Good morning. Welcome to the Ross Stores fourth quarter and fiscal 2008 earnings release conference call. This call will begin with prepared comments by Michael Balmuth, Vice Chairman, President and Chief Executive Officer, followed by a question-and-answer session. (Operator Instructions) At this time, I would like to turn the call over to Mr. Balmuth.

Good morning. Joining me on our call today are Norman Ferber, our Chairman of the Board; Gary Cribb, Executive Vice President and Chief Operations Officer; Michael O’Sullivan, Executive Vice President and Chief Administrative Officer; John Call, Senior Vice President and Chief Financial Officer; and Bobbi Chaville, Senior Director of Investor Relations. We’ll begin our call today with the review of our fourth quarter and 2008 performance, followed by our outlook for 2009 and the longer term. Afterwards, we’ll be happy to respond to any questions you may have. Before we begin, I want to note that our comments on this call will contain forward-looking regarding expectations about future growth and financial results and other matters that are based on managements current forecast of aspect of the company’s future business. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from managements current expectations. These risk factors are detailed in today’s press release and our fiscal 2007 Form 10-K, fiscal 2008 Form 10-Qs and fiscal 2008 and 2009 Form 8-Ks on file with the SEC. Earnings per share for the 13 weeks ended January 31, 2009 grew 9% to $0.76, up from $0.70 from the 13 weeks ended February 2, 2008. Net earnings for the quarter grew to a record $97.4 million, from $94.5 million in the prior year period. For the 52 weeks ended January 31, 2009, earnings per share grew 23% to $2.33, up from $1.90 for the 52 weeks ended February 2, 2008. Net earnings for fiscal 2008 increased 17% to a record $305.4 million, up from $261.1 million in 2007. Fourth quarter sales increased 5% to $1.734 billion, with comparable store sales down 1% from the prior year. For the full year, total sales rose 9% to $6.486 billion,…

Thank you, Michael. As Michael discussed, our fourth quarter operating margin improved slightly over the prior year, as the 40 basis point increase in gross margin was partially offset by a 35 basis point increase in selling, general and administrative costs as a percent of sales. The higher gross margin during the fourth quarter was driven mainly by better merchandise margin, which increased about 70 basis points. As Michael noted, our more liquid ultimate by position this year, enabled our buyer to take advantage of the very attractive close-out opportunities in the markets. Combined with leaner inventories, we also realized faster turn and lower markdowns. The improvement in merchandise margin in the quarter was partially offset by an increase in occupancy and distribution expenses versus the prior year. About half of the higher, selling, general and administrative costs as a percent of sales during the quarter, was driven by the de-leveraging impact on store operating costs from the slight decline in same-store sales. The remaining pressure was mostly related to expenses equivalent to about $0.015 per share to close the five dd’s locations at year end. Finally as Michael noted, both our balance sheet and cash flows remained healthy. At the end of fiscal 2008, we had $322 million in cash and short term investments, and $150 million in long term debt, comprised of two series of notes due in 2018 and 2021; proceeds from which were used to finance our distribution. In addition, we have a $600 million un-drawn revolving credit facility with a wide syndicate of commercial banks that remains available and extends through July 2011. As a result, the combination of our existing cash balances, on going cash generating capability and current credit facility, gives us plenty of financial flexibility to fund our growth and working capital…

Thank you, John. To summarize, Ross Stores was able to achieve strong sales and earnings growth in 2008, despite one of the toughest macroeconomic and retail climates on record. As mentioned earlier, we generated 2% growth in same store sales, added 23% gain during 2008. More importantly, we continue to show earnings growth in the second half of the year, despite the fierce economic headwinds that exerted pressure on the retailing world and became increasingly difficult as the year progressed. Our comparable store sales slowed from the strong 5% gain we posted in the first half to a 1% decline in the second half. However, our strict inventory management enabled us to drive faster turn that is led to better than expected gross margin. This allowed us to leverage these revenue gains into solid 13% earnings per share growth for the third and fourth quarters combined. These financial results, especially compared to the vast majority of other retailers, reflect the continued resilience and flexibility of our off-price business model when it is well executed. Looking ahead, we remain confident that our on going ability to deliver compelling bargains will continue to resonate with today’s increasingly value driven consumer. Our continued focus on efficiently executing our off-price strategies will remain the key to maximizing our prospects for sales and earnings growth, while optimizing stockholder returns over the both, the short and long term. At this point, we’d like to open up the call and respond to any questions you might have.

(Operator Instructions) Your first question comes from Marni Shapiro - The Retail Tracker.

Two quick questions, the first is housekeeping. You guys have done a lot of work on shrink over the years than you have initiated a couple of years back. I was curious as the economy gets tougher, have you increased your reserves for ‘09? Then the other is for Michael. I know there is so much inventory out there; we all know that there’s a ton of inventory out there. I was curious if you could just talk about the quality of inventory and if you’re seeing the quality of brand improve for you guys, still even at the end of the year and heading into ‘09 and if you feel good about those relationships heading into ‘09, as it seems some of the inventory commitments have started to comedown a little bit?

I will take the first one on the shrink reserve. This is John. Our practice is to reserve based on our most recent historical results and we recognize that in these tough economic times, there could be some upward movement in shrink; we’ve tried to provide for that. We are also investing pretty heavily in shrink control on measures. So, hopefully we’ll have a good result this is year.

Great, thanks.

It is Michael. On merchandise availability and the quality of brands and relationships, our merchandise availability has been strong and continues to be, and this is at all levels, both in moderate and the upper end of the business and the quality of the assortments that are available, as well as the brand has really never been better. I think the relationships have gotten stronger through these tougher times for ourselves, with the marketplace and I think it puts us in good stead going forward.

Your next question comes from Kimberly Greenberger - Citigroup.

John, I was hoping you could help us with the comp metrics in the quartered number of transactions versus the average signet. Then Michael if you could talk about your inventory plans for the year; on going double-digit declines, can you help us understand how you’re able to execute this and does it involve a change in your packaway strategy? Thanks.

Kimberly, this is John. On the comp metrics, actually our total basket is down a couple of points; the transactions are up one, which resulted in the downward comp. So we’re seeing customers spend a little less, but the traffic launch transactions have been pretty healthy.

It’s Michael. Relative to our inventory position, as you all know we cut our inventory dramatically last year. It actually started at the end of ’07, cutting it. Basically, our premise was increasing the flow of receipts to stores in a more consistent, actually rapid manner and with the work we’ve been doing over the last several year, in approving the speed through our whole distribution network, that helped give us the capability to cut our inventories and anticipate that we would be able to still replenish the stores quite frequently. So, we have not seen the customers say ‘ouch,’ in terms of not having product in our store and so we’ll continue to run at lower level this year as we’ve said. It does not affect our overall packaway strategy. We are able to make decisions; however on some product that we might have packed before, we might slow now, some portion of it or all of it. So, on an overall basis though, our packaway strategy has not changed.

Your next question comes from Brian Tunick - J.P. Morgan.

Thank. Hi it’s Evren Kopelman for Brian. The first question is about your square footage growth. Have you thought about 2010, if you expect the unit growth to potentially return to normal rates or if you still think it will be in the mid single digit range and do you still think you can be a 1,200 store chain?

No, as it were in 2000, obviously we’re not that far out. We did I think last year announce that our growth this year would be more in the mid single levels and I don’t know whether we’re ready to talk about 2010 yet, based on what’s going on in the market.

In terms of long term growth we still see ourselves having the potential of being 1,200 or beyond, the 1,200 is your number.

Okay and then secondly in terms of rent, how many stores do you have in centers with either Linens ‘n Things or Circuit City that could potentially give you kick out clauses or rent relief? Michael O’Sullivan:

Finally, your packaway has really declined over the past several years from the mid 40s to I guess mid 30s at the end of last month. Again, you mention your packaway strategy is not changing, but can you talk a little bit more about whether that’s kind of the rate you plan to keep or what that means in general inventory planning?

Well, our packaway inventory levels will fluctuate based on availability of product and also the level in which we exceed our sales plan and so, we haven’t had a materially different view of that for years and so I would say for modeling; John we are guiding people?

That’s even kind of on a year-over-year basis as a percent, and obviously there is seasonality that comes into play there as well.

Your next question comes from Paul Lejuez - Credit Suisse.

Thanks, guys. You had mentioned your plans for merchandised margin to be up for the year. Can you maybe talk us through how that might look throughout the year; where your real opportunities are from a merchandise margin perspective and maybe address if you think that you still have opportunity in the back half? Then second, just wondering if you’ve seen any impact improvement in the stores that are located close to some of the Mervyn’s that are closed? Thanks.

Well, relative to merchandised margins, as we look at ‘09 Paul, actually we think there’s still some upside as the markets are pretty good for us by size. Additionally, as we manage inventories tighter, we think we can get quicker turns and reduce some of the markdown. So, we still see some better upside in that throughout the year, and a piece of that by quarter is covering out that meaningfully right now as the total is looking at the four year level.

Even if we get to the back half there is still opportunity, right?

Yes, we think there’s opportunity in the back half as well.

Paul, on your second question about impact from store closings, our expectation, stating the obvious I guess is, had more competitive drive in the market, we’re going to master it from there. We think many of those shoppers are going to be looking for bargains and we think if we execute on our strategy of delivering those targets we’re going to pick up business.

Have you seen anything just yet on some of those store closings?

I would just add some things; we believe we are seeing some benefit, but it’s difficult really to quantify, especially with all of the other external issues that are impacting not only us, but all retailers today, but certainly over the longer term, closures could do some very good things for us. It should enhance merchandise supply; it should give us a further ability to attract good retail talent and I think our market share should grow as we can play as we have the competitive landscape.

In terms of quantification Paul, just to put in perspective, many of these retailers have remained closed for both [Inaudible]. If I go through the list we have 400 Ross Stores that are in five miles of Linens 'n Things; we have over 200 Ross Stores that are in five miles of the Mervyn’s; we have several 150 within five miles of the Shoe Pavilion. So there isn’t much about change that hasn’t had a retail go out of business within a competitive sort of feedback. We are pretty happy with our business so far based upon our preparation to performance and to be the successful [Inaudible] given the extent of the retailers going out of business.

Your next question comes from Jeff Black - Barclays Capital.

For John, what drove the distribution expenses a little higher in the quarter? I don’t believe I caught that; and Michael, why not use this opportunity to buy a lot of stock up here and put some of that money into growing stores if you think you got a good stable ROIC model; and if we do at some point get around to growing square footage again, would we likely see Ross move into some new geographic areas? Are we there yet or would we see dd’s expense? Thanks.

Jeff, I’ll take the first one on the DC. They did de-lever by 20 basis points in the fourth quarter, but DC costs really can fluctuate on a quarterly basis. We have certain DC costs that get capitalized in inventory and as inventories comedown, those costs flow through the P&L, so there’s a timing issue there. So, I think it is probably more constructive to look at DC for the year, to take out some of the time indifferences and we did levered by about 20 basis points based on productivity and efficiencies that were achieved in the DC’s.

On the square footage question Jeff, I mean to be clear, we are growing square footage about 5% to 10% this year and as John mentioned earlier, we’re looking at plans for 2010 and beyond. We expect to continue to grow. We haven’t yet made decisions about when we would actually market; that’s probably a couple of years away, but I’ve got no opinion of that right now.

Your next question comes from Stacey Pack - SP Research.

A couple of things; one is can you say what the drag was for dd’s for the quarter? Two can you tell us what shrink was for ‘08 or did you come out ahead versus your reserve this year? Three, the comp to leverage occupancy and SG&A and then just going back to the whole merchandise availability question; specifically thinking about the second half, how are you thinking about managing the business given that there was so much product late ‘08 early ‘09? I guess I’m kind of surprised packaway isn’t higher and I’m just wondering how you think about it. Have you changed your strategy at all to compete and how low can you get inventory going forward? Thanks.

So, the first one is dd’s drag. I’ll take that one. So for the year, it’s about 35 basis points. That included about five basis points related to the closure that we had at year end in dd’s. That compared to about 40 basis points in 2007.

Is that in the fourth quarter or you don’t break it out by quarter.

That is broken out by quarter. We expect to improve on that as we go into ‘09. The second question was comp leverage? We think on the expense line we need probably about a 3% comp to get leverage on expenses and occupancy and the third question was on the shrink reserve. We actually were a little over reserved as we came in with physical inventory and I think we took about 10 basis points on the keen basis in the income during the year. So, I think we’re adequately reserved.

Relative to how we’re thinking about the business going forward in terms of availability, we would expect that the year-over-year volume in the year and availability would still be there. I’ve been doing this for a number of years and availability has always been there, but I think retailers are having a hard time forecasting their sales patterns. When that happens, it leads to more inventory for the off-price sector and I don’t think this will be any different for the back half of this year. How low can we get inventories? I don’t know, okay. We’re going to keep moving the needle. We’re certainly going to do what we’ve said for this year and I would expect that it will take some further reductions going forward, but we haven’t started planning ‘10 yet from an inventory level basis at this point, but certainly, the business is built on receipts not inventory levels and as long as we’re getting enough fresh receipts to our stores, we seem to be satisfying our customers.

Just on the inventory, a lot of retailers are getting better control over their inventory for the second half. So, why would you not be changing at all in your strategy? I mean why do you just think they’re going to be off in forecast? Wouldn’t it make sense to maybe have more packaway or something along those lines?

When they get control of their sales line, I’ll be more concerned.

Your next question comes from David Mann - Johnson Rice.

In terms of dd’s, John can you quantify in terms of basis points what that improvement you expect to be on the drag in ‘09? Then in addition can you give us a sense on how many stores or what kind of time line you would expect to get to profitability there, and then I have a second question for Michael.

Sure. We probably expect it to trend with five to ten basis points of improvement in dd’s in ‘09 Dave.

And then how many stores or when would you expect it to be profitable?

Okay, and then Michael, obviously the fourth quarter environment, everyone was like caught by the [Inaudible] that’s defined there. When you see the commercial environment as it’s sort of starting to pen out in the first quarter and related to what you saw in the fourth quarter, are you seeing any level of improvement in terms of what the competition is there?

Are these promotional?

Exactly.

I think it’s a little tanner right now okay. Again pre-Easter hasn’t really kicked in yet. It’s too early February. Certainly the clear out prices on forward are extremely aggressive and department stores advertising, discounts on full product up to 85% offsets unusual; on new spring merchandise it doesn’t feel much more aggressive than it’s been in prior years.

Your next question comes from Sean Noughton - Piper Jaffray

I guess I have a couple of questions here. First, can you remind us of some of the puts and takes within the operating margin that may impede your progress towards achieving, an operating margin that you’ve seen before, a 9.5%, 10% level?

Having said that, we are doing a good job of maximizing merchandise gross margin of inventory control and we are always looking for expense save. The company has a very good history of being pretty fertile on the expense lines, so we’ll keep coming with those things and get back to more healthy margins.

Then in terms of just specifically freight for the year, how far down are you planning that?

For the year we believe just based on fuel pricing, the way it’s been I think fuel pricing today is just at about 30% lower than it was last year. So, we do expect some help from that on the freight line; probably 10 to 20 basis points in ‘09.

Okay and then on dd’s, is there anything specific within the trends in the merchandise that you are seeing within that business?

It really is very broad based. Its broad based, the business is a younger business in terms of the customer level; in terms of some of the businesses in the store, the younger businesses are more important, but the trend is very broad based.

Okay, and then lastly on the sales tax increase that’s set to go in here in California, on April 1, can you comment on or quantify any sort of impact that you’ve seen in prior times when you’ve had some sort of a tax increase?

It’s constitutive; we’ve gone back and we’ve looked at it, but the reality is what’s happening in California is just a small subset of what’s happening in the overall economy. I mean with the housing market getting worse, with California legislatures [Inaudible] cost of budgets and federal governments and state of the banks, it’s hard for us to figure out what the impact of all of those things is and certainly, perhaps one thing, the sales tax increases have been very hard. We tried, but we just don’t have…

Your next question comes from Rob Wilson - Tiburon Research

You’ve had a lot of success, I guess recently with Mid-Atlantic. Are those stores as profitable as the rest of the chain now? Have they historically been less profitable? Do I have that correct?

Yes, you have that correct. Relative to store contribution they don’t do as well, because the volumes aren’t what the other parts of the chain are. We have done well recently in the Mid-Atlantic from a comp stand point, but they still aren’t at the level of store volumes of the chain. Michael O’Sullivan:

So that gap is closing, but is it a material gap still John?

It’s enough to where they’re planning to work on.

Okay, also in your cash flow statement, I noticed an up tick in depreciation in Q3 and Q4 versus the prior year and I was wondering if you could help explain that John?

Sure. We brought online a part of our Moreno Valley distribution center, we had things added to that depreciation line and that’s started in kind of third, fourth quarter of this year.

So that will continue into the first half of ‘09 and do I have that right, $175 million to $180 million is your guidance for depreciation in ‘09?

Yes, that’s right.

Okay. One last question, in your guidance you provided for Q4, you suggested that there will be no interest income or expense; would it be flat net and there was certainly expense in Q4, so I was wondering if you could help us understand that, John.

Well that rate, that’s actually down on investments pretty severely during the fourth quarter and that’s what led to that difference in interest income.

Your next question comes from Dana Telsey - Telsey Advisory Group.

Can you talk a little bit about, when you think about your customers in this environment, do you feel you’re gaining new customers from the stores or bigger share of the wallet from your existing customers and if so, how do you track it? The next thing is, on the competitive landscape out there, how has that changed given the ultra promotional environment that we’ve had? Is our discounters encroaching more, is the dropdown in department store pricing making it more competitive? How do you see the landscape and how are you adapting to it also? Thank you. Michael O’Sullivan: Dana, this is Michael O’Sullivan. On your first question of our customers, it’s very hard for us to track precisely where our customers are coming from. We always believe that our customers have lots of different choices and we’ve always believed that our customers shop around within the markets. So, when we look at our business now versus the business of other retailer, what we have to conclude is that we are getting a bit of share; probably getting more customers into the store and buying those customers and therefore expanding our share versus competitors; just looking at the relative cost metrics that has to be true. In terms of your question about the competitive landscape, that’s a good question. It’s hard to predict when that falls on this economic crisis we’re going through. As we said a little bit earlier, we do think that we’re pretty well positioned and we expect to come out of this economic environment stronger. As more retailers struggle, as more retailers drive business, we think that’s going to be good for us long term.

(Operator Instructions) Your next question comes from Patrick McKeever - MKM Partners.

I know February is a small month and then you’ve got this Easter shift in the current month that makes it difficult to assess current trends, but I just wanted to ask if is there any discernable, meaningful change in trend. I mean you think consumers are feeling, your core customers are feeling a little bit better these days, a little bit worse? I know you talked about 2009 being a very difficult year, but any insight that you might be able to provide into just kind of current trends will be helpful? Thanks.

I think all we’re willing to say is that we’re happy with February and it is very early in the season to think that we’re seeing anything discernable going on out of February and I think there is a lot of bad news out there and hopefully it will start moving in the right direction, but we are not economists and it’ll be too early for us as a retailer to form any conclusions.

Thanks Michael and then second question, you mentioned close-outs in the press release, that there are huge opportunities in close-outs and most of your buying, still manufacture overruns, right. Are close-outs becoming a meaningfully bigger percentage of your buys, and how about picking up those orders. Are close outs canceled orders as well or is that something different. I guess I’m just wondering how the mix of merchandise that you’re buying is changing.

Okay, close-outs, overruns and canceled orders are all one and the same. So, the mix of what we are buying is we are a close out oriented company and we are seeing more close-outs available now, so close-outs even are a bigger part of our mix than they are normally, but it is a mix of all of those three types of purchasing that you said that forms the basis of our talking about ourselves as a close-out driven, off-price company. So, it’s somewhat different, okay, and the numbers are higher in the level of close-outs that are in our assortments today than before and the big point though is, it really isn’t just a percentage gain, it’s the quality of the close-outs versus the past. It’s been a very good shopping time.

So getting some brands anyway that you might have had a year ago, I mean you’re getting new…

Some of that and more of the resources we’d like to carry to most of them. So, it’s a mix of some newer brands in the store and also a mix of getting more products from top tier brands.

Thank you. We will now turn the call back over to Mr. Balmuth for closing remarks.

Thank you all for attending. Have a very good day.

Thank you. This concludes today’s conference call. You may now disconnect.