Good day and welcome to the Abercrombie & Fitch First Quarter Earnings Results Conference Call. Today's conference is being recorded. (Operator Instructions). We will open the call to your questions at the end of the presentation. We ask that you limit yourself to one question during the question-and-answer session. At this time, I would like to turn the conference over to Mr. Tom Lennox, please go ahead, sir.

Good afternoon and welcome to our first quarter earnings call. After the market closed, we publicly released the quarterly sales and earnings release, balance sheet, income statement and updated financial history. If you haven't seen these materials, they are available on our web site. This call is being taped and can be replayed by dialing 888-203-1112. You will need to reference the conference ID number 5786431. You may also access the replay through the Internet at abercrombie.com. With me today are Mike Jeffries, Chairman and Chief Executive Officer; Mike Kramer, Chief Financial Officer; Mike Nuzzo, Vice President of Finance, and Brian Logan, the company's Controller. Today's earnings call will be limited to one hour. After our prepared comments, we will be available to take your questions for as long as time permits. Please limit yourself to one question, so that we can speak with as many callers as possible. Before we begin, I remind you that any forward-looking statements we may make today are subject to the Safe Harbor statement found in our SEC filings. Now to Mike Jeffries.

Good afternoon. Abercrombie & Fitch had a very good quarter. Mainly, we achieved our fundamental goal to meet our short-term financial goals while enhancing our brands and investing in the long-term. In that spirit, we took a major step towards developing the international component of our group initiative during the first quarter with the opening of our London flagship. Other major investments included a continuation of the actions we have taken over the past few years in terms of effectively leveraging our organizational structure in order to be more efficient and better positioned to analyze the business and respond accordingly. In contrast to other companies that are hindered by our rigid structure of divisions, which can result in a lack of information flow creating counter productive competition within business units. At Abercrombie & Fitch are brands that are aligned to benefit from sharing resources and data. For example, we consolidate selling data to help make more informed merchandize planning decisions. This ultimately leads to a strong gross margin. We also continued to reinvest in our existing store base. During the first quarter we upgraded approximately 40 of the 160 stores slated for 2007 upgraded projects. Our store refresh program is on track for $60 million worth brief refresh improvements for fiscal 2007. From a systems standpoint, we are making investments in technology to improve productivity and efficiency, as well as provide flexibility to the organization. We have already begun several new initiatives, and one of which is our core retail merchandizing system implementation. This project will deliver to the company, streamlined functionality and better data access. This will allow the organization to spend less time maintaining systems and more time being creative and focusing on fashion and trends. Once the core retail merchandizing system implementation is complete, we will introduce…

Thanks Mike and good afternoon. First quarter net sales for the 13 weeks ended May 5th 2007 increased 13% to $742.4 million from $657.3 million for the 13 weeks ended April 29th, 2006. First quarter direct-to-consumer net sales increased 43% to $43.5 million for the 13-week period ended May 5, 2007 compared to the 13-week period ended April 29th, 2006. Total company comparable store sales declined 4% for the 13 weeks ended May 5th, 2007 compared to 13 weeks ended May 06, 2006. The first quarter gross profit rate was 65.6%, up 20 basis points compared to last year. The increase in rate was due to improved initial markup, partially offset by slightly higher markdown rate versus last year. We ended the first quarter with inventories up 5% per gross square foot at cost versus last year, in line with guidance provided on our fourth quarter conference call, when we estimated that inventory would be flat to slightly positive on a per square foot at cost basis at the end of the first quarter. Going forward we expect to end the second quarter with inventory flat to slightly positive per square foot at cost compared to the second quarter of 2006. Stores and distribution expense for the quarter as a percentage of sales increased 220 basis points to 41.5% versus 39.3% last year. The increased in rate resulted largely from an inability to leverage rent and other fix costs due to the comparable stores sales declined, and as discussed on the fourth quarter earnings call, minimum wage rate increases and preopening costs associated with the London flagship contributed to the increase in percentage of sales. These increases were partially offset by a reduction in payroll hours on a per store basis, as well as by other variable expenses, which were…

(Operator Instructions).We'll take our first question from Janet Kloppenburg with JJK Research.

Good afternoon.

Hi, Janet.

And congrats on a good quarter. Mike, maybe if you could spend a little bit time talking about, qualitatively how you've strengthened the brands during the quarter? I mean, I see the products and I see that's improved but, maybe there are some hidden things going on that you could talk a little bit about. And also if you could talk a little bit about the strengths and continual flow of new look in tops and if you think that that will allow this question about the bottoms business being weak to sort of de-mitigated and if it's going to be a tops driven business going forward? And lastly Mr. Kramer if you could just talk about at what level of comp store growth you will get leverage on your store and distribution expenses? Thank you.

Okay. First question, strengthening the brands. I have said before and I think this true, we have to do two things very well to continue to prosper in this environment. We have to enhance our in-store experience, enhance the iconic nature of each of our brands and two; we have to deliver right merchandizing on a regular basis. I think we have made progress in both. We have store initiatives that I am excited about in-store lighting, music enhancing the look and feel of the stores and I think the results are obvious to anybody walking in the store. We've spent a lot of time working on enhancing the iconic nature of the product as well. I think that the brands look distinctive. I think that we are operating a business that is very consistent; consistent across categories, consistent across the brands. I think the mark of this business is consistency and I think that you have seen in our product, in our stores, we are improving markedly. We are running a tighter, better controlled business than we've ever run. And I think that you can see that in the results. There aren't wide fluctuations by brand, by category. This is becoming a very, very consistent business through intense control. Second question, new looks and tops. I think that’s a really good question Janet, because, our tops business continues to be good. Our bottoms business, not good, much better in men's than women's. We are running continued weakness in women's bottoms. I had expected it to turn better than it has, with the advent of the warmer weather and the increased share of the business coming from shorts. It continues to be difficult. I am planning at this point that the bottoms business will continue to be difficult. The women's bottoms business, female bottom's business through back-to-school. They are well into back-to-school. Obviously, we are pushing the tops business. I believe that the top's business will continue to trend.

Okay. Great, and do you think the men's bottoms business will be better for back-to-school?

It will better than first quarter because there is a greater percentage in through July in shorts. I would believe that their denim business is really an unknown. So we'll have to wait to see. I believe the men's bottoms business will be better than the women's bottoms business. I don't think it will be good, as good as the top's business.

We'll take our next question from Liz Dunn with Thomas Weisel

Hi good afternoon. I guess last quarter you provided some guidance for the corporate overhead piece that we should expect about flat to the fourth quarter level and I believe you came in about $10 million better than that. But it seems like you are saying the flex was primarily in the store's piece. So, are there some areas in the corporate overhead piece of SG&A that you had some unexpected favorability versus plan? Then also could you address the potential sales shift as we look at the retail calendar this year which may give you an extra week of back-to-school selling in the second quarter?

I'll address the first part of the question to start-off with, with regards to the MG&A in terms of the guiding to $100 million. No, it was definitely not unexpected. As I've said on numerous quarterly calls that we will manage our expense structure to our top line. We were able to save strategic dollars in terms of travels as we indicated on the upfront conversation as well as we save money on samples and we save money in terms of headcount. When the top line doesn't come in exactly where we had forecasted, we are obviously going to take a look at any and every area in more scrutiny then ever before and when Mike says that we are maniacal about it, that's in every aspect of our profit and loss statement. We were very pleased that we were able to save roughly about $9 million to what we had forecasted in our MG&A line which helped us offset the de-leverage in stores and distribution. So, we are excited about that. What I would say on a go-forward basis is, I don't anticipate Q2 to be roughly the $91 million, I would say that it's going to be in the range of $95 million to $100 million. The later part of the question in terms of the sales shift, we actually do believe that there is going to be some volume shift Q3 into Q2, largely due to a shift in the tax free weeks. But we do anticipate that's not going to impact our comps due to the shift of the 53 week this year versus 52 last year. I would also like to take this time to actually address the last question Janet, in terms of stores and distribution expense. Janet I am sorry to do this to you, but I am not going to answer it directly. What I am going to tell you is that that we will leverage stores and distribution on flat to slightly positive sales. However as I indicated earlier to Q1 that there was some downward pressure in terms of our expenses, $3 million a quarter roughly for minimum wage increases and another $3 million in terms of increased salaries that we took in terms of the management and MITs of our stores to get them to be more competitive. So, basically I will let you guys do the calculation, its basically about $6 million a quarter. If you back that out you should leverage on flat to slightly positive comps.

We will take our next question from Barbara Wyckoff with Buckingham Research.

Hello, hi everyone. Good job.

Hi, Barbara.

Hi. Could you give us some more details on the new merchandising systems? Give me some examples of what it's going to do versus the old systems? And then the question Mike, as usual about the whole accessories, that result into a more, casual look, more complimentary to the merchandise. Now how are they doing versus the previous more serious work?

Okay, let Kramer, take issue one, the merchandise system.

Yeah, actually, I have a surprise for you guys. I'm going to turn this conversation or this answer over to Kristen Blum, our CIO and she will be able to clarify that little bit for you.

Great. Hello everybody. So as you guys have probably are aware (inaudible) partnership deal with Oracle, for their pretty much comprehensive suite of retail applications that we will be implementing over multiyear plans, starting with the retail merchandising system as Mike had mentioned earlier in the conversation. It's really the core foundation for what we are doing. We are doing this for a lot of reasons, obviously the ones that have already been discussed, in terms of approving efficiencies, product activity, data integrity. But we also want to get rid of our old disparate architecture and systems that have been around for 15 plus years, that are really costing us from a total cost of ownership perspective. As well as the (inaudible) technologies that is up-to-date with where we are looking for our IT organization to support the business going forward. So we really looking to provide industry best practice, functionality, to the organization, and it starts with the retail merchandising system and we build on additional merchandising and supply chain components from there as they move forward.

The second part of your question, Barbara about RUEHL handbags. I believe that the hand bags do compliment the apparel now. I have to say that I'm really pleased with the total RUEHL assortments, as they are coming in the stores. And I think handbags look very good, and the success rate is excellent. We are clumping women's handbags, exclusive of Bleecker Street which is normally very positive across the chain. So, I think we have established a look that is unique and casual that we can really build upon.

We'll take our next question from Jeff Klinefelter with Piper Jaffray.

Yeah. Mike, the question is really on the fashion cycle that we're in and your discussion on the tops category. Include, you've been through these before, coming out of the very strong khaki and cargo cycle. Some similar trends towards more of the tops focus. Can you discuss comparing contrast of this transition versus that last transition, maybe what you learned during that from a merchandizing perspective and how this one is different? And then just a clarification on the international expansion, you've mentioned Tokyo is an '09 flagship opening. Is that literally the next store to open internationally or are there other UK and European stores that are sort of on-deck as well?

To answer the first part of your question Jeff, I guess I haven't got it through as you've just asked the question in terms of relating it to how we went in and out of that cycle in the past. Maybe I should. What I can say is that, our tops business is good and we will continue to push that business at a reasonable rate. I believe that key to what's going on in female bottoms now is denim. And the size of the basic denim business is in question for third and fourth quarter. We are doing everything we can to maximize all the business that is out there. There is going to be a fashion component, which I really don't want to talk about. But I believe that we will start mitigating the negative denim trend. I don't know how much it's going to change. So, the answer to the question is, I can't related to what happened in the past, all I can say is that we are doing our best in every category. In tops to drive that business as hard as we can and we are doing our best to seek next in female bottoms. We have got a lot of dealers out there, but we are not there yet. Tokyo '09, we are working on a deal in Tokyo that has not been finalized or agreed. We are working on other locations. We have not signed any deals for any other stores at this moment. We are being very selective. We are making a lot of money in London and we anticipate doing that every place we are going to go.

We'll take our next question from Rob Wilson with Tiburon Research.

Yes. Thank you. Mike you indicated that RUEHL would be profitable by end of year '07. How do you define that, do you mean that it would be profitable for the whole year or may be just for Q4? And also the other Mike, maybe you can help us with FAS 123 expenses. I believe it was $0.04 last year in Q1 what were they this year? year. Thank you.

Kramer, you could take one and two.

Yes, we're looking in terms of RUEHL profitability, along with our guidance, we're looking at basically Q4 to be profitable not full year. And actually two of the key factors for us to reach our guide path, are one, we would like it to get closer in terms of productivity to ANF. There is momentum there. The one thing I want to point out that is probably hidden under the covers a little bit, is the fact that even though we have posted negative comps for RUEHL, our transactions increased 18% on a per store basis. So, I am pretty excited about some of the trends that we're seeing there on that RUEHL. The other aspect that's going to be critical for us to reach for RUEHL profitability in Q4 is the gross margin, and getting that parallel or consistent with our other brands. There is no other company out there that can manage margins like we do. So, I am not too concerned about that one as well. As we restated in the script, we feel very confident about our ability to reach that, that profitability in terms of Q4. In terms of FAS 123, it was roughly around $5 million in Q1 of last year and roughly $1 million this year in Q1.

We'll take our next question from Paul Lejuez with Credit Suisse.

Thanks. Can you talk about mark down levels this year versus last year? And Mike, Jeffries or Kramer actually, inventory by brand and how you are planning for the rest of the year, I think second quarter you said flattish to up slightly. Does that differ by brand?

My only response to that is we really don't get into that level of detail when we're talking about this externally in terms of our inventory expectation by brand or really quite frankly even by category. I am going to stick with our comment with regards to the guidance, the low-end of the guidance range being correlated to a flat comp store and with that we think that our inventory will be flat to slightly positive as well.

We'll take our next question from Lorraine Maikis with Merrill Lynch.

Thank you, good afternoon. You have said a few times that the bottom-end of your guidance are based on flat comps and seeing a negative in the first quarter, what gives you the confidence that you can actually get that back up to flat and even positive?

Basically, if you take a look our historical builds, and in terms of the cadence through Q1; obviously I am not give you guidance in terms of by week in terms of April, but let us just say that in terms of historical builds, combined with where we are coming in, we feel strongly that we can hit the flat comp.

We'll take your next question from Lauren Levitan with Cowen and Company

Thanks, good afternoon. Mike I was wondering if you could give us a little bit more insight into some of your comments on RUEHL. May be give us a little sense of what the new prototype looks and feels like and how many stores are now reflecting that look. Also just trying to get a sense if it more consistent with the more casual approach that the merchandise now has. Then related to RUEHL, does the trend that you are seeing here particularly in transaction growth, does that at all have any implications for your real estate try to go forward or for how big you think this concept can be overtime. And I guess lastly, a gender mix within RUEHL; I know that had been changing, so I am curious, how that’s been playing out?

Okay. Look of store, we opened a store in Austin, Texas a few weeks ago. That is our first step of the new prototype; it's on one level and feels great. I was hesitant that we could make it work. It feels great. We will open the next step of this which is to reduce the selling square footage later this year and we are still working on the first of those stores. You have the date.

I think it would be in January.

Okay. So it's the end of the year in January. I am very comfortable that we are going to get increased productivity through it and it's interesting that our capacity isn't hindered by cutting the floor size down. The look of this and feel of the store is the same as current and I love that. I think it's terrific and I think it's a reflection of the merchandise. So I am very, very pleased with where we are going with RUEHL. Gender mix, we are growing the men's and women's business about the same; 63% female, 37% male. I believe the female percentage has up side.

We will take our next question from Dana Telsey with Telsey Advisory Group.

Good afternoon everyone.

Hi, Dana.

Hi, one of the things that we haven't heard as much about on this call is, how you are feeling about Hollister. Given the continued expansion plans for Hollister, how are you feeling about that business? How do you see it different than the core? And the other thing I'm noticing is that using the word consistent that you use to describe your business, its seems like getting smarter with systems is one of the investments being made and one of the outcomes. Where are you, what inning are you in those systems investments and what you are seeing there? Thank you.

Okay, let me talk first about Hollister. I love what's going on with Hollister. I think it looks great, feels great and is performing very solidly. As I started the conversation, we are seeing consistency across the business. Hollister, is a highly productive business. I don't expect to see wild increases or decreases in the likes in that business. We’ll continue to improve our productivity overtime. We are not going to over hype the volume in that business on an existing store basis. It will grow at a reasonable rate. It's interesting that our likes are consistent across the businesses and I would think that that would continue. It has to do with how we are controlling that business. The growth opportunity in Hollister is huge. We opened stores at highly productive levels and we'll continue to do so and I think everyone sees the potential for Hollister in many places. And now--

I'll talk about the systems initiatives and where we are at and I love the fact that you recognize the term consistent, which is really a message that I think we've always been sending but are definitely punctuating much much more today. I think the bottom line reflects that. In terms of the systems initiatives which I think are really going to give us a lot more productivity here in home office and a lot more efficiency. I think that we are quite frankly, probably, in totality about the beginning of the game, in the first two to three innings. Now there are certain aspects of our system initiatives where we are further down the road. But let me kind of break some of these down for you, let me put them into some categories. One that you've heard me talk about is our supply chain initiative. The first and foremost with regards to that is this merchandising core system that Mike talked about in the script and Kristen also alluded to with our agreement with Oracle. We are in the requirement phase with regards to this and we're anticipating an early 2008 implementation. The second aspect of the supply chain is our allocation system. We are in the late stages of development and the early stages of testing. This is one of the systems initiatives that we are further down the road and we are going to phase that end. The first brand will be phased in October of this year. The remainder will be post-holidays. Another aspect which I'm very very excited about is our inventory optimization tool, and that's actually going to go in play here in the next couple of months and it will be used for late fall and spring planning. And then the last…

We will go next to Christine Chen with Needham & Company. Christine Chen - Needham & Company: Thank you. Good afternoon.

Good afternoon. Christine Chen - Needham & Company: I wanted to ask as RUEHL has evolved since you launched it, have you seen a change in who the customer is, and are you currently happy with where the price points are? And then I also have some housekeeping questions for Mike Kramer.

Alright. To answer the question about RUEHL, I think we are seeing the same customer as we started. I think that customer has viewed as he anticipated to be post Abercrombie. I am very pleased with the current price structure. The prices are working and I think we are at a price structure that can grow a considerable business. I think the efforts we are making in terms margin improvement, cost reductions are going to result in a business of scale. Christine Chen - Needham & Company: Okay, great. Thank you, and then.

Thank you. Christine Chen - Needham & Company: The tax rate in Q1 was a little bit below where I had expected. I think you had guided 39% for first half, wondering what we should be thinking about for Q2? And then if you could give us ending square footage CapEx and depreciation for the quarter?

On the effective tax rate, our effective tax is and was, 39%. However, there are some positive aspects to that effective tax rate, in terms of entrance into London. You can actually see some favorabilities to that effective tax rate in the range of 10 to 20 basis points. And as always, there is always going to be adjustments to that based on reserves, based on state tax settlements, and most importantly what probably, what did actually effect this quarter's effective tax rate significantly is our tax exempt investment income. Those are usually the categories that impact that. You know, I hate to be really, really conservative with you guys, but what I would continue to do is use an effective tax rate of 39%.

I would like to just tack on the question of RUEHL, because I think, the complete answer to that question is, we think that we have a very good performer in RUEHL. But, I think if you look at this company and how we've emphasized consistent bottom-line growth into the future. What we're providing is a pretty good array of potential growth. Be it international ANF, Abercrombie flagships, international expansion of the kids store, continued domestic expansion of Hollister and then maybe some thing else, Concept five. We take the requirement that we continue to add stores in a reasonable prudent tested way to continue to grow our bottom-line very, very seriously. And I think it demonstrated success there.

Let me answer the other housekeeping question. I am glad that that's put into the category of housekeeping. Our square footage at the end of the quarter was 6.7 million. Our CapEx for the quarter was $112 million and our depreciation for the quarter was 44 million.

We'll take our next question from Randall Koenig with Bear Stearns

Hi, quick question for Mike Jeffries. You gave us an example of how the organization leverages off each other across the brands. Can you just give us some of the home office examples or different areas of the corporation, would it be on the product design side, whether it would be on merchandising side. That the brands truly do leverage off each other on a day-to-day basis? Thank you.

Well, to understand the business is that and this isn't a secret, we're organized by [silo] in design and by category in merchandising. So the category and merchandising gives us terrific strength in terms of reading the business, developing expertise by category, buying strength by category and I think will continue to fuel the business far end of the future. We are category specialists and to really understand this business, it's necessary to understand that that's the way that we are organized.

We will take our next question from Robin Murchison with SunTrust Robinson Humphrey.

Hi, thanks.

Hi, Robin.

Hey there. RUEHL, how large would RUEHL have to get to go e-commerce with it?

Oh, that's a good question we are anticipating going on e-commerce probably in the next few months on a lifestyle basis and the first category to go on e-commerce will be handbags. So that addresses my first response to how do we feel about handbags. We think that going up on the entire product line, we haven't set a date. But it's not going to be far in the future.

And the next comes from Marni Shapiro with The Retail Tracker.

Hey guys.

Hey Marni.

Hi Marn.

So, you've had a couple of things that have stuck in the stores besides than just mid-tops. Like a few dresses three or four of them here and there and a few woven tops particularly Hollister. And I am curious about some of the items that are working for you guys, that aren't mid-tops and going forward. And can also touch on in that category, swimwear and the toots and handbag business at Abercrombie and Hollister as opposed to RUEHL?

Okay. First woven tops, we are starting to see some traction in woven female tops. It has been a long push for us. But I think we are seeing that that category performs as our body conscious and in our easy and in our personality. We think that there is women top business, fashion women top business now until Labor Day and then we will talk about next spring. Dress category; we are starting to see some success, its checkered, but we are just starting and we are studying it very carefully and we hope to see some traction there. We are studying and looking at result before we are going to make huge commitments there. We have been very successful in the top category in all of the brands and the last was Swim. The female swim business for spring has been exceptional across the brands. It's an exceptional, we under bought it like crazy. We have a lot more potential in that business. I wish I could say the same for male swim, it doesn't fit, but we'll do better next year.

We'll take our next question from Dana Cohen with Banc of America.

Yes, hi guys.

Hi Dana.

Hi Dana.

Hey. Mike, I just wanted to circle back on the bottom's issue. In your opinion is it just girls are just not buying bottoms at all or what do you really see going on there, just to think the entire bottom's category for growth is down. And then second for Kramer, can you just go over that leverage issue again? I wasn't sure if you were talking for the second quarter or the back half.

I think the female bottoms business is tough. I repeat we have to see what's going to happen with denim, or back-to-school because that's going to dictate a level to the business and it's going to be determined by what is a basic denim level. We've been comping negatively there for quite a while. Will that turn around for back-to-school, I hope so? I think our assortments were terrific. There is a fashion component in denim for back-to-school that we hope. We run a very strong nit business but it's not been able to overcome the denim business and clearly our short business has been terrific but it's not been able to overcome the negative there. I think we're doing everything that we should be doing. I think our assortments were balance and good, and this too shall pass. It's kind of the answer to the question. In terms of the leverage, in terms of stores and distribution, let me see if I can clarify it a little bit more. On a quarterly basis we are incurring roughly $6 million of incremental expense. That's evenly split $3 million a quarter for minimum wage increases, $3 million a quarter for salary increases for our manager and MIT levels in our stores. If you exclude those incremental costs, we will definitely leverage on flat to small single-digit like. But now I am knowing that I have that $6 million of incremental expense. There will be a need to be more of a positive compress to leverage. I will let you guys do the calculation.

I'll just circle back and say the last thing about the bottom's business. I truly don't know what it's going to be for back-to-school, but I am looking at it as the worse possible case and trying to look at the rest of the business to makeup for that if it is the worse possible case. We still have a few months to see.

We'll take our next question from Nora Kahn with HSBC.

Hi. Thanks. So, I have a question about your gross margins. It seems like despite the weaker comps, you were able to improve gross margins, you don't have higher inventory levels than you expect to going into Q2. And I am wondering, what kind of allows you to do that? What processes, any speed games? And also on you IMU, you mentioned there IMU improvements and because [I have to do] is changes in brand mix, any processes going forward that might affect?

I think the answer to the first question. I think the people who followed us have seen that we do very good job balancing inventories with demand. We are quite proficient at inventory management and we are paranoid about it. IMU, we never promise or calculate an increase in IMU, but we constantly seek it.

Roughly more of a detail aspect of that; the IMU really is driven by two categories; one of them Mike alluded to in terms of the mix of business, tops versus bottoms. Secondly as you guys know, our pricing strategy in our London stores allows us for a higher IMU. I am not going indicate to you the business with regard to the dollar volume that London. But given the fact what we set up front in comparison to that avenue, it should give you some idea as to impact this store could potentially have for IMU.

We will take our next question from Jeff Black with Lehman Brothers.

Yeah, Mike Kramer, two quick questions. Did you break out what the London flagship, the impact on a basis point basis and how long we get that? I assume it to be next three quarters. And also on the inventory, all this talk and consistency, I mean we have seen a pretty consistent build in inventory. At what point, do you just get uncomfortable with that, what kind of levels of inventory do you look at, that you say, you don't want to have? Thanks.

The first question, in terms of the London breakout, in terms of profitability. Yes, I do know that, but no I am not going to tell you. We are very excited about it and we said that its accretive just as if our Fifth Avenue store is. We're incredibly excited about both these stores in terms of the profitability. Secondly, in terms of the build on inventory. We are comfortable with where we're at from an inventory perspective. We have always been the first and foremost to call out any inventory issues that we have. We are in the process or in the midst as I said, in terms of where we're. As I tell Michael at the time, Mike Jeffries all the time, he is never satisfied. We are constantly looking to optimize better, better and better. And with the implementation of our inventory optimization tool in the next two months. We might be able to even become more optimized in that area. But, we’re very pleased with where we're sitting from an inventory perspective. Do you have anything to add?

We'll take your next question from Brian Tunick with J.P. Morgan

Thanks.

Hey Brian.

Hey guys. So couple of question I guess if I can. So Kramer, you are not commenting to Jeff's question about how much the London flagship impacted.

No.

The store in distribution line.

No, just that it was positive.

Was positive. Okay. When you originally guided for the quarter, you said a lot of the earnings pressure would be from that?

You want to know just the expense side, not the store (inaudible).

Yeah, just the expense side?

$2 million.

And we'll take our final question today from Margaret Mager with Goldman Sachs

Hey Margaret

Hi, hey thanks. And the one in-store is awesome especially the sound system. And lots of other things about it too.

Thank you.

I have a question. Can you talk about your Abercrombie stores that I know you are slowing down the number of openings you are just doing 10 this year and you are starting to approach your goal of over 100 stores. Would that ever be a number that you would consider revising upward in the US and can you just talk about your philosophy on numbers of stores and what are the right numbers of stores for your various businesses going forward? Thanks.

Okay. I think that's a really good question. We don’t anticipate the number of ANFs going considerably beyond where we are now. We have mall openings. So we've said maximum 400 and the reason for that is that we can maintain ANF in the US as an aspirational brand at that number. And how we look at the total business is that we will not overextend any brand, but we have enough brands in the germination stage, domestically and international to fuel our growth long time in the future. Kids business we said we could probably add another 50 stores, but that's maximum for kids and Hollister obviously has the domestic potential to be a much, much, much bigger business than it is currently. But the point is we have invested in the brands in the iconic nature of the brands, so that they can travel internationally, domestically and we do not over torque any thing for consistent bottom line growth. So we don't torque the business on a likes basis, we torque the business on an over expansion basis what we do is very deliberate and proven. But most important, protects the integrity of the brands. And that's the future of the business. Brands that are iconic, that are aspirational, that's were we've been and I think we have just started to prove that. But good question, thanks Margaret.

Any other questions?

There are no further questions at this time.

Thank you, guys. Thank you.

This does conclude today's conference call. We appreciate your participation you may disconnect at this time.