Good day and welcome to The Children’s Place conference call. At this time all participants are in a listen-only mode. Later there will be an opportunity to ask questions during our Q&A session. I would now like to turn the program over to Ms. Heather Anthony. Please go ahead.

Thank you. Good morning everyone. Thanks for joining us today for a review of our fiscal 2008 first quarter financial results. Joining us on this morning’s call are Chuck Crovitz, Interim Chief Executive Officer and Sue Riley, Executive Vice President of Finance and Administration. Also on hand to answer your questions at the end of management’s remarks are Rich Paradise, our CFO, Richard Flaks, Senior Vice President of Planning, Allocation and IT and Dina Sweeney, Group Vice President of Merchandising. Before we begin, I would like to remind participants that any forward-looking remarks made today are subject to the Safe Harbor statement found in this morning’s press release as well as in our Securities and Exchange Commission filings. After our prepared remarks we will be able to take your questions. Now I would like to turn the call over to Chuck.

Thank you Heather. Good morning everyone and thanks for joining us. Earlier this morning we announced our first quarter 2008 financial results. In a difficult economy we delivered income from continuing operations of $0.66 per share compared with $0.64 per share last year. Operating income was up 15% and operating margin increased 20 basis points to 8.5%. We believe these results reflect good progress towards our goal of returning the company to its historical levels of profitability. Last fall we outlined several key areas of focus including improving our merchandising assortments, lowering our inventory levels, expense management and commencing a strategic review to maximize shareholder value. I am pleased to say that in the first quarter we made progress in each of these areas. First and foremost we are returning to our roots in terms of merchandising strategy. By that I mean great color, great outfitting and great fashion at a tremendous value. We began experiencing increased consumer acceptance of our product in Holiday which continued in the first quarter particularly with Easter, dressy and summer. Our improved merchandise and value proposition are enabling us to take market share. Particularly as consumer behavior, we believe, is shifting towards value. According to NPD our market share increased 30 basis points to 4.2% during the first calendar quarter of 2008 versus last year. While recent business trends are encouraging, our outlook has to remain cautious since most of our business is done in the second half of the year. As noted earlier, Dina Sweeney, our Group Vice President of Merchandising is here with us this morning and will happily go into further details about our merchandising performance during the quarter. As many of you know we recently promoted Dina who is transitioning seamlessly into her new role. Dina is a 20-year Children's…

Thank you Chuck and good morning everyone. For the purpose of today’s call we will be discussing the business on a continuing operations basis. The Disney Store business has been classified as discontinued operation in accordance with generally accepted accounting principles given our decision to exit that business. Consequently, continuing operations reflect The Children's Place business only. Now moving on to our results. Net sales from The Children's Place business for the first quarter ended May 3, 2008, increased 12% to $400.2 million from $356 million last year. Contributing to our sales growth in the quarter was a 70% increase in eCommerce sales. Comparable store sales for The Children's Place business increased 5% for the quarter on top of last year’s 2% increase. Our 5% comp was comprised of an approximate 3% increase in comparable store sales transactions reflecting modest increases in conversion in traffic and an approximate 2% increase in average transaction size. A mid single-digit increase in units per transaction offset a low single-digit decrease in AUR. All regions comped positively in the quarter with the exception of the Southeast and Canada, which comped in the negative low single-digits. Gross profit dollars increased 13% to $171.1 million. Gross margin increased 10 basis points to 42.8%. Lower mark downs, production and design costs and occupancy as a percentage of sales were partially offset by higher distribution costs as we have not yet anniversaried our Southeast distribution center and lower initial mark ups. SG&A as a percentage of sales was 29.8% in the quarter representing 40 basis points of leverage. Contributing to the leverage were lower payroll and benefits expense, lower store opening expense reflecting fewer openings versus last year and lower marketing expense all as a percentage of sales. Partially offsetting the leverage were store related expenses and supplies,…

Thanks Sue. To wrap up we believe that we are taking the necessary actions to put the business on a solid footing. Our first quarter financial results reflect initial progress of our goal of returning the business to its historical levels of productivity and profitability. Thanks. Now operator we’d like to open the call to questions.

(Operator Instructions) Your first question comes from the line of Kimberly Greenberger – Citigroup. Kimberly Greenberger – Citigroup: I wanted to ask about the inventory numbers you could give us. The in-store inventory here at the end of Q1 excluding that in-transit piece would be helpful. I think Sue you mentioned the initial mark up in the quarter was down slightly. Is that a rise in sourcing costs you are seeing or is there something else in there? That would be helpful. Thirdly if you could just remind us when you anniversary the opening of that new distribution center.

The inventory in-store without in-transit was up in the low single-digits. So we were roughly in line with the guidance we gave last time. The difference between where we ended and the guidance was purely goods that go onto ships sooner than we thought they would.

I mentioned the IMU was slightly down. That is largely the assumption of mix year-on-year as opposed to cost increases. Our AUR you may have noted as well in prepared remarks is down slightly as well. The anniversarying of the DC is back-to-school of 2008.

The next question comes from the line of John Morris – Wachovia. John Morris – Wachovia: I guess following up on that Sue, are you seeing any sourcing increases or cost increases as you get into the back half particularly as it relates to goods coming out of the Far East but also prices of cotton, etc. and raw materials? Separately if you all can talk about the merchandising, particularly from a product strategy perspective as you head into the fall back-to-school season. Where the opportunity is on a year-over-year basis and how you are thinking about it from that perspective. Finally, for Sue just kind of quick question. Did last year, the numbers you released today the $0.64 did that include a $0.03 due to options expense?

The first question you asked of me was about cost of goods. What we continue to see in cost of goods is yes there is pricing pressure. It is coming from a variety of…the dollar is weak right now; commodity prices including cotton are increasing. However, that has been mitigated somewhat by demand where the retail environment in the U.S. is somewhat down and so we are pretty much able to hold our costs in line in part, again, sourcing is a core competency of this company. So we are pretty good at being able to shift production to lower our costs and also we are seeing that the lower demand is helping us to mitigate higher cost pressure. Then the next question you asked of me specifically before I turn it over to Dina had to do with last year’s earnings per share and whether or not that included option expense. That did in fact include option expense. So last year EPS including those costs was $0.64 and then if you take that out it would have been $0.68. This year we also had some items in the first quarter that one could characterize as one-time and if you pull that out of this year’s first quarter it would have been $0.70. John Morris – Wachovia: Can you just give us a brief run down of what those were?

In the first quarter of this year? John Morris – Wachovia: Yes.

Primarily professional fees associated with some of the activity that we had around certain lawsuits. John Morris – Wachovia: Then the merchandising question.

As Chuck had mentioned from a strategy perspective we are returning to our roots, offering the great color, great fashion, and great outfits all at a tremendous value. We have reduced our overall investment in “best” product this year substantially below last year and we have shifted that into “good” products. We continue to see an opportunity in girls and newborns with a new focused and narrow assortment. Our inventory investment in denim we substantially lowered from last year as well which has really brought us in line with our 2006 position which was our best denim year ever. From a category perspective we still feel that denim will still continue to be the single largest volume driver for the company during the back-to-school period because it does remain the primary staple for the children’s wardrobe. We’ve made some adjustments to the girl’s denim program. We have introduced new washes and fits on both the boys and the girl’s side in the good price point. In addition we will continue to offer premium denims to silhouettes however we have reduced that investment as well. Just overall we have also differentiated from last year our fall one assortment versus our fall two assortment really focusing on more shorts and short-sleeved products which we believe is the correct strategy as we move forward.

The next question comes from the line of Margaret Whitfield – Sterne Agee. Margaret Whitfield – Sterne Agee: Looking at the balance sheet I wonder what you could say regarding your future financing needs. I think you were working on the term loan. What is the status of that? The interest rate and timing?

Margaret, we are continuing to work on that term loan. We feel that not withstanding the fact that our borrowing was less coming out of this quarter than what we had anticipated some months ago we still feel that given the volatility of the business it is just wise to have a backup source of financing. So we are continuing to work on the term loan. As to timing, I’d say it is fairly the next couple of months we should have it closed. Margaret Whitfield – Sterne Agee: So the revolver presently can sustain your needs of financing inventories and store openings?

Yes. Margaret Whitfield – Sterne Agee: That’s good news. I know, Chuck, you were assessing the real estate. Any thoughts or updates for us on the strategic review?

No. We have made good progress on that assessment and it’s not quite complete yet so I’d like to hold off on that and we’ll update you on that in the future. Margaret Whitfield – Sterne Agee: How about shared services? I assume there were some severance costs in Q1. Or were there not Sue?

There actually were some severance costs in Q1 but they were offset by some severance adjustments from last year. So in fact there was not a one-time expense in the first quarter associated with severance in total. Also bear in mind that the severance costs associated with the exit of the Disney business and people in shared services who had been working on the Disney business were in fact included in discontinued operations. So severance is not a material component of the continuing operations PNL. Margaret Whitfield – Sterne Agee: And I mentioned good response to summer. Any comment on May sales trends thus far?

No, it’s a little hard right yet. But we’ll be happy to talk about that in another month or so.

The next question comes from the line of Brian Tunick – JP Morgan. Brian Tunick – JP Morgan: The SG&A came in better than we were expecting. We’re just wondering are you still endorsing sort of flattish for the rest of the year and was there any timing in the marketing shifting out of Q1 into Q2? Second question, any comment on shoes? Is that still a big focus? Dina do you still think that is the right direction for where this business should be going? Finally any comments you can make, probably not, on Ezra given the 90-day standstill agreement? Are you still working with Lehman Brothers? Is this going to be something we are going to hear from soon?

SG&A, actually I think we will see a little bit of leverage this year versus last year on a continuing operations basis. That is pretty consistent with what we had said. We expect to see most of the savings from our restructuring really kick in starting this quarter and into the second half. I think you can expect to see some leverage year-on-year. With regard to marketing spend the first quarter shifted…we’re going to see more of that in the second half than we expect to see in the second quarter. So we are putting more emphasis on back-to-school and holiday. Dina?

From a shoes perspective we are still focusing on shoes. We have identified some key learnings. We see some opportunity in narrowing the overall SKU assortment we have given the stores. We are looking at re-evaluating the square footage as we continue to open in new locations. We also are playing with the longevity of specific categories as we continue to move forward. We are also finding ways to improve and leverage our clothing to our shoe locations. So it is something we are definitely focused on.

In terms of Ezra there is not a lot new to say on this. He remains an active, engaged member of our Board and we continue to work actually with Lehman Brothers. The Board is committed to addressing any qualified offers we might receive. There has not been much change on that.

The next question comes from the line of Janet Kloppenburg – JJK Research. Janet Kloppenburg – JJK Research: On the shared services expense of $107 million can you give us an update on where you think that will come out as a stand alone business for The Children's Place?

I think what you are referring to is shared services expense from last year. As you look at The Children's Place what you can expect to see is we couldn’t restructure all of that out but the number you see here in SG&A is pretty much comparable to that. The concept of shared service no longer exists. Janet Kloppenburg – JJK Research: I appreciate that but what should we be using as that level? What will it come down to this year? I know it is not commensurate with proportion of sales.

A way to answer that is as I was saying to Brian Tunic if you look at SG&A last year on a Children's Place only basis and look at SG&A this year I expect to see some moderate levels of leverage. Janet Kloppenburg – JJK Research: Have you delineated that for us Sue?

We haven’t yet because we have to restate 2007 to pull out the Disney business. Janet Kloppenburg – JJK Research: When will we get that?

You’ll see it in the first quarter and then Rich Paradise and his team are working on the remainder of the year. We should have that in the next month or so?

I would say that’s fair. Janet Kloppenburg – JJK Research: So we’ll get it before you release the second quarter?

I think that is fair. Janet Kloppenburg – JJK Research: Should we expect the IMU to be down for the rest of the year?

We’re looking at IMU being down moderately for the year this year compared to last, yes. Driven by primarily product mix. We are SKU’ing more into “good” as opposed to “best.” Primarily it is mix driven. Janet Kloppenburg – JJK Research: I expect as mark downs go lower and as you anniversary some pretty promotional, high inventory periods that you could offset some of that lower IMU with lower mark downs?

That is the plan. Although we are cautious about back-to-school. Janet Kloppenburg – JJK Research: The interest expense was much lower than I expected in the quarter. Can you give us some guidance going forward?

Actually we’re not giving guidance at this point. Interest expense was lower in the quarter primarily because we had cash oversees that was still invested during the quarter so we were able to mitigate some of the expense. Beyond that I think it is best if we wait until we have the financing we want to obtain secured and then we’ll give you some guidance on what you can expect. Janet Kloppenburg – JJK Research: Could that benefit that you saw in the first quarter trickle into the second and third quarters as well? The higher cash?

Second quarter we come into a trough because of buy back and inventory so I would say not. Janet Kloppenburg – JJK Research: The depreciation level about $17 million in the quarter. Should we be using that as the go forward for the quarter?

I’d say you should take it up. Because there is going to be some capital spending but I’d say very moderately. I’d say it was $17.7 I think in the quarter and if you round up you’d be okay for the year. Janet Kloppenburg – JJK Research: Did you guys say your carry over inventory was 9% versus 5% last year? Does that mean the clearance inventory is higher than it was going into Q2 2007?

That is predominantly spring goods are higher as a percentage of our total. Part of that is because the go-forward inventory back-to-school is down but yes we are higher. The reason for that is last year the customer really did not like our line so we aggressively marked it down very early, the spring line. We were at $4.99 and under events by the beginning of April. This year we have not been as aggressive because we haven’t needed to be but we are clearing that inventory comparably at a sell through rate comparable to last year. Janet Kloppenburg – JJK Research: Just two more questions. When you look in to the back half of the year do you look for your inventories to be as lean as you expect them to be coming out of Q2, which is down around 10% per square foot? Dina, can you talk to us a little about how much you were able to affect the back-to-school and holiday product lines?

To answer the inventory first, we don’t give guidance out more than one quarter but directionally we do expect the inventory to be down. I just want to make one other point about the end of the second quarter. We gave guidance based on last year but if you look at it on a two-year basis it is actually flat to slightly up to two years ago. I just don’t want everyone believing that the big negative inventory position we are reporting at the end of the second quarter is a function of not having enough. It is a function of just rectifying where we were last year. We feel very comfortable relative to two years ago. Janet Kloppenburg – JJK Research: Sue if you could talk about if there is anything you could do to affect the tax rate? Dina my question on holiday and back-to-school.

The tax rate we gave some guidance. Janet Kloppenburg – JJK Research: I know it is 45 but it is high.

I know, it is high. We know. It is a high tax rate. The thing I’ll point out there Janet is that is our book rate. Cash, the actual taxes we will be paying out in cash will be lower than that. That rate is a function of our having repatriated cash from Asia so we are no longer permanently invested in that. To be honest there is very little we can do with that rate this year. I think we have a finance team…I know Rich and his team will be working to get that rate down in future years but I think this year the order of magnitude there is relatively little that can be done.

Although my primary focus is Canada and eCommerce I really always have been an integral part of the merchandising team.

The answer is yes she affected it.

The next question comes from the line of John Zolidis – Buckingham Research. John Zolidis – Buckingham Research: A question on the balance sheet. You indicated that 2/3 of the approximate $50 million of exit costs related to Disney have already gone out but you have these restricted assets in Chapter 11 that are on the balance sheet, about $99 million. Is that the working capital associated with the Disney Store business?

Yes. The balance sheet is complex. The assets that were held for sale as of the end of the quarter primarily it is held in the bankruptcy. So inventory…it is working capital. It is cash that we received, that the bankrupt entity received for the inventory that was sold to Disney. John Zolidis – Buckingham Research: So my question is when we finalized the exit of Disney or we look at the balance sheet for next quarter is there any other working capital or cash drag that is going to kind of out flow to Disney?

Very little. Nothing to Disney from CP. So there is no cash movement from The Children's Place to Disney or to Hoop. What you will expect to see is there are certain obligations that are obligations of The Children's Place Corporation and that is the 1/3 remaining that we expect to pay out between now…it is things like severance for employees of The Children's Place that had been associated with Disney but they were not the obligation of Hoop the entity and other items somewhat like that. I would expect to be largely done by the end of the year with some flow into next year. Not material amounts. John Zolidis – Buckingham Research: Can I understand from your statements about the current revolver being sufficient to handle your seasonal and capital needs but decide to try to get the term loan just as an insurance policy, if you will, that when we get to year end we will be in a net cash position?

That is a reasonable conclusion. John Zolidis – Buckingham Research: A little bit of a broader question. Right now you may be aware that your stock is trading about $4 higher at about 15%. Ezra had previously talked about making a bid for the company at $24. The stock is currently approaching $33. Given that we are very early in seeing the progress and improvement from a number of the initiatives you have in place, how would the Board consider a take out proposal from either Ezra or another party in light of the potential for the stock to go higher based on your own performance as the year progresses?

The Board is going to do what the Board would typically do. I think you just outlined the calculus that any Board would go through in evaluating offers. We basically have here sort of a high class problem. It is great that the strategies are starting to take hold and the stock is going up. I think it just puts the shareholders in a good position overall. That is what our objective has been.

The next question comes from the line of Dana Telsey – Telsey Advisory Group. Dana Telsey – Telsey Advisory Group: Can you talk a little bit about in the current environment how are you looking at the promotional cadence going forward particularly as you compare back-to-school and also on the merchandising side as you think about back-to-school and holiday season price points and what you see being different with the assortments this year compared to last year? Also any update on the CEO search?

In terms of the promotional strategy we are being a little bit cautious based on what we saw last year with back-to-school so what we’ve done is we have positioned the strategy that doesn’t necessarily anniversary last year’s promotion activities. But we have the contingency to go there if we need to because we could go into back-to-school and see something different to what our expectations are. It is a little early for us to actually definitively lay out our promotional strategy because we are sort of keeping our options open based on the experience we had last year.

From a merchandising perspective again, we really differentiated some of the products in fall one to fall two this year, really driving it towards a wear-now perspective. Holiday has been more of an evaluation of reducing that SKU assortment and really allowing the product the time to live on the floor. Dana Telsey – Telsey Advisory Group: Then with the CEO search?

The CEO search. That is ongoing. No particularly update on that but it is ongoing.

The next question comes from the line of Linda Tsai – MKM Partners. Linda Tsai – MKM Partners: With regards to ending Q2 inventory levels being lower than last years it sounds like an improvement from what you were previously expecting at the end of 1Q. Was this simply a function of discounting more to sell the inventory or was there something else going on?

No. I think we had given a directional…we just said we were going to be negative. We have not given any definitive numbers around that. Now we’re just being more definitive but it is pretty much in line with where we expected to be.

This is part of a longer-term strategy we talked about last fall that we felt we needed to bring inventory levels down and the first quarter that we could really fully affect was this back-to-school period. This is the first time we are fully feeling the effect of that strategy. Linda Tsai – MKM Partners: At what point do you think you will provide more detailed guidance? You mentioned when you secure financing. When should we expect that to happen?

No, I had said that when we secure financing I think we can give you more visibility into what our interest expensing might be. At this point we haven’t identified a time we expect to go back and give guidance. Our business was very volatile last year and as such we stopped giving guidance. We’re not giving a definitive point of time at this time.

The next question comes from the line of Jim Chartier – Monness, Crespi, Hardt. Jim Chartier – Monness, Crespi, Hardt: Most of my questions were answered. I was just curious on where you are in lowering the cost for new store build outs and if the reduced costs were going to be in place for you to open stores in the second half of the year?

Yes and yes. We have made good progress on doing that and are starting to see some nice results from the sourcing holding the store building off in the first half of the year has allowed us to clearly consolidate. We are still not where we think we can ultimately be but it will represent good progress and you’ll see that in the second half of the year. Jim Chartier – Monness, Crespi, Hardt: What kind of percentage decline in price are you targeting? Or have you targeted for the stores?

I think I would prefer to talk to you about what we have accomplished. So let me update you on that in the second half of the year when we’ve actually got those in place.

The next question comes from the line of Margaret Shipiro – Retail Tracker. Margaret Shipiro – Retail Tracker : Richard I do have an inventory question. Not that anyone is worried that you would not have enough inventory in this environment…but the end of the second quarter you guys are hoping to end down high singles to low double. Should we expect that through the entire back half of the year? Then just with the merchandising side you guys have had some issues in newborn and big girl so is the inventory down across the board or are you focused on certain areas with managing it a bit more tightly?

From an inventory perspective again we are not going to give definitive guidance beyond one quarter but directionally we expect inventory to be down throughout the whole year. What I’m not going to do is sit here today…some of it we have not even purchased yet. Some of what comes in the fourth quarter is spring product. We have just seen our spring presentation so until we have actually purchased the goods it is hard to give definitive guidance that far out. But our targets are directionally to be down throughout the whole year. In terms of the investment what I would say is that the inventory investment is down in all areas because all areas were inflated. It is just not a straight line. It is not down equally in every single business. We went back and did an analysis of the businesses and we’ve made the strategic investment in different places based on where we thought the opportunity was. Even within businesses it is not equal by category. We just really went and did a lot of analysis on the inventory. Margaret Shipiro – Retail Tracker : If you guys could also just follow-up on the merchandising side a little bit. You talked about moving out of best and into better. I guess a little more color around that. Some of the tee stands of fashion do they sort of start to disappear or are they more of the one-off items that you guys have layered into your stores?

We actually said we re-invested the mix from best into more good product. But you will still continue to see fashion elements within the store reflected on the tee stands. We have not given that up. They are unique pieces to us. Margaret Shipiro – Retail Tracker : So it won’t look too basic.

Although we have not given up those fashion pieces we have as part of the narrowing we have narrowed it. One of the reasons we did that was we were experiencing not leaving enough fixtures open to put sales product on so we have narrowed the assortment go-forward to make the assortment look more focused and tightened.

The next question comes from the line of Jeff Steinberg. Jeff Steinberg – No Company Listed: As you are looking at the business structurally you are obviously making a lot of progress here. Is there any reason to think you can’t return to the historic operating margin of the business and success of the business?

That is our goal. It will take some time to get there. There are some structural changes that have to be made. It will take some time but we can get there. Jeff Steinberg – No Company Listed: If I’m not mistaken I think you had talked in the past about having targets for operating margins that had been substantially better than the 6% you had achieved.

That is correct. But understand the divestiture of Disney we have expense we have to absorb. So it will just take some time to get there but it is certainly our goal to restore The Children's Place to its historical level of profitability. Jeff Steinberg – No Company Listed: I’d appreciate any perspective as you think back to the historical margin structure of the business and you think about the improved operational actions you are taking talking about from a big picture standpoint what might allow you to perhaps do better than what you had done in the past in terms of operating margins?

What are the levers we are looking at? Jeff Steinberg – No Company Listed: Yes. Where do you see some large opportunities Chuck to structurally improve the business which might allow margins to be 6+% over a recovery period?

I think it is a combination of generating higher sales per store and certainly our inventory mark down performance is going to help us there. There is some category expansion that we talked about in terms of shoes. We have a very booming eComm business that we feel very good about and that has positive operating margin leverage for us. Then we do have some engineering to do on the cost side which will both reduce cost and increase efficiencies. Some of those will actually have impact on margins as well. So we are going through a laying out series of initiatives but in terms of the long range planning we have done we think we can get back to the historical levels of profitability that are well above 6%.

We’ll take our last question from the line of Kimberly Greenberger – Citigroup. Kimberly Greenberger – Citigroup: I just had a quick follow-up on the IMU Sue. The pressure you are expecting on IMU through the rest of the year as you increase you investment in good and decrease the best investment can you give us any sense…is that like 50 basis points or 100 basis points? Any help there would be great. Secondarily, if I remember properly last year in 3Q or 4Q, it may have even started in the second quarter…I’m not sure. The mark down for the core Children's Place division I think were up multiple hundreds of basis points. Can you just remind us a general range you saw in increased mark down activity last year?

Let me start with IMU and short of giving very specific guidance how about if I say that your range is not far off the mark. I’d say between 50-100 basis points on IMU for the year. On mark downs, we had actually seen a significant increase in our mark down rate in the second quarter of 2007. That is when we really started to see the consumer acceptance of our products was not what we had really anticipated. So it was really second quarter, third quarter and fourth quarter of last year where mark downs were significantly ahead of the 2006 levels. We are expecting them to moderate but as Richard said earlier we are being somewhat cautious at this point because we haven’t seen the consumer’s reaction to our back-to-school assortment yet. I will say we are pretty encouraged by the early consumer response to summer.

That concludes our Q&A session. I would like to turn it over management for any closing remarks.

I’d like to just thank everybody for joining us today and for your interest in the company. We look forward to updating you on our business initiatives and our progress throughout 2008. Thanks again.

Thank you. This does conclude today’s conference call. You may disconnect at any time.