Mel Dick: It is the personnel and costs associated with the field retail organization as you have more stores, more districts, more regions. Also the home office expenses associated with supporting that retail expansion as we''ve grown our revenues up 17 plus percent. You''re going to have growth in your merchandising and your back office support functions.

Mark Montagna (C.L. King & Associates, Inc.): With the catalog, are you seeing a significant increase in your mailing expenses?

Mel Dick: There was an increase in postal rates and we assumed that there was going to be an increase in postal rates and have built that into our plans. Hence it didn’t have a significant impact on us this year from that standpoint.

Mark Montagna (C.L. King & Associates, Inc.): Are you seeing increased redemptions on the coupons and are there any thought of trying to pull back to protect margins?

Daniel Griesemer: Yes, we are seeing a slight increase in the redemption, but we are not planning on pulling back as those coupons.

Richard Jaffe (Stifel Nicolaus & Company, Inc.): Any comments about the second half in regards to those ads spend in your direct investment?

Daniel Griesemer: We''ve tested television in the first half of the year where we are not going to be spending money on television in back half of the year, and we''ve directed some of that money that we''ve planned on television and to magazine ad spend and those spends are approximately flat this year with last year. We are doing the 8-page and 4-page national magazine ads and two-in-one, where appropriate in holiday and we are pleased in confident about that strategy.

Richard Jaffe (Stifel Nicolaus & Company, Inc.): What fuels the second half confidence for you from finance, operations and merchandising standpoint?

Georgia Shonk-Simmons: Fall just got on the floor. What has happened so far with the August environment hasn''t had much to do with fall merchandise. We still believe in the fall merchandise going forward. We also believe we will pick up share. We have been touting managing inventory for almost six months now. We''ve taken a different inventory approach to looking at all the products keeping us into buy taking very strong positions on the items and the categories we believe in.

Susan Sansbury (Miller Tabak & Co., LLC): Can you comment about the markdown rate versus the higher IMU on a cost basis?

Mel Dick: On an overall IMU basis, we were up 200 basis points in IMU, probably 75 to 100 of that basis points was as a result of the direct sourcing initiative. We''ve also had some great cost negotiations relative to our domestic vendors. In terms of the offset to that, our markdowns were up about 170 basis points over the previous year quarter and our discounting was up about 130 basis points as well. We had some de-leveraging of our occupancy cost of slightly less than 100 basis points, all of which net down to our gross margin going down about 170 points.

Susan Sansbury (Miller Tabak & Co., LLC): Given the more difficult environment in the third quarter and/or the second half, is it fair to say that you won''t get any SG&A de-leveraging?

Mel Dick: A lot will depend on the strength of our selling and where that comes out as a result of some of the macro economic conditions to see whether there is any opportunity to leverage our SG&A. Certainly, if there would be an increase or the traffic would come back, we are well positioned to take advantage of that with the strength of our merchandise and our marketing initiatives.

Crystal Kallik (D. A. Davidson & Co.): You have always been very successful at staying away from the promotional environment. How do you approach that this year versus how you played it the past several years?

Georgia Shonk-Simmons: If you look at what we sold, 65% in Q2 was still at regular price. That''s still a very high percentage although it was less of a percentage in the prior year. The environment has changed with traffic and other macro issues that are keeping her away from stores and in fact shopping. For us, it will mean again, keeping it close handle and watching those sales very carefully on a day-to-day basis from a reaction perspective. Now, again we have been conservative with our inventory, and we have instituted cost controls. We are feeling that we are doing the things that we need to do to protect our business against this environment.

Crystal Kallik (D. A. Davidson & Co.): Is there anything that''s changed from Q1 customer research to Q2 customer research?

Georgia Shonk-Simmons: There will be more emphasis on her wearing pants and then that changes how she feels about what she wears on top whether it be more jackets again and more prints. We are excited about some of the products that we have with shine. The shine and glimmer seems to be working because she doesn''t own a lot of that.

Crystal Kallik (D. A. Davidson & Co.) On your gift card business, could you talk about your thinking specifically for Q4 and the gift card opportunity?

Daniel Griesemer: We rolled out in April a gift card fixture in our stores that carries 96 different graphics and carriers, envelope carriers. We are pleased with what that means to the business and how we are seeing increased start of sales and redemption. We''ve seen increase on a per location basis and gift cards do play an important role in the holiday gift-giving season and we are very aware of that and have strategized for it. But it is not what is going to determine the overall success of the season. It will be the product and the great customer experience she has come to know and love.

Marc Bettinger (Stanford Group Company): Do you think on a same-store basis you are still picking up share?