Good afternoon and welcome to Shoe Carnival’s fiscal year 2008 Q4 and full fiscal year conference call. Today’s call is being recorded and is also being broadcast via live webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. This conference may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company’s actual results to be materially different from those projected in such statements. These forward-looking statements should be considered in conjunction with the discussion of risk factors included in the company’s SEC filings and today’s press release. Investors are cautioned not to place undue reliance on these forward-looking statements which speak only has of today’s date. The company disclaims any obligation to update any of the risk factors or to publically announce any revisions to the forward-looking statements talked about during this conference call or contained in today’s press release to reflect future events or developments. I will now turn the call over to Mr. Mark Lemond, President & Chief Executive Officer of Shoe Carnival for opening comments.

Welcome to Shoe Carnival’s fourth quarter and fiscal 2008 earnings conference call. Joining me on the call this afternoon is Kerry Jackson, our Chief Financial Officer and Tim Baker, Executive Vice President Store Operations. Cliff Sifford, our Executive VP and General Merchandise Manager is normally on the call but will not be with us today. Faced with a difficult economic climate, we operated all aspects of our business in a conservative fashion during 2008. This included implementing cost control initiatives, maintaining lean and fresh inventories, managing capital spending and applying conservative balance sheet and liquidity management policies. These initiatives enabled us to reduce per store inventory levels via almost 10% at year end, generate free cash flow of $13.9 million during the year and in fiscal 2008 with $24.8 million in cash and cash equivalents and no interest bearing debt. As you no doubt have heard too many times prior to this conference call, the soft goods retail environment continued its downward spiral during and after the holiday selling season and needless to say we were not happy with the way our business trended in the fourth quarter. We saw a significant decline in store traffic during the quarter which resulted in a very low double digit decrease in footwear unit sales on a comparable store basis. However, our average unit retail in footwear actually increased by low single digit percentage. This combination resulted in a comparable store sales decline of 8.3% for the fourth quarter. Due to the promotional nature of retail during the quarter, our focus on clearing seasonal goods to maintain fresh inventories and the deleveraging of occupancy costs against a lower sales base, our gross profit margins dropped to 24.7% for the fourth quarter from 27.5% last year. As a result, we recorded a net loss…

Let me begin by discussing the results for the fourth quarter and the year followed by information on cash flows and ending with certain expected 2009 financial metrics. Our net sales for the fourth quarter decreased $7.4 million to $156.9 million compared to $164.3 million for the fourth quarter 2007. An increase of $7.4 million in new store sales was offset by an 8.3% comparable store sales decrease for the quarter and to a lesser extent a decline in sales in stores we’ve closed. Gross margins for the fourth quarter 2008 decreased 2.8% over the same period last year to 24.7%. The merchandise margin decreased 2.0% while buying, distribution and occupancy costs increased 0.8% as a percentage of sales. The decrease in the merchandise margin was due to a more promotional holiday sales period and our aggressive clearance of seasonal product in order to lower our inventory levels at year end. The 0.8% increase in buying, distribution and occupancy costs was attributable to a higher occupancy cost due to the combination of higher costs due to operating additional stores during the quarter and the deleveraging effect of lower sales. SG&A expense for the quarter was $43.6 million. This expenses declined $67,000 for the quarter despite operating additional stores at the end of Q4 compared with Q4 last year and incurring additional store closing costs during the Q4 this year of $1.1 million. While expense savings were wide spread reductions in advertising and employee incentive expenses were the primary savings that offset the increase in costs of the additional stores operated during the quarter and the additional store closing costs. Store closing costs included in SG&A in Q4 this year were $2.4 million of which $1.9 million was a non-cash impairment to store assets for stores we expect to close in…

(Operator Instructions) Your first question comes from Jeffrey Stein – Soleil Securities. Jeffrey Stein – Soleil Securities: Kerry, I joined the call a little bit late and I want to make sure I have something straight here. SG&A, you said there were $2.4 million in store closing costs which included $1.9 million of non-cash charges. How does that tie in to the $1.1 million of store closing costs? I guess I’m a little bit confused on how much is impairment and how much would be other?

I’m lost on the $1.1. What we incurred, let me just repeat for the full quarter all store closing costs were $2.4 million. Now, included in that $2.4 million was a non-cash impairment charge of $1.9 million. So the remainder $500,000 were cash based store closing costs that represented various items. Jeffrey Stein – Soleil Securities: Question with regard to your assumption, if you’re modeling a low single digit negative comp, what kind of buying and occupancy deleverage would you see on that type of number?

It’s going to deleverage. We’re going to do a good job of controlling our costs from the standpoint of while we incurred additional occupancy costs without a doubt because we’ll have more stores opened, we’ll get the full year effect of the occupancy costs on stores we opened last year plus the new stores this year, the net new stores. But, we should be able to reduce our buying and distribution costs. However, we’re still going to incur 1% to 1.5% increase in actual costs year-over-year. Given a low single digit you should see some deleverage 10, 15, 20 basis points depending upon your comp assumption. Jeffrey Stein – Soleil Securities: So 10 to 20 basis points and you saw 80 in the fourth quarter on an 8% plus comp decline, correct?

Yes. Jeffrey Stein – Soleil Securities: Now, you mentioned that February was a very good month for you but you also said it was a clearance month and I just want to make sure I understand, were you very promotional in February because it sounded like you did everything you could to clear your inventories by the end of January. Did you end up having some carryover or were there other factors that we should be considering here?

Certainly we continued to clear product in February, you’re always going to clear boots and two primary months for clearing boots are January and February. So, definitely we continue to clear product in February of 2009. Absolutely. And, it was very promotional. Jeffrey Stein – Soleil Securities: As far as how you’re approaching the customer for 2009, if you look at your assortment as kind of a good, better and best assortment would you be tending to try and skew your opening price points a little bit lower this year? Or, how are you kind of thinking about marketing to a much more value driven consumer?

Well, we’ll skew our opening price points a little bit higher this year and obviously that takes in to account a whole raft of issues not the least of which are increased cost in certain cases although we are starting to see a leveling off and even in certain instances a decline particularly in non-athletic product. But, as far as opening price points we don’t expect to see a decline however, as you well know, you’ve been associated with this company or you’ve been involved in this company for a long, long time, we are very promotional at store level and we gear our marketing efforts and our advertising efforts around promotions off of regular retail price. So, we’ll continue to react to the nature of retail as we did in 2008. Jeffrey Stein – Soleil Securities: So the scenario sounds to me like we should expect buying and occupancy deleverage and continued pressure on the merchandise margin line.

We will continue to put pressure on merchandise margins if we need to and again, that’s going to depend upon what our competitors do and how they react particularly in the high selling seasons of Easter, back-to-school and holiday periods. With this concept, that’s one of the advantages of this concept is we can be reactionary. One thing that we are continuing to focus on and I want to make this very clear is we will continue to focus on keeping our inventories lean, fresh and low. Now, we don’t expect to reduce inventory levels the same 10% we saw at the end of this past year versus the year before but we’ll continue to put pressure on the inventory not lit it right up over the same periods of the year before. Jeffrey Stein – Soleil Securities: One final question Mark if I may, you alluded to the fact that you’re beginning to see product cost level off somewhat particularly in non-athletics. What I’m hearing from some of the other family footwear retailers in the industry is that for the back half of the year they are expecting a fairly sizeable drop in product costs and I’m wondering if you are kind of planning the same thing?

Jeff, I’m not going to say that we’re expecting – I’m not going to get in to what we would consider a sizeable reduction in cost per unit but we are expecting to see an overall decline in the cost per unit of non-athletic product. We don’t expect to see that same sort of reduction in athletic product.

Your next question comes from Sam Poser - Sterne, Agee & Leach. Sam Poser - Sterne, Agee & Leach: Can you walk through the comps, November, December, January?

Sam, we don’t normally give that out. They weren’t significantly different except for January was much worse than November and December. Sam Poser - Sterne, Agee & Leach: The comp that you mentioned, that was February clean or was that to date you were running up high single digits.

It was February. I will tell you that with the shift in Easter it is very difficult to get a clean comp store sales number in the first part of March as we start to enter the Easter selling period. I think Easter last year was the third week in March I believe, if I’m right, around the 20th or the 21st. So, from a comp standpoint those sales will be shifted in to April this year. Sam Poser - Sterne, Agee & Leach: The second half of February, what drove the increase of the second half of February to come up high singles you still must have had good – what is driving the sales other than the promotional activity?

I don’t know Sam, I’ve heard all kinds of reasons why. Sam Poser - Sterne, Agee & Leach: No, no, like what product, what product was driving it?

Oh, from a product standpoint? Sam Poser - Sterne, Agee & Leach: Yes.

We continue to see athletic product perform very nicely. Even boots and women’s continued to perform very nicely in the month of February. Although, a lot of that was at clearance prices, people were willing to come in and buy boots. Our children’s product has performed very nicely in February, continues to perform nicely in the early Easter season so just as we thought would happen with the down turning economy, athletics has picked up and our children’s business has become very good. Sam Poser - Sterne, Agee & Leach: On your leases, you mentioned kick outs and expirations, do you also have co-tenancies?

Correct, yes we do. Sam Poser - Sterne, Agee & Leach: Are you seeing benefits from that and are you seeing opportunities for percent rents and things of that nature?

Yes we are. Sam Poser - Sterne, Agee & Leach: About how many of your stores do you perceive that you’re going to be able to touch in 2009?

Sam, I don’t have that number with me. Touch in terms of? Sam Poser - Sterne, Agee & Leach: Of being able to renegotiate a lease for whatever reason.

Because of co-tenancy? Sam Poser - Sterne, Agee & Leach: Just in general between the three?

I don’t have that number. I’d hate to conjecture as to a number right now Sam. Sam Poser - Sterne, Agee & Leach: What we’re hearing from other people especially in similar markets as yours in the strip centers that you’re a major anchor and with some of the major guys having problems like Goody’s and so on and so forth, I’m not sure how much you overlap with them.

Well certainly Goody’s, Circuit City, Linen N’ Things were major players in our strip centers and yes, we do have co-tenancy clauses tied to in a number of cases those three players particularly so there’s a decent amount of stores, I just don’t have the number right now that we’ve been able to negotiate either off of a co-tenancy clause or just because of renewals or any other reason. I just don’t have that number at the tip of my fingers right now. Sam Poser - Sterne, Agee & Leach: The existing store base with those included, it sounds like if you’re going to be down say 2% for the year you’re going to de-lever occupancy slightly, 10 to 20 bits is what you said, correct?

Buying distribution and occupancy costs so the combination of the three, we don’t split those out. Sam Poser - Sterne, Agee & Leach: But I would think if you came in flat you might be able to break even or possibly even lever that because of all the changes going on in this?

Possibility. I want to add that not all of those negotiations have been finalized at this point in time so that’s something that’s yet to come to a conclusion in 2009, certainly as we move through 2009. Sam Poser - Sterne, Agee & Leach: Could you talk about any brands, the major brands that are outperforming or not even major brands but think where you’re seeing some light considering the negative comps you suffered in the fourth quarter?

I talked a little bit about those in my prepared remarks, Converse Chucks has done very nicely. Some of the urban product, street product for Nike has done very nicely. We’re seeing Nike product continue to perform well into the first quarter of 2009. Performance running from a number of the important brands in the running category have performed very nicely.

Your next question comes from Christopher Svezia - Susquehanna Financial Group.

A couple of questions, I guess first, Mark, can you maybe just comment on your average selling price trend in terms of what you might anticipate as you look to 2009 after a reasonably strong performance last year? Just your thoughts about what you think you might be able to do here in the current fiscal year?

Chris, I think our ADRs are going to continue to, they’re not going to increase significantly because I still expect that 2009 is going to be a very promotional year but we are continuing to put upward pressure on average unit retails. I’m not looking for a very high increase. The increases that we’re going to get and the increases that we have seen recently have come from unit sales increases as opposed to increases in retail prices. Having said that, our retail prices in the early part of 2009 are up slightly.

If you continue to plan your inventories the way you’re planning, down low single digits and the average unit retails continue to have some support, when you look at your merchandise margins, just assuming everyone is relatively sane this year, is it fair to assume that maybe you can actually see an improvement in your merchandise margin or would there possibly be some pressure on that?

We hope to see increasing merchandise margins, that’s kind of a BGO but again I think that the way we planned our business is we’re not planning for a big increase in merchandise margin. the way we’re planning our business is to increase our margins over this past year but not significantly. To that end, we’re not allowing our cost structure to elevate and we’re being very cautious with the way we’re spending our money from a capital expenditure standpoint. When you take all those three things combined, we’re not looking for a big increase in margins, but we’re offsetting that with control of expenses and control over capital expenditures to continue to generate that cash flow we keep talking about. That is our primary focus, is generation of cash flow.

On the opportunistic buys, can you maybe just talk about what percentage of your inventory now as you look to opportunistic buys and what you’re seeing out there in the market at this point?

We’re not going to talk in terms of percentage of the inventory because that changes so dramatically from day to day and when you make the buys. But we are seeing more opportunity in the marketplace today than I think we’ve seen over the past really two years. You’ve got a shrinking retail base obviously and that’s playing into the availability of product to the more important retailers and I consider Shoe Carnival to be one of the more important footwear retailers out there today. Because of that shrinking retail base I expect that we may continue to see opportunities in the marketplace for buys either because of excess inventory or just because of better cost opportunities than what we saw last year.

Last question I have here, any thoughts about, I don’t know if it’s too early at this point, if you got a read, but just in some of those markets where you might have seasonal product particularly on the sandal end of the business, any thoughts about open toe in terms of how that might be performing early going at this point or do you have to wait until you get a little closer to Easter to get any good quantitative results.

I frequently see good results in our very, very, very Southernmost markets but I think it’s going to, we’re mainly concentrated besides Florida and Texas in the very South of the marketplace we’re concentrated in the Midwest and towards the Northern part of the United States. I think it’s going to take a little bit warmer weather as we get into April but it’s going to take a little bit more of a selling period as we get closer to Easter to see the full impact of what sandal season is going to turn out to be. I’m not placing a lot of reliance upon early season sandal sales at this point in time. However what I am very pleased with up to this point in time is the sale of athletic product that we saw down trending in the fourth quarter. It seems like that may be coming back a little bit. Now, getting back to my incorrect beginning of an answer to Sam Poser’s question, I’ve heard all kinds of different reasons for business being better in February, you’ve got pent up demand, you’ve got rising mortgage delinquencies, you’ve got early refunds of tax checks or tax refunds. There’s a number of reasons which are attributing to better sales in the early part of 2009. Most of those reasons are not sustainable obviously so we’re being very cautious still about how we plan our inventories and about going out, we’re not loading up with inventory, we’re not loading up with those opportunistic buys but we are taking advantage of a very lean inventory position at Shoe Carnival right now and a very liquid position in terms of the cash versus debt formula. We’ll continue to do that but I want to caution everyone that we’re not going out and spending a tremendous amount of money on close out buys at this point in time.

Mark, athletic just given how it’s performing and it probably seemed like it performed reasonably well in February does that incrementally increase as a percentage of your buys at all or does that pretty much stay even at this point?

We stated before that we expect to shift that purchase out of the, I don’t want to say this the wrong way, but out of the brown shoe industry into the white shoe industry, into the athletic industry. We expected that that purchasing shift would happen. It did happen and we’re seeing athletic products start to take off in the early part. Again I want to be cautionary when I make those statements because I’d rather see a more definitive trend as we get through the Easter selling period.

Your next question comes from Jillian Caruthers – Johnson Rice & Company. Jillian Caruthers – Johnson Rice & Company: If you could talk about the 10 store closings you’re planning this year, perhaps when those closings will occur and where the markets are more in terms of were these small one store markets or some markets where you had a handful of stores?

In terms of the markets, they’re both Jill and obviously for a number of reasons I’m not going to get into specific store locations but they’re in both large and small markets and as opposed to 2008 where we closed 8 of our 11 stores in the fourth quarter and very late in the fourth quarter. These seem to be more spread out throughout the year. Again, most of the closings are as a result of termination of leases for one reason or another. These are natural termination or kick outs or whatever the case may be, but they’re more spread out during the year than 2008. I think it’s still back half loaded though in terms of the closings. I think six out of the 10 are probably in the back half. Jillian Caruthers – Johnson Rice & Company: Just to follow on that, I know all stores are suffering from the tough economy right now but where are you seeing better performance, in the larger markets smaller town markets, are you seeing a big difference between those two?

It’s really store specific. We’re seeing some very good results out of stores in larger markets and just the same way we’re seeing good results in stores in the smaller markets. I wouldn’t make that generalization that it’s large market versus small market, North versus South. It’s more store specific. Jillian Caruthers – Johnson Rice & Company: Last question, digging into the merchandise margin hit of 200 basis points in the fourth quarter, I know you entered into the quarter with 8% less inventory per store and your merchandise margin declined from 3rd quarter, I know it’s promotional environment, maybe you could talk about where you felt the biggest hit, was it more on the women’s non-athletic side? A little bit more into that since we saw further deterioration in the merchandise margin.

It certainly was more in the women’s non-athletic side but that’s a matter of the nature of the business. We feel that we have more fashion risk in that product than we do in the athletic product and therefore we’ll clear that product faster than we will athletic product although we clear athletic product pretty fast. We consider that to be the most risky piece of the business certainly in terms of carry over so definitely the largest hits from a margin standpoint came out of the women’s dress and casual business. Jillian Caruthers – Johnson Rice & Company: And that part of the business is shrinking, correct for ’09 given you talked about where a shift to more athletic?

Jill, when we say we’re putting more of our purchasing power behind athletic product, we’re talking in terms of a few percentage points. We’re not talking about a tremendously huge swing between our dress and casual business either in men’s or women’s or children’s and the athletic side. Quite frankly some of the close outs that we’re seeing are in the women’s fashion piece of the business so we’re going to take advantage of that as well as any close outs or opportunistic buys in the athletic piece of the business. We’re not looking for big swings in that trend but we are going to finance and fund the athletic business a little more than we funded it in 2008.

Your next question comes from Sam Poser - Sterne, Agee & Leach. Sam Poser - Sterne, Agee & Leach: Just real quick, can you give us exactly what your total square footage was for the quarter, Kerry?

At the end of the quarter? Sam Poser - Sterne, Agee & Leach: Yes.

It was 3,365,000. Let me clarify that, I gave Sam a wrong number. At the end of ’08 it was 3,332,000.

Your next question comes from Adriana [Inaudible] – Lyons Consulting. Adriana [Inaudible] – Lyons Consulting: I was wondering what your position was in opening and really furthering your website to really include eCommerce sales?

At this point in time we’re not going to put an effort behind eCommerce primarily because of the startup cost and the costs associated with getting that up and running. Additionally, even though we’ve implemented significant improvements in our distribution center regarding per pair picks for our store base, we’re not in a position to implement Internet fulfillment at this point in time. Adriana [Inaudible] – Lyons Consulting: Is that the single largest challenge, is the fulfillment aspect?

No, the single largest challenge is the capital commitment behind starting that process at this point in time.

At this time there are no further questions in the queue. Mr. Lemond I’ll turn the call back over to you for any additional or closing remarks.

I’d just like to thank everyone for joining us on the call and we’ll look forward to hopefully communicating better results for the first quarter of 2009 in a couple of months. Thank you very much.

That does conclude today’s conference. We thank you for your participation.