Heather Anthony - Senior Director of Investor Relations Ezra Dabah - Chairman, CEO Susan Riley - EVP of Finance and Administration, CFO Neal Goldberg - President Tara Poseley - President of Disney Store Amy Hauk - SVP, General Merchandise Manager of Disney Store Jill Kronenberg - SVP, General Merchandise Manager

Kimberly Greenberger - Citigroup Janet Kloppenburg - JJK Research John Zolidis - Buckingham Research Margaret Whitfield - Sterne Agee Dorothy Lakner - CIBC World Markets Jim Rice - Avenue Capital John Morris - Wachovia Brian Tunick - JP Morgan Rob Wilson - Tiburon Research Jeff Black - Lehman Brothers Marni Shapiro - The Retail Tracker Jim Chartier - Monness, Crespi, Hardt Paula Kalandiak - First Albany Vik Kumar - Soundpost Partners Nicole Jacoby - Liberation

Welcome to today's teleconference. At this time, all participants are in a listen-only mode. Later, there will be an opportunity to ask questions during our Q&A session. Please note this call may be recorded. I will now turn the program over to Ms. Heather Anthony. Heather Anthony - Senior Director of Investor Relations: Thank you, Kevin, and good morning, everyone. Thanks for joining us today for a review of our fiscal 2007 preliminary second quarter financial results. Joining us on this morning's call are Ezra Dabah, Chief Executive Officer; Neal Goldberg, President; Tara Poseley, President of Disney Store; and Sue Riley, Executive Vice President of Finance and Administration. Also on hand to answer your questions at the end of our remarks are Richard Flaks, Senior Vice President of Planning, Allocation and IT; Amy Hauk, Senior Vice President and General Merchandise Manager at the Disney Store; and Jill Kronenberg, Senior Vice President and General Merchandise Manager at The Children's Place. Today, Ezra will provide some opening remarks, Sue will cover our preliminary financials, Neal will review The Children's Place business, and Tara will discuss Disney Store. Before we begin, I'd like to remind participants that any forward-looking remarks made today are subject to the Safe Harbor statement found in this morning's press release. After our prepared remarks, we will take your questions. With that out of the way, let me turn the call over to Ezra Dabah. Ezra? Ezra Dabah - Chairman, CEO: Thank you, Heather, and good morning, everyone. The second quarter proved challenging for both brands. This morning, I'll address my remarks separately for The Children's Place and the Disney Stores. At The Children's Place, sales increased 8% and comparable store sales decreased 1% for the second quarter. The second quarter reflects similar challenges to the ones we have faced in the previous two quarters. Our merchandise lacked clarity of offer, which was compounded by our strategy to increase AUR primarily through mix, which did not meet our expectations. We believe our back-to-school and holiday assortment at The Children's Place reflects progress from the clarity in AUR standpoint. It's important to note The Children's Place brand remains uniquely positioned within the competitive arena, and we are confident in our team's ability to strengthen that position and drive long-term profitable growth. At Disney Store, sales increased 6% and comparable store sales were flat. Tara will provide color on Disney Store's results later in the call. This morning we also announced that we are in discussion with Disney on modifying some of the deadlines to remodel and refresh the chain in 2007 and 2008. In return for this, we are discussing to lift some of the restrictions of the license agreement that are important to Disney, however, we believe should not be material to our business. We are working closely together to quickly finalize our understanding. I want to take this opportunity to reiterate our strong belief in the Disney Store brand. Our access to the full vault of characters, past, present, and future, merchandised in an emporium format, operating under the Disney Store brand, positions us for long-term profitable growth. The resurgence of classic characters driven by Playhouse Disney, new franchises like Cars and Fairies, and the hugely popular tween properties like High School Musical and Hannah Montana fuel our enthusiasm. The desire for Disney branded merchandise is growing rapidly. Disney's licensed product business is on-track to reach $26 billion this year, double where it was five years ago. The Disney Store team is talented, energized and loves working with all the creative possibilities that the Disney Store brand offers to elevate and innovate our merchandise assortment, strengthening our unique position. Turning to operations, next week our new 700,000 square foot distribution center in Fort Payne, Alabama goes live on schedule, and will support our current needs and future growth over the next few years. Regarding guidance, this morning we lowered our outlook for 2007 in view of the sales and margin trends we have experienced at both brands through the first half. While we remain cautiously optimistic regarding the second half and are pleased with the month to-date sales trends, we believe its best to take a conservative view for the remainder of 2007. Thanks. And I will now turn the call over to Sue, who will review our financial results in more detail. Susan Riley - EVP of Finance and Administration, CFO: Thank you, Ezra, and good morning, everyone. Before I begin a discussion of our second quarter results, I want to remind everyone that these results are preliminary and may be subject to adjustment pending the review and confirmation of certain tax laws and other factors. Due to our previously announced restatement, we are not providing full comparative financial results, and we are providing only selected balance sheet data. For ease of comparison, last year's numbers are as reported in the press release. As such, any comparisons to last year made today are subject to change post the restatement. We're providing preliminary net income results today only. Preliminary net loss for the second quarter was $27.1 million compared to a net loss of $15.2 million last year. On a preliminary per share basis we lost $0.93 versus a loss of $0.53 last year. During the quarter, we also incurred stock option investigation fees of approximately $1.8 million pre-tax. On a segment basis, The Children's Place recorded an operating loss of $8 million versus an operating profit of $3.5 million last year. Disney Store's operating loss was $10.6 million compared to an operating loss of $4.5 million last year. Shared services reported an operating loss of $24.1 million, including $1.8 million in stock option investigation fees, versus an operating loss of $24 million last year. Excluding the previously mentioned stock option investigation fees, shared services expense decreased 7%. Consolidated net sales for the second quarter increased 7% to $424.3 million from $395.6 million last year. Second quarter sales were comprised of $290.5 million from The Children's Place brands, an 8% increase over last year, and $133.8 million from Disney Store, a 6% increase over last year. Consolidated comparable store sales decreased 1% for the quarter, reflecting an approximate 1% decrease in comparable store sales transactions. The Children's Place brands' comparable store sales decreased 1% versus a 13% increase last year. Comparable store sales for the Disney Store were flat compared to last year's 15% increase. Consolidated gross profit dollars decreased 3% to $130.3 million. Consolidated gross margin decreased approximately 320 basis points to 30.7%, primarily driven by higher markdowns in occupancy deleverage of both brands. Partially offsetting the decrease was higher initial markup. Selling, general and administrative expense as a percentage of sales was 36.4%, which represents approximately 10 basis points of deleverage versus last year. The deleverage reflects increased payroll expense, higher store variable expenses and previously mentioned stock-option investigation fees, partially offset by lower management bonus accrual, and a credit taken in the quarter for long-term equity compensation. Additional factors contributing to SG&A were lower marketing costs compared to last year, as well as lower store and remodeling expenses due to the timing this year versus last year. During the second quarter, we incurred $635,000 of asset impairment charge for one of our Children's Place stores. Depreciation and amortization expense was 4.3%, which represents approximately 40 basis points of deleverage, reflecting higher capital spending coupled with accelerated depreciation on the Mickey stores that we plan to renovate. Operating loss for the second quarter was $42.7 million compared to an operating loss of $25 million last year. Our effective tax rate was 36% in the second quarter versus 37% last year. Moving on to the balance sheet, we ended the second quarter with cash and short term investments of $83 million compared to $110 million last year. In addition, we had $72 million of borrowing on our credit facility at quarter end compared to zero borrowings last year. Cash from the beginning of the year changed primarily as a result of capital spending of approximately $100 million, inventory build of $94 million, which were partially offset by borrowings on our credit facility. We expect to end this year with cash of approximately $160 million to $170 million, which assumes an equipment financing of $30 million. This estimate, of course, is based on our ability to meet our most recent guidance. We had no long-term debt this year or last year at the end of the quarter. Total consolidated inventory was up at cost 33% or 23% on a square foot basis. At The Children's Place, inventory at cost was up 19% on a square foot basis, above our previous guidance, reflecting higher merchandise in transit. Excluding the merchandise in transit and incremental shoe inventory, inventory per square foot was up approximately 10%. Children's Place carryover inventory per square foot as a percentage to total is comparable to last year at less than 3%. Disney Store inventory at cost was up 37% on a square foot basis, below our previous guidance, reflecting lower inventory in transit. As a reminder, the growth in inventory primarily reflects our new e-commerce business. Excluding e-com, inventory per square foot was up 22%, also below previous guidance. Disney Store's carryover inventory per square foot as a percent to total was comparable to last year at less than 5%, and we are comfortable with the freshness of our inventory as we move into the third quarter. Looking ahead, we expect Children's Place brand to end the third quarter with inventory per square foot up in the mid-teens. At Disney Store, we expect to end the third quarter with inventory per square foot up in the high 20s or mid-to-high teens excluding e-commerce. During the second quarter, we opened 16 Children's Place stores and closed one. Year-to-date, we have opened 22 Children's Place stores and closed five. As of August 4th, 2007, we operated a total of 1,211 stores, comprised of 883 Children's Place stores and approximately 4.1 million square feet and 328 Disney Stores and approximately 1.5 million square feet. Turning to CapEx, we have reduced our expected capital spend for fiscal 2007 from $230 million to approximately $200 million, primarily reflecting a slower buildout of our new corporate headquarters and reductions in IT and store-level spending. Turning to guidance, while we remain cautiously optimistic regarding the second half, we believe it is best to take a conservative view for the remainder of the year. As stated in this morning's press release, we now anticipate reported earnings per share of $2.25 to $2.40 for fiscal 2007. Our full-year projection includes $3.4 million incurred year-to-date for stock option investigation expenses. Third quarter earnings are expected to be $0.94 to $1.02 per share, and fourth quarter earnings is estimated at $1.79 to $1.86 per share. Our second half guidance implies that SG&A as a percent of sales will be approximately flat to last year as we will continue to accrue long-term equity compensation at about 50% and are focused on reducing nonessential and discretionary spending. Gross margin as a percent of sales is expected to decrease, reflecting the markdowns associated with planned promotions we expect to roll out in the back half of this year. We now anticipate a tax rate of approximately 37% for the year, and our year end diluted share count is estimated at 30.5 million shares. Again, we remain committed to filing our financial statements with the SEC by the end of next week. Now, I will turn the call over to Neal. Neal Goldberg - President: Thank you, Sue. Today, I'll review the second quarter, initial back-to-school trends and our plans for the second half. Our second quarter results reflect weak customer response to our summer line, particularly in big girls and newborns, boy's and accessories comp in the positive low single digits for the quarter; Our decision to move our monster sale and back-to-school floor sets later in the quarter, the results of which were negative to sales; Increased average unit retails, which did not resonate with the customer and a slow start to initial back-to-school selling, particularly due to later back-to-school starts, corresponding tax-free shopping events, coupled with an intense promotional environment. Our slow start was particularly felt in big girls. Our negative 1% comp reflects a 1% decrease in transactions. Lower traffic was partially offset by higher conversion. By region, Canada was strongest with a low-teen comp, while the Southeast was weakest with a negative double-digit comp. Based on early back-to-school selling, we looked at the second half to ensure we have proactive strategies in place to compete in a promotional environment to drive traffic and sales. As part of the strategy, we launched a $9.99 denim event in the third week of July and moved up our Fall One sale by 10 days in early August. Both events were successful in driving traffic and sales into our stores. The markdowns we expect to take as a result of our second half promotional strategy are factored in today's earnings guidance. Fall Two set last Friday and includes our Halloween Costume offering. Let me now point out some key differences between how we approached our assortments between the first half and the second half. For example, in the first half, ticketed AURs increased in the mid-to-high single digits. In the second half, ticketed AURs are planned flat to slightly down versus last year. In the first half, our style count was up approximately 20% versus last year. In the second half, our style count is planned up 2%. In the first half, depth per style decreased 20%. In the second half, depth per style is up 10%. Our second half plans reflect our commitment to narrow deep, focused assortments at a great value, which makes for an easy shopping experience and is easier to execute. On July 10, we launched on schedule our new store-within-a-store shoe concept and are now currently operating 33 stores as well as online. Though still very new, initial customer response has been positive. While we have a lot more to learn, we are confident that our concept of fashionable, high-quality shoes at a great value fills a big void in the marketplace. As a reminder, shoes will not be material to our financial results in 2007. In closing, while the second quarter and first half have been challenging, we believe we have identified the issues and have made the right changes from the pricing, planning and promotional standpoint. Thanks, and I'll now turn the call over to Tara. Tara? Tara Poseley - President of Disney Store: Thank you, Neal, and good morning, everyone. Q2 recap. The second quarter at Disney Store was challenging. We attribute our results to continued mall traffic declines; number two, Meet the Robinsons and Ratatouille merchandise not meeting our expectations; and thirdly, our decision to move both semi-annual sale and fall delivery a week later this year versus last year. Areas of strength during the quarter came from our Cars, Pirates of the Caribbean and Golden Princess assortments. Our flat comp for the quarter reflects the 1% increase in our average transaction side, driven by higher units per transaction, partially offset by lower average unit retail. Comparable sales transactions decreased 1%, partially offset by higher depth conversion. Guest traffic, which we are dependent on, was down 6% in the quarter, in line with national mall traffic declines. By geography, comps were positive in Canada and in the Northeast, and in the negative, low-single digits in all other regions. By department, hard lines achieved a positive, mid-single digit comp, while soft lines comps in the negative, low-single digits due to softness in boy's apparel, reflecting last year's strength in Cars. Media comps, while not material to our results, were negative for the quarter due to last year's DVD release of High School Musical. Back-to-school, turning to fall, guests have responded favorably to our new studio collection. Other strong categories include home decor, particularly our new canvas artwork and stationary, kids' graphic tees, girl's fashion and denim where our backpack program has been challenging. E-com, on July 10th, we soft launched on schedule our new e-commerce initiative in alliance with Disney Shopping. Initial customer feedback has been positive, and we are on track to offer our full online assortment in time for the holiday season. Fall Two and Halloween. Our Fall Two stage set arrived in stores this week, similar to last year, and features our famous Role Play and Halloween costumes. We have expanded our infant plush costume offerings this year versus last year, and for the first time, are offering adult sizes in select stores. Tweens. Last week, we launched a new tween offering in our 70 top stores, coinciding with Disney Channel's August 17th premier of High School Musical II. Our assortment spans room décor, accessories, apparel and stationary and features Disney Channel's hugely popular High School Musical and Hannah Montana franchises. We will roll out tween chain-wide during the holiday season with a broader, more comprehensive assortment. Looking ahead, as we look forward, we are excited about the DVD releases for the second half, which include the 40th anniversary platinum addition of Walt Disney, The Jungle Book, Meet the Robinsons, Ratatouille and Pirates of the Caribbean-Dead Man's Chest. DVDs, while not a hybrid margin business, are great traffic drivers. We also look forward to theatrical release of the Walt Disney Pictures' Enchanted, featuring Giselle, a new concept from Disney. In closing, we look forward to the opportunities that lie ahead for us. Our home-grown big ideas create unique excitement that set us apart from the competition, and upcoming synergy events offer endless product possibilities. Thanks, and I'll now turn the call over to Ezra to wrap up. Ezra Dabah - Chairman, CEO: Thanks, Tara. I'm actually going to open the call to questions. Kevin, please open it up for questions.

(Operator Instructions) We'll take our first question from the line of Kimberly Greenberger with Citigroup. Your line is now open. Kimberly Greenberger - Citigroup: Great. Thank you. Good morning. Ezra Dabah - Chairman, CEO: Good morning. Kimberly Greenberger - Citigroup: I was hoping you could talk to us a little bit more about the disclosure in the press release about Disney's ability to grant direct licenses to other specialty retailers. Can you just talk about what the amendment is to the agreement versus the June agreement? Also, if you could -- is there anything else you can say on the violation of internal controls and compliance by two executives internally? And on the filings, is the only delay, Sue, in the ability to get those filings updated, the disclosures on the Disney discussion, or is there something else there? And then lastly, if you could give us any sort of update on work-in-progress at Disney and any color on gross margin performance at any of your divisions, that would be helpful. And I apologize for the slew of questions there. Ezra Dabah - Chairman, CEO: Kimberly, I'll take the first one as it relates to Disney. One, it's important to note that we're working very, very closely together. And our relationship to date has been one of, a good relationship that is based on what's right for our business and what's right for their business. As you know, we signed a letter agreement in June and we bounded ourselves to certain deadlines, especially as it relates to '07 remodels and refreshes. Unfortunately, in view of these deadlines, we were not able to meet, mostly because of circumstances beyond our control. And Disney, understanding that, basically gave us waivers and at the same time, I wanted you to know, so far the waivers were regard to immaterial delays in what we were supposed to do. What they're asking us is to release some of the constraints that we had on them as to their ability to direct to retail license and Specialty retail. And they've asked us to do that in the area of adult merchandise. One that is not so relevant to our business and we actually believe that to the extent that they can increase their adult offering, it's actually going to be good to our business. So that's one. And the other is, they wanted some flexibility regarding their New York store, which is really not important to us and important to them, so in view of our good relationship we just work together or we need on our end and what we need on their end. And we basically have an understanding that we look forward to document very quickly. Susan Riley - EVP of Finance and Administration, CFO: Okay. Kimberly, on the internal controls, basically we had two violations of our policies and procedures on the part of senior executives. One was not an executive officer or a named executive officer and the other was. As I characterize the control violations, I would say that the violation on the part of the named executive officer was relatively small, although, given there's a heightened sensitivity to our control environment right now given what happened with stock options. The internal control violation or policy violation on the part of the executive who is not a named executive officer is more serious and can be characterized as a very serious lapse of judgment. There will be remedial actions. We expect there to be remedial actions that will be taken by our board, but we do expect the executives to remain in place. As to our filings, yes, you are correct that the filing is being delayed because we want to reach -- we feel we need to reach resolution with the Walt Disney Company before we file. And further the internal controls -- the evaluation of our internal control framework has also resulted in the delay in filing. As I said, we're committed to August 31, but there maybe some delays to that date. And then you asked about gross margin at both brands and in this quarter gross margin was, in fact, down at both brands. The external gross margin was down at both Disney and Children's Place, due primarily to markdowns. Kimberly Greenberger - Citigroup: Okay. And are you still seeing some sourcing gains at Disney and those were just overwhelmed by higher markdown levels, or are you now seeing the same progress with sourcing and reduced -- and increased IMU at the Disney brand? Tara Poseley - President of Disney Store: Kimberly, hi, it's Tara. We're very pleased with the direction that we are moving our initial margin. So really the Q2 was driven by a much higher markdown rate, much more promotional environment and it affected our margin for the quarter. But I think we've made great strides in apparel. Obviously, that was a core competency of the company and we were able to really tackle that area first. There would still be some savings in that area, but the area we still have opportunity in -- and I don't want to quote what that exactly looks like, because really the end process of that is toys, but we really want to find the right partners in toys. We're taking that very slowly to make sure these are long-term partners. But we do believe as we expand our sourcing base in that area we will continue to glean better initial margins in the future. Kimberly Greenberger - Citigroup: Very helpful. So Ezra, just with regard to the Disney concession, it sounds to me like the concessions are in adult merchandise, not in product that would draw children necessarily to other specialty retailers. Is that the right way to read it? Ezra Dabah - Chairman, CEO: That is correct. Kimberly Greenberger - Citigroup: Fantastic. Thanks and good luck for the second half. Ezra Dabah - Chairman, CEO: Thank you.

We'll take our next question from the line of Janet Kloppenburg with JJK Research. Your line is now open. Janet Kloppenburg - JJK Research: Hi. Thanks so much. I wanted to talk about the Disney business with Tara and maybe for Amy. If you could talk a little bit about the corrections to course you took specifically. I know that you had later semi-annual sales and the fall came in later. It sounds like the apparel business maybe isn't quite as strong as it needs to be, something could be off in boys. Maybe you could talk a little bit if those situations have been remedied for the third quarter or if we should look to the fourth quarter. And I think I heard Neal say that back-to-school got off to a good start. I was wondering if you could comment on that as well. And Neal, if you could talk a little bit about the trends you're seeing in the business and if it's just a tax-free event that's leading to the business being better and what the outlook for sustainability is there, especially if you could talk a little bit about the girl's product. Thanks. Amy Hauk - SVP, General Merchandise Manager of Disney Store: So Janet, this is Amy. Good morning. Janet Kloppenburg - JJK Research: Hi, Amy. Amy Hauk - SVP, General Merchandise Manager of Disney Store: Hi. How are you? Janet Kloppenburg - JJK Research: Good. Thanks you. Amy Hauk - SVP, General Merchandise Manager of Disney Store: In hindsight in Q2, there are a couple of missteps that I think I made and I look back at the product. And I'm going to really focus it on art style. We launched Ariel and her sisters and we did the Tiki Family collection, and we really did an interruptive, more sophisticated very flat line art style. And it just didn't resonate with our guests. And when I look at that art style and what they're really responding to, I think that that was a misstep on our part and they just didn't respond to that product. So we've, of course, corrected that going forward. We really, in looking at historical business trends and what really resonates with the guest. We're being more literal in story telling in our art style. And I feel confident going into the back half that we've really addressed that and course corrected. I will also say we probably, Janet, have one idea too many in our stores in Q2. And I think that, you know, I'm a firm believer that less is more. And I think that in trying to get all these great franchises and properties and this wealth of Disney characters that Ezra really referred to, we could have been more disciplined in editing out one of those ideas. So that's what I really feel from a product -- Janet Kloppenburg - JJK Research: And Amy, you feel you were able to course correct fully for the back half, or do you really think this could take a couple more quarters? Amy Hauk - SVP, General Merchandise Manager of Disney Store: Well, then, you don't know until you're in it. Janet Kloppenburg - JJK Research: Correct. Amy Hauk - SVP, General Merchandise Manager of Disney Store: So we do the best that we can and I'm proud to say, I'm lucky, I guess, that I work with a team that really holds themselves accountable to the highest level in executing great product and strategy. So, you know, we looked at Q2 and as soon as we started seeing things that weren't working we course corrected. I mean when the numbers come in and all is said and done, well, in hindsight there's probably a few things we would have done differently. But, hopefully, we've made the right moves to positively impact the business. Janet Kloppenburg - JJK Research: Perfect. Good luck. Amy Hauk - SVP, General Merchandise Manager of Disney Store: Thank you very much. Neal Goldberg - President: And Janet, just to respond to. It was Ezra who said please with month-to-date sales. Janet Kloppenburg - JJK Research: Okay. I apologize, Neal. Neal Goldberg - President: That's fine. Clearly, the tax-free swing, the later back-to-school weather, and our promotion cadence helped contribute to that. And other than that, I'm not going to speak to anymore future about the month or... Janet Kloppenburg - JJK Research: Okay. Could you perhaps you or Ezra talk about the competitive profile in the malls? It seems to me that Gap Kids has become more price-focused and if you go on the Crazy Eight web site. I think you'll see a lot of price points that mimic yours, so I was wondering how you might deal with this growing competitive profile? Thank you. Ezra Dabah - Chairman, CEO: Hey Janet, I think you know that that back-to-school season started off very competitively with Wal-Mart being the first, dropping prices 10 to 15%. The majority of that slowdown in the start to the season, we believe, had to do with those major states that actually delayed their back-to-school opening. So just kind of started off slow and because of the slow start, everybody became very competitive and of course we were part of that. And whatever we did, our promotion cadence, as Neal mentioned on denim and expediting our back-to-school sale about ten days earlier has helped results month-to-date. Janet Kloppenburg - JJK Research: Okay. And then just Ezra, looking into fiscal '08, you have a tremendous number of renovations planned for Disney. I think the number is over 65 and I am just wondering if there's any way for you to modify this agreement with Disney. So that every time you don't -- every time you release, we don't get these, you know, scary notifications that you and Disney may part ways. I mean, is there a way to create a situation, where you and Disney have an understanding and where you're not constantly in violation of contract covenants? Thank you. Ezra Dabah - Chairman, CEO: As we mention today, we have gotten some relief on our obligations in '07 and '08, so one might take that from there that we've gotten some ability to push back some of our obligation in '08 and '09. And again, it's important to note that Disney is really working with us and just to make sure that whatever we do is right for our business, they want us to be profitable, they want us to be successful and they're working very closely with us. Tara Poseley - President of Disney Store: May I just clarify? Ezra just said, we're working with the Walt-Disney Company to get this relief, we don't have it yet, but nonetheless, we are working towards that goal with them. Janet Kloppenburg - JJK Research: And it sounds like you're happy with the way you're working together and it feels like everyone wants to move forward together. Is that a correct assumption? Ezra Dabah - Chairman, CEO: That's a very correct assumption. Janet Kloppenburg - JJK Research: Thank you and best of luck to you all. Neal Goldberg - President: Thank you. Ezra Dabah - Chairman, CEO: Thank you.

We'll take our next question from the line of John Zolidis with Buckingham Research. Your line is now open. John Zolidis - Buckingham Research: Hi, good morning. Ezra Dabah - Chairman, CEO: Hi, John how are you doing? Susan Riley - EVP of Finance and Administration, CFO: Hi, John. John Zolidis - Buckingham Research: Hi. First, just a housekeeping. Could you give us the square footage for both divisions, if you haven't done so already? Susan Riley - EVP of Finance and Administration, CFO: We did. Square footage, it's 4.1 for Children's Place and 5.1 for Disney. John Zolidis - Buckingham Research: Okay. Thank you. And then with regard to the inventory plan for the end of the third quarter, I believe you said up mid-teens for the Children's Place division and then I think you said maybe up in the mid-20s excluding the e-commerce business for Disney. Why do you feel that planning inventory so aggressively when you'd experienced some sales softness is the right way to go at this time, and why should we feel that we're not going to continue to see additional downward pressure on merchandise margins as a result of this? Ezra Dabah - Chairman, CEO: John, first thing, I just want to clarify the guidance for the end of the third quarter. Without e-com at Disney, we're talking about inventory being up in the teens, not the 20s. So both brands are pretty much in the teens at the end of the third quarter. The answer to your question is, if trends from the first half of the year continuing to the back half of the year, then we have more inventory than we would like. And what we've done is in the guidance that we gave this morning, we've contemplated the markdowns necessary to get back inline by the end of the year, assuming that should happen. So I believe the downside in the markdowns due to having have liquidate the inventory is already built into our guidance. John Zolidis - Buckingham Research: Okay. So the margin piece is in there but -- so are you saying that a mid-teen increase is actually higher than you would like it to be, or that's where you want it to be? Ezra Dabah - Chairman, CEO: It depends on what happens to the business. So on The Children's Place side, a year ago, we came out and said going into the fourth quarter we came in under the inventory level that we would like and in fact going into the first quarter of this year, we had less inventory carryover than we would have liked. There's still a fair amount of volume that gets done on carryover inventory at markdown in both of those quarters. So part of the adjustment on the TCP side is due to us wanting to have more inventory than we had last year, because we think we ratcheted down too much last year. However, the increased inventory investment in the back half is much more focused in a narrow deep assortment rather than scattered over a broad assortment. So we think it's a bigger investment and it was a planned bigger investment, but a much smarter investment. On the Disney side, the couple of other things going on. One is, and I think we indicated, there were some stores, store slides and changes based on some of the stuff that's been going on, trying to land on the remodel. So we ended up buying for a few more stores than we would have liked to and we now have to deal with that inventory. On the positive side at Disney, is there's a much bigger percentage of the inventory that is what I would classify as basic or ongoing and our ability to get out of some of that inventory and push it out and adjust our inventory levels is a little higher at Disney. But in either case, what we've done is in the guidance we've built in the markdowns, we need to get to the level we would want to be at the end of the year. John Zolidis - Buckingham Research: Okay. Thank you. And then, one last question. I'm sure that it's not in Disney's best interest to try to walk away from the licensing agreement, but can you just try to give us some parameters about if in worst case scenario, if that licensing agreement was terminated and it had to be unwound, you know, how would that actually play out? Any idea what the financial implications of such an event would be for your company? There would, it seems to be, possibly some positive benefits from working capital and so on, but could you just talk about that a little bit so we can kind of have the ability to think about it? Thank you. Ezra Dabah - Chairman, CEO: John, I mean frankly, we don't even want to go down the road. I mean to the extent that you wanted to, the license agreement is available and you may be able to decipher from there what our obligations are. But it's more -- what's most important here is, we are basically have the right and the privilege to operate the Disney brand, and Disney as a brand is really going places. The content is immense, the popularity is immense, and we have the rights to everything that Disney has, as I said, and we see this as just an enormous thing to have. We have turned around the business, we have stabilized it, we have positioned it for growth, we have a great team in place, and we see a great future together and I know some people are concerned about as you look at the capital investment and what the real return on investment is. But as we look at it, the return on investment is immense as to the accretion that the Disney Store will generate over the next few years. John Zolidis - Buckingham Research: Great. Well, I look forward to you guys getting back on schedule with the remodels and so we can get that realized. Ezra Dabah - Chairman, CEO: Thank you. Susan Riley - EVP of Finance and Administration, CFO: Thanks.

We'll take our next question from the line of Margaret Whitfield with Sterne Agee. Your line is now open. Margaret Whitfield - Sterne Agee: Good morning, everyone. In light of my expectation and hope that you'll be current on your filings soon, I wonder what your current thoughts are on a buyback given the valuation of the shares currently. Ezra Dabah - Chairman, CEO: Margaret, as you know, since we could not do a buyback while the SEC filings are not current, so a buyback is something that the Board has not considered. It's important to note that we listen to our shareholders and we know that this is an idea that a number of shareholders want us to consider. You know, our management and our Board are committed to enhancing shareholder value and acting in the company's best interest, so we'll see what happens from here. Margaret Whitfield - Sterne Agee: Good to hear. Just to confirm this, last incident with Disney, in which you have not received any written confirmation, does that differ in any way from the prior situations for which you did get written confirmation that they were not breaches. Tara Poseley - President of Disney Store: I think Margaret is referring to the current breach, right the current -- we know it as a breach? Margaret Whitfield - Sterne Agee: Yes. Tara Poseley - President of Disney Store: I would say it's more of the same. The only reason, I believe, I can't speak for the Walt Disney Company, but the only reason why we didn’t have a waiver of the breach is because it surfaced later in the cycle. What had happened in that instance is that there was a store that we had been in dialogue with Disney about delaying a store because the mall the center of the store was located in was undergoing a renovation so design plans for that store were not submitted along with other design plans. So it’s a very -- it is a breach as the letter is written, but nonetheless it's relatively minor and is being contemplated in this overall amendment that we've been talking about. Margaret Whitfield - Sterne Agee: Okay. This is for Jill. I know that the girl's area ha been a subject of fashion issues. I wondered if you could discuss what you've missed out on, Jill, and what we might expect in forward deliveries to limit this problem? Jill Kronenberg - SVP, General Merchandise Manager: Well, Margaret, a lot of challenges that Ezra and Neal have referred to have really affected big girls more than other areas. The increase in AURs driven by our good, better, and best mix has definitely affected big girls more than the other divisions. Our lack of focus and depth has also affected big girls more dramatically than the rest. Again, compounding this with our decision to ship some of our floor set and sale dates out and again, the later back-to-school in past we shipped as well. Margaret Whitfield - Sterne Agee: How about the holiday delivery? Any new fashion you can speak to, Jill, because I guess, you've missed out on plaids and baby doll tops who might have gather, not you, but the firm? Jill Kronenberg - SVP, General Merchandise Manager: Sure. Do we wish we had more plaids and baby doll right now, yes. And actually for holiday our dressy collection is based on plaids. You will see it in our windows in October. You will see it in the front of out store in the first shop it's all about plaids. So we feel we have a much bigger statement in plaid for the holiday. In addition, we have a much bigger penetration of dresses as well for holiday, which we feel very good about. And again, as we move into the back half of the year and into holiday in particular, we're very well positioned in gift-giving items, which we feel becomes a much more important piece of the business at the time of year. Margaret Whitfield - Sterne Agee: Can you elaborate on what you might be offering for gift items this year that differs from the past? Jill Kronenberg - SVP, General Merchandise Manager: Not at this point. Margaret Whitfield - Sterne Agee: Okay. All right. Thanks and good luck. Jill Kronenberg - SVP, General Merchandise Manager: Thank you.

We'll take our next question from the line of the Dorothy Lakner with CIBC World Markets. Your line is now open. Dorothy Lakner - CIBC World Markets: Thanks. Good morning, everyone. Ezra Dabah - Chairman, CEO: Good morning, Dorothy. Dorothy Lakner - CIBC World Markets: Just a couple of housekeeping issues. Just, could you remind us of the size of the new Children's Place Stores that you're opening this year, just a detail there? And then no new Disney Stores are opening; is that correct? And then just remind us of the number of remodels that we will have this year. How long, approximately, those take? And then is there any way of sort of helping us out with looking -- figuring out a way to look at CapEx for next year. Obviously, you're in the midst of these discussions with Disney, so I realize it maybe difficult, but you know, just help us think about that a little bit. And then finally, I just wanted to go back and make sure I understood. I think this may go back to Kimberly's question about the part in the press release discussing Disney's ability to grant direct licenses to other specialty retailers. The way it reads, it says specialty retailers primarily focused on children's merchandise, but I thought I heard you speak about adult merchandise. So I just wanted to get a little bit of clarification on that point. Neal Goldberg - President: Margaret, I'll take the first… Ezra Dabah - Chairman, CEO: Go ahead, Neal. Neal Goldberg - President: Just the size of The Children's Place Stores, 5500 the cost of addition of shoes to new stores. Dorothy Lakner - CIBC World Markets: Okay. Ezra Dabah - Chairman, CEO: And we are opening new Disney Stores, primarily outlet stores this year. Dorothy Lakner - CIBC World Markets: Okay. Ezra Dabah - Chairman, CEO: The remodel is projected to take approximately 12 weeks. Dorothy Lakner - CIBC World Markets: Okay. Susan Riley - EVP of Finance and Administration, CFO: You asked about CapEx… Dorothy Lakner - CIBC World Markets: Just a point on that. When the remodels take 12 weeks, what happens with employees in those stores? You're paying them while the store is undergoing renovation are the stores completely closed during the renovation, are they partly open? Tara Poseley - President of Disney Store: I can take that. We have plans for all of our cast members during those times. And some of them are redeployed to other stores in the area. Dorothy Lakner - CIBC World Markets: Okay. Tara Poseley - President of Disney Store: So you pretty much redeploy them as our full-time employees, we want to make sure we're retaining them. We've got great tenure in our cost members out there, so it's really important for us to not lose them during that 12-week period when we're going either through a remodel and obviously, with a new store you don't have that issue, because if it is a brand new store in the market then ramp up accordingly. Dorothy Lakner - CIBC World Markets: Right. Okay, that's great. Thank you. Susan Riley - EVP of Finance and Administration, CFO: And then Dorothy, you had asked two questions, which I'll take. One had to do with CapEx for '08, which we'll be giving guidance on in the fourth quarter call. And lastly the DTR restriction in the new agreement we're talking to Disney about. In fact, the press release should have clarified. We'll probably issue a clarification later today. Dorothy Lakner - CIBC World Markets: Okay. Susan Riley - EVP of Finance and Administration, CFO: But it should have said, in addition the parties have been discussing modifications so that the restrictions on Disney's ability to grant direct licenses to other specialty retailers for the sale of Disney merchandise will apply only to special retailers primarily focused on the sale of children's merchandise. Dorothy Lakner - CIBC World Markets: Okay. Great. Susan Riley - EVP of Finance and Administration, CFO: It limits that -- it reduce, relaxes that restriction, if you will. Dorothy Lakner - CIBC World Markets: Okay, great. That's helpful.

We'll take our next question from the line of Jim Rice with Avenue Capital. Your line is now open. Jim Rice - Avenue Capital: Ezra, I'm, I guess, completely shocked on a number of fronts here. First of all, I'm shocked you're not firing those executives that were responsible for potential breaches here. I really think a message needs to be sent within your organization that people need to have ethics here especially, in the wake of this options investigation. And second of all, why is a shareholder and why should the Board have confidence in you, Ezra, that you should remain in place when you're responsible for a $1.3 billion decrease in market cap here. This is absolutely ridiculous. Ezra Dabah - Chairman, CEO: Yeah, Jim, as it relates to the executives, I think it's important to understand the issues before making any judgments. And so as soon as the Board reviews it and makes its decision and as Sue mentioned, it was not big a material and it is expected that these executives will stay on. Jim Rice - Avenue Capital: Why can't we have anymore information about what the issues were? Ezra Dabah - Chairman, CEO: As soon as it's resolved and as soon as we file the K, you would have all the information you need on that. As it relates to your second question, I'm just not going to comment on it. Jim Rice - Avenue Capital: Yeah, that's ridiculous. Good job.

We'll take our next question from the line of John Morris with Wachovia. Your line is now open. John Morris - Wachovia: Thanks. I have a couple of questions, Ezra, as it relates to the non-operating items that you talked about. I mean, first of all, I would just want to say, I think it's been incredibly helpful for you and the company to be more forthcoming, particularly on this conference call, with respect to explaining how you have been handling both the Disney and also the SEC investigation or the stock option investigation, very helpful. Two or three follow-ups, I guess, on some of those that would give us a little bit of extra clarification. One would be, with respect to the June agreement, I guess as I understand it, just explain to us a little bit why the company would have agreed to the original calendar timing of those remodels in June? Presumably you all would have known at that point in time that you would have been able to schedule those remodels and make them accordingly or not. So I think, if you can answer that question, that will probably shed some light on it. Secondly, is the non-executive officer who's in violation still at the company? That would be helpful to know. And then third, is the Disney agreements -- or I should say why is the Disney agreement connected to the inability to make the filings? Just maybe shed some light there might help. And then finally, to get to really the crux of the operating issues or operating our performance, which would help to understand. Has there been, Neal, any kind of a change in the promotional cadence scheduled for fall as you look ahead currently. You already talked about what you've done so far. So if you could talk about that that would be great. Thanks. Ezra Dabah - Chairman, CEO: John, as it relates to obligation in the June agreement, all of us, including the team in charge, you know, felt that the dates that we obligate ourselves to are executable. Unfortunately, we encountered certain things behind our control. An example would be a tenant did not vacate the store that we needed to remodel, and that's on one end. And other end, we just wanted to make sure both us and Disney is the quality of the stores that we do is absolutely 100% and perfect. And we both felt that taking a little more time and we leaving some of those date obligations will be best suited for both of us. And that's why we are working together to extend a few days. Susan Riley - EVP of Finance and Administration, CFO: And you asked… John Morris - Wachovia: If the non-Executive Officer, who was in violation, the non-Executive Officer, is that person still at the company or no longer at the company? Susan Riley - EVP of Finance and Administration, CFO: Yes. Yeah. That person still is at the company. John Morris - Wachovia: Okay. Susan Riley - EVP of Finance and Administration, CFO: …at this point in time. As I said earlier, there will be some kind of remediation that the board will impose that's in discussion right now, but right now the person is still with the company and expected to be. John Morris - Wachovia: And on the business question you had on… Susan Riley - EVP of Finance and Administration, CFO: Go on. I think before that you had asked about the Disney agreement. Why we had to have the Disney license agreements issues resolved before we could file the 10-K. And the reason for that is it's highly, highly advisable to have those issues resolved prior to filing the K, so just highly, highly advisable. John Morris - Wachovia: Okay. You know again, I think it's very helpful to hear from you all on all these. You've been very forthcoming. Neal? Neal Goldberg - President: As I said in my prepared remarks, we really look closely at the second half to ensure we have very proactive strategies in place to compete in the promotional environment. That said, you know, we built in a lot of contingencies. I'm not going to say what they are, but much as we demonstrated at the end of July and so far in August, we have those. Very important is the markdowns anticipated to correspond with these are built into our guidance. John Morris - Wachovia: Okay. Very clear. Thank you, good luck for the rest of the season. Susan Riley - EVP of Finance and Administration, CFO: Thank you.

We'll take our next question from the line of Brian Tunick with JP Morgan. Your line is now open. Brian Tunick - JP Morgan: Okay. Thanks. I guess I'll follow-up with a couple of questions, since it's hard to get a hold of you guys. I guess the first one -- I guess a lot of questions about the Disney remodeling questions, but what kind of top line disruption do you expect that we should be thinking about for next year, as you go through remodeling the stores? I guess that's question number one. Number two; I guess as far as guiding for up earnings in Q4, I know last year SG&A was pretty bloated, direct marketing, you know, what's your plan for direct marketing customer acquisition this year in Q4? And maybe just finally as far as the balance sheet goes, what kind of cash or potential drawdown into your line of credit do you think we should be expecting for year end? And on the inventory side, are you seeing the sales lift at the Disney e-commerce that you're expecting given the inventory? So a couple of questions appreciate your time. Susan Riley - EVP of Finance and Administration, CFO: First question was Disney remodels what kind of top-line disruption. Tara? Tara Poseley - President of Disney Store: Topline reduction from the remodel? Susan Riley - EVP of Finance and Administration, CFO: Disruption from the remodel. Tara Poseley - President of Disney Store: Topline disruption. You know all of that has been scheduled into our plans for 2008. And I don't think we're going to have new stores coming online next year, so it's going to be a balance in some of the stores closing for remodel and new stores coming online. So we don't foresee any great disruption in the topline sales. It's more just about trying to make sure we're getting all of those openings and remodels done in the first half of the year. So we're really staged and poised for that back half of the year, which is very important to the Disney business, obviously, as we move into that late, Q3, Q4 timeline. Amy Hauk - SVP, General Merchandise Manager of Disney Store: And then I'll just tag on before we hand it over The Children's Place, Brian, this is Amy Hauk. As far as acquisition of direct mail, we know that that's really important for our customer, our guest to get them through our doors to get them excited about the product. We have a fairly aggressive campaign in the back half of the year, and so that is up substantially over last year, our direct mail, so our expense as a percent to sales is relatively flat in overall marketing spend. And then e-commerce, we're not going to comment any further than to say initial response has been good. We have a lot of history because Disney Shopping owned a lot of these categories previously, so we felt the planning teams feel very comfortable about how much we've invested and where we've invested our inventory to support sales. Tara Poseley - President of Disney Store: And I think with the amount of traffic that goes to the Disney shopping site, as a percent of brick-and-mortar, the Disney Store e-com side is going to be a higher percent of sales than you would find at The Children's Place. And in addition, I mean also an exciting avenue that we didn't have last year to drive traffic into brick-and-mortar, as well. Ezra Dabah - Chairman, CEO: Just to embellish Tara, Brian, as it relates to sales in '08, you know, you have to take the projected number of stores that are going to remodel and multiplied by 12 weeks? Some of that will be made up by new stores that we're going be opening throughout the period. Brian Tunick - JP Morgan: Okay. Susan Riley - EVP of Finance and Administration, CFO: You asked about earnings in Q4 and marketing cadence to drive the earnings. Neal Goldberg - President: The marketing cadence is inline with last year's marketing spend. And, you know, again as we said many times, we're cautiously optimistic well opportunities. Susan Riley - EVP of Finance and Administration, CFO: You asked about cash -- expected cash balance at the end of the year and what kind of drawdown you could expect on the credit facility. And as I said in my prepared remarks, cash is expected to be between $150 and $170 million as of year fiscal year end. That is contingent of course on our ability to achieve the guidance. Having said that, we also are anticipating doing an equipment financing for some of the equipment that we have in our southeast distribution center for about $30 million. And that is contemplated in that ending cash balance. At this point in time, I'm not -- we're not looking at drawing down on the credit facility as we exit the year. Brian Tunick - JP Morgan: Okay. Just one final one, we saw that one large shareholder filed a 13-G recently and sometimes companies respond with some kind of press release that they'll talk to them or something. Are you guys open to talking to your larger shareholders and have you had a meeting with them? Susan Riley - EVP of Finance and Administration, CFO: We're always open to speaking to our shareholders. Brian Tunick - JP Morgan: Have you met with the firm that filing… Susan Riley - EVP of Finance and Administration, CFO: We meet with many shareholders in the normal course of business, particularly the large ones. I mean they call us frequently. Brian Tunick - JP Morgan: Okay. Good luck. Ezra Dabah - Chairman, CEO: Thank you.

We'll take our next question from the line of Rob Wilson with Tiburon Research. Your line is now open. Rob Wilson - Tiburon Research: Yes. Thank you. Sue, you mentioned earlier there was a credit to long-term equity compensation in Q2. Could you provide us with that number? Second question would be as we look at Disney merchandise margin in Q2 this year, how does that compare with two years ago? Is it higher or lower, then finally I'm just curious if anyone at your corporate office has walked into a Crazy Eight store? Thank you. Susan Riley - EVP of Finance and Administration, CFO: Okay. The credit, starting with the credit that we have for long-term comp in the second quarter is under $1 million. Rob Wilson - Tiburon Research: Okay. The merchandise margins at Disney this year versus two years ago? Susan Riley - EVP of Finance and Administration, CFO: Merchandise margins, Tara, do you want to take that or do you want me to? Rob Wilson - Tiburon Research: Just directionally? Susan Riley - EVP of Finance and Administration, CFO: Directionally in this quarter, the merchandise margins at both Disney and TCP were down versus last year and the reason for that is because of higher markdowns. I don't happen to have the two-year-ago numbers in front of me, but they are down year-on-year. Do you want to pick it up, do you… Rob Wilson - Tiburon Research: And just... Tara Poseley - President of Disney Store: It is up. Okay. I mean from an initial margin standpoint, the initial margins from '06 to '07 are up about 150 basis points and we still continue to see some of that initial margin increase in the 2008 piece. And again to reiterate, really the merchandise margins were affected by a highly promotional climate we had in Q2 to make sure that we're moving into inventory and moving into Q3 clean. Rob Wilson - Tiburon Research: I guess, I was just concerned with -- two years ago we had this tremendous merchandise margin opportunity and I'm just curious, did that all come to fruition? Tara Poseley - President of Disney Store: Yeah. It has been coming to fruition and as we continue to expand our sourcing base, and as I talked about earlier, we still think we have a lot of opportunities in toys as we continue to develop new partners. We are confident and will continue to see our initial margin increase as we go forward, not as dramatically, probably, as we've seen in the -- since the acquisition, but we do see that there's still opportunity there. So I really think for us it's really managing inventory, making sure that, you know, we're managing that promotional element to our business and putting outstanding assortments out there that we get good follow-through on in our stores and that's really what it's all about and what this team is focused on here, is putting outstanding assortments out there for our guests that still responds you. Rob Wilson - Tiburon Research: I agree with you, but I guess, I was talking more maintain margin and not initial margin. Susan Riley - EVP of Finance and Administration, CFO: Yeah. I think another way to answer, perhaps you're looking at the sourcing gains that we've achieved at Disney. And we in fact, you know, if you look at our cost of goods in this quarter versus last year, cost of goods as a percentage of sales, in fact, declined. But that was given back, you know, as we've said, in markdowns, more than given back in markdowns, which resulted in a decrease in the gross margin. Rob Wilson - Tiburon Research: Okay. Fair enough. Has anybody there walked into a Crazy Eight Store and evaluated that concept in the potential implications to your brand? Neal Goldberg - President: Yeah. I'll take that. We’ve -- the team has walked into Crazy Eight’s, we have product there, it's no different than every retailer. We're in the malls on a weekly basis, going into all our competition, learning what they're doing, what their products looks like, what's their quality, what's their promotion cadence as we don't have a merchant or store person. We're very focus on getting out there and not only look at our stores and seeing what everyone else is doing. Rob Wilson - Tiburon Research: I appreciate that. Thank you. Neal Goldberg - President: Thank you.

We'll take our next question from the line of Jeff Black with Lehman Brothers. Your line is now open. Jeff Black - Lehman Brothers: Hey, thanks. Ezra, I'm going to try to focus in on the same thing on the Disney. You know what’s an example of a retailer that has a direct license that isn't primarily, you know, focused on children, that has Disney merchandise now? And is one of your overall implied contentions here that there's just a lot of Disney product out there at Wal-Mart target, elsewhere, it's a great franchise that you don't have all of it. And could you just elaborate on that? Thanks. Ezra Dabah - Chairman, CEO: Can you repeat your question one more time, please? Jeff Black - Lehman Brothers: Well, you seem to want to move to Disney agreement to specialty retail -- to grant direct licenses, to specialty retailers that are primarily focused on children. Ezra Dabah - Chairman, CEO: No. That's a mistake. We have some restrictions in Disney's ability to grant direct to retail license for children's and adult merchandise. And what we are relieving here is the ability to grant direct to retail licenses to specialty stores that carry -- that primarily carry adult merchandise. So to us it's not so important, our adult business is 10% to a maximum 15% of the business and as you know most of what we do is for children and that restriction remains. Jeff Black - Lehman Brothers: So maybe I'm just being thick here, but you're trying to restrict… Ezra Dabah - Chairman, CEO: Not we are trying, we have… Susan Riley - EVP of Finance and Administration, CFO: We are relaxing. Ezra Dabah - Chairman, CEO: We are relaxing a restriction that we had on Disney in our original license agreement. Jeff Black - Lehman Brothers: Okay. Susan Riley - EVP of Finance and Administration, CFO: In consideration for getting extensions of dates, due dates on store remodels. Jeff Black - Lehman Brothers: Okay. Fair enough. I think, I'm much more clear on that. Thanks. Susan Riley - EVP of Finance and Administration, CFO: Yeah. The press release wasn't clear enough, and we'll be issuing a clarification as soon as we conclude this call. Jeff Black - Lehman Brothers: Okay. Thanks. Susan Riley - EVP of Finance and Administration, CFO: Thanks.

We'll take our next question from the line of Marni Shapiro with The Retail Tracker. Your line is now open. Marni Shapiro - The Retail Tracker: Hey, guys. Jill Kronenberg - SVP, General Merchandise Manager: Hey, Marni. Marni Shapiro - The Retail Tracker: I'm exhausted for you guys already, and as if all the noise wasn’t bad enough. It’s been a tough start to back-to-school. So I want to start with products, that's where it all happened, at Disney and at Place. At Place, if you guys could just talk a little bit about how we should think about holiday versus fall, as it relates to your second half initiative to narrower and deep. Because this was put in place for fall, but was not evident when you walked into the stores. And then, if you could talk about the tween assortment that we're expected to see coming out of the Disney Stores, because you said you were going to expand that? So I'm just curious into what other areas, would that include sleepwear and things like that as well? Jill Kronenberg - SVP, General Merchandise Manager: Hi, Marni. It's Jill. Marni Shapiro - The Retail Tracker: Hi. Jill Kronenberg - SVP, General Merchandise Manager: We talk about the style and SKU count being down in the back half of the year. When you look at fall versus holiday, it's much more dramatically down in holiday. We absolutely have made a more significant shift into key items at value price points in holiday. We did it in fall, but you will even see it more dramatically in holiday. We have definitely shifted the assortment, it's more narrow, it's more focused, we have a much bigger investment into these key items, and we're coming out with strong, strong value price points on them. We have some fabulous pre-planned promotions for holiday that we're very excited about, and we all feel very strong about the opportunity we have in the fourth quarter. Marni Shapiro - The Retail Tracker: Good to know. Amy Hauk - SVP, General Merchandise Manager of Disney Store: Marni, it is Amy. On the Disney side, so I want to start with tween. We're rolling tween out to all stores currently right now, it's in 70 stores. And we're actually after the release of High School Musical 2 and is 17.2 million viewers, and people who changed vacation plans so their children could watch High School Musical 2 and participate in slumber parties. We're actually even fine-tuning the assortment right now. It will definitely cover sleepwear, it will also cover things like sports equipment, raglan sleeves and short tail bottoms which we see checking tremendously, sleeping bags, stationary, home, as well as ready to wear. And we'll be focusing predominantly the assortment that we'll be rolling out in holiday will be predominantly High School Musical and we're working very closely with the Walt Disney Entertainment Corporation to see if we can take a fun spin on that. So I'm really excited about that. As far as the rest of the fall assortment going into holiday, we're really focused from a fashion perspective around metallic accents and inserting the metallic into the collection really pop, we're seeing a lot of that out there in the market where linens and different fabrics are shot through with metallic. So you'll seeing a really strong point of view, and going into holiday around metallic as well as the whole flat trend which we will be continuing throughout the holiday season. And role play, which is just set this past week is kind of a little more glitzy and glamorous. And if I was to say what you're going to feel when you go into the Disney stores for holiday, it's going to be more glitz and glam. And that's also supported by Enchanted, which releases Thanksgiving weekend and, you know, what better news than to have a new Disney print style. Marni Shapiro - The Retail Tracker: Great. Amy Hauk - SVP, General Merchandise Manager of Disney Store: So that gives you a little flavor. Marni Shapiro - The Retail Tracker: It does. I just want to follow-up on this. High School Musical is very much a tween, not a boy type of scenario, even though the boys are all watching it. I'm just curious, is there a way to balance, and I believe you mentioned Hannah Montana as well on the call. And I congratulate you guys for getting on the bandwagon, because I wondered where it was in your stores. But is there is way to also include and I can't remember which of these your boy's shows is Disney versus the other one it's either Zack & Cody or something else. Is there a way to include some of the other Disney name into your stores, whether it's in books and notebooks and thing like that. And have you thought about expanding that, and if that's the case, which I support completely, what comes out of your stores? Because as we've talked about, I think Amy you mentioned, editing is becoming more important, because there are so many great Disney franchises. Amy Hauk - SVP, General Merchandise Manager of Disney Store: Yeah. So, you know, that's always the balance that you try to achieve is the passion for a new idea of fitting in because you have to be new in order to be relevant. You have to be fresh, but you also have to have clear messaging. So we're actually really drilling down, I call it APF lethargy, it's really culling through the assortment and looking what's not delivering on ROI. We're also looking really dramatically at fixture, turn, and how many units do we have to have out on the floor, in order to support the volume that we need to do. So we've tightened up some SKUs in the boys and girl, some extraneous fashion SKUs to be able to support tween. And interestingly enough, Marni, the feedback that we've gotten in talking in the field and getting out there and talking to Moms, is because of the sports element of High School Musical. We've gotten huge requests for the raglan baseball sleeves boys want to wear. The actual clothing that Troy wears in the movie and Corbin Blue wears, we are getting actual requests for that, as well as basketball and baseball, which are the sports-inspired aspect. And then, your third point, it is funny, because for spring you'll see exactly what you just talked about. What we are looking at is creating a specialty stationery and graphic tees, an emporium format that cover all the tween franchises, and then, we will be highlighting in a bigger way one to two franchises a quarter, with a more fleshed out expanded assortment. So you will have that eclectic mix that appeals to "The Suite Life of Zack & Cody." There's new shows coming out from Disney, and then that will be anchored with bigger assortments with franchises like Hannah Montana and High School Musical. Tara Poseley - President of Disney Store: Marni, it is Tara. You know the other exciting thing is just the channel is getting stronger and stronger. Taking that -- synergy events that theatrical releases are still going to be really important to our business, but it is so exciting for us to have channel properties that are 365 days a year, that we can be reacting to, chasing into, and I mean, I am so proud of the merchant team here on this side. They have reacted so quickly to High School Musical, and are basically getting more High School Musical product back in store for holiday. We just started talking about this a few weeks ago, and we are going to have it for holiday. So I think it's exciting because it's really forcing us to change us to have even more speed in our process, which I think the team is doing a tremendous job with. So we can keep reacting to some of these hot shows on the channels, especially when you're looking at tween. And then not to even mention the whole Playhouse Disney. And that's another place you're going to see our continued focus on the store and expansion. And we will talk more about that as we get into next year, because we have got some exciting plans around that as well. Marni Shapiro - The Retail Tracker: I don't mean to monopolize the call here. I just had a follow-up on both of these. And Amy, by the way, my son will not have the Troy baseball shirts, I just don't think he's cool enough. Amy Hauk - SVP, General Merchandise Manager of Disney Store: You know there are kids that want it. Marni Shapiro - The Retail Tracker: I am sure there are. But two quick follow-ups here. Is there a possibility, we have all seen obviously the explosion of Webkinz and some of the other tween retailers bring them in, albeit at a late date. And there are other trends out there like a kooky pen, for example, that the tweens buy in to. Is there an opportunity for Disney to enter into this sort of collectibles fun business that plays off of the Hannah Montanas and the High School Musical things? And then the other question that begs here is if you go into Playhouse Disney in a bigger way and you are doing all of this, in your conversations and I guess this is really more bigger picture. But in your conversations with Disney, is there the opportunity left opened that in a year from now even, or two years from now that maybe there is a separate tween type of Disney store, or slightly older replication of a Disney store that targets that customer, with her entire lifestyle from apparel to sleep to accessories? Tara Poseley - President of Disney Store: Marni, Disney acquired Club Penguin, which is a Canadian-based company. It is very similar… Marni Shapiro - The Retail Tracker: It's the number one, I believe. Tara Poseley - President of Disney Store: What? Marni Shapiro - The Retail Tracker: I believe it's the number one site. Tara Poseley - President of Disney Store: Right. So we are in discussions right now. I have been having conversations about how we leverage that and I am actually really excited about opportunity through e-Com. So we are talking to them, we do recognize that that is valid and could be a potentially exciting opportunity. What was the other part of it? Amy Hauk - SVP, General Merchandise Manager of Disney Store: Collectible, I think, for… Tara Poseley - President of Disney Store: For collectible. Marni Shapiro - The Retail Tracker: Well, that would sort of be, that would be that part of the conversation. But is there an opportunity down the line that Disney has a small, could be a smaller footprint store, but a smaller store that is really a home for the tween and encompasses all of these items within the lifestyle, from apparel to sleeping bags to notebooks to hair? Tara Poseley - President of Disney Store: Yeah. I mean, Marni, it's -- I mean that's an amazing idea, very exciting and all those kinds of ideas, obviously, are always being, are on the table, I have got a highly creative group here at the Disney store. But we can't really talk about those kind of things at this moment. But as there are new strategic initiatives that we are working on that we can share, we will do that. Marni Shapiro - The Retail Tracker: Great. Thanks, guys. Good luck, with the rest of the fall. Ezra Dabah - Chairman, CEO: Yeah. Tara Poseley - President of Disney Store: Thank, Marni. Amy Hauk - SVP, General Merchandise Manager of Disney Store: Thanks, Marni.

We will take our next question from Jim Chartier with Monness, Crespi, Hardt. You're line is now open. Jim Chartier - Monness, Crespi, Hardt: All my questions were answered. Thank you. Tara Poseley - President of Disney Store: Okay. Thanks.

We will take our next question from Paula Kalandiak with First Albany. Your line is now open. Paula Kalandiak - First Albany: I don't want to keep this call going much longer either, but just a couple quick questions on merchandising. With regards to the key items for holiday, would it be items that you have already invested deeply in past holiday, and you know that they work, or are you taking any risks with any new key items this year? Jill Kronenberg - SVP, General Merchandise Manager: Paula, it is Jill. We are doing both. We are definitely buying back into our true and blue gift-giving items that we have had success with over the course of a couple years that we still feel are very relevant for our customer. And we have significant investments in that. At the same time, we've added some fresh, new and exciting fashion gift items, more fashion basic, but new things that our customer hasn't seen before from us that we are very excited about. Paula Kalandiak - First Albany: Okay. And then just going back to the denim promotion that you had earlier in the quarter, was that exclusively to drive traffic, or did you actually need to get rid some denim? Ezra Dabah - Chairman, CEO: I will answer that. It was really to drive traffic. The one area at The Children's Place that we have flexibility on inventory is in denim. A lot of the denim loved and we are able to push out those deliveries and then not buy on the back end. It was really to drive traffic for the whole box. Paula Kalandiak - First Albany: Okay. Thanks and good luck. Tara Poseley - President of Disney Store: Thanks. Ezra Dabah - Chairman, CEO: Yeah.

We'll take our next question from the line of Vik Kumar with Soundpost Partners [ph]. Your line is now open. Vik Kumar - Soundpost Partners: Hi guys. Just one question on shares outstanding. It looks like the number of shares have declined quarter-over-quarter, and I thought I heard you say you haven't done a buyback. So I was just wondering what is behind that? Susan Riley - EVP of Finance and Administration, CFO: That's because when we are in a loss, we have to use basic shares outstanding, not the diluted. So there is a difference. That has nothing to do with buying back stock or option trades. Our windows have been closed. Vik Kumar - Soundpost Partners: Okay. Got it. That's it. Thank you. Ezra Dabah - Chairman, CEO: Yeah.

We'll take our next question from the line of Nicole Jacoby with Liberation. Your line is now open. Nicole Jacoby - Liberation: Hi there. I wanted to know a little bit more about the remodels and refreshes that you are required to do for Disney. Can you talk a little bit about what kind of incremental ROI you had in the past on those or what you expect going forward on those? Tara Poseley - President of Disney Store: Yeah. The issue with the remodels on Disney is that -- that really was and the way we look at that is that it was part of the acquisition cost of getting the Disney license at a 5% royalty fee. So that was a going-in proposition. We are not looking at returns on investments from incremental sales for those remodels as a discreet matter, but rather we are looking at the entire Disney business and those remodels being the going-in and acquisition fee, if you will. And the return on investment, when you look at it that way, is very high. Nicole Jacoby - Liberation: Can you give us an idea of the order of magnitude of the overall ROIs and on the purchase, including these kind of costs? Tara Poseley - President of Disney Store: We have not disclosed our expected return on investment for the purchase of Disney Store. Nicole Jacoby - Liberation: Okay. The next question is, I know someone was asking earlier about, you know, worst case scenario, Disney actually goes ahead and cancels. And I think the answer was kind of look it up. I wanted to know if you guys could, as long as it is publicly available information, you know, sort of believe that transparency with respect to your shareholders making it a little bit easier for them to learn about your company and do their jobs, would probably in the end be more beneficial to you guys. So I was hoping you can reconsider and tell us a little bit about what the implications would be? Tara Poseley - President of Disney Store: I think the intent of that question is that the license agreement is a very, very thick agreement. And as you know, there has been a modification to it. And in the term of -- the form of that letter agreement, we would be happy, Heather, Sue and I are happy to entertain calls, and we can answer questions about the license agreement. It's complicated, and we don't want to tie up this call with purposes to really talk about our second quarter results and outlook for the rest of the year with questions, very specific questions on the license agreement. But if you give us a call afterwards, we'd be happy to talk it through with you. Nicole Jacoby - Liberation: Okay. So even the general stuff like inventory and leases, you don't want to discuss on the call now? Tara Poseley - President of Disney Store: What do you mean by inventory? Nicole Jacoby - Liberation: Like what would happen with the inventory or what would happen with the leases, that sort of thing? Tara Poseley - President of Disney Store: The leases, the Hoop subsidiary, Hoop which is a subsidiary of The Children's Place stores has the lease obligations to the malls versus the Disney leases. Inventory is not owned by Children's Place. Inventory is owned by Hoop. Nicole Jacoby - Liberation: Okay. Great. Thank you. The last question was I think you said you are aiming to file your 10-K by the end of the month. So about how long after that are you expecting to have your annual meeting? Susan Riley - EVP of Finance and Administration, CFO: We will issue a notice of the annual meeting as soon as we get the 10-K filed. Nicole Jacoby - Liberation: Okay. And then I just also looking through your governance documents online, and I guess depending on when your meeting is in forms, when you can nominate directors, do you guys have -- can you give me some guidance as to what the timeframe is for nominating the directors? Susan Riley - EVP of Finance and Administration, CFO: We'll get back to you on that. Nicole Jacoby - Liberation: Okay. Great. Thank you very much. Susan Riley - EVP of Finance and Administration, CFO: Bye.

We'll take a follow-up question from Kimberly Greenberger with Citigroup. Your line is now open. Susan Riley - EVP of Finance and Administration, CFO: Kimberly? Neal Goldberg - President: She must have… Ezra Dabah - Chairman, CEO: Okay. Is that the last one, operator?

No. The line of Kimberly Greenberg is now open. Kimberly Greenberger - Citigroup: Okay. In the effort of moving the call forward, I will ask offline. Thank you. Susan Riley - EVP of Finance and Administration, CFO: Okay. Thanks, Kimberly. Bye. Ezra Dabah - Chairman, CEO: If there is no other questions, as always…

We have actually got a question from Nick -- no. Okay. We have no further questions at this time. Ezra Dabah - Chairman, CEO: Okay. We thank you for your interest in the company as always. Sue and I and our team are available if you should have any additional follow-up questions. Thank you.