Allison Malkin – ICR, Inc. Chuck Rubin – President and CEO Gregg Bodnar – CFO

Ike Boruchow – JPMorgan Neely Tamminga – Piper Jaffray Daniel Hofkin – William Blair & Company Erika Maschmeyer – Robert W. Baird Christina – Oppenheimer & Company Jason Gere - RBC Capital Markets Evren Kopelman - Wells Fargo Securities Jill Caruthers - Johnson Rice & Company LLC Elizabeth Howell - Raymond James Shreya Jawalkar – Jefferies & Company

Greetings and welcome to the Ulta Beauty Third Quarter 2011 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allison Malkin of ICR. Thank you, Ms. Malkin. You may begin.

Thank you. Good afternoon. Before we get started, I would like to remind you of the Company's Safe Harbor language, which I'm sure you're all familiar with. The statements contained in this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those projected in such statements, due to a number of risks and uncertainties, all of which are described in the Company's filings with the SEC. We will make references during this call to the metrics free cash flow, a non-GAAP financial measure defined as cash provided by operating activities, minus the purchases of property and equipment. Now, I would like to turn the call over to Ulta's President and CEO, Chuck Rubin.

Thanks, Allison. Good afternoon, everyone. Thank you for joining us to discuss our fiscal 2011 third quarter results. On the call with me today is our Chief Financial Officer, Gregg Bodnar. Following my opening remarks, Gregg will review our third quarter financial results and provide our outlook. I will then offer some closing comments and turn the call over to the operator so that we can answer the questions you have for us today. We are very pleased to continue our positive performance and deliver better than expected third quarter sales and earnings. Briefly touching on our results for the third quarter, net sales rose 21.8% to $413.1 million from $339.2 million last year. Comparable store sales grew 9.6%. This is on top of last year's 12.2% for a two-year comp gain of 21.8%. Comparable store sales were driven by traffic growth, but also included an increase in average ticket. Gross profit margin rose 100 basis points including 60 basis points of merchandise margin expansion. Strong sales growth, combined with expansion in gross profit margins and leverage in SG&A, led to an 82.1% increase in operating income, with operating margin up 350 basis points to 10.7% of net sales. Net income increased by 88% and income per diluted share increased to $0.42 from $0.23 in the third quarter last year. Our strong performance resulted in us capturing additional market share during the quarter with our comp sales led by strong gains in prestige color and skin. We introduced to all stores new brands including Laura Geller Cosmetics and Art of Shaving for men. In addition, we introduced new products from existing brands, including Urban Decay's anniversary palette, Book of Shadows 4, Tarte's True Blood, MIA 2 from Clarisonic and Sally Hansen Nail. We also saw a strong growth from brands recently introduced such as Philosophy. All of these product elements combined to fuel our sales growth. Our new fragrance introductions also performed well. These included Coach Poppy Flowers, Jennifer Aniston, Estee Lauder Sensuous Nude and Taylor Swift Wonderstruck. We believe our strong third quarter fragrance sales bodes well for fourth quarter sales given the category's importance during the gift-giving season. During the quarter, we successfully completed the introduction of Lancome to 29 stores across four markets and have been very pleased with the initial performance. In store, we continue to focus on our customer service levels and are proud that our service scores are reaching new highs. We remain committed to providing the best environment and experience within the beauty industry for our guests. The successful expansion of our store base continued with the opening of 28 new stores in Q3. We ended the quarter with 442 locations. Early in the fourth quarter, we completed our 2011 store program with the opening of seven additional new stores. This brought our new store openings to a total of 61 for the year, representing a 16% expansion in square footage. We continued to be pleased with the performance of our new stores which are performing above our expectations. We are also pleased with our 2012 of new store pipeline and now expect to accelerate the pace of our new store openings next year to include square footage expansion at the upper end of the 15% to 20% long-term goal we have previously communicated. Our site selection process continues to maintain the same rigor as you have come to expect from us. The expected acceleration in our 2012 square footage growth is the result of a very good flow of high quality existing retail locations. We are confident that these new 2012 store sites are of the same high quality as our sites over these past years. Our marketing was highly successful driven by the continued integration of products, services, and eventing. This contributed to our strong comp sales increase in stores and our continued high growth of online sales. For example, our 21 days of beauty campaign reflected our unique ability to deliver both the latest trends and the best values to our guests. We improved the campaign over last year, adding new brands and introducing fun, high-value beauties deals each day. Our campaign in support of Breast Cancer Awareness Month, Donate with a Kiss was equally strong raising a record level of donations for this important cause. This year we significantly improved our efforts by adding more products in support of this campaign, such as shower gel for the Cure from Philosophy and Pink Shatter nail polish from OPI. Also for the first time, we integrated the salon into our campaign with a national Cut-a-Thon day. Our marketing was multifaceted and included our successful print efforts, but also for the first time leveraged our growing Facebook following with a Guess the Celebrity Kiss campaign. Our efforts this year resulted in significant publicity and we believed heightened brand awareness to a broader base of customers. Finally, we were pleased with the introduction of our new exciting Conde Nast relationship which included the launch of a magazine subscription offer on two titles, Glamour and Allure as well as the leveraging of these titles trend expertise in our other advertising. We believe this relationship reinforces our beauty authority position with our guests. Turning to Salon, we achieved a solid positive comp in the quarter. This sales increase was lower than the rate of our retail product growth. However, we are encouraged by the progress being made in our Salon business. During the quarter, we saw increased salon traffic as we successfully utilized e-mail and direct mail marketing and saw a strong response to our new service offerings, including our hair straightening service and feather weaves. We ended the quarter with a strong balance sheet. At quarter end, cash was $131 million and our balance sheet was debt free. We continue to work with our Board of Directors to evaluate the best uses of our cash for the benefit of our shareholders. Turning to the fourth quarter, we believe our exciting line of merchandising and marketing plans, along with our strong service commitment, positions us well to capture additional market share in both our holiday and base businesses. Let me share a few of the expected drivers of our Q4 performance. In product, our holiday offering will reinforce both our trend and value focus as we launch exciting new products across all categories with prominent, end-cap displays and online features to promote gift giving. In prestige color cosmetics, we will introduce exclusive holiday kits from Urban Decay, Benefit, Tarte, bareMinerals and Smashbox. In styling tools, we will offer exclusive holiday patterns by Ultra Chi. In addition, we will offer our exclusive Ultra blockbuster color sets at a great gift giving price. We will continue to offer great value through our 5 for $5 and 5 for $10 gift tables that allow our guests to choose their own fun stocking stuffer gifts. For Fragrance, we are optimistic about our holiday sales based on the momentum from our robust Q3 performance, along with new introductions including Fendi, Ed Hardy Villain, Vera Wang Princess Night and Tresor Midnight Rose. We will also offer two Fragrance GWPs during Q4 which we expect will bring guests to Ulta through Christmas. The excitement in our offerings will continue after holiday with our skincare event in January. In fact, we will be offering more in-store eventing, more sample gift bags, and more new products which we expect to be the perfect solution for our guests' mid-winter skin needs. Turning quickly to Salon, Ulta will be the first national chain to introduce nail gel by OPI, an up trending new service for our guests. We are excited to add nail gel to our salon service menu as it will also allow our guests to get a unique, long-lasting nail service while indulging in our other salon services, or just stopping in for a special affordable treat. All of these products and services will be communicated to our guests through our marketing, which for the fourth quarter introduces our new overarching marketing theme of Welcome to Fabulous. We expect to continue to build upon our successful foundation of newspaper inserts and direct mail, which leverages our strong loyalty database. We plan to also expand the frequency of in-store eventing, add a fun new radio campaign that supports all stores, launch a new Facebook campaign that actively engages our guests and for the first time, introduce a new prestige fragrance direct mail piece targeted to our very best guests. In total, we are very proud of our performance during the first nine months of the year and equally excited about our ability to deliver strong results in the fourth quarter while capturing additional market share. We have a great team whom I'd like to thank for their continued hard work, exciting merchandising and marketing plans and I believe we are well-positioned to finish the year strong and continue our positive momentum in 2012. And now, let me turn the call over to Gregg to review our financials and outlook in more detail.

Thanks, Chuck. We are very pleased with our third quarter results which were driven by better-than-expected sales and margin performance. During the quarter, we delivered a 21.8% increase in total sales, a 9.6% increase in comp store sales, 100 basis point expansion in gross profit margin and leveraged SG&A by 210 basis points. This performance delivered a 350 basis point increase in operating margin to 10.7% for the quarter. We also delivered an 83% increase in third quarter earnings per share. Turning to a review of the income statement, third quarter net sales increased 21.8% to $413.1 million. Comp store sales rose by 9.6%, representing a two-year increase of 21.8%. This two-year comp sales result is consistent with the trend from Q2 in the first half of the year. As Chuck mentioned, our strong sales performance was broad-based and we believe resulted in market share expansion reflecting the increasing preference of our overall consumer proposition. During the quarter, we opened 28 new stores and closed one. At quarter end, we operated 442 stores, expanding square footage by 16% from last year's third quarter. Gross profit dollars increased 25.5% to $149.2 million from $118.9 million last year. Gross profit margin expanded 100 basis points to 36.1%. Our gross profit margin expansion was primarily driven by 70 basis points of increased leverage and fixed store cost due to our comp store sales increase and 60 basis points from improvement in merchandise margins. SG&A expenses were $101 million or 24.5% of net sales, compared to $90.3 million or 26.6% of net sales last year. The leverage in SG&A was primarily driven by comparable store sales growth and our cost management discipline. Third quarter fiscal 2010 included $1.4 million non-recurring compensation charge which impacted SG&A by 30 basis points. Preopening expenses totaled $4 million in the quarter which compares to $4.3 million in the third quarter last year, reflecting 28 new store openings during the quarter versus 30 last year. Our strong sales growth and margin expansion, combined with our continued prudent expense management, resulted in operating margin expansion of 350 basis points to 10.7% from 7.2% last year. Interest expense was $176,000 and represents fees associated with our credit facility which we've not utilized this year. The income tax rate for the third quarter was 39.2%, down from 40.9% last year, primarily driven by a lower amount of non-deductible compensation. Income for the quarter increased 88.5% to $26.8 million or $0.42 per diluted share. This compares to $14.2 million or $0.23 per diluted share last year. Now turning to the balance sheet and cash flow. Merchandise inventories at the end of the quarter were $354.9 million, compared to $301.6 million at the end of the third quarter last year. Average inventory per store increased 2.2% from the prior year. The increase in average inventory per store is consistent with our plans and reflects our initiative to bring in holiday inventories slightly earlier than last year to better position our start to the fourth quarter and holiday period. We are pleased with the overall inventory position, the result of this initiative and the start of the holiday period. We remain on track to our previously stated year-end goal to reduce average per store inventory by approximately 1% to 3%. Capital expenditures for the third quarter were $45 million and depreciation and amortization was $19.2 million. Now regarding our fourth quarter outlook. We currently estimate net sales in the range of $552 million to $562 million, compared to actual fourth quarter 2010 net sales of $473.7 million. This assumes a comp store sales increase of 6% to 8% following last year's increase of 10.4%. We have opened 7 new stores in the fourth quarter compared to 5 stores last year. We have now completed all of our 2011 new store openings, resulting in 61 new stores, representing a 16% increase in square footage. We continue to be very pleased with the performance of our 2011 new stores. Income per diluted share for the fourth quarter is estimated in the range of $0.62 to $0.64. This compares to actual income per diluted share of $0.49 in the fourth quarter of last year. In addition, based on the midpoint of our guidance range, we expect gross profit margin to expand by approximately 80 basis points from last year's gross profit margin of 33.1%. As I’ve previously mentioned, as we accelerate our new store program this year, it has had an expected impact on gross profit margin. Our gross profit margin will continue to increase in the fourth quarter, but at a more modest rate versus the first half of the year. This is a normal and expected impact of our store model and the acceleration of our new store program. Gross profit margin expansion will continue to be driven by fixed store leverage on a comp store sales growth and merchandised margin improvement. We also expect to leverage SG&A by approximately 80 basis points during the quarter from last year's rate of 22.6%. As a result of the aforementioned drivers, we expect to expand fourth quarter operating margin by approximately 160 basis points. We expect pre-opening expenses to be approximately $1.2 million for the quarter. We currently anticipate a tax rate of approximately 39.6% compared to 38.3% in the fourth quarter last year. We expect our fully diluted share count to be approximately 63.8 million for the fourth quarter. Based on the midpoint of our fourth quarter guidance and our positive performance in the first nine months of the year, we expect to achieve the following for the fiscal year; total sales growth of approximately 20%, comp store sales growth of approximately 9.5% which exceeds our long-term growth goal of 3% to 5%. We also expect full year net income growth of approximately 50%, excluding the impact of the one-time compensation charge last year. This expected result exceeds our long-term goal of 25% to 30% net income growth. And finally, we expect to deliver an operating margin of approximately 10.8%, reflecting an expansion of 260 basis points from the prior year. We also expect capital expenditures of $130 million, representing a 34% increase from fiscal 2010 levels. The increased investment reflects our store expansion program as well as investments we’ll make in technology and infrastructure to support our strategies and future store growth. This increase also includes the addition of a third distribution center, the development of which continues to progress according to our plans. Depreciation and amortization will be approximately $77 million. Average inventory per store will decline approximately 1% to 3% by the end of the year. We believe our continued strong performance in the third quarter reflects the solid execution of our strategies and our disciplined approach to growing our business. We are pleased with the results of our efforts and remain focused on driving sales and earnings growth, generating free cash flow, and expanding operating margin. As mentioned earlier, this year we expect to achieve an operating margin of approximately 10.8%, which we believe further supports our ability to expand operating margin solidly into the low double-digit range by the 2012-2013 time period. We also remain confident in our ability to achieve a mid-teen operating margin as we look forward. As we continue to evaluate the uses of our cash resources, our focus remains on appropriately investing the growth for business, both new store locations and our e-commerce channel in order to maximize value for our shareholders. As Chuck mentioned earlier, for 2012, we believe we can further accelerate store growth towards the high end of our 15% to 20% target from this year's expansion of 16%. We have and will continue to be extraordinarily focused on the same quality of new locations that we have built the existing chain on. And now, I'd like to turn the call back over to Chuck.

Thanks, Gregg. In summary, we are very pleased to share with you another quarter of robust results and we are equally excited about our ability to continue our strong top and bottom line performance in the fourth quarter. Ulta has become an important destination in beauty and we see significant opportunity to continue to grow our authority in this category as we continue to focus on our growth strategies while delivering a great experience for our guests. With that, let me turn the call back over to the operator to begin the question-and-answer part of the call. Operator?

Thank you. (Operator instructions). Our first question comes from the line of Brian Tunick from JPMorgan. Please proceed with your question/ Ike Boruchow – JPMorgan: Hey guys, how are you doing? It's actually Ike calling in for Brian. Congratulations on a great quarter. Question about the overall Cosmetics & Fragrance market that you guys operate in. Obviously for the last two years you guys have done a great job taking market share in the industry. It looks like maybe the pie is growing a little bit more now and the department stores seems to be doing better in the category. Obviously for the last 18 months or so, it seems like you've been taking share from the department stores. Could you comment just on what you're seeing over the last couple of months and how you see that playing out into next year?

Yeah, Ike, the industry certainly has seen some good times with expansion. With that, while the ocean has potentially been raised for everyone, we certainly have gained more than our fair share of market share. So we are winning and winning more of that additional business. I think that growth has been for the industry as a whole and we have excelled within that because of the newness in the industry. There is a lot of new products and some new services out there and when you look at our business model, the fact that we are the only ones in the industry that put it all together in one shopping experience, I think that is what has led to our success and our ability to take share from department stores as well as others. As you look out into 2012, lots of predictions about what happens out there, but we are very confident that we will continue to capture more share because of the unique model that we bring to our guests. Ike Boruchow – JPMorgan: Okay. And then just one quick follow-up. Looking at the monthly cadence of the quarter, obviously another great quarter, 9.6 comp. At this point, how pleased are you looking back? Was there anything you could have done better and basically, how did you see this relative to your internal expectations?

We had guided lower than we actually achieved. So we were very pleased with the quarter and when you look at these results, whether the strong comps that exceeded the guidance or the margins that continued to expand in the quarter, or the additional market share that we captured within the quarter, we're very, very pleased with how we did. We exceeded in many ways what we thought we would do. At the same time, we never talk about weather. The quarter did have a little bit of frustration on the very last day of our fiscal quarter. That northeast snowstorm did have an impact and cost us our double-digit comp. So we were working hard to get there in those last couple of weeks and that weather hurt us. Nonetheless, the future of our company is enormous as we've talked about before and with that, we recognize that sometimes weather will throw us a curve ball, but otherwise all of our parts came together; the product, the services, the service in the store and our marketing. So I think it is a quarter that we're very, very proud of. Ike Boruchow – JPMorgan: All right, great. Congratulations, guys.

Our next question comes from the line of Neely Tamminga from Piper Jaffray. Please proceed with your question. Neely Tamminga – Piper Jaffray: So congratulations, great quarter guys. Just wanted to get a little sense more on the real estate side of the business. So you're accelerating the growth towards the higher end for next year. Could you give us a sense as to new markets versus existing, what you're thinking there? I think you've been in a wee bit of a backfill mode or at least that's the intention, but I'm just wondering if anything there has changed. And then in terms of the remodel program, do you have to shift because of human capital constraints and physical capital constraints – you have to shift away from a remodel program and towards the new stores or do you keep that going? Thanks.

Neely, a couple of reasons for the acceleration. One, lots of high-quality locations out there which is the reason why we're being opportunistic to go after it. We do have the infrastructure to continue to grow with this rate and certainly beyond that rate. We do not need to divert resources away from the remodel program next year to handle this expanded new store growth program. We will continue to focus on making sure that we continue to maintain that shopping environment for the guests. So the remodel program will continue next year as the expanded new store program accelerates. We'll continue to do all the things that we've done in the past in terms of making sure that we grab high-quality locations, balancing those between new and existing markets. The real estate pipeline will continue to be focused as it has been on existing locations, but we're seeing a nice flow of existing locations that meet our criteria, which is why we're accelerating our square footage growth. Neely Tamminga – Piper Jaffray: That's really helpful. Can I just ask one follow-up here on the business broadly? If you were to look across the whole landscape of the business by – say by price point and I know you're seeing great success like across the board. Is there anything about – whether high-end tools or kind of tiny little frequency of pick up items that probably you can say about consumer behavior that you've read into?

Well, prestige – first of all we saw good business across the breadth of our business, whether it was mass or prestige or appliances or in our salons. So that's the first good piece of news. When you look at it, the prestige component did grow faster than any other part of our business. So those are some higher ticket items within that. I don't know if we would – if I'd draw any conclusions on any part of that. If you look at our –Gregg mentioned in his prepared comments that we're pleased with how the holiday season has started off. If you look at Black Friday weekend – I suspect that we would be asked this, we were very pleased with Black Friday. It’s one part of the fourth quarter and the biggest part of the holiday season is still ahead of us, but we're very pleased with how Black Friday worked out. But that is more of a value-based shopping experience, but that is all the time every year when you go back into our history. So a bit of a long-winded answer, but I wouldn't say that there is any indication that the customer is shopping more than usual for price point. Instead, for us, as prestige continues to grow, we're seeing that increase a little bit. Neely Tamminga – Piper Jaffray: Chuck, that’s very helpful. Greg, thanks a lot. Good luck to you guys for the holiday.

Our next question comes from the line of Daniel Hofkin from William Blair. Please proceed with your question. Daniel Hofkin – William Blair & Company: Hi guys, congrats on another great quarter. Just a quick question if I – also on the theme of sales trend. So Prestige continuing to grow somewhat faster. Would you say in terms of the upside relative to your expectations, was that also primarily concentrated in Prestige, color and skin and fragrance or was the upside broad-based?

Yeah. I think – I don't want to get into too many details on this, Dan. But I would say that we're very pleased with the breath of our strength. So I wouldn't call out any business in particular, but we are pleased with how broad-based it was. Daniel Hofkin – William Blair & Company: Okay, that’s great. And as far as just a balance sheet question. With the payables percentage or I guess if you could combine payables and accrued expenses together down a little bit year-over-year, is that also a function of timing of receipt flow versus prior quarters?

It is, Dan. As you probably know you could probably figure out looking at our balance sheet and the product flow is all concentrated in payables. It's not sitting in accrued liabilities. We pay generally in 30-day terms. I think that's pretty commonly understood and it certainly can be implied based on looking at our balance sheet. So in that shorter time period a little bit difference of flow with the inventory as we brought a little bit earlier you’d see show up in the AP ratio. Daniel Hofkin – William Blair & Company: Okay. I guess lastly, I know the website in general e-commerce is still very small but growing fast. How would you characterize the overall functionality performance of the site during the higher traffic periods?

It was okay. As you said, we saw very high growth. We continue to see high growth off of our e-commerce site. As many sites over the long holiday weekend had some trouble, we had a couple of pockets of that. They were short. We were back up very quickly and we've addressed some customers that were disappointed in their service. But we strive for 100% uptime and that's what we work towards. So I think as many of our competitors and many other retailers in general experience, there are some things that you can continue to learn through the expansion of the online business, but we're very committed to that and we see tremendous growth in this long-term for us. Daniel Hofkin – William Blair & Company: Great guys. Congrats again and good luck.

Our next question comes from the line of Erika Maschmeyer from Robert W. Baird. Please proceed with your question. Erika Maschmeyer – Robert W. Baird: Hello. Thanks and congratulations. With your gross margin expansion in Q3, you noted it was up 100 basis points, 70 basis points from leverage and 60 basis points from merch margin. What was the offset there, fewer supply chain efficiencies or?

A combination of two things as I think I mentioned last quarter. We will have small amount of costs in the back half of this year as we're bringing up the Northeast D.C. We're doing some of that preparation to bring it online next year and it relates to the inventory too. We spend a little bit more on supply chain costs again to bring some of the inventory in sooner than we had last year, better prepare for the start for the holiday season which turned out to be a very successful initiative. Erika Maschmeyer – Robert W. Baird: Great. And then on the real estate side, are there any particular retailers whose old boxes you’re scooping, any particular focus from geographic or regional perspective? I think you had been filling in on the western part of the U.S. there for a while and do you have any kind of non-10,000 square foot boxes in that mix?

Geographically, the same opportunities exist as they have in the past and we've been capitalizing on those opportunities primarily as we're seeing high-quality existing locations come back on to the market, either chains that are downsizing or chains that are going out that had high-quality real estate that wasn't the business issue, but it's on both coasts. So the opportunities on both coasts, those are some of the areas we're focused on, but not exclusively focused on. And then as it relates to – you can think through some of the failures you've seen lately, like Borders as an example. A lot of high-quality real estate, that wasn't their issue, a lot of those boxes have gone back to developers now and where there is opportunities for them to split them up and us to work with them to take some great real estate locations, we're doing so.

Erika, just to add – the other part of your answer. Most of these sites that we’re getting are about the 10,000 square foot footprint that we've been building, so it's not a different size. Also, keep in mind that we are less than halfway through our 1,000 store build-out. So there really is not a geography in the U.S. that we don't have opportunity to expand in. So this has been an opportunistic play as opposed to a targeted real estate play. We have opportunity everywhere and where the opportunity has arisen to get a good site, we've taken it. Erika Maschmeyer – Robert W. Baird: And just a clarification or a curiosity question. With the OPI nail gel service, are you going to be also adding manicure and pedicure services?

Well, it actually is a – it is a dry manicure, not a wet manicure. So essentially it is a manicure service, kind of a modified manicure. We will not be doing pedicures, it will only be manicures. They'll be done by the stylists. We are up and running right now. We have been testing it for some period of time with some good success and we've now put it into about 200 stores or so that are up and running now and the initial results are very encouraging. Erika Maschmeyer – Robert W. Baird: Okay. Thanks so much.

Our next question comes from the line of Joe Altobello from Oppenheimer & Company. Please proceed with your question. Christina – Oppenheimer & Company: Hi, this is actually Christina in for Joe. I was just wondering if you could give a little bit more color on the Lancome test, how many doors that you expect to be in?

No, Christina, what I said in my comments was we successfully launched it in the 29 stores we had previously announced and we're very pleased with the results so far. And as we had talked about before, we'll keep you up-to-date as developments continue to unfold there, but right now we're in the 29 doors. Christina – Oppenheimer & Company: Okay. And then do you expect to see or are you seeing same-store sales growth growing faster at stores that have the Lancome than other stores?

We wouldn't get into those details, but you can – where I'd leave it is, we are very pleased with how this has launched and we're excited to have it in the portfolio. We think our guest has been looking for it and we think it's been a very nice addition to the offering. Christina – Oppenheimer & Company: Okay, great. And then just one follow-up question. You have a target of 1,000 doors. With the improved economics do you see an upside to that number?

We're actually going through that analysis now and we'll come back and talk to you more as we finish that. Christina – Oppenheimer & Company: Okay. Thank you so much.

Our next question comes from the line of Jason Gere from RBC Capital Markets. Please proceed with your question. Jason Gere - RBC Capital Markets: Okay, thanks. Good afternoon. I guess just two questions. One, I guess thinking about the new pipeline of stores for next year. What percentage of that would run to the new DC? I'm just trying to think about – I mean, the new DC and when that would get the leverage. I assume it'd probably be like 200 or so that would probably get you full average on the DC. But just wondering how you think about that and in terms of the transition from some of the stores that are at the Chicago DC going over to Pennsylvania DC?

Jason, we'll bring that DC online starting in the beginning of next year and then we will slowly ramp it up. We have a lot of stores up in the Northeast today that are being serviced out of our Chicago facility and those will be the first candidates that we will move over to that new distribution center. Next year the impact of that the new distribution center will be as I mentioned on the last call, a little bit of a negative impact on gross margin, although gross margin will still expand significantly next year. But we expect it's probably going to have about 10 basis points of negative impact on gross margin for the year. Start-up costs in the first part of the year as we ramp that DC up, then as we start to put stores into it in the back half of the year bringing those stores in from the Northeast that they will then be closer to their distribution point, we'll get some leverage in transportation costs. Jason Gere - RBC Capital Markets: Okay, great. And just broadly speaking, if you think about your merchandising activity for this holiday season versus maybe last year, can you just compare and contrast where you think maybe you're being more aggressive or where you think the programs are a little bit better. I just wonder if you could talk maybe a couple and give a little bit of color, some anecdotes about, obviously without giving away some competitive secrets, but just talking about the pace of growth versus last year? Thanks.

Jason, I'd tell you in a couple of areas. Within our offering, newness continues to be very exciting. There is newness in our color offering, there is newness in our skincare offering and newness in particular in fragrance has been very, very strong and given the importance of fragrance in this fourth quarter, we're especially excited about that. We think it sets up very well for our gift-giving business. But even the newness in skincare when you then move to January, we have a significant skincare event. Here again, I think that it positions us well. Our eventing, where we actually bring the product to life for our guests, is up significantly this holiday season compared to last year and we think that makes the shopping experience that much more special compared to our competition and certainly what we've done in the past. And then just to touch on the marketing for a moment, our marketing outreach this year is broader than it has been before. It certainly leverages our successful print campaign and the loyalty database that we have, which continues to grow and be a very core part of what we used to market affectively. But this year we're going to leverage radio and there will be a component of radio in all stores. It will be a national program and then it will be heavied up in a number of key markets. We're also leveraging digital media more. Our Facebook presence is more significant. Our digital outreach also is more significant. So there is a lot of excitement and that has led to our guidance that we've given that we think we're going to have another really good quarter. Jason Gere - RBC Capital Markets: Here is kind of an abstract question, but when you think about the events that you're going to be doing then, the radio, digital, where do you get the best ROI? I mean how do you kind of measure that? Just figure out where do you put an incremental dollar to work in terms of getting a better lift on your sales?

Yeah. We're a pretty analytical company and that's part of a discipline that has allowed us to seize a lot of this growth. So we measure ROIs on our marketing spend pretty aggressively, but there are certain components that are difficult to measure. The radio that we're doing this holiday, we've talked about our testing of radio over the past couple of quarters so you can – we've obviously been encouraged by those tests and that's why we're pushing into this more aggressively. So I wouldn't get into a lot more detail about ROIs by vehicle. I think that's a bit of the secret sauce for us, but I would stress that we are very focused on returns of every investment that we make, whether it's a new store or a new DC or the marketing spend that we have. Jason Gere - RBC Capital Markets: Great. Thanks a lot guys.

Our next question comes from the line of Evren Kopelman from Wells Fargo. Please proceed with your question. Evren Kopelman - Wells Fargo Securities: Thanks. Good afternoon guys. I have a couple of questions. One of them is, if you can comment on the environment for this holiday. For most categories – and that I wanted to ask if you think beauty is this way, did the mall and the department stores are very promotional, incrementally promotional year-over-year. Are you seeing that in beauty as well, looking at gift with purchases or any other promotions like that?

I don't know if beauty is more proportional than it was last year, but the environment is widely promotional. I'm not sure if I would conclude that even the apparel or the electronic guys are a lot more promotional than a year ago, but that's just personal observation. Clearly, when you get into the gift-giving season, the competitive field for beauty becomes broader because the shopper has lots of choices for that gift, whether it's apparel or electronics or beauty. We feel very, very confident in our strategy in how we're set for the holiday selling season. As we've mentioned, we're pleased with how we've gotten off into the quarter so far and I think that what makes us unique is the broad range of offering that we have. We have fashion and trend and we have value as well. So we do provide a very appealing offering and a very appealing shopping experience for the holiday season. So we're very comfortable with how we stack up against other beauty retailers as well as other types of product retailers. Evren Kopelman - Wells Fargo Securities: And then the second question is on inventory. This year you're going to end down per store. Do you think you have an opportunity for that next year as well, or that would be a part of your inventory strategy, or is that just an event for this year? Thank you.

We are constantly – a little bit like Chuck's comment on return on investment, we are constantly focused on continue and improve the productivity of our inventory. We are talking about our plans for next year. Don’t have anything specific yet, but we will continue to drive the inventory productivity that has helped deliver the earnings results that we've been delivering today.

Our next question comes from the line of Jill Caruthers from Johnson Rice. Please proceed with your question. Jill Caruthers - Johnson Rice & Company LLC: Good afternoon. Two quick questions. I guess just following up on the comments you made on the promotional events and marketing events, you're holding more of them. Have you seen if this attracts a new customer or just that existing customer to add another trip to your store?

Yeah, Jill, just to clarify, I wouldn't describe these marketing events as more promotional. In my terminology, promotional is discounting. In fact, that's not what this entails. They are more marketing, there is more demonstrations, there is more interaction between our team and the store and the customers. So just to clarify that, it is not focused on price discounting. As far as new customers versus existing, I think it's both. We continue to expand, we believe share well with our existing customer base as well as attracting new. Jill Caruthers – Johnson Rice & Company LLC: Okay. And is it safe to assume that November simply tracked in line with your fourth quarter comp guidance?

I don't know if we'd get into the details on that. Just that – although the bulk of the holiday selling season is still ahead of us, we're accountable with how November went. I'm pleased with how it went and that's incorporated into the guidance that we provided today. Jill Caruthers – Johnson Rice & Company LLC: All right, appreciate it. Thank you.

(Operator instructions). Our next question comes from the line of Elizabeth Howell from Raymond James. Please proceed with your question. Elizabeth Howell - Raymond James: Thanks and let me add my congratulations on a great quarter as well. I just wanted to check for an update on the loyalty program, IT platform. Was that completed in the third quarter as planned? And any clarity on when we might see the two loyalty programs transition onto one?

We did finish it. As we mentioned on the last quarter call that we were bringing that platform up. We did do that successfully. We were extremely pleased with the performance of the new platform. All stores are up and operating on it now and again very smooth transition, very pleased with the transition to the new platform.

As far as the transition to the new program, Elizabeth, we'll talk more about that on our next earnings call when we speak more explicitly about 2012, but I do anticipate that you'll start to see us move stores over to the new points program during next year. Elizabeth Howell – Raymond James: Okay, great. And then I know we need to think about some gross margin drag in the first half of 2012 with the new DC. Are there any other investment projects we need think about for next year, perhaps something in terms of the timing of your accelerated store plan openings?

As we look to next year to expand the store program from the 60 that we did this year, our intention would be to balance more of those openings going from the 60 up into the first half of this year. Having said that, that will not create a drag on gross margin. We will continue to expand gross margin all year long, including the first half of the year. Elizabeth Howell – Raymond James: Okay, great. Thanks.

Our next question comes from the line of Randy Konik from Jefferies & Company. Please proceed with your question. Shreya Jawalkar – Jefferies & Company: Hey guys. This is Shreya Jawalkar filling in for Randy. Just wanted to ask about your regional performance. I know you mentioned some weakness due to the storm in the Northeast, but aside from that did you see any differences within the country?

No, we have good performance countrywide. We had good solid growth in every part of the country. Shreya Jawalkar – Jefferies & Company: Okay. And then just a follow-up on comp trends. Obviously, you guys have been doing a great job despite the difficult compare. Do you see any change in the comp metrics as we go forward?

In terms of the comps that we deliver, is that what you mean? Shreya Jawalkar -- Jefferies & Company: Yeah, in terms of the – like with traffic and conversion, what's driving the comps now? Are they – do you see similar metrics driving the number up as we look towards next year?

I think that I'd focus on the guidance that we gave to you for fourth quarter and tell you that our strategies – we're pleased with our strategies. We think that they are the right ones for our business. We're pleased with how we're executing and we think that 2012 and beyond we have continued growth ahead of us. Shreya Jawalkar – Jefferies & Company: Okay, great. Thank you.

There are no further questions in the queue. I'd like to hand the call back over to management for closing comments.

Thank you, operator. Well, let me thank everyone for joining us today and on behalf of Gregg, let me wish you all a very happy and healthy holiday season and look forward to speaking to you the beginning of next year.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.