Marciano, we consider Marciano division to be a key growth opportunity in North America. During this quarter, we added significant talent in our team and launched our new Marciano footwear product line. So far this year, we now opened seven new Marciano stores in U. S. and Canada, including a brand new line in [inaudible] bringing total Marciano stores count to 32. Some key new location opened during the second half of the year such as Fashion Square in Scottsdale, Arizona, Houston [inaudible] in Texas, Time Square in Las Vegas, and Hawaiian shopping center in Hawaii. Across all retail concepts, we have opened 20 stores in North America so far through the first half of the year, which is ahead of our plan. We expect to open 30 more stores during the second half of the year and to have over 370 stores by the end of this year comparing to 334 for 2006. Wholesale, our wholesale business is also a terrific quarter with 75% sales growth and improved profitability both achieving our plan. As you know the segment increase our new business in Asia, that is South Korea and China, which did very well. And of course, our wholesale segment increased our wholesale business in North America which have very strong performance in the period as well. Europe. Our business in Europe was exceptionally strong during the quarter with revenue growth of 121% or an increase of $59 million to $108 million from $49 million last year. Contributing about 22% of this growth was a contemporary line Guess by Marciano which have a solid performance during the period. Our handbag and footwear business had a terrific quarter posting 160% growth. This was probably to early shipment of full product as a result of the change on the business model. Our retail source in Europe doubled the business in the quarter. This was accomplished with new stores and healthy comp sales growth significantly ahead of the plan. We continue expansion in Europe to push for markets such as Spain, Germany, Benelux, which are barely penetrated by one today. For our international retail expansion outside North America, we are continuing to make some great progress in our retail expansion plan with our partners across the world. During the second quarter, we opened 38 new stores, including 16 in Europe and 22 in Asia. For the year, we increased our goal of total store opening from 108 store to 141 store. During the first half of the year, we opened 104 new stores and 37 are planned to open for the second half of the year. Licensing, our licensing business have an exceptional quarter accomplished with growth in organic sales across all key accessories, categories, and footwear. Sales penetration in our retail stores in North America continued to increase year after year. In addition, the excellent acceptance of this line, all over Europe and now Asia contributed to an increase of 51% for the quarter. As a six months recap of all our businesses division. We have exceeded our financial goal for the Company both on top line performance and bottom line contribution, recording revenue growth of 45% and earning growth of 77%. We are proud of these results and we are accomplished it with significant diversification of earning. In fact, consistent with our long-term strategy, our earnings configuration which for the six month period were up 73% which is divided as follows: 45% North America; 31% Europe; and 24% licensing. I will now hand the call over to Denis and Carlos to take you through the numbers for the quarter and outlook. And then I will follow up with an update of global initiatives for the year. Dennis R. Secor - Senior Vice President and Chief Financial Officer: Thank you, Paul and good afternoon. As Paul mentioned, we enjoyed another record setting period in the second quarter. Let me now take you through some of the important financial details for the quarter. Total net revenues for the second quarter increased 48.2% to $388.3 million from last yearÕs $261.9 million with all of our business segments contribution to this growth. Our gross profit for this quarter increased 57.1% to $173.4 million from $110.3 million a year ago, translating into a gross margin of 44.6%, a 250 basis point improvement over last year. The gross margin improvement for the quarter was driven by an improved leveraging of occupancy costs and by the relative growth of our higher margin European business. The SG&A expense rate for the period was about flat compared to the prior yearÕs quarter. SG&A expenses for the quarter were $114 million compared to $76.7 million last year, an increase of 49%. About 36% of the increase was related to the addition of new businesses including Focus Europe and our South Korea operation, while we now manage full P&L and also our new G by Guess concept. About one-third of the increase related to volume driven variable expenses and the rest supported infrastructure investments and performance based compensation. For the quarter, we increased the CompanyÕs operating profit by 76.4% to $59.4 million from $33.6 million last year and expanded operating margin 250 basis points to 15.3%. We adjusted the estimate of our annual effective tax rate to 38.9%, and therefore, we are planning the remainder of the year at this rate. This resulted in an effective tax rate of 39.1% for the quarter as compared to 39.9% in last yearÕs second quarter. We generated $37.5 million in net income or $0.40 per diluted share during the second quarter compared to $20.6 million or $0.22 per diluted share last year, an increase of 82% in net income and earnings per share. Next, I would like to quickly review our revenues and earnings by business segments. Our North American retail sales increased 21.4% to $201.6 million. During the period, we opened 12 new stores and closed one underperforming store resulting in a net 3.9% increase in average square footage over last year. In the quarter, we completed our analysis of unredeemed gift card liabilities and adopted the redemption recognition method of accounting for gift cards. This resulted in a one-time cumulative increase of revenues of $300 million for the North American retail business. For the period, the retail segments operating margin increased 120 basis points to 13.8%. We were able to effectively leverage our occupancy cost as a result of higher sales. Expenses increased due to additional advertising spending and investments in the G by Guess brand initiative. In our wholesale segment, revenues increased 74.5% to $57.3 million. Operating margin for the wholesale business improved to 140 basis points to 17.8% this year, driven by higher product margin and improved leveraging of SG&A cost particularly in North America. Revenue for Europe segment increased $459.1 million or 121.2% to $107.9 million in the second quarter, contributing nearly half of the CompanyÕs total revenue growth. All of our businesses in Europe including retail, performed well and the segment also benefit from the business model change with some shipments historically made in the third quarter being delivered in the second above our plan. Operating profit for the European segment increased 135.6% to $19.4 million with an operating margin improvement of 110 basis points to 18%. Licensing revenue grew 51.1% to $21.5 million in the second quarter. Bare in the mind, this excludes the royalties from Focus Europe and our South Korea operations this year as we now manage those businesses directly. Now turning to attention to the balance sheet. We ended the quarter with $200.5 million in cash and equivalent compared to $196 million a year ago. Our accounts receivable increased by $77.8 million to $186.9 million compared to the prior year and the growth was proportionate to the significant increase in European sale including Focus Europe. Inventory at the end of the second quarter reached $226.4 million compared to $132.5 million last year, an increase of $93.9 million or 71%. Approximately 50% of the increase will support our new businesses, which include South Korea, China, Mexico, Focus Europe, and our new G by Guess concepts. About 25% of the increase relates to our core European businesses, which includes apparel and accessories. The remaining inventory growth relates to our North American business, but we are experiencing a substantial AUR increase and have positioned our ownership strategically with early receives of fall products including coats, sweaters and denim. Finally, we announce today that our Board of Directors has approved an increase to our quarterly cash divided to $0.08 per share up 33% from the pervious dividend of $0.06, which will be paid to shareholders on October 5. This increase in dividend demonstrates our CompanyÕs commitment to continued creation shareholder value and confident in our future profits. And now, I will turn the call over to Carlos. Carlos Alberini - President and Chief Operating Officer: Thank you, Denis. As we announced in our earnings release today based on the strength of our second quarter performance, we have increased our consolidated revenue guidance for the full fiscal year to a range of between $1.560 billion and $1.600 billion. We expect that our segments will deliver operating margins for the full year consistent with the levels that we provided on our last conference call, with our retail segments delivering an operating margin of about 15%, our wholesale segment at about 16%, and our Europe segment in access of 20%. As a result, we continue to plan for an operating margin for the total Company for the full fiscal year of about 17.5%. We are raising our full year EPS guidance to a range of between $1.79 and $1.84 per share. Now, let me provide with an update to our segment revenue goals for the balance of this fiscal year. Retail, beginning with North American retail, we continue to be very pleased with a performance of this business, which delivered a very strong comp sales increase in the second quarter and 15% comp gain year-to-date. As mentioned, our recent sales trends have been very good in August, which speaks well for our back-to-school assortment and prospects. Accordingly, we assume that our plans will continue to capitalize on this trend, and we are raising our second half comp guidance to the mid single digit range. For the full year, we are now planning for overall retail revenue to increase about 13%. We are confident in our inventory position and product assortment. However, we remain committed to grow our business in a controlled manner and donÕt want to be over confident in our current position. We will continue to focus on leveraging our expenses and managing our inventory levels effectively. We are well positioned on both fronts. Regarding expenses, we have achieved leverage in our existing business as our revenues continue to grow. Regarding inventories, we are well positioned to capitalize on key business opportunities that we have identified for the second half and expect solid margin performance for the period. For the Company as a whole, we are planning that our year-end inventory will be between 20% and 30% higher than at the end of last year. In the wholesale segment, we continue to expect a significant portion of our growth to come from our Asian businesses as it has in the first half of year. For the second half of the year, we are expecting revenues to increase by about 30% and are now expecting full year revenues to grow between 45% and 50%. In Europe, for the second half of the year, we are planning for our revenue to grow by about 30%. This, of course, states into account the shift of third quarter revenues into the second quarter, which was mentioned earlier. For the full year, we are reiterating our guidance for revenues to grow in the range of 50% our 55%. In our licensing business for the second half of the year, we are raising our revenue guidance to an increase in the low single digit range, which will result in a full year increase of about 20%. We now expect capital expenditures for the full year our reach $89 million net of tenant allowances and depreciation and amortization to be about $48 million. Thank you very much. And with that, I will turn the call back to Paul. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you, Carlos. Now, I will like to update you three global key initiatives that we spoke about on our last two conference calls. Footwear, footwear is our first global key initiative. We continue to invest in this major long-term project and the result have been very positive. In North America, where there was an additional space to the footwear business in our stores and invested in footwear specialist in all our top doors. [Inaudible] his team while starting our first footwear retrial store. In the next 12 months, we plan to our location such American at Glendale, California, fashion show in Las Vegas and eventually, Miami, Florida as location to launch this exciting new concept. I believe this, the concept is wide it could easily be a 150 stock chain around the world in the next three to four years as we have already opened 130 accessories stores in the last two and a half years. Our footwear concept could be a repeat of the success of our accessories stores. As a footnote, we have already opened two footwear stores in Paris, one in Milan, one in Djakarta, Indonesia, and new one in Singapore. I just did a full two August stores in South East Asia last week visiting our very first footwear stores in that region and was very happy with the presentation. In the next few months, we will be opening more footwear store locations in Rome in Italy, Valencia in Spain, and two more in Kuala Lumpur, Malaysia The second initiative at GC watches is another one global one, where we have made excellent progress towards our goal to double the size of our business in 2007. In the second quarter, sales of GC watch, North America increased by 120%. I repeat again that all the GC watches are Swiss made and range in retail price from $250 to $1,000 a piece. Our third global initiative is handbag and its continued expansion on the business of handbags. This business, once again, outperformed our expectation. In fact, the month of July represented the best sales month ever for our handbag licensee which is already 14 years old. This business was at 40% of North America for the quarter with significant improvement in sales expansion in our stores. In addition, our global handbag business was up 45% during the quarter compared to December of last year. Our strategy is clear and we are obsessed with the execution and the timing of the plan. We have a complex, but very unique business model, well balanced across the world in product category and highly diversified among distribution channel. In conclusion, I am convinced about our performance and our financial result, our testimony of the talent, passion and hard work of our team and partners around the world, and I want to thank them once again for our outstanding result. I think we are ready now to open the lines for your question. We request that everyone limits themselves to just one question. So, that we can accommodate as many people as possible. If time permits, we would be happy to take follow-up questions. Thank you. Operator? Question and Answer

[Operator Instructions]. Your first question comes from the line of Jeff Klinefelter of Piper Jaffray. Please proceed. Jeffrey Klinefelter - Piper Jaffray: Yes, congratulation everyone on another fantastic quarter. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you, Jeff. Jeffrey Klinefelter - Piper Jaffray: ItÕs hard to limit it to one. How about one and a half question. In terms of licensing, you are coming at a Q1, you had just a terrific first quarter, and then guided conservatively, and now you have come out with another fantastic quarter, in licensing. Can you give us a stance, for why or more conservative second half again, is it just sticking to your prior guidance, or is there something going out there? How do you get a better visibility, for how your licensing is coming in and in both international and U. S., that basis? And then other question would be more broadly and Paul, you want to take a shot at it, or Carlos as well. From a global consumer demand perspective, there is lot of concern right now, obviously on the U. S. consumer. You guys touched so many different markets and not just your product, which is tracking well but what are you hearing from some of these other markets, around the globe, Europe and Asia in terms of consumer demand at trend. Thank you. Paul Marciano - Vice Chairman and Chief Executive Officer: This is to Paul. To answer your question about licensing. The outlook that you have right now for the third quarter, is basicallyÉ we are in a new fiscal year. We have changed calendar of shipping dates, so that isÉ we try to anticipate as much as we can. But also we at the same time, have an acceleration of store opening, have an acceleration on due stores opening, abroad stores opening and also very, very successful products, built up season-after-season by licensees. We donÕt conduit the business; we donÕt drive the business there. And we go with the flow, that have we expand. We try to be as much possible of visibility but we cannot anticipate what we donÕt know. So, we go with what the consumer goes, and the acceptance of the product. So, that I think answers your question about licensing is now so large and we are on every continent of the world and let's see that may be the acceptance of the product on new market is bigger than what we expected of brand new market for us and we did not expect to say wow. We know we are going to win here. We don't. So, we just goÉ in Europe we have some visibility now because we have been there for many years. But Asia is totally new for us and we grow by, I mean, month-by-month. But the consumer, the consumer around the world, I just came back last week. I visited three countries, Singapore and Indonesia and Japan. And frankly, we have seen very strong numbers everywhere including our distributors who are some of them public company who just reported last week and very, very strong numbers on comp against strong numbers of last year, especially in South East Asia. As you know the economy is very strong on that region, but they are very influenced about what's happening America as well. So, again, we have reading on a daily basis of that what's happened on each region. And we feel that we are well positioned to continue to grow. Jeffrey Klinefelter - Piper Jaffray: Okay. Great. Thank you. I will follow-up with you after the call with my questions. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you. Carlos Alberini - President and Chief Operating Officer: Thank you. Paul Marciano - Vice Chairman and Chief Executive Officer: Operator?

Your next question comes from the line of Eric Beder with Brean Murray. Please proceed. Eric Beder - Brean Murray, Carret & Company: Hi. Paul Marciano - Vice Chairman and Chief Executive Officer: Hi, Eric. Eric Beder - Brean Murray, Carret & Company: I am going to ask you two quickies here. The first isÉ could you kind of quantify, whatÉ how much the shift move from Q3 to Q2? And you guys had a tremendous business last year in outerwear and could you kind of talk about that opportunity for the second half of the year. Paul Marciano - Vice Chairman and Chief Executive Officer: Yes, we have not quantified that specifically. But if you look at the business cycle that number could in the $10 million to $30 million in terms of revenueÉ the shift between third and second quarter. With respect to outerwear, we do have a great position right now. In fact, a lot ofÉ we decided to bring some of the outerwear early. And we feel that there are many areas, especially those climates that turn to cold weather earlier, can capitalize from this initiative. So, we are very excited. We also think that our product is phenomenal for the second half. And we have invested not only for our retail business for U. S. and Canada also we have an initiative that pursues wholesale growth as well. Eric Beder - Brean Murray, Carret & Company: Yes, it does look great. Congratulations, guys. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you, Eric. Dennis R. Secor - Senior Vice President and Chief Financial Officer: Thank you, Eric.

Your next question comes from the line of John Rouleau with Wachovia Securities. Please proceed. John Rouleau - Wachovia Capital Markets: Hey guys. Excellent quarter. Couple of questions. My first question really kind of gets to the accessories penetration, maybe your own retail sources is the best way to kind of ask this question. I mean accessories have been growing, muchÉ very quickly and I am kind of wondering maybe, roughly what percentage of sales they makeup in your own stores and where you maybe see them going to? Just trying to get a handle on, how much additional growth is left in the accessories side given this huge tremendous growth that we have seen over the last couple of years. How do you think about the accessories business as maybe a percentage of the mix in your stores? Carlos Alberini - President and Chief Operating Officer: John, as you know, accessories and now footwear have exceeded the income growth that we have seen in the rest of the stores for several years now. So, the penetration has increased consistently year after year after year. I donÕt think we know how high this can be, because really we continue to be very, very pleased with the penetration. And we continue to invest in all these categories. Last year, for example, we put a lot of big effort in giving accessories a prominent place in the stores, and we have remodeled many of the stores and created these shops within the stores, I am sure you have seen them. John Rouleau - Wachovia Capital Markets: Yes. Carlos Alberini - President and Chief Operating Officer: And thatÕs one of the reasons why our business has been growing so fast too. In addition to that now we have footwear as a new category and our business there has been growing again at a faster rate than the rest of the store. But we think that there is much more potential to grow for us. So, itÕs a great position that we have. I think itÕs very unique. Paul has said that many times. Now this positions us in this market in a very unique way and one way that is very difficult for any of our competitors to replicate. John Rouleau - Wachovia Capital Markets: Right. So, it doesnÕt sound like you are thinking that that could level off any time soon? Carlos Alberini - President and Chief Operating Officer: Actually, we donÕt plan the business that way. Many of the initiatives that we are investing for the second half include many of the accessories plan, including handbags, including footwear, including watches. Which are the areas that trended so highly as Paul mentioned in his part of his remarks. But this, of, course, has a direct impact on licensing, which goes back to a question from Jeff. WeÉ remember that we had a lot of growth, starting last year, because of these investments that we make that are going to impact royalties as well. In meaning the rate of growth that we experience is not something that we are coming on top of what we experienced last year for now. And of course, every time that we have its going toÉinitially said if we get surprised with outside, of course, we are going to welcome that. The other thing that is also impacting royalty is the fact that the shift from third quarter to second quarter that we just discussed for Europe also has an impact on royalties as well. So, keep that in mind. John Rouleau - Wachovia Capital Markets: Okay. And then I wondering if you can just touch quickly on AUR I know that again in the last couple of years that has come up nicely. I think there was a point in time where you kind of stagnated if you will on the AUR side. What really pushed the envelope a lot further? But it sounds like from your commentary based on inventory that maybe you are taking AUR up, but maybe thatÕs category specific in hardware and some other areas. Just wondering if you could just add a little color and touch on AUR? Carlos Alberini - President and Chief Operating Officer: Yes exactly. I mean AURs areÉ if you look at our inventory ownership today, AUR in North America is up very nicely but some of that is mixed related. As mentioned, that brought of coach, those are high ticket items, so thatÕs obviously AUR up. Some of the initiative and accessories again, Paul mentioned that GT watched initiative that carried that higher AUR as well items for items. So, many of those are mixed related but the great thing is that, we are talking about the state of the consumer, we havenÕt seen any slowdown in our business, I mean, the last four months, we have seen increased traffic, we have increased conversion and AUR sustained favor of the impacted. So, we are in a very special position and we are trying to run the business efficiently. John Rouleau - Wachovia Capital Markets: Yes, one of just the few in that area, that hasnÕt seen the slow down, so keep it up, thanks. Great quarter. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you. Carlos Alberini - President and Chief Operating Officer: Thank you.

Your next question comes from the line of Gabrielle Kivitz with Deutsche Bank. Please proceed. Gabrielle Kivitz - Deutsche Bank: Good afternoon. And I will add congratulations as well on a very strong quarter. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you. Gabrielle Kivitz - Deutsche Bank: My question is on the wholesale business. Here you are talking about the investments that you are making to support Asia and those investments obviously, pressure the margin to some extend, but you achieved some pretty strong margin improvement in the first half. I know, the first quarter with incrementally helped by some of the North AmericaÕs step but even in the second quarter you achieved some nice margin expansion and when I look at your guidance for the margins for that wholesale segment for the second half, looks like you are expecting a fairly big drop off. I am just wondering if you could maybe walk us through that understand why we should expect the margins to be under incremental pressure in the second half versus the first half? Carlos Alberini - President and Chief Operating Officer: Sure Gabrielle, let me try to address that. Last year we had a great year in wholesaleÉ in the North American wholesale, which was the majority of almost the entirety of that business. But at that great performance, really started in the second half. We had a great performance in terms of margin growth in the second half. That performance continued into the first half of this year and it construed nicely to a big quarter that we are now announcing today. So, the North American business continues to be very healthy but we do not expect to see that kind of acceleration into the second half because we already got it last year in a way. What is putting some pressure on the second half were the margin of the new business is that you mentioned, the South Korean and Chinese business and we said from the beginning that we expected this business to be dilative in terms of what we could see for the overall wholesale business and of course that business and of forward-looking statements course growth into in the second half it will become larger part of the total business for wholesale. So thatÕs what we are expecting. Again, we helped that business guidance would be conservative. Gabrielle Kivitz - Deutsche Bank: Okay, great, thatÕs very helpful, thanks very much and good luck for the second half. Carlos Alberini - President and Chief Operating Officer: Thank you. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you very much.

Your next question comes from the line of Brad Stephens with Morgan, Keegan. Please proceed. Brad Stephens - Morgan, Keegan & Company: Hey guys, good afternoon. And congrats on a great quarter. Carlos Alberini - President and Chief Operating Officer: Thanks Brad. Brad Stephens - Morgan, Keegan & Company: On your guidance here, your beep at your high-end of your range by $0.7, you know, raise it by $0.04, so is that $0.3 differential here, is that relates to the 10 million or 13 million in early shipments for Europe? Carlos Alberini - President and Chief Operating Officer: Exactly. Brad Stephens - Morgan, Keegan & Company: Exactly, okay. And then my second question would be then if I look at the $3 million you said for on the gift card breakage, does thatÉ is that 100% margin? Carlos Alberini - President and Chief Operating Officer: Yes it is. Brad Stephens - Morgan, Keegan & Company: Okay. So far, looking at retail then, I look back at my revenues and back at my operating profit and if I do that, it seems like despite the fantastic comp that profitability was basically flat in the quarter, is that a fair assumption then? Carlos Alberini - President and Chief Operating Officer: About the retail business? Brad Stephens - Morgan, Keegan & Company: Yes. Carlos Alberini - President and Chief Operating Officer: Yes, that is that will be great. Brad Stephens - Morgan, Keegan & Company: And can youÉ I guess, you just kind of walk me through the moving parts given the 16 comps of why it was flat? Carlos Alberini - President and Chief Operating Officer: Well, we have made significant investments in new initiatives. One of them being G by Guess, we have a full team, they are that is supporting this initiative and all that is part of the expense number that you are looking at. In addition to that we have remodeled a lot of stores, we opened a lot of stores, we incurred some pre-opening cost included in the expense base as well. But when we look at the overall variable expenses for those business that are core we did experience some leverage, its mild, modest, but it was leveraged about 65 points I think it was. Brad Stephens - Morgan, Keegan & Company: So, gross margins at the $3 million would have been up for retail sale? Carlos Alberini - President and Chief Operating Officer: Yes, because of the impact of leveraging all the occupancy cost, which was pretty significant. Brad Stephens - Morgan, Keegan & Company: All right, great. And last question then. Can you talk about the flow between the third and the fourth quarter, I am sorry if I missed that, but? Carlos Alberini - President and Chief Operating Officer: The flow in terms ofÉ we didnÕt talk about the flow, I mean, the only thing that I would say is that we did bring some early receipts because we saw lot of opportunity. And to be able to capture some early business in fall with some of those items and thatÕs the three big areas where we invested money in addition to accessories we discussed before. Our coats, sweaters and denim. Brad Stephens - Morgan, Keegan & Company: Okay. Thanks guys. Good luck. Carlos Alberini - President and Chief Operating Officer: Thank you.

Your next question comes from the line of Holly Guthrie with Janney Montgomery Scott, please proceed. Holly Guthrie - Janney Montgomery Scott: Thank you, congratulations. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you, Holly. Carlos Alberini - President and Chief Operating Officer: Thank you. Holly Guthrie - Janney Montgomery Scott: Question on retail, the retail business in the back half of the year, particularly in Q3, historically Q3 has always been a bigger contributor to the overall sales and even with the recaps numbers, I am looking at the easier comparison that you have in the Q3, the fact that the G by Guess stores the good portion of that were already open, the higher AUR, can you just talk about all this contributing factors and how you are thinking about the sales for the third quarter? Carlos Alberini - President and Chief Operating Officer: Yes Holly, the third quarter is always very strong for us because of back-to-school but it was never at the level of the fourth quarter, where we benefit from holidays. So, why it is more productive quarter than either one of the first or second is always less productive on the fourth. But that being said, we are guiding today to a mid-single digit comp increase. We had a very strong period last year in the third quarter, we think thatÕs we are well positioned to comp against those numbers and thatÕs why are guiding to margins shoot continue to solid. But we also had a great third quarter last year. So overall our guidance is pretty much inline with what we have said in the past. Of course we are aware of the fact that there are some issues about the consumers and so forth and fortunately it hasnÕt affected us like we said and we are going to keep our business running in that way. Holly Guthrie - Janney Montgomery Scott: Great, thank you. Have a good fall. Carlos Alberini - President and Chief Operating Officer: Thank you. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you Holly.

Your next question comes from the line of Christine Chen with Needham & Company. Please proceed. Christine Chen - Needham & Company: Thank you. Congratulations on another amazing quarter everyone. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you, Christine. Carlos Alberini - President and Chief Operating Officer: Thank you. Christine Chen - Needham & Company: I want to ask, if you could possibly help us in our modeling by quantifying how much did the extra week last year on the retail side benefit Q4 of last year and how were you thinking about it for Q4, like this year? And then if you could just expand a little bit about G by Guess or are you seeing certain categories performing better than others and what about the performance of the standalone versus factory versus full price conversion stores? Thank you. Carlos Alberini - President and Chief Operating Officer: The extra work is about $10 million in revenues. Of course, you are talking about a week that is not to tell you the most profitable one, but and this about retail by the way, related to the retail business. Christine Chen - Needham & Company: Right. Carlos Alberini - President and Chief Operating Officer: But we were profitable for that particular week. Its not significant number, but itÕs a meaningful number. With respect to GYK, Christine, I think it you probably heard PaulÕs remark we think it is very important that we have a full idea of a whole season running because of the impact of introducing a new brand with a complete new product, no promotional product initially and some of the conversions that we went through. So, we think that it would be important to really wait until we have that whole season under our belts to be able to give you a full picture and a comprehensive picture of how the business is performing relative to our expectations. Christine Chen - Needham & Company: Okay. Thank you. Good luck. Carlos Alberini - President and Chief Operating Officer: Okay. Thank you. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you, Christine.

Your next question comes from the line of Dorothy Lakner with CIBC World Markets. Please proceed. Dorothy Lakner - CIBC World Markets: Thanks. And I will add my congratulations to the pile. Just wanted to get a little bit of more color on merchandise performance in the quarter and hoping you could maybe kind of compare contrast retail versus wholesale. And then if you could give us a little bit of color related to that on the merchandise performance we are seeing in the G by Guess business realizing, itÕs early on that one but just a little bit of comparison would be great, I am particularly interested in the denim side of the business. Thanks. Carlos Alberini - President and Chief Operating Officer: With respect to what drove the business, we had invested in dresses and dresses had a terrific quarter. Denim pants was very strong. We also had great success with shorts, this on the womenÕs business. We drove a lot of business with knit tops, woven tops, also had a positive quarter and overallÉ and even non-denim jackets had a very positive quarter as well. The great thing is that we all feel is that the product assortment was really great. And that also carried into our wholesale business as well. So, all the items that did very well in the retail did very well at wholesale as well. And as a result of that wholesale had a pretty significant increase even over all we had anticipated and better profitability. With respect to G by Guess, the items that drove the business are similar in terms of key contents, talking about denims, talking about dresses, talking about some of those tops. Dorothy Lakner - CIBC World Markets: And did you see theÉ.. are you expecting the denim part of the business to be the bigger portion of G by Guess or relatively the same? Carlos Alberini - President and Chief Operating Officer: Relatively the same, the mix is very similar. Dorothy Lakner - CIBC World Markets: Okay. Okay great. And then one house-keeping question, if I could add that am just the number of wholesale doors at the end of the quarter. Carlos Alberini - President and Chief Operating Officer: We ended with 954 thatÕs versus 852 last year. Dorothy Lakner - CIBC World Markets: Okay, great. Thank you. Carlos Alberini - President and Chief Operating Officer: Thank you.

Your next question comes from the line of [inaudible]. Please proceed.

Hi, good afternoon. Just thatÉ actually I was just curious on the back-to-school business that you have seen so far, just what products are driving our business similar trends what you are seeing in Q2 and just second part of that question, I believe you mentioned you received double digit comps in August, is there... I am just curious that if there is anything artificial driving, such as may be the shift in the back-to-school shopping holidays in Texas and Florida or if there is any just reason for cooling off from you guys able to continue that trend for the rest of that quarter? Carlos Alberini - President and Chief Operating Officer: Absolutely, it is true. We run double digit in August and yes, there were some changes in the calendar that impacted August favorably and July negatively. That being said, we also run double digit in July and the performance has been pretty much consistent to growth before. We even employed our workers shift in back-to-school starts and also tax free events, we were able to count those numbers with blank callers; Texas was a little bit more challenging but still running in double digits.

Okay then the product requirement so far for back-to-school eventually. Carlos Alberini - President and Chief Operating Officer: Yes. Very similar to what we saw before. We seeing some early checks on the outer wear like we have out in Canada and it is very encouraging. But overall the same category that drove the business in the second quarter continues to drive the business in the month of August. And that is also true for Marciano which had a great second quarterÕs as well.

Okay. Great. Thank you very much. Carlos Alberini - President and Chief Operating Officer: Thank you.

The next question in the line comes from Betty Chen for the Wedbush Morgan. Please proceed. Betty Chen - Wedbush Morgan Securities: Thank you. And again congratulations everyone on a nice quarter. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you. Betty Chen - Wedbush Morgan Securities: I am just wondering if you can give up update on maybe some of the infrastructure investment that you spoke of in the past. For example, I think you spoke of the global foot product, now that you have focus under your control as well as maybe any benefit from the mark man or the CRM program that I think you were looking at maybe for the Marciano concept, any update would be appreciated. Carlos Alberini - President and Chief Operating Officer: Yes we have been investing in systems initiatives you mentioned, I think a lot of these margin improvements that we are seeing, are related to the implementation of margin optimization. We are very happy with that. We continue to tweak the model but we think there is a lot to be said about, that they have contributed to us. We have been able to run the business with a very clean inventories and continue to do so. With respect to the loyalty program CRM, itÕs something that is work in progress. We have not launched it but we are about to and you are right, its in the merchant of business, and we have, expectation, that this could be a great profitable factor, because that business depends on clientele in a big way, thatÕs why we decided to implement it there first. And our plan would be to roll it out into the other businesses. And I think that maybe you are also referring to be along. We continue to work on that project. We think, that there is a long term future on that; to be able to roll out worldwide. And then at some point, we should capitalize on that for the core line development, meaning to really globalize the whole brand. Betty Chen - Wedbush Morgan Securities: Thank you. And good luck. Carlos Alberini - President and Chief Operating Officer: Thank you.

Your next question is a follow-up from the lines of Holly Guthrie with Janney Montgomery Scott. Please proceed. Holly Guthrie - Janney Montgomery Scott: Thanks. My question has been answered. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you, Holly. Next?

Ladies and gentlemen. [Operator Instruction]. The next question comes from the line of Janet Kloppenburg with JJK Research. Please proceed. Janet Kloppenburg - JJK Research: Hi, everyone. Congratulations. Paul Marciano - Vice Chairman and Chief Executive Officer: Hi, how are you Janet? Janet Kloppenburg - JJK Research: Very good thank you. Just a couple of follow-up questions. Is the gift cards breakage policy going to continue, in other words, should we see some benefits from that, for the next three quarters until we anniversary it? And also in terms of the retail profitability, I am wondering if we should expect more leverage in the back half, or if the G by Guess investment will continue to constraint margin growth there? And then I have a follow-up on inventory. Thank you. Carlos Alberini - President and Chief Operating Officer: With respect to the gift card, the three million dollars that we have recorded in this quarter, I would view it as a one time event. Going forward there will be an aspect of income, an increase in revenue associated with that but its going to be minor. Janet Kloppenburg - JJK Research: Okay. Thank you, Dennis. And then on the retail margin? Carlos Alberini - President and Chief Operating Officer: With respect to the retail margin, I think that there is opportunity in the second half, if thatÕs what you are askingÉ Janet Kloppenburg - JJK Research: Yes. Carlos Alberini - President and Chief Operating Officer: Especially in the fourth quarter, we do see opportunities to get some leverage and to your point about G by Guess because the sales productivity of both third and fourth quarters are much higher and the expenses are reasonably fixed in terms of that investment, in supporting the brand, we think that there is a better opportunity to leverage those expenses as well in the second half overall. Janet Kloppenburg - JJK Research: Great. And then the inventory reduction that you are planning between the fourth half and second half, as I said you are projecting, only up by 20% to 30% by year-end; I think the investment in the new businesses are still going to be pretty significant. So, I was wondering if I was missing something. Carlos Alberini - President and Chief Operating Officer: No, No, you are not. We are pretty confident with our forecasting here. And one of the big reasons for that, is thatÉ the main reason why the inventories were higher, about 50 %- I think so Janet mentioned this but 50% of the growth was supporting new businesses. Where both business for the most part, get anniversary by the end of the year; in the month of January. So, we thenÉ at that point we are just funding the core growth. And as a result of that, the increase that you see is significantly lower because the new business is part of the base. Janet Kloppenburg - JJK Research: And then lastly hearing a lot about apparel price increase is coming first out of China, and I am wondering what supposedly is there and what you are seeing? Thank you. Dennis R. Secor - Senior Vice President and Chief Financial Officer: In terms of product sourcing well price increases in China is pretty significant right now. We are always looking into better ways to source and I think we have a very strong team there. We are looking into alternative sources, but we always do. And we havenÕt experienced any significant increases in our own sourcing but because we look for alternative sources as well. So, we are in pretty good shape right now. Janet Kloppenburg - JJK Research: Great and congratulations again. Best of Luck. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you. Dennis R. Secor - Senior Vice President and Chief Financial Officer: Thank you Janet.

Your next question is a follow-up on the line of Gabrielle Kivitz of Deutsche Bank. Please proceed. Gabrielle Kivitz - Deutsche Bank: Hi. Just a follow-up question on a comp store sale trend. I thought you heardÉ you said at the beginning of the call that in August, comp continued to be double digits. I know you have a somewhat easier comparison for the fall Q3, but I have just been wondering if you would possibly just give us some color on what the comparisons look like for September and October just so that we could understand. How the rest of the quarter plays out that will be a helpful thing. Carlos Alberini - President and Chief Operating Officer: Gabrielle, matter of fact, the third quarter may look lower in terms of theÉ how divided, but in reality it worked the month of August where we were lower. So, we were up against a 4% comp last year and that is what brought the comp for the quarter to a lower number. But the comps for September and October last year were pretty healthy. Actually, we reported 11.3% comp in September and 11.8% in October, which brought the comp for the quarter to 8.9% because of the 4% for August. So, that's where we are being cautious. The fact that August was very strong for us is something we take it, and we move forward, margins were very healthy. And we think that we can continue to run the business that way. Gabrielle Kivitz - Deutsche Bank: Okay. Great. That helps explain the conservatism. Thanks. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you.

Your next question is a follow-up from the line of Dorothy Lakner with CIBC World Markets. Please proceed. Dorothy Lakner - CIBC World Markets: Thanks. Just a couple of quick ones. Most of the store openings that you now have left for the second half of the year willÉ should we assume those take place in the third quarter? Or if not if you could give us a little bit of color on that. And I just wanted to make sure that I have this store count by concepts for North America correct for the full price outlets, accessories et cetera. Carlos Alberini - President and Chief Operating Officer: Yes, let me start with the second part first, the store count. At the end of the quarter, retail was 180, factory was 94, Marciano 32, retail accessory stores 7, factory accessory stores 9, and G by Guess is 25. That's some of the 347. Dorothy Lakner - CIBC World Markets: Right, okay. Paul Marciano - Vice Chairman and Chief Executive Officer: And the answer to your secondÉ to your first question rather is it's absolutely correct we are opening most of these stores prior to the beginning of the fourth quarter. Dorothy Lakner - CIBC World Markets: Okay. Great. Thank you. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you.

And at this time, gentlemen, there are no further questions in the queue. Paul Marciano - Vice Chairman and Chief Executive Officer: Thank you very much for your time today and we will talk to you in December for the report of the Q3 someplace, sometime. Thank you very much. Dennis R. Secor - Senior Vice President and Chief Financial Officer: Thank you. Carlos Alberini - President and Chief Operating Officer: Thank you.

Thank you for your participation in today's conference ladies and gentlemen. All parties may now disconnect. Have a great day.