The selling, general and administrative expenses (SG&A) decreased by 15 basis points, versus the same quarter last year.

For the nine months ended October 31, 2007, SG&A increased by 21 basis points as costs related to non-comparable expenses to operate the firm’s new home office facility as well as certain non-recurring legal fees more than offset favorable rate reductions from controlling store and store support related expenses.

The income from operations for the quarter increased 35% to $61.3 million, or 16.2% of sales.

The earnings per share grew from 21 cents to 27 cents for the same period last year.

During the quarter, the company finalized its certification of certain tax credits received for work performed in conjunction with its home offices resulting in an additional one-time tax benefit of approximately $2.3 million applied to its tax expense (or 1 cent impact on diluted earnings per share). Excluding the one-time federal tax incentive benefits received thus far this fiscal year, the company''s annual effective tax rate would have been approximately 34%. In the prior year''s comparable quarter, the company received a $4.4 million one-time tax benefit (or 3 cents impact on diluted earnings per share) for work performed in conjunction with its home office.

The company successfully launched Anthropologie’s CRM initiative.

The first phase - Anthro Project - is now fully operational in all 100 Anthropologie stores. Anthro Project is not a loyalty program; it’s a database tool to better understand the customer, to understand how and when she wants to hear from the firm, what she wants to hear about, to learn about her product preferences, what services she values most, and so on. Anthro Project will endeavor to provide an unimagined experience that puts the customer first.

The company also successfully implemented the new e-commerce platform at Anthropologie and Urban Outfitters. This new platform has significantly more functionality, flexibility and stability, all critical to better serve the customer as the company enters the holiday selling season and beyond.

Looking ahead, the company has several priorities.

The first and most important priority is to return the Urban Outfitters retail business to its historical performance level. The Urban Outfitters five-year comparative store sales increases averaged 9% over the last five years, including last year’s down 10%. The company believes that the Urban Outfitters brand should operate at margins similar to the Anthropologie brand. Though the management believed that it would take several quarters to achieve a sustainable, historically profitable turnaround at the Urban brand, the brand is making solid progress. The Urban Outfitters stores look better, with a clearer and more compelling point-of-view. There is also improvement in the selling reports. The company is getting great hits on product and there is plenty of traffic in the stores and it gives the assurance that the firm’s new product direction is correct. However, the firm is not where it needs to be yet but it is moving in the right direction.

At Anthropologie, the firm is focused on maintaining the momentum and the stores are appropriately inventoried and beautifully merchandised for the holiday season. The Anthropologie team has numerous exciting growth initiatives underway.

Free People is also focused on maintaining its momentum. With annual store sales productivity in excess of $1,000 per selling foot, the brand has begun to accelerate its store opening schedule, and the year-to-date results are helping the company to reframe the long-term potential of the brand. The team is also looking at ways to continue wholesale growth. Based on the success of the intimate apparel launch, for example, the line will expand to 12 deliveries next year.

The company expects to launch its fourth concept, Terrain, in calendar 2008.

Key questions and answers from the third quarter fiscal 2008 earnings call conducted by Urban Outfitters Inc. on November 8, 2007.

Jeff Black (Lehman Brothers): On the SG&A side, why did we see so little leverage there? You talked about controlling store expenses, but what offset that? What expectations for SG&A leverage are baked into the rest of the year?

John E. Kyees: Apparently last year, our ADR expenses in the quarter because we moved in halfway through the quarter, weren’t as substantial as they were this year. We have annualized that now and I would expect fourth quarter to see SG&A grow somewhere between 20% and 21% instead of 22.5 like we just grew.

Neely Tamminga (Piper Jaffray): As you are looking into next year from a sourcing perspective, across the board we are hearing about pricing going up in China. Your opportunity for more significant full price selling, particularly on the Urban division, would offset any pricing increases. What is your perspective on that and China and raw material costs in general going up?

Glen T. Senk: First of all, we are diversified in terms of our sourcing. In fact, I would expect the percentage of Chinese product to probably reduce somewhat relative to the total. But having said that, we are not seeing any pressure in first cost pricing for the spring product.

Brian Tunick (J.P. Morgan): Could you talk a little more about some of the categories inside the Urban Outfitters division? What is still dragging down the comp there and what are some of the opportunities you think in the near-term?

Tedford G. Marlow: We don’t give a lot of color on that but as our business has struggled here over the last number of months, we haven’t had the balance and the mix of the women’s business that works on our profit model. We have seen improvement in our cut and sew knit top business, which is a very important category for us, coupled with other categories that have been trending well gives us some room for optimism as we head into the fourth quarter. The women’s accessory business has improved nicely second quarter to third. The home and men’s business are running positive.