The company''s working capital decreased to $157 million at the end of the third quarter from approximately $164 million at the end of third quarter of 2006.

Once again, the effectiveness of the company’s triple channel business model allowed it to end the quarter with premium retail inventory including retail inventory at the distribution centre down 10% per square foot compared that with the prior period.

Total inventory increased 16 million or 9% to $194 million at the end of the third quarter from $178 million at the end of third quarter of 2006.

This increase was primarily attributable to the addition of 69 premium retail stores representing more than 30% increase in retail square footage since the end of the third quarter of 2006.

The weakening housing market, rising energy prices, tightening credit market and unseasonably warm fall weather across the country clearly resulted in a difficult retail environment.

The firm has seen no improvement in that environment as it enters the holiday season. Customer mindset continues to be influenced by the macro environment and there appears to be some distraction associated with the overall geopolitical climate and the upcoming elections. Along with the outside influences, there is a fashion dilemma in the Women''s Specialty Apparel sector. Clothing plays such an important part in defining her identity and her lifestyle, it seems the company has missed the mark as far as providing the right fashion for this baby boomer customer.

Prior 2007, the brands in the sector all serve various specific niches. As the environment has changed over time, the firm has all become homogenized creating the perception that there is a lack of newness, excitement and therefore exclusivity in the products that the firm offers. The company relies too heavily on what worked in the past and found itself in the middle of too much sameness. In short, for a brand that has been known for differentiating itself, the firm was not standing out from the crowd as dramatically as it had done in the past.

The jackets and sweaters underperformed during the fall season. The fabrics were too dark and appeared too heavy for the unseasonably warm weather. However, customers did respond to the successful launch of new pants initiatives, featuring new silhouettes, fabrics and fits.
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For the holiday season, it certainly appears that this trend will continue. The firm also knows that the customer remains very conservative when it comes to spending money on herself. The company is seeing that she is focused on comfortable, cozy apparel and leaning more towards a dressed up casual look for the season. The pant business continues to be a relative highlight for the firm and sweaters are starting to pick up as the country is experiencing cooler temperatures. The company launched its holiday gift assortment prior to Thanksgiving with the seasons best gift ideas. The highlights of this year include jewelry, sweaters, pant sets, new PJ shop and a wide array of specialty items for decorating her home.

Key questions and answers from the third quarter fiscal 2007 earnings call conducted by Coldwater Creek Inc. on November 28, 2007.

Jeff Black (Lehman Brothers): You had mentioned that you had identified over assortment as an issue in the mix. Where are we in the process of taking care of the over assortment? What categories are we talking about? How might that continue to impact the business into the spring of next year?

Georgia Shonk-Simmons: First of all, early spring will be what it was planned to be as it obviously had already been received. You will start seeing an impact to the SKU and style reduction at the end of March and beginning of April of this summer. You will start seeing that impact and it will continue throughout the year. We are absolutely tearing apart every category, still wanting to keep a neglectic mix of what we do. We are not going to turn the basics that isn''t the point of view. The point of view is to look at every single category and decide how we will run this railroad, and we are excited about the opportunities, so it starts for early summer and we''ll go all the way through the year.

Lizabeth Dunn (Thomas Weisel Partners): The results came in for the third quarter a little bit better on the gross margin line then you had initially predicted. For the fourth quarter, what should we be looking for to get to that flat guidance in terms of the composition of gross margin and SG&A deleverage?

Tim Martin: On our gross margin rate, what you should expect to look at is something comparable to Q3 or potentially a little bit lower than Q3 as we move into our post holiday clearance events. But I think generally in that ballpark would be a good place to tag.

Lizabeth Dunn (Thomas Weisel Partners): You opened one last spa store than we were anticipating. Is there anything going on there or was that just a shift in timing of the opening pattern?

Daniel Griesemer: It''s a shift in timing to the first week of November basically out of the fourth week of October.

Mark Montagna (C.L. King & Associates, Inc.): Can you give us specifics as to some of the cost reduction initiatives that you were able to employ for the third quarter?

Daniel Griesemer: We were looking at every aspect of the business and that is absolutely we are doing enterprise-wide. It includes suppliers. It includes resources, investments. It''s everything we are doing, so it''s across the board.

Mark Montagna (C.L. King & Associates, Inc.): Would it be fair to assume that it was probably going to be more to come in the future for cost savings?

Daniel Griesemer: We have also said that we are developing our budget for 2008 and in that process, we are looking at how are we going to continue to execute on our overall strategy and story, which by the way has not changed. What has changed is that we need to take into account a very difficult macro environment that we are saying is not going to improve with the change of the calendar to 2008. We are assuming this is the environment in which we are going to have to operate and we are going to have to figure out a way to flourish in this new environment. We are looking at absolutely everything.

Mark Montagna (C.L. King & Associates, Inc.): Can you give an update on the SAP implementation that you are doing with core merchandising system? Where you are in that process and what the go live date will be?