Steve Nelson – Director of IR Howard Lester – Chairman and CEO Sharon McCollam – CFO, COO and EVP Dave DeMattei – Group President of Williams-Sonoma, Williams-Sonoma Home and West Elm Laura Alber – President

Budd Bugatch – Raymond James & Associates Matthew Fassler – Goldman Sachs Alan Rifkin – Merrill Lynch Joe Feldman – Telsey Advisory Group Michael Lasser – Barclays Capital Neely Tamminga – Piper Jaffray Brad Thomas – KeyBanc Brian Nagel – UBS

Ladies and gentlemen, thank you for standing by. Welcome to the Williams-Sonoma Incorporated third quarter 2008 earnings call. At this time, all participants are in a listen-only mode. We’ll conduct a question-and-answer session after the presentation. This conference is being recorded. I would now like to turn the call over to Mr. Steve Nelson, Director of Investor Relations at Williams-Sonoma Incorporated to discuss forward-looking statements. Please go ahead sir.

Good morning. This morning’s conference call should be considered in conjunction with the press release we issued earlier today. The forward-looking statements included in this mornings call constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. These statements address the financial condition, results of operations, business initiatives, guidance and prospects of the company in 2008 and beyond and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company’s current press release and SEC filings including reports on Forms 10-K, 10-Q and 8-K for more information on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. As a reminder the fourth quarter of 2008 is a 13 week quarter versus 14 weeks in fiscal year 2007 and the fiscal year 2008 is a 52-week year versus fiscal year 2007, which was a 53-week year. The extra week in 2007 added approximately $70 million or 5% to our fourth quarter 2007 revenue growth and 4% or $0.05 to our diluted earnings per share. I’ll now turn the conference call over to Howard Lester, our Chairman and Chief Executive Officer.

Good morning and thanks for joining us. With me today is Laura Alber, our President; Pat Connolly, our Chief Marketing Officer; Sharon McCollam, our Chief Operating and Chief Financial Officer; and David DeMattei, our Group President for the Williams-Sonoma, Williams-Sonoma Home, and West Elm brands. Let me begin today with an overview of our third quarter results and then discuss how we are approaching the current economic environment going forward. I’ll then turn the call over to Sharon, Dave, and Laura. During the third quarter, the unprecedented downturn in the US financial market had a significant impact on our business. To put this in perspective, year-over-year net revenues declined 16% resulting in a third quarter loss of $0.10 per diluted share. During the quarter, comparable store sales declined from a negative 14% in August to negative 20.1 in September to a negative 27.6 in October. This compares to a 10.4% decline in the first half of the year. In our core brands, net revenues decreased 17.9%. This decline was driven by 23.8% decrease in the Pottery Barn brand, 15% decrease in the Pottery Barn Kids brand, and a 5.7% decrease in the Williams-Sonoma brand. In our emerging brands, which include West Elm, PBteen and Williams-Sonoma Home, net revenues decreased 4.4%. But while the top line continued to be a challenge throughout the quarter, we did continue to make significant progress on several of our key initiatives. In direct marketing, we continue to move forward with our catalog circulation optimization strategy, which greatly contributed to 14.5% reduction in advertising expense during the quarter. Due to the success of this initiative, we are looking at new ways to expand this strategy over the next several quarters. In supply chain, we once again delivered meaningful customer service and financial benefits from our returns, replacements, and damages initiatives that we’ve been working on, including a 140 basis point reduction in our total company sales return rate and a 30 basis point reduction in replacements and damages expense. This has been a key initiative for us and we believe there is still significant opportunity to reduce further as we continue to assume greater control over our Asian furniture operations and in-home furniture delivery in key markets. In both these areas, we are progressing ahead of schedule. We also made significant progress on our inventory reduction initiative. At the end of the third quarter, year-over-year inventory was down a better than expected $75 million or 9.8%. As we look forward to the balance of the year, it’s extremely difficult to project how the recent deterioration in the US economy is going to affect peak holiday spending. But what we can project consistent with our October 29th guidance is what the fourth quarter would look like if the trends we saw in October and November continue. As such, we are reiterating our fourth quarter revenue guidance in the range of $940 million to $1 billion and our EPS in the range of $0.10 to $0.30 per share. This represents a year-over-year revenue decline of 27% to 32% and diluted earnings per share decline of 74% to 91%. And while these results are reflective of current economic conditions, we are not dwelling of what we can’t control. With revenues and earnings decline of this magnitude and a potential for an additional 10% to 12% revenue decline in 2009 if these trends continue, we are taking dramatic action to protect the bottom line in our balance sheet. These actions include the following changes in 2009 versus 2008. A targeted 10% reduction in 2009 inventory receipts, a targeted 50 to 100 basis points improvement in cost of merchandise-sold, a targeted $75 million reduction in 2009 SG&A expense, a targeted $10 million to $15 million reduction in 2009 returns, replacements and damages etc. We targeted $100 million or nearly 50% reduction in 2009 capital spending and a steady plan to close underperforming stores where possible and the implementation of a strategic pricing and promotion plan to enhance the value proposition across all of our brands. All of these actions will allow us to protect our bottom line, build our balance sheet and position our brands to emerge stronger when the economy improves. Cash is king in this environment and all of our decisions are and will be made with that in mind, including the recent termination of our $150 million share repurchase authorization. Additionally with 100% participation from our bank group we have successfully amended our $300 million unsecured revolving line of credit facility in addition to our $165 million unsecured letter of credit facility as a proactive response to the significant changes in the macro environment and the associated impact on our businesses. I’ll let Sharon discuss the details of these amendments later in today’s call. While we recognize that our business today is being significantly impacted by the country’s serious economic problems, we know that over time these problems will be solved. We also know that despite recent declines in housing values peoples’ homes are still their most material asset and they are going to invest in them and when they do, we’ll be there to capitalize on it. But now I’d like to turn the call over to Sharon.

Thank you, Howard. Good morning. I’d like to now talk about third quarter results. In the third quarter of 2008, net revenue decreased 16% to $752 million. This decrease was driven by a 21.4% reduction in comparable store sales and 14.6% and 26.1% decrease in catalog and paid circulation respectively. This decrease was partially offset by an 8.3% increase in retail rate square footage. Diluted earnings per share in the third quarter of 2008 decreased $0.35 to a loss of $0.10 per share versus a $0.25 per share profit in the third quarter of 2007. Gross margin expressed as a percentage of net revenues was 32% in the third quarter of 2008 versus 38.2% in the third quarter last year. This 620 basis point decrease was driven by the deleverage of fixed occupancy expenses primarily due to declining sales and increase in cost of merchandize including the impact of increased markdowns and an increase in inventory-related reserves. These increases were partially offset however, by a 30 basis point reduction in replacement and damages expense. SG&A expense was $260 million or 34.6% of net revenues in the third quarter of 2008 versus $297 million or 33.2% of net revenues in the third quarter of 2007. This 140 basis point increase was primarily driven by an approximate $12.3 million or $0.07 per diluted share asset impairment charge associated with four underperforming retail stores and the deleverage of advertising and employment costs primarily due to declining sales. These increases were partially offset however by reduction in other general expenses. This year’s employment expense included an approximate $11 million or $0.06 per diluted share benefit associated with the reversal of performance based stock compensation expense as discussed in the company’s Form 8-K filed with the SEC on October 29. I’d now like to discuss significant year-over-year working capital balance sheet variances at the end of third quarter of 2008. Cash and cash equivalents were $23 million with no borrowings under our $300 million revolving line of credit. This represents a year-over-year increase of $7 million after returning $98 million to our shareholders through share repurchases and dividends over the past 12 months. Merchandize inventory decreased $75 million or 9.8% to $695 million, which was significantly better than our expectations. The primary driver of this decrease was a reduction in units across all brands including a $66 million reduction in the Pottery Barn Core brands, a $22 million reduction in the emerging brands and a $10 million reduction in the William Sonoma brands including costs and mix shift impact. These reductions were partially offset by a $23 million increase in new and remodeled stores for all brands. Prepaid catalog expenses decreased $22 million or 28.8% to $54 million. This decrease was primarily driven by our catalog circulation optimization strategy partially offset by cost increases in paper and postage. Additionally, as Howard said earlier despite having no borrowings under our revolving line of credit at the end of the quarter, and no breach in financial covenants, we proactively amended both our $300 million unsecured revolving line of credit and our $165 million letter of credit facility to provide us with the financial flexibility and liquidity that we believe maybe necessary during these difficult economic times. The highlights of the covenant amendments are as follows, a reset leverage ratio with significantly reduced threshold, the addition of a fixed charge coverage ratio, certain limitations on the company’s ability to increase dividends, certain limitations on future share purchases, and an increase in the estimated annual cost of the facility of approximately $1.5 million. We are very appreciative of the unanimous support that we received from our 10-member bank group on these amendments in light of this extremely tight credit market. The expiration dates of both agreements remain unchanged with the revolving line of credit agreement expiring in October 2011, and the letter of credit agreement expiring in September 2009. Further details regarding these amendments are available in the company’s Form 8-K that was filed this morning. I’d now like to discuss our fourth quarter guidance. As Howard mentioned our guidance for the fourth quarter has not changed. It is predicated on the assumption that the revenue trends we have seen in October and November continue and that our selling gross margins will decline up to 200 basis points on a year-over-year basis as we competitively increase our promotional levels and reduce our inventory. As these are the same assumptions that supported our October 29th guidance, we are reiterating our fourth quarter revenue and diluted earnings per share guidance in the ranges of $940 million to a $1 billion and $0.10 to $0.30 per diluted share respectively. We would say that the most likely outcome based on our economic outlook is that we will be at the lower end of these ranges particularly as we work aggressively to reduce inventories. In response to these lower sales trends we are however continuing to reduce our infrastructure and overhead costs and will be taking even significantly greater actions once we get to peak season. We are also aggressively developing overhead and infrastructure reduction plans for 2009 that are reflective of the current economic environment which we believe could continue for the foreseeable future. Accordingly as Howard shared earlier, from a balance sheet and cash flow perspective, we are reducing our 2009 year-over-year retail lease square footage growth to 3%, our capital spending in the range of $95 million to $105 million and our year-end merchandize inventory in the range of 7% to 10%. But we are also looking at all current and overhead infrastructure costs in relation to 2004 level when our sales were similar and developing a roadmap to get back to those levels where possible. Such dramatic change cannot be implemented overnight but this is a key objective to the balance of 2008 and 2009. While we recognize that many of the cost increases are fixed we also know that there is significant opportunity here and are aggressively pursuing it. Beyond these initiatives, we are continuing to identify new business opportunities that can further benefit us as we move forward through the balance of the year and into 2009. As we have said, we are leaving no stone unturned and are continuing to strategically invest in those initiatives that will enhance our competitive position and allow us to emerge stronger than before when the economy begins to rebound. I’ll now turn the call over to Dave DeMattei to discuss the William-Sonoma, William-Sonoma Home and West Elm brands.

Thank you, Sharon and good morning. I’d like to begin with William-Sonoma. While the William-Sonoma brand continued to be more resilient than our other home furnishing brands, it too was negatively impacted by the progressive declines in mall traffic and the weakening retail environment in the third quarter. During the quarter, net revenues declined 5.7%, with similar decreases in both channels. Performance in the retail channel was primarily driven by 11.4% decrease in comparable store sales partially offset by incremental revenues from new and expanded stores. Comparable store sales like all other brands declined progressively throughout the quarter with the month of October ending at a negative 17.4%. From a merchandizing perspective we saw growth in seasonal food and electrics, which we believe is a positive indicator for holiday sale. However, these categories were substantially offset by tabletop, cook’s tools, housewares, and cutlery. As we look forward to the balance of the fourth quarter, we believe that the William-Sonoma brand with its seasonal relevance and gift giving focus will continue to be more resilient than our other home furnishing brands. But despite this belief, our fourth quarter guidance is being projected based on our October and November trends and assumes total brand sales will decline in the range of negative mid-to high teens on a 13 to 13-week adjusted basis. We are however aggressively responding to the macro headwinds that we are facing by implementing several new marketing strategies to try to increase sales including a Black Friday weekend, buy now and receive a gift coupon for the future purchase program and an standard set pricing program to promote unit sell up at a great value for the customer. With the holiday compression of five less shopping days between Thanksgiving and Christmas, our execution will be critical and we’re focused on the following initiative to capitalize on the brands authority, promoting our gift assortment to highlight the broad range of price points and options that we are offering, strengthening our marketing messages to draw attention to new and exclusive offering, leveraging the functionality of our new e-commerce platform, and providing a superior shopping experience to our customers while balancing the cost pressure of a softer top line. We believe that despite the macro environment, the William-Sonoma brand will continue to be the premier destination for high-end cooking and entertaining essentials and with strong execution can outperform the industry in the holiday season. The Williams-Sonoma Home brand due to substantial downturn in the US economy in the high end retail sector has had a significant impact on the performance of this brand in both channels. As such, for the fourth quarter we are aggressively implementing a strategy to drive increased traffic to the brand and enhance the value to our highest end consumer, including leveraging the promotional ad initiative we just discussed in the William-Sonoma brand. We are also hosting for the first time a friends and family event which is starting today and will extend through the weekend. But despite these initiatives we are cognizant of the challenges facing this brand in this difficult economic time. At a minimum, we know that our revised sales projections are going to put pressure on gross margins as we reduce inventory levels and that our retail performance is going to fall well below expectations due to the current sales declines. Based on these results we are strategically evaluating the overall market potential for the William-Sonoma Home in this economic environment. In the West Elm brand, the impact of the macro environment in the third quarter was much less pronounced than in many other home furnishing brands. Although our revenues did decline due to lower traffic in our existing retail stores and a weaker consumer response to the direct to customer channel, these declines were partially offset by incremental sales from new stores. During the quarter, we opened 4 new stores ending the quarter with 36 stores versus 27 last year. From a merchandizing perspective we did see positive year-over-year growth in textiles, lighting and table top. But these increases were more than offset by declines in furniture and decorative accessories, and while we are disappointed in our overall decline in sales which we believe is macro-driven, we remain confident in our design-driven merchandize offering and its competitive positioning in the marketplace. We look forward to the fourth quarter – as we look forward to the fourth quarter we are doing so as an aggressive marketing and promotional plans and a key focus on sales driving initiatives that we can execute against. We are continuing to focus on reducing cost of goods sold through strategic sourcing, enhanced quality assurance programs and improved inventory management as we strive to increase the operating contribution in the West Elm brand long-term. I’ll now turn the call over to Laura to discuss the Pottery Barn Brand.

Thank you, Dave. Good morning. First I will start with the Pottery Bran brand. Third quarter year-over-year net revenues decreased 23.8% with declining trends throughout the quarter in all channels. Of this revenue decrease, approximately 215 basis points were driven by the catalog circulation optimization strategy. Merchandize margins were also lower during the quarter as we increased markdowns to react to weak retail traffic, lower direct to consumer conversion rates, and a more promotional environment. Retail was particularly challenging with third quarter comparable store sales decreasing 27.6%. The month of October however at a negative 34.5% comp was notably weaker than the rest of the quarter. From a merchandizing perspective, we saw relatively similar year-over-year sales declines across all key categories including furniture. Highlights were in pillows and select furniture collections. Authentic design, casual style, great value and superior quality, is what the consumer is responding to. From an operational perspective during the quarter, we continue to make significant progress in both our catalog circulation optimization and our returns, replacements, and damages initiative. We also significantly reduced our inventory level in both units and dollars despite a significant sales decline we saw in October. As we look forward to the remainder of the fourth quarter we are assuming that the negative trends that we saw in October and November will continue and as such on a 13-week to 13-week adjusted basis, we are projecting that total brand sales in the fourth quarter will decline in the range of 30% to 35%. Our focus is on maximizing and investing in the initiatives that we believe will drive increased traffic and higher sales including reinforcing our value proposition including the roll out of a more lucrative private label credit card loyalty program and a one-year savings cash financing offer to our customers, enhancing our merchandize presentation in all channels to resonate with the consumer’s changing mindset, increased Internet marketing, including an increase in promotional offers and focus on conversion and expanding in-store service levels to include decorating classes, increased clientele-ing and customer outreach programs. We are also intensely focused on reducing inventories through management of people [ph], transfers between channels and the utilization of our outlet stores and e-commerce website. To support these initiatives, we expect to be significantly more promotional between now and the end of the year. Now I’d like to talk about Pottery Barn Kids. Third quarter net revenue in Pottery Barn Kids decreased 16%. Of this decrease, approximately 200 basis points were driven by reduction in catalog circulation as expected. Merchandize margins were also significantly lower than last year due to increased markdowns and promotions to drive increased traffic. We continue to believe that the macro environment is having a significant impact on both the top and bottom lines of the Pottery Barn Kids brand due to its dominant mix of high margin discretionary categories like textiles and decorative accessories. Both core furniture and life stage categories were also impacted this quarter. Retail was particularly impacted with comp stores sales declining 20%. Like our other brands, the decline was progressive throughout the quarter with October ending at negative 25.6%. As this trend has continued into November, our fourth quarter guidance on a 13-week to 13-week adjusted basis assumes that total brand sales will decline at a similar level in the fourth quarter. From an operational perspective during the quarter, we continue to see better than expected savings from both catalog circulation optimization and returns, replacement and damages initiative. Like Pottery Barn, Pottery Bran Kids was able to substantially reduce inventory levels despite the significant unexpected decline in sales. At the end of the third quarter, the Pottery Barn and Pottery Barn Kids inventories combined were down $66 million versus last year. As we look beyond the fourth quarter for both the Pottery Barn and Pottery Barn Kids brands, we do not believe that the home furnishing categories is going to rebound quickly. But we do believe that there are things we can do now that are strategic for longer growth potential of the brands. Therefore, what we are focused on today, is aggressively addressing the customers’ perception of the value proposition in both brands, continuing to update our core assortment to reflect a mix that is reflective of today’s economic environment and managing the aspect of the business that we can control while at the same time protecting our brand’s image. By focusing on all of these initiatives, we believe that the Pottery Barn and Pottery Barn Kids brands will emerge from these challenging times with an even stronger competitive presence. Let me now talk about Pottery Barn Teen. After delivering positive year-over-year net revenues growth in both August and September, net revenues in the Pottery Barn Teen brand declined so dramatically in October that the brand ended the quarter with negative revenue growth for the first time in its history. Net revenues in the PBteen brand declined 2.4% in the third quarter of 2008. From a merchandizing perspective, like our other home furnishing brands, furniture did slow during the quarter, and while this decline was extremely disappointing, it is clear that the issues facing the brand are very macro in nature and not brand-specific. But that does not change our need to react. Therefore as we look forward to the balance of the fourth quarter, we will do so with a more cautious economic outlook but on an optimistic brand outlook. We are also continuing to drive merchandizing and marketing initiatives to improve the teen customer experience and extend the reach of the brand. These initiatives include leveraging the August launch of an upgraded e-commerce website, testing Pottery Barn Teen merchandize for the first time at retail in one Pottery Barn Kid store which opened in November, and expanding our merchandize assortment across a wide range of price points to serve a broader range of teen interest. We continue to be excited about the long-term growth potential of PBteen as it solidifies its positioning in the Pottery Barn portfolio brand. I’d now like to open the call for questions. Thank you.

(Operator instructions) We’ll go first to Budd Bugatch with Raymond James & Associates. Budd Bugatch – Raymond James & Associates: Good morning.

Hi Budd. Budd Bugatch – Raymond James & Associates: Sharon, maybe you could kind of give us a feel as you look out a little bit longer term as to the fixed the variable nature now of the businesses as you try to deal with this new real – new economy that we seem to be in and give us a feel of when leverage starts to come back to SG&A and what maybe the gross margin aspect looks like going forward if we have to stay more competitive for a longer period of time?

I think that when you – that is a great question and when we released our Q4 earnings we will give you more specific guidance for 2009 but I think there are some advantages that we have in this company that are not shared by other retailers and the largest of those is the fact that 40% of our business comes form the direct-to-customer channel and with catalog circulation we have more flexibility than a retailer who is sitting with bricks and mortar. So, one of the things that we of course are continuing to look at, is the expansion of our catalog circulation optimization strategy and you’ve noticed that in Howard’s commitments for 2009 that he went through in his prepared remarks that he said that we expect SG&A next year to be down $75 million and a piece of that of course is coming from ad cost. It is also coming from employment and other areas and that’s just where we are getting started. On the store side, I will let Howard speak to the fixed cost but we do have some opportunities from a real estate point of view that will be coming up. We have a distribution center that has got a lease expiring in the next 24 months, that’s a large one, and we are working on getting out of that. We also have an office building in San Francisco in 2010 that is expiring. So, we’ve got some good fixed things that we will talk more about at the time that we actually give guidance for next year but I would like to turn it over to Howard to talk about the real estate strategy and what they are doing now with our landlords.

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And when we are looking at those we are looking at when Howard talked about the four walls, of course with depreciation in stores are taking a tremendous hit but when are referring to our stores at the end of the third quarter just to put it in perspective, we only had 19 stores with negative cash flow and so when you look at a portfolio of over 600 stores, you can see what Howard is referring to as to the strength that we had previously in those stores from a cash flow perspective.

And our next question comes from Matthew Fassler with Goldman Sachs. Matthew Fassler – Goldman Sachs: Thanks a lot and good morning. I want to focus on real estate and capital program as well I guess to understand where the merchant brands fit into the CapEx program. Were they getting more or less of their share of CapEx reductions and given the challenging environment and the potential that will last for a little while with implications for capital? Is this leading you to reconsider your plans for rolling these out and to continue to develop this array of businesses?

Okay. I am going to let Howard take the question. I’ll talk about overall CapEx and how it affects the real estate question about where the investments are next year.

Matt this is Howard. From the stand – the vast majority of – we are surely going through the sale but the majority of our CapEx plan for next year and beyond, 2010 and 2011 are new stores or there is some in there that we have to do for remodels for stores. We don’t want to let our stores run down. So, we do have some CapEx in there just on remodel programs on our existing stores base. But with respect to the new stores, we have quite a few – not quite a few, but we have a number in 2009 that frankly is higher than we would like for it to be. About half of that Sharon tells me is West Elm I think and these are stores that we had already contracted for and signed leases on. By and large if we don’t have a lease, we are not doing it. Unless we have some legal obligation to do it, we are stopping all new store development whether it is emerging brands or any of our brands for that matter. There are some again because we work 18 to 24 months out that we are already committed for in 2009 and 2010. But there might be one or two small exceptions to what I just said, where we are relocating some stores from one place to another and the landlord is planning for the building of the stores or something. We might be doing that but that would have almost if no impact on CapEx. So, ’09 is going to be higher than we would like, again because the bulk of that is pre-contracted for the lease already. Some of those are under construction like for instance in New York City we are building is under construction (inaudible), a new West Elm on Columbus Circle. In today’s environment, we probably wouldn’t have done that. I’m sure we wouldn’t have done that, but we signed the lease sometime ago and started construction last year. So, you’ll see some of those things happening. But by and large you will see it come here to a halt. There is no preference for emerging brands or anything. We just don’t want to be opening any new stores unless we have to in this environment.

And then Matt, just keep in mind that we are reducing the capital spending by almost a $100 million. So when Howard says we still have more than we would like, we would hope – we are still hoping and Howard is still working on taking that $100 million reduction to a higher number. The majority of that reduction is coming in stores, and in IT and when we talk about IT we still have a significant investment in the Internet next year. But the reason that our IT spending is coming down is because as you know we have recently implemented several major systems and their spending cycle is over. It is not that we have had to change a way or the direction that we were going or renew plans from an IT perspective. We are just finished with those projects and the spending is behind us, so it’s very opportunistic. The other thing that we’ve been mentioning is that we also from a store capital perspective this year we had some significant investments including replacing all the IT technology and followed by registers at all of our stores, and so that is behind us this year. So, if we look forward to ‘09, ‘10 or ‘11, we have very little “maintenance capital” from an IT perspective in the store organization. So, we have got a lot of things that have happened in ‘08 that have really set us up perfectly to weather this in 2009 and the next couple of years if that’s required.

With Merrill Lynch, we’ll go next to Alan Rifkin. Alan Rifkin – Merrill Lynch: Yes, thank you. I just wanted to say a point of clarification. I do have a couple of questions, if you don’t mind. You are backing your fourth quarter across the board essentially with respect to sales, comps and earnings and that’s pretty much in line with what you articulated in October. Can we be led to believe than that November relative to October was actually stable?

It was and actually it was very similar to October. It started out slightly worse. I know you guys all heard that and we saw the same thing and then we actually did see some resilience in the customer as we got closer to Thanksgiving but remember our William-Sonoma, they are still relevant at that time, but across all of our brands including the Black Friday in that weekend, we did see some improvement. The other thing that we did is Dave and Laura articulated these promotion programs that they put into place and they have been very successful. We have been looking all year for promotion programs that are working with the consumer and we think we have actually identified some things that are very important and I would like to ask Howard to add a few things.

I would just like to add something Alan, I think in October we would have said, by the end of October we would have said this thing is so powerful that we can seem to do anything to move the needle and that was the frustrating part. We couldn’t tell, it was just overwhelming from the customers, the way they were acting. The encouraging thing in that aspect last month in stores and the encouraging thing is that now some of the programs that we thought through, our people thought through, particularly in Pottery Barn although it is also true in West Elm and in Sonoma. So, it is not just limited to Pottery Barn are starting to work. We are seeing improvements. I just came from one district where we had tested some things and we were running 500 basis points better than the trend, the brand trend there as a result of those programs and they were up. They were making a 100% of the difference. So we are starting to – that’s the most encouraging news that I can give you is that we are starting to see some things move the consumer our way a little bit where before we just didn’t feel like we could do anything to do that. So, if there is a bright light, that’s it.

(Operator instructions) And we’ll go next to Joe Feldman with Telsey Advisory Group. Joe Feldman – Telsey Advisory Group: Thanks guys, a question about Pottery Barn, a couple actually. As you think about the issues going on with Pottery Barn, Howard it sounds like maybe you have answered some of this but, how much of it really is macro versus the micro? You know is the product still resonating with the customer? Are there things that you have to do to tweak the product, is there – are there pricing issues? I know that you have tried to bring in some more entry point prices a year ago and that seemed to be working better, but lately it seems like prices have kind of moved upwards a little bit. Just maybe you could address some of those issues?

Well Laura and I will do it together but let me take the first shot at it because we have both been out in stores pretty much in the last month as I said and I talked to a lot of our kids and looked at a lot of stores and tried to understand at that level what is really going on with the customer. I will tell you that two years ago, three years ago, we had some brand issues within Pottery Barn. I think that we talked about them, that we had opportunities with improving our field organization, improving our merchandize. We thought we got a little tired, improving our value proposition and I think now I’ve never seen the field organization in Pottery Barn look better than it does today in the stores that I’ve been in and I’ve been all through the Southeast, Southwest and Chicago, West Coast, Portland, they are looking, I mean the quality of the people, their attitude, their morale, the things they are doing with their outreach programs is as good as I’ve ever seen it. I would say that the stores look terrific. Are there opportunities within the merchandize? You know they always are. I think we are trying to get back to very strong core assortment. We have done a good job there. We’ll try to do a little bit better job with maybe some more editing and a few things that – there are always opportunities to improve but I would say by and large it is – this thing is more macro now. But we are – and that’s in the programs that I was just talking about earlier in response to Matt Fassler’s question, when we talk to customers and we do our job right, we know we will get the sale. So, and we are seeing some real results from that. So I don’t think Pottery Barn is perfect but I don’t think we have a lot of apologies to make today. There are categories of merchandize that we missed in that we know we can do better for next season in. There is always opportunity but it’s not primarily about the merchandize today, it might be (inaudible).

Just to add on your specific question Joe about pricing we – from a few months back when we mentioned and talked publicly about our prices getting too high, we did reduce our pricing offer and went strategically through every category and reduced them. However, now that the consumer has cut back more we have to do an even better job of being more competitive and what we’ve been very successful in doing, is to drive operational improvement and to cut our costs and we are able to give that back in savings to the consumer and particularly next year as we cut inventory. So, I am excited about the opportunity to improve our value proposition because of our operational improvement and that’s really what the customer is – it is very important maybe I think so many of us are saying right now we don’t want to buy things at regular price. We want to make sure we get the best value, and we are in a better position to offer the customer great value that we have ever been because we have really improved our quality and we’ve stabilized where we are with our design aesthetics and are clear about where the customer is resonating with the brand and where they aren’t. So we are excited about those opportunities as we go into next year, even though the customer is much more picky and much more thoughtful about what they are buying.

And we’ll go next to Michael Lasser with Barclays Capital. Michael Lasser – Barclays Capital: Good morning, thanks for taking my question. I am going to throw two out there so I don’t get cut off. Number one, can you talk about the relative performance particularly in Pottery Barn of the on mall and off mall locations, you know, the reason why I ask is perhaps the nature, not only in mall traffic decline, but perhaps the nature of the traffic is changing such that the profile of the customer who is shopping at our mall today is not entirely consistent with what your typical customer profile is and that might change the relevancy of those stores over the long-term. Number two, could you break down the inventory a little bit more in terms of how much was the performance due to a reduction in purchases and how much was due to returning some of the goods back to the vendors? Thanks and best of luck.

I’ll take the inventory question just from a broad perspective. And that $75 million there was substantially very little of it at all if any that was returned to the vendors. This has been a strategic initiative for us. We have reduced purchase orders, we have reduced our real quantities and then the other part of that has been the effective utilization of our outlet stores and our websites to clear merchandize. We see the – if you look at the sales numbers and you know they are in the range but those are how we are getting there. Remember, I mentioned earlier this year that we made a strategic decision at the beginning of the year with our outlet stores that they would not have an open to buy for our product direct to the outlet. They are basically what we have said is, on a few exceptions we are allowing it, but basically their only vendor is the brand and that has been very effective for us in clearing merchandize.

On the store locations question, I don’t think there is any material difference between street stores or lifestyle centers or shopping malls. Pretty much it is – it is pretty much across the board. The differences that we see is because we have got a better, some outstanding manager in one store and a better team and they can make 20% difference and that has been true in good times and it is still true in bad times. I mean we have got stores that are comping up in this environment when all the stores and the sister stores in the district are down. There are up and you say why is that? And it’s because they have got a manager and a team that just somehow gets it done, and other than that I don’t think it is location specific. I think the consumer is just not spending and to look for all these details it varies a bit by region but pretty much it is not discriminatory by type of – whether it is a downtown location or whether it is shopping mall. It is pretty much the way it was before it started.

And from Piper Jaffray, we will go next to Neely Tamminga. Neely Tamminga – Piper Jaffray: Great. Just again I will throw my housekeeping and my real question up there, first on housekeeping, if I go back and I look at what you guys did in 1999, 2000 in terms of store openings, I mean you would have in theory your average lease life about 80 plus stores coming up for lease renewals in the next two years and I’m just wondering how many, just by way of example, how many of those 80 stores have you already reworked or renegotiated those leases or all – are all ED kind of up for renewal, that will be the housekeeping question and then secondly just for the two different brand precedents, if you can give us a sense of clearly you guys have some really good promotions that are working and resonating and particularly in the William-Sonoma side you have got some focus here on post Christmas, which is a lot less gift giving. So how are you morphing the assortments to pick up that business post Christmas with gift card sales clearing going to be coming down this year, it is going to be a lot more sort self focused instead of gift focused and clearance focused. Just trying to get a sense of what is going to happen there?

Okay, I am going to let Howard take the real estate question and then Laura will take the Pottery Barn and Dave will take Sonoma, so Howard.

Well on the – first of all, our leases, the vast majority of them are 12 year leases, not 10. So, when we look at these leases we look at then year-by-year. We are out in front in a lot of them. We have trended historically to remodel our stores about every 7 to 9 years. It is kind of when the store starts to gets tired or it has grown to the point. So, many of those have already been dealt with along the way when they were 7 years old or 8 years old the volume grew to the point that we enlarged the store and to enlarge the footprint, signed a new lease and move on. So, I can’t give you the number year-by-year but as I said earlier the vast majority of our stores that are coming up are still stores that you would covet to have. So, but I can’t give you the number of opportunities. So, we are – except to generally say we are about two years out in front of them, and Laura and Dave can talk about the promotion side. I don’t want to see this go into a lot of detail on those. I mean we have worked hard to develop the strategic kind of things that we are doing and so we kind of generally talk about them but not specifically.

Right Neely if you don’t mind we are in such a competitive environment right now and as I said in my prepared remarks, we are doing promotions, we are taking markdowns based on sales and we have contingency plans based on sales going up and sales going down and we are going to be all over it. So, that’s as much as I really want to share, given the competitive nature.

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And our next question comes from Brad Thomas with KeyBanc. Brad Thomas – KeyBanc: Hi thanks. Actually I just wanted to follow up on something you just mentioned Howard. You were talking about the expanding of your existing stores. I know it has been a long-term strategy of yours. Can you talk a little bit about how some of your bigger stores are doing versus the smaller stores from a return standpoint? Do you still plan to do some of these expansions over the next couple of years and is that still really a viable opportunity for you as we look out longer term or was this something that perhaps had been an opportunity during some very good retail years.

It is a great strategy when sales are going up. It’s not a great strategy when sales are going down. So for all these years you know they have increased and we opted to enlarge our footprint rather than have more footprints in the market area because we felt that we could improve the brand and with the consumer. We could have a much larger, better and more enjoyable shopping experience for the customer, we could do more in the store, add more talent in the store et cetera, et cetera and it has worked for us. As I said earlier, in the next couple of years until the economy gets a lot better, we are not going to do anything more than likely. I mean that is not to say that you know some opportunity might come up that’s too good to not do. But by and large our rule around here is we are not interested. We are spending time on strategically rearranging our real estate portfolio, and so more effort is going into, almost all the effort is going into trying to close those stores that are really the handful Sharon mentioned. It is maybe 20 or something out of 620. But – so, we are focused on that but I will say that we have got an eye to the future. I mean we are doing all of that in the context of looking at each market that we are in and where we have got to be five years from now. We don’t want to cut costs to the point that we really hurt the brand and we put ourselves in bad. We are not at that point. But we want to rearrange that portfolio given this economic environment that we are in. One day that strategy might come back again you know but right now we are having to deal with sales that are going the other way.

And our final question comes from Brian Nagel with UBS. Brian Nagel – UBS: Hi good morning. I’ve got a few questions and I will list all at once. But the first couple are for Sharon. The first is a follow up to a prior question, we talked – you have taken a CapEx for 2009 down to say $100 million. Maybe you can be a little more specific on how much of that $100 million is still discretionary? The reason we think about how far you could pull that back if you guys so choose? Second question also finance related, the dividend, your company is generating plenty of cash now but we saw you pull back and eliminate your share repurchase program. Where is the dividend remaining as far as your capital allocation priorities? And then the final question for Laura on the Pottery Barn side, to what extent do you think the clearance has limited things over the past few months or particularly over the past few weeks it has got more intense and if this impacted sales at Pottery Barn? Thanks.

Okay, let Laura just take the question on limited things and then I’ll follow up on the other two.

Thank you. I don’t – I believe that all of the promotional environment is affecting our consumer and I have had the opportunity to be in a lot of malls and shopping centers were limited thing were fairly closed and in other places it is not. So where it is closed I watched customers going back and forth between the two stores the other day and I would have probably said to you had I not seen that that it had no effect but I was watching it with my own eyes. So, anecdotally I will tell you that I will be glad when it is over, and we are watching very carefully all of our competition that’s in the home business and very mindful of the discounting that they are doing in their stores, very different type of concept but of course all these things do impact the customer.

And then on the question on CapEx, about 70% of the CapEx next year is related to stores and therefore the stores that we have on the list right now are stores that we would have to say we are virtually committed. We have either got a lease signed et cetera. However, I’d say that – I will also say we have great relationship with our landlords and where it is convenient for both parties or there is a desire, Howard is aggressively talking to them and working on plans to defer or move out if that’s possible. So, but I think right now you have to assume that that is pretty well committed. The balance will be coming in the areas of IT and distribution in the other areas where you have got your remaining representative. There is probably some flexibility there but the Internet is still proving to be our best performing channel and a big opportunity. So absent of that – a major change, further change in the economic environment I’d say that we are pretty committed to at least the low end of that range, most likely the low end of that range and we will evaluate going forward. However things could change. Of course we have got some basic IT spending in there that we might be able to ground a little bit. On the dividend question, our Board takes dividend and all uses of cash very seriously. They do a full review of this say at least once or twice a year minimum and we will continue to assess our cash flow and operating performance and assess it as we move forward. There – from a strategic priority point of view, our strategic priority Howard said is that cash is king in this environment and every decision that you make needs to be looked at in reference to that but how much cash do you need? With all these adjustments we are making we feel very good about our 2009 cash flow. We expect that we can move this around after another major change in the economy and be able to hopefully be able to not consume any cash next year and if we can do that, including that I mean including paying the dividend, so that’s what we are looking at.

Thank you. That is all the time we have for questions today. I will now turn the call over to Howard Lester for closing comments.

Well, I thank all of you for joining us today. We appreciate your time and we will keep dealing with this environment the best way we can and we will talk to you soon. Thank you so much.