Scott Edmonds – Chairman of the Board, Chief Executive Officer, President, Director Kent Kelleberger - Chief Financial Officer, Executive Vice President, Treasurer Michael Smith - IR

Jennifer Black - Jennifer Black and Associates Kimberly Greenberger - Citigroup Barbara Wyckoff - Buckingham Research Jeff Black – Lehman Brothers Neely Tamminga - Piper Jaffray Lauren Levitan - Cowan Lorraine Maikis – Merrill Lynch Tracy Kogan - Credit Suisse Dana Telsey – Telsey Advisory Group Crystal Kallik - D.A. Davidson

Good morning. Welcome to Chico’s FAS fourth quarter and year-end earnings call.

Today we will have our Chairman and CEO, Scott Edmonds, and our CFO Kent Kelleberger giving prepared statements on the business. This will be followed by a question and answer session.

Before we start I would like to read our Safe Harbor Statement. Certain statements contained herein including without limitation statements addressing the beliefs, plans, objectives, estimates or expectations of the company or future results or events constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended.

Such forward looking statements involve known or unknown risks including, but not limited to, general economic and business conditions and conditions in the specialty retail industry. There can be no assurance that actual future results, performance or achievements expressed or implied from such forward looking statements will occur.

Users of forward looking statements are encouraged to review the company’s latest annual report on form 10K, its filings on form 10Q, management’s discussion and analysis in the company’s latest annual report to stockholders, the company’s filing on form 8K and other federal securities law filings for a description of other important factors that may affect the company’s business, results of operations and financial condition. The company does not undertake to publicly update or revise its forward looking statements even if experience or future changes make it clear that projected results expressed or implied by such statements will not be realized.

Thank you. I will not turn the call over to Scott Edmonds.

Thank you Michael. And thanks to everyone for attending our fourth quarter fiscal 2007 conference call.

With me on the call is Kent Kelleberger, our Chief Financial Officer. Michele Cloutier, Chico’s Brand President, will join us during the Q&A portion of today’s call.

Net sales for the 13-week period ending February 2, 2008 decreased 7.9% to $409 million from $444 million reported for the 14-week period ending February 3, 2007. Net loss for the fiscal 2007 fourth quarter, which consisted of 13 weeks, was $20.5 million or 12 cents per diluted share, compared to net income of $18.2 million or 10 cents per diluted share in the prior year’s fourth quarter which consisted of 14 weeks.

As previously reported, comparable store sales decreased 15.7% for the 13-week period ending February 2, 2008 compared to the comparable 13-week period last year ending February 3, 2007. The Chico’s brand same store sales decreased approximately 16%.

In the White House/Black Market brand the same store sales decreased approximately 17%. Our financial results for the fourth quarter of 2007 were certainly disappointing.

While we attribute much of our underperformance to last year’s merchandising issues, some of the corrective measures we have taken are being matched by the slowdown in retail overall and in the Missy sector in particular. We further anticipated the Women’s sector will continue to face major challenges this spring.

Accordingly, we have pulled back our inventory commitments for much of 2008 and continue to attack all elements of our expense structure. I am pleased to report that we are seeing improving comp trends in the White House/Black Market brand and continuing strong top line performance for the Soma Intimates brand.

The Chico’s brand is on a slower path to recovery, but is making progress. We are actively addressing issues in our accessories division and travelers collection and recently added a senior level merchant to each of these areas.

We expect to see improvement in each of these categories later in the year. We are currently forecasting negative comparable store sales for the first half of 2008 and expect to have lower earnings than the first half of 2007.

Our current expectations are to return to positive comparable store sales increase in the second half of 2008, resulting in overall earnings growth during this time frame. We have also significantly lowered our capital expenditures plan for 2008.

Our total capital expenditures plan for 2008 ranges from approximately $120-125 million compared to approximately $202 million in capital expenditures in 2007. We have also pulled back our real estate growth targets for 2008 and 2009 and we do not intend to increase the number of new stores beyond current commitments until we see improvements in the economy and are own performance.

Despite the current challenges, we continue to have confidence in our long-term strategies and remain optimistic about our future. We have assembled a strong management team and continue to attract world class talent in key areas such as merchandising, production and marketing.

As I previously stated, we are steadfastly committed to protecting our free cash flow and our strong balance sheet that includes approximately $275 million in cash and marketable securities and no debt. This position allows us to take advantage of any market opportunities when overall economic conditions approve.

Regarding the fourth quarter performance of our core brand, Chico’s, an aggressive and competitive environment combined with sluggish demand necessitate a deeper discount in order to maintain sales productivity. Average unit selling retail is down across the quarter, accelerating unit movements but not to a level sufficient to offset AUR erosion and maintain top line sales.

As a result, we saw declines in the average dollar transactions each month of the quarter. ADS (average daily sales) was down approximately 10% for the quarter.

Deep declines in customer traffic across the quarter contributed to the balance of our miss for the quarter. Transactions were down each month with the exception of December when deep promotional pricing offset the decline and brought us flat for last year.

Transactions in our comp stores declined approximately 7% for the quarter. We did end the season with less fall holiday carryover than last year and a great percentage of our inventory owned in go-forward full price goods.

Moving on to February, the first week of the month was stronger due to an earlier mailer drop that was shipped into account for Easter falls in and week four of March this year. Although the sales related to this mailer did improve our trend, the momentum did not carry to the balance of the month.

For the month of February we saw overall transactions decline by approximately 17%. We navigated the month by effectively managing markdowns and driving volume in several key areas such as jackets, outerwear, denims and pants.

Unfortunately this volume was not enough to offset the misses in other key categories like travelers and non-apparel. We are highly focused on evolving these two categories.

We remain confident in the direction of the product. It is a product category that has not evolved over the last 6-12 months that are the poorest performing categories.

We also continue to invest in the executive talent necessary to evolve the product in all categories in order to lift the entire business. During the fourth quarter we hired Judd Harner from Desgrippes Gobe as the new marketing executive for the Chico’s brand.

Judd has worked with Michele over the last 18 months on the brand positioning and strategy. We are making steady progress in the line of the merchandise and marketing for the Chico’s brand.

We continue to fully anniversary all of last year’s marketing activity to minimize the risk of sales misses due to lack of external promotion. Turning now to the White House/Black Market brand, overall performance in the fourth quarter was extremely disappointing.

The holiday product assortment was not well received by our customers and resulted in a high level of promotional activity. We continue to be plagued with over assortment and heavy penetration of dressy product that results in aggressive markdowns to liquidate inventory throughout the quarter.

However, our December and January resort collections, which reflected some of our new merchandising efforts, performed very well. Casual sweaters, knits and denim were the standouts and overall the full price performance was stronger than we had experienced in earlier delivery.

As we shared in the last conference call we expect spring 2008 to be a steady progression in the White House/Black Market business. We have focused in elevating the product and aligning the marketing and in-store experience to restore White House/Black Market to a premier fashion brand.

Our customers responded positively to the February collection and marketing campaign. The full price performance continues to improve and we’ve experienced higher than planned performance on the merchandise features in our February direct mail campaign.

Fashion is drawing our full price sales particularly in dresses, woven socks, jackets and denim. The matrix show positive traction throughout the month and while we continue to see a decline in transactions for last year, our average net retail and average dollar sale continue to show improvement over last year.

We’re pleased with the progress we’ve seen in the White House/Black Market brand. Our merchandising marketing are now aligned and the new positioning is being well received by our customer.

Today the Soma Intimates business have 68 front line and one outlet store. I’m pleased to report that the Soma Intimates business continues to see nice improvements across all major product categories resulting in growth in new customers and repeat purchases from existing customers.

The Soma brand continues to be propelled by fresh, innovative and new products, continuous improvement in the quality and content of our consumer directed marketing, improved store operations and accelerating direct to consumer sales growth as evidenced by the 93% increase in sales in February 2008 over February 2007. We expect a strong initiative in 2008 to continue a broad awareness of the Soma brand.

While we are encouraged by Soma’s performance especially in this economic environment we continue to refine the financial model. Soma will need to continue to demonstrate several successful quarters of positive momentum before we will consider accelerating the current conservative store expansion plan.

On a direct consumer front we continue to be very excited about the growth of our direct to consumer business with a fourth quarter revenue increase of 26% and web traffic up 78% over the same period last year. We continue to take market share from our competitors through this channel.

We see this area as a tremendous growth opportunity for all three of our brands. In closing my comments…2008 will be an extremely challenging year and we’re planning our business conservatively.

We’re committed to reducing our capital expenditures, slowing additional headcount to a minimum and attacking expenses in all areas of the company. Our focus for 2008 is to maintain our financial discipline, continue to make progress on improving our product offerings across all three brands, continue to evolve our marketing our customer loyalty programs, continue to provide our customers with the most amazing personal service across all three channels of distribution (stores, internet and catalog), continue to fund the headcount growth in the key merchandising areas that will provide the necessary bench strength to grow the business.

I firmly believe that when the economy begins to improve Chico’s FAS will emerge once again in the Missy specialty store sector. Now I’ll turn it over to Kent.

Thanks Scott. Good morning everyone.

Obviously we’re all disappointed with the fourth quarter results. We continued to face both internal and external challenges as we went through not only the quarter but the entire year.

We worked hard to strengthen the management team as well as improve our processes and procedures. While these changes have had some impact there remains much work to be done which I will address later.

Overall sales for the fourth quarter were $409.3 million, down 7.9% versus last year. Last year’s results include the infamous 53rd week for those of us who follow the retail calendar, which amounted to approximately $24 million in sales.

So factoring that amount out of last year’s top line, our overall sales would still have been down but only in the 2.5% range. Both the Chico’s and White House/Black Market brands face major challenges with new leaders focusing on improving product and assortments during this tough economic environment.

Same store sales for the quarter decreased to the mid-teens for Chico’s and White House/Black Market which is nowhere close to where we wanted them to be. It is important, however, to know that when we deliver positive comps for both brands our productivity reaches over $800 per square foot, which is among the highest in retail and at these levels these brands have the potential to be huge cash drivers.

To reflect back on the quarter, in December we faced challenging traffic and sales. By the second week of the month we made a decision to significantly reduce our carryover going into the end of the year.

This led us to be much more aggressive in markdowns, particularly at Chico’s, and drove our AUR down as much as $10 from November and probably moved about $10 million of sales out of January into December. In hindsight we should have not been so aggressive on price, put a little more margin dollars in December and carried a few more items into January for the clearance customer.

Our overall gross profit rate came in at 47.7% for the fourth quarter; 660 basis points below last year’s rate. The biggest drop in merchandise margin rate was Chico’s front line stores, down 680 basis points versus last year.

This decrease in rate was driven primarily in higher markdowns, and to a lesser extent continued investment in product development and merchandise infrastructure, along with higher cancellation charges as the result of trimming our investments in spring delivery. Because we took an aggressive posture with promotions we were able to end the year with overall inventory of $60 per square foot; a small increase over last year’s $57 per square foot but below the $64 per square foot from the year before.

As previously mentioned we ended the year with less fall carryover per store. The small increase in inventory per square foot at year’s end was largely contributable to deliveries associated with an earlier Easter and an earlier catalog drop compared to last year.

Reviewing further down the PNL, our SG&A expense during the fourth quarter approached $229.3 million and for the year $847.6 million, an increase of 960 basis points and 650 basis points in rate respectively. These increases were primarily driven by increased store operating expenses including skilled management positions, increased marketing spending, hiring recruiting and relocation costs, and the de-leveraging associated with negative comparable store sales.

As a call out to marketing, we spent more money in the second half of 2007 and did not get paid for our work in Chico’s and White House/Black Market. As a result and in concert with recognizing efficiencies to be gained in our direct marketing efforts, we will be spending fewer dollars on marketing in 2008.

In summary, we lost 12 cents in diluted earnings per share for the quarter which brought down our annual diluted EPS for the year to 50 cents, representing a 46% decrease from last year. Though the numbers are weak there were bright spots.

We saw continued improvements in wear-now fashion, sweaters and the bottoms area. We also began to see a dramatic change take place in the creative area of marketing for all three businesses, but more so in Chico’s and White House/Black Market as we begin to launch resort and spring transition products through our direct marketing efforts.

We should also mention that the small investment in television for Soma significantly boosted trend in those markets both during and after the ads ran. And the other call out to the Soma business as we remain optimistic as their top line continues to improve even in this challenging retail environment.

While not disclosed separately, some of you with good analytical skills can estimate Soma’s impact on our consolidated same store sales. Also having worked with another company some years ago that through national retail and direct consumer intimate apparel business, I remember the hurdles that Soma faces in its relative infancy stage of business but I can also appreciate the potential financial reward on our investment.

We also see continued growth in our direct to consumer business which grew 36% over the prior year and represented 4.2% of our overall sales mix. This continues to be an opportunity for all three businesses and could grow from 10 to 15% of our total business over the longer term.

As to cadence of changes in our fleet of stores during the fourth quarter, we opened 40 new stores and closed six. We also expanded or relocated six additional stores.

That puts our final number for the fiscal year at 143 new stores opened. During the year we closed an aggregate 15 locations for our three brands, as well as an additional ten Fitigue stores.

We also re-acquired 13 franchise stores and expanded or relocated 52 existing locations. For the year that leaves us with a total square footage growth rate of 23% in 2007.

This has also been segued into our thoughts about 2008 starting with real estate. Since we are in a merchandising fix mode and while it appears the economic outlook for at least the first half of 2008 appears challenging, we have slowed our 2008 and 2009 store growth plans.

We are currently calling for 60 new, or 45 net new stores, which takes into account 15 closures. We are planning on relocating or expanding another 30 or so stores.

This will result in a real estate growth rate of 10% for 2008. Currently we see the real estate growth rate for 2009 slowing down further as we have committed to only about 10 new stores.

Not only have we slowed our real estate growth rate, but we have also scaled back our capital expenditures beyond those stores. We have also eliminated some expenditures and delayed plans for our home office in D.C.

expansions. We have also delayed parts of the SAP integration for White House/Black Market and Chico’s in 2009.

These events along with trimming back other capital projects will reduce our CapX spending next year to under $125 million versus over $200 million for the previous two years. If we were to consider tenant allowances from developers or landlords on new stores, our net spend would be under $100 million which by the way is a tad higher than our estimated depreciation for 2008.

Our commitment to higher cash balances and free cash flows does not stop at the CapX line. We will be managing our inventory investments judiciously by eliminating extra or fringe choices and managing to overall inventory levels closer to the trend of the business until we see a convincing opportunity to break trend.

We will also employ improved balance sheet management by increased payables leverage along with monetizing nonessential assets such as store supplies and other assets. While maximizing cash sounds really good we would not be doing our jobs if we did not attack our gross margin and expense structures.

We recently concluded our 2008 budget process which surfaced many opportunities for both increased margin and reduced expenses. The following is just a sample of opportunities we expect to seek out in the months ahead: Increase the ocean delivery portion of the mix on our inbound freight.

Changing the penetration or mix of our offshore suppliers. Reducing the number of periods in which promotions overlap in our business throughout the year.

Eliminate overnight shipments of inventory and communications to stores. Better balancing of our store payroll mix between full and part-time associates.

Lowering page comment circulation in select direct mail pieces. All of these have the potential to save hundreds of thousands or even a few million dollars so stay tuned.

In summary, I joined this company on a full time basis only 100 days ago. I knew there would be some major challenges but I believe we have the talent, the commitment, the financial resources, the loyal customer base and the potential to turn this business back into a hugely successful earning and cash driven franchise that will generate significant rewards to our shareholders and our associates.

With that we can now begin the Q&A portion of our call.

Good morning and congratulations on making what I can see as total progress with your product. My question really has to do with a two-part question.

1. Your marketing campaign at White House/Black Market looks much better and I wondered how many of the extra large glossy books you sent out with Donna’s letter?

That’s my first question.

That was 130,000 to the top 130,000 customers.

Okay. That was a beautiful book.

And then I wonder if you have any plans to incentivize the sales associates at the store level to better utilize the internet to be able to give better service to the customer as well as consummate the sale?

That’s a great question Jennifer. That’s something that we’re certainly aware of and looking at but we currently don’t have an initiative in the pipeline but when you look at I think Kent said 4.2% of our volume came out of the direct business – we have analyzed it and there is concern at the store front on the return portion because they don’t get bonused on the sale but they get nicked on the return.

We’ve done some analytics there. It’s not quite as damaging I think as some of the store associates thought it was, but in the long run we have to have the stores and the web and the catalog all aligned and the store staff have to be incentivized to push people to the web.

That’s no question. Just with everything we’re dealing with right now it is not one of the key initiatives in the pipeline.

Alright. Thanks a lot and good luck.

Great thank you. Good morning.

Scott could you talk about how you are managing inventory figures for 2008. Should we look for inventories to be down in the first half (inaudible) look for sales to be down and then secondarily on the SG&A…you commented that you really impact SG&A in the fourth quarter and I was wondering if you could describe some of the areas where you see progress and it may not be readily apparent in the fourth quarter results.

Kimberly this is Kent and I’ll take both of those questions. Managing inventory is near and dear to my heart.

I’ve been working closely with Michele and Donna for some time now and I think what we’ve been able to do at least as it relates to the beginning of August or the end of second quarter inventory levels are closer to flat and perhaps with the idea of getting slightly down if we can manage the fallout which represents a portion of the receipt plan that we cancelled due to late deliveries or quality issues. So that’s at least the game plan for now.

Obviously when we started reducing inventory levels our work was pretty much cut out for us. We weren’t able to significantly impact first quarter but it is certainly front on our mind as we go forward.

From the SG&A perspective – really quite honestly we weren’t able to impact the fourth quarter significantly but it was really more of a go forward basis for 2008. We really had some big pockets of opportunity.

I think the first one that comes to mind is we looked at our store sales bonus plan and really got a closer line to what I would characterize as the total store performance even though we still incentive on high average dollar sales but in some of the initiatives that we’ve done with respect to store bonus program we’ve trimmed roughly about $6 million just in that area alone. We’ve also looked at how we can manage the rates better as far as the variable payroll associated with sales – you know selling payroll – and by changing the mix to have more hourly part-timers versus full time is probably one of the levers that we can pull on the go forward basis.

Just another flavor of another area of SG&A we’ve already started trimming page counts on a lot of the direct mail pieces and we’ve become a little more selective in some of the prospecting we do either through the number of pages or how often these people get mailed on a go-forward basis.

Hi. I have a couple of questions.

Is Michele there?

I am.

Hi Michele. I guess the first question is for you.

What is the customer telling you? Are you doing closed focus groups?

How are you viewing your tasks now versus when you first started? And can you comment on travelers.

It’s been weak for some time. What is the problem here?

I know you’ve hired somebody but it has been weak for a very, very long time and when do you see it improving. Then I have a follow-up question for Scott.

First of all are we doing customer research? Yes.

The answer is yes. It is more of a go forward strategy.

As you know we hired Elaine Boltz to head consumer research and she and I are actively working together to establish what we’re tackling at travelers as the first one I’m tackling in about two weeks. In terms of what the customer is telling us in response to the product – I’m certainly out in stores all the time.

She is responding and continues to respond to the newness in the product. There is no question about it.

We see it every single day and we feel very strongly in moving forward and as I stated in the last call I feel we underestimated the desire for new fashionable clothing and we need to continue to move in that direction. On the traveler’s side, it has been diminishing.

It significantly impacted our business last year. It has continued to worsen.

We need to stop the bleeding in that category but more importantly I need to evolve the product into other categories. I think that soft knits, dressy element of our business is an important one.

I think after nine years of running fabrics she has a closet full of travelers but again I may get real life information from folks coming up but from the business you would absolutely say we have to move more aggressively into growing other categories faster.

Scott…why are you still growing headcount in the merchandising area? It seems you’ve been adding headcount for the last year.

What exactly are the openings? Could you talk about that a little bit?

Yeah I’ll give you sort of a fine level answer. I’m not going to get into exactly what openings are there.

This business exploded in that 9-year period. Quite frankly I think that I did a poor job on insisting that we allocate more resources to the merchandise departments.

The leadership over those businesses felt comfortable with the way the departments were structured if you will and the level of bench strength we were running with and we were posting huge numbers. So why get in there and mix it up.

In retrospect, and it is always a lot clearer in the rear view, I should have insisted that we take some of those huge operating margin points and pour it back into the structure of the business…people, processes…we have a lot of opportunity in sourcing and design. When Michele went into business we had one person reporting in to her over a billion dollars worth of business.

So it has really been trying to bring both the Chico’s business and the White House business towards (inaudible s/l towards) to have the bench strength to have a solid foundation to grow the business over the long run versus I think the mistake we made was we were protecting that tremendous operating margin. So from a high level viewpoint that is why we continue to pour resources into merchandiser renewal.

That is the key area that we’re adding headcount. Other than in the direct to consumer business which is a great growth vehicle for us.

There is very little headcount being added other than merchandising, production sourcing and direct to consumer.

Okay thanks.

Thanks. Good morning everyone.

A couple of questions I guess. On the inventory side just to clarify how much did the carryover or cutting the carryover impact the rate in Q4?

If you look at your inventory level now especially in accessories and travelers – are they down year over year? How does that compare with the overall rest of the inventory levels?

The final question relates to the GNA side. If you look at year over year growth in SG&A, how are we supposed to understand that?

Is that growing inline with the unit growth at like 10% for the year? Or given all the things you’re doing might we see a rate meaningfully lower than that?

Kent why don’t you take SG&A first.

Well I think at least what I’m able to observe in the growth in GNA it is somewhat in line with the unit growth. Part of the issue when we compare our GNA rate to other retailers some people have the occupancy rate of the gross margin.

We have a GNA which sort of exacerbates some of the comparison. The occupancy rate is probably roughly around 13% in that de-leveraged type of environment.

So when you draw negative comp it sort of sticks out like a sore thumb but obviously since we grew square footage 23% last year obviously that was a big, big player in the growth of our GNA rate. I think on a go forward basis what we’re attempting to do by not only scaling back the real estate growth I think we’re getting a little bit smarter on store size and I think we’re going to be a little bit more aggressively managing our relationships when it comes to rent and (s/l condenary) maintenance among other things.

We also have some cost savings opportunity on occupancy but it’s just not about occupancy in GNA. We spoke to the opportunity that we’ve already seized upon in store payroll on a bonus perspective.

We’re actually working through some testing of payroll matrixes in the spring season as well as trying to get some rate reduction in the overall payroll rates. Our marketing dollars are actually going to be down in 2008 versus 2007.

That’s going to help our rate. By the fact that we’ve all but frozen the headcount in the shared services – the back office portion of our business – I would say our home office for shared services will see an actual decrease in the rate on a go forward basis.

So that’s jut the flavor for the GNA.

Before I flip it over to Michele to talk about carryover and travelers accessories. The carryover from the White House/Black Market business, Jeff, fall holiday carryover last year was approximately 18%.

This year it was approximately 11%.

And Chico’s you’ll see we carried over 26% last year. We carried over 16% this year.

And then on the travelers and accessories inventory question…travelers was down. It is obviously further down than we anticipated but we can course correct that pretty quickly because of the rolling commitment we have on traveler’s fabric.

On the accessories business it was not planned down – it was planned flat, but as you know accessories has a much shorter lead time than apparel and again we can control that inventory go forward.

Okay thanks guys. Good luck.

Good morning. Just two questions.

One, conceptually on guidance I can appreciate having so many different (inaudible) of business and you coming into this fresh. And the (inaudible) are already at 30 cents for the first half versus last year’s 50 cent.

I guess the guidance kind of suggests that the 30 cent number is generally okay so I would assume if you guys were planning something in the order of 10 cents you might come forward on something of that mismatch of street relative to consensus. Could you help us navigate the language whether you can do it through comp expectations, obviously being negative but are we talking negative low or negative double as we’ve kind of kicked off the quarter…just a little bit more color I think would be helpful and I just have one follow-up question.

Well Neely I’d like to help you but I think that’s about as much guidance as I’m willing to give right now. I think there is three different pockets of businesses and I think Scott summarized this earlier.

White House/Black Market seems to be turning. Soma is trudging along.

Chico’s is a little bit slower pack to recovery but I have to tell you that the total retail environment particularly in the Missy sector is challenging. We’re just not that good at being able to predict and give you a point estimate either from a comp perspective or earnings perspective so I think the fact that we’re planning negative in the first half in comps and planning down earnings in the first half is about all we’re willing to throw out there today.

Okay. And just some clarification questions on CapX numbers that you put out there.

Is that net CapX or gross CapX and then in terms of your marketable securities obviously it is a hot button issue right now – do you have any exposure to the municipal auction rate securities that we should know about?

Okay two pieces on the CapX. Scott gave a range of about $100-$125 million on a gross basis, where if you were back off tenant allowances as I said it would be under $100 million on a net basis.

As it relates to exposure, we don’t have any auction rate securities. I think that the average rate of maturity of our investment portfolio right now is roughly about five days.

We have about 10% of the money in overnight money and we had about 10% of the money invested in single issue or munies that were probably I think the longest maturity out there was maybe 12 days so we don’t have the exposure to auction rates that others do.

Thanks. Good morning.

Scott I was hoping you could elaborate on your assessment of the environment. You obviously mentioned that you do expect it to remain weak but could you give us any sense of regional differences, how the macro factors might be affecting, how the consumer is looking at different categories and price points – how it may or may not be affecting per frequency of visits and expectations for promotions and any thoughts on how the competitive environment might be affecting you as well.

Thanks Scott.

Sure Lauren. Thanks for the question.

We are seeing regional differences currently. More so – actually Michele and I were talking very early this morning – if you look at the concentration of stores we have in Florida, California and Arizona and you sort of overlay the foreclosure rate in those markets there is no question it is having an impact on our company to the tune in February of almost four points in just a couple of key states.

So there is no question that the higher the foreclosure rate and the higher the concentration of stores we have in that state it is a tremendous challenge for us. As far as the competitive set, you guys follow our competition for a living.

When you look at the way they’re going through these restructures and these reorganizations it is sort of like what we’ve been going through here for the last 18 months. I feel like we’re a little bit ahead of the curve there.

We have nine executives on the executive committee that run the company. We have no openings, no searches going on right now.

I don’t think I could say that for my key competitors. So I think that relevant to what is going on out there in the missy sector it is a very tough environment.

We’ll certainly hear more at the end of the day today and as the week unfolds but I think specifically the Chico’s customer is even challenged than the White House customer. The core edit point for the Chico’s customer is like 52 years old.

The edit point for the White House customer is in the 40-year-old range…that brand tends to bring in a much younger customer. If you travel to the stores you’ll see groups of college girls shopping in the White House/Black Market.

So I think that there is a little more protection from the economic environment for the White House brand than there is for the Chico’s core customer and as far as the macro environment going forward over the next six months it just seems like every day you read that the current environment is the worst that it has been. I was looking at the University of Michigan consumer confidence study and all the stuff that has been pouring out this week…I wish I had a crystal ball that could tell me when this was going to get better for this sector specifically but I think that planning down our comp note negatively for the first six months and planning earnings down year over year is a pretty conservative approach in the environment.

Thanks Scott. One follow-up for you.

You’ve been very clear in the last several months that you think you were over-earning and under-investing and that the historical operating margins weren’t something that we should have expectations of revisiting. But you have also given us in the past some thought that you thought it could get back into the 16%+ range.

I’m wondering if with some of the changes in the business if you have revisited what you think the appropriate possibility for the businesses is in a more normalized environment.

Certainly a double digit operating income model. There is no question there.

I think we are focused on getting it back to double digit and revisit the story at that point.

Thanks very much and good luck.

Thank you. Good morning.

Your commentary implies a pretty sharp increase in second half earnings and I guess you’re planning for positive comps in the back half. Is that driven by specific macro factors or product improvement?

I guess what gives you the confidence that you can get in the positive?

Well certainly that we’re reading Lorraine they are calling for currently…of course this is our current viewpoint, some sort of recovery due to the reduction in the interest rate and the fiscal stimulus package that is going to be out there. Everyone is pointing to the back half and when you layer in the horrific comps that we posted in the back half of the year we feel like a conservative plan is to get back to a flattish comp and if we did that it would speak to earnings growth during that period.

And did your commentary imply overall earnings growth for 2008 year over year for the full year?

We’re not prepared to give guidance on that other than…I think I will expand a little bit on what Scott said. I think its both macro and I think there is also some merchandising issues.

I think that while we’re seeing a recovery in White House/Black Market we still have some bottom fit issues – we think we’ve got answers to that. In the April/May time frame at 100% we’ll have the new bottom fit and we’ll have a new bottom fit and we’ll have new bottoms so I think that’s helpful.

I think that with Chico’s and the travelers line in speaking with the Vice President of merchandising over that area she feels pretty good about new product that’s coming in the May/June timeframe. So physically it looks fresh.

She’s pretty conservative in her points of view so we’re looking to see some improvement merchandise specific but most of what I’m hearing and most of what I’m seeing out there is people are looking towards the second half for recovery. If we are in fact in a recession and it looks a little bit longer and we have more failures in the financial market it could be longer.

Thank you.

Thanks. Good morning.

Question for Scott or Kent. Can you guys talk about any cost inflation you’re seeing out of China and then what opportunities you might have to offset these cost measures and then if you could also just remind us how much of your merchandise came from China in the latest year.

Thanks.

Michael Smith is looking up the percent of total. We just recently look….its approximately 55% out of China.

As far as the inflation out of China – do you want to grab that?

Yeah I’ll grab that. Of course we’re starting to see the inflation starting to see a conversation in the negotiation of our merchandise.

However, we are continuing to move to a direct sourcing model which will absolutely offset that. In addition as you know we’ve put a lot of goods in the air versus ocean and we’re looking to get a slightly higher percentage back on the ocean which would help also offset some of these costs.

But it is not significant yet.

Thanks. On Soma you said you closed three underperforming stores this year.

Was there any particular region of the country where those stores were or any type of location or were they near Chico’s or not near Chico’s?

They weren’t in any specific geographic area. The original strategy for the brand when it was branded Soma by Chico’s was to open by our top performing Chico’s.

A lot of those are in strip centers and are destination. As we moved the brand in fall of 2007 to Soma Intimates that proved to be a flawed real estate strategy.

A perfect example, we opened beside a $5 million dollar store in Dallas, Texas and it was store #65 for Chico’s…99% passport customer. Great Chico’s.

Opened up a 2500 sf Soma next door to it and it was one of the worst performing Soma’s that we had because again in this category she only shops a couple of times a year and even taking the greatest Chico’s customers upon the number of customers in that market that shop that store to two visits per year to the adjacent Soma was not enough to draw the top line. So we have a little bit of a refined real estate strategy these days and (audio break).

… you did say in a previous press release that you were committed to being profitable in the first quarter. Are you still comfortable with that because that language was not in this press release.

Thank you.

Regarding the question on White House, Donna’s first day in the business was August 8th so her first day she walked into her office was August 8th. She certainly wasn’t going to impact Q3.

She had a minimal impact on Q4. But she pulled all of spring and reviewed spring receipts down to everything she could possibly get her arms around.

What you see in the stores today certainly is a reflection of Donna’s influence on spring. I think the way that we’ve talked about it is we expect spring 2008 to be a steady progression of improvement and that bears out Donna’s influence.

There is no question. As far as the direction – I’ll answer that with one of the keys to Donna’s disciplined approach to run the business with a balanced assortment.

In the past you are spot on. We got too casual.

Then we got too dressy. We got way too dark.

The key really is imbalance. I think the comment I made on the December sales release was that our goal was to get back to profitability in Q1.

And Kent I don’t know how you want to…

No we definitely expect to be profitable in Q1.

Just one more thing. On remodels what is your current thinking.

I know you’ve given us the guidance as to how many remodels you think you’ll do but what is the thinking about that as a use of capital in an environment where you are clearly pulling back on capital and looking at ways to improve your returns in other aspects? Are you really seeing the types of returns that are appropriate?

Absolutely. The reason that we are doing these remodels is we are absolutely landlocked.

We have stores that sometimes do in excess of $1,000 per square foot and it gives us no opportunity to expand our assortment even if we wanted to. So we absolutely do see payback on our investment on expanded stores.

Thank you. My first question is for Michele and then I have a follow-up.

I just want to understand how you think about your target market for Chico’s. As you strategize and plan more fashion for your customer do you see the biggest issue is how to appeal to a broader customer or how to get more wallet share from your existing ones?

I guess how do you balance between satisfying your young to mid 40-year-old customer up through your mid 50 to 60 year olds?

So in terms of the target demographic as Scott said the sweet spot is 52. That is our focus.

So to say that I’m going to appeal to a 35 and a 40 to 60 or 65-year-old it is about attitude not age. So we’re going to target a 50-year-old.

As you know over time I feel like we moved beyond that in terms of the assortment so we’re just making sure we round it out with that target in mind. What was the second part of that question?

I guess are you looking to broaden it at all?

In terms of customer yes. So the focus is obviously on new customer acquisition as well as getting our loyal customer to spend more.

It is both. It is not an either or.

Okay great. Then my next question is just relating to the store side.

A few years back when it seemed like you were maxing out – you certainly were maxing out on productivity – it clearly made sense to expand the stores. But I guess I’m wondering have you reconsidered what the optimal store size should be in this environment where not only do you have macro pressures but more competition.

Thanks.

I absolutely think we look at optimal store size. I think that at least the short while that I’ve been involved in the real estate process we are challenging some of the size of the stores, even the ones that we are expanding.

We’re probably a little further along in our Soma franchise just because we are trying to refine the model and recognize that we opened too large of stores and we have too much of an obstacle to overcome from an occupancy standpoint but count on the fact that we’ll look at store size.

Yeah overall right now front line average store size is 2,541 sf. Last year we opened them in the 3,400 range.

The year before 3,100. Certainly I don’t think you’ll see us increasing that and depending on the market – what we believe the market can bear out – that will determine the store size.

Okay thank you and good luck.

Good morning everyone. Could you talk a little bit about the marketing tactics what you are looking at for each brand in 2008.

Seasonal versus how it compares to last year and then what are you looking at for the cost of Soma in 2008 given the strides that you’ve made there and then lastly on catalog circulation – are the numbers going to be lower this year than they were last year?

The catalog circ will be down per average store and that will primarily come out of we have a prospect file in the second half of the year primarily. As far as the marketing tactics…you will see a little television from Chico’s.

You will see Soma. There are some currently running.

We don’t currently have any plans for television for White House/Black Market. We have a new creative brain in the Chico’s marketing who is coming up with some creative ideas but primarily as I said in my opening comments Dana our intent is to anniversary the marketing events of last year to not lose any sales based on external promotion.

And the cost of Soma?

We really haven’t given any specific point estimates other than to say that the business has improved both from a top line and a bottom line perspective and it will be less diluted in 2008 than it is in 2007.

Thank you.

Thanks. Most of my questions have already been asked.

I guess is there any additional color you can give us on what you saw on the outlet channel? I know you mentioned it briefly in the release but any color on what you are seeing as far as trend of business there?

We know it has held up well I guess for awhile relative to the mall based business.

The comment that I would make on the outlet business is the outlets for Chico’s FAS, Inc. have always been a true liquidation process for us.

At Chico’s we do buy a little bit of product under the label of Additions at White to offset some of the margin erosions in the outlet business of Chico’s. At White House we currently do not do that.

Donna’s background – she was running factory stores for Anne Taylor and it is absolutely an agenda item for us for 2009 as we improve our core businesses to focus on the outlet business and move that more towards a factory store model. We certainly have the experience in-house now between Donna and Michele and certainly know the impact that the outlet business is having on the earnings of a lot of our competitors and other retailers in the space.

Operator I think we have time for one more question.

Good morning. Thanks.

Just under the wire there. Kent could you tell us your thoughts…I realize that its early for this environment and it makes it a little bit tricky but previously there was some talk of comp needed to leverage around 3-5% and maybe gross margin around 7-8%.

Do you have any thoughts now that you’ve been able to look at the numbers and see what the environment is…do those numbers still make sense right now?

I think that right now the current model would suggest somewhere in the neighborhood of 3-4%. I still think there are some opportunities in our cost structure to carve out.

I still think there are some margin opportunities to increase in rate but generally that 3-4% range is what I’m comfortable with right now.

Okay great. Could you tell us if there is any more cancellation costs you are looking at entering Q1 or the first part of the year that you recognized in Q4?

It really hasn’t been on the radar screen. I would say that I wouldn’t expect any significant additional cancellation charges.

It just so happened that we made a call in late fourth quarter when we were taking a look at the trend of the business versus our preliminary thoughts on 2008, particularly on the spring, and we just decided the right thing was to try to get out of some inventory commitments and we were able to incur some cancellation charges as a result of that but we have also as a result signed up to some liabilities on additional piece goods which we think we could cut on a go forward basis – just not as early as we originally planned.

Okay great. That’s helpful.

Just finally clearly the direct business is a bright spot right now for you. I know you talked about it being up to 15% longer term.

How do we look at that for 2008 with 2008 with the way the trend has been really strong year over year.

Well we grew that business I think the number was 36% in 2007 over 2006. While I’d like to say that’s what we’d do in 2008 it just so happens that the first half is going to be a little bit tough and I think we have to be a little bit more conservative in our growth rate.

It will still be probably in excess of 15% but we’ll have to wait and see when things pick up a little bit.

Okay great. Thank you very much.

Good luck in Q1.

Okay operator. That concludes the call.

We thank everyone for dialing in this morning and we’re all going to get back to work. Thank you.