Ladies and gentlemen, thank you for standing by and welcome to the Kirkland’s third quarter 2009 earnings conference call. (Operator Instructions) I would now like to turn the conference over to Mr. Trip Sullivan, Corporation Communications. Please go ahead.

Thank you. Good morning and welcome to the Kirkland Incorporated conference call to review the company’s results for the third quarter of fiscal 2009. On the call this morning are Robert Alderson, President and Chief Executive officer; and Mike Madden, Senior Vice President and Chief Financial Officer. The results as well as notice of the accessibility of this conference call on a listen-only basis over the internet were released earlier this morning in a press release that has been covered by the financial media. Except for historical information discussed during this conference call, the statements made by company management are forward-looking and made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Kirkland's actual results in future periods to differ materially from forecasted results. Those risk and uncertainties are more fully described in Kirkland's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10K filed on April 20, 2009. With that said, I will turn the call over to you, Robert.

Good morning. Thanks for joining us today. We are pleased to report yet another quarter of positive comparable store sales and strong earnings results. This was our best performance in a non-fourth quarter in memory and certainly since becoming a public company. Our results were driven by strong improvements in our merchandise and operating margins versus the prior year. We remain in a very solid financial position, ending the quarter with a cash balance of $37 million and no debt. Mike Madden, our CFO, will now walk you through the third quarter results and our financial position. Mike.

Thank you, Robert and good morning. I will start with a review of the third quarter financial statements and then finish with some high level guidance for the fourth quarter and fiscal 2010. Net sales for the third quarter were $92.4 million, a 7.6% increase over the prior year quarter despite operating 30 fewer stores on average during the quarter. Comparable store sales increased 11.3% for the quarter. Average sales per store were up 17% versus the prior year quarter. Comps increased 11.2% in our off mall stores and increased 11.7% in our mall stores. Average sales volume in our off-mall stores was 28% higher than our mall stores during the quarter. The comp gain was driven by a strong increase in the number of transactions, as well as the slightly higher average ticket. The increase in transaction count was due to a 4% increase in customer traffic count combined with a higher conversion rate. The increase in the average ticket was the result of a higher average retail selling price, partially offset by a decline in items per transaction. These results were consistent between our mall and our off-mall stores. Geographically, all states contributed with positive comp sales. All of our merchandise categories performed at or above plan with the strongest results coming from our wall decor, seasonal, and gift categories. In real estate at the end of the quarter, we operated 296 stores, 218 off-mall stores, and 78 mall stores, representing a 74% off-mall, 26% mall venue distribution. As planned, total square footage under lease decreased 5% from the end of Q3 2008 while total store units declined by 8% for the same period. Gross profit margin for the quarter increased 800 basis points to 41.3% of sales from 33.3% in the prior year. The components of the…

Thanks, Mike. We had a great third quarter. We are very pleased and gratified -- double-digit increases in comp sales, an increase in earnings over the first and second quarters, and strong reversal of the third quarter 2008 earnings loss demonstrates the continued building of the positive momentum in our business. We have already earned more money in the first three quarters of 2009 than we did in all of 2008. More importantly, with a solid fourth quarter, Kirkland’s is positioned to have its best earnings year in its history, despite operating in continued difficult economic conditions. What has driven our continued success? As we noted last quarter, the combination of strong comp sales, stronger than planned results from new store openings, much improved merchandise margin, reduced occupancy expenses, and expense discipline was a winning combination. That’s been true again. With Kirkland’s, a merchandise driven retailer, success always starts with offering very compelling product -- that is, new and unique items of outstanding quality that have clearly discernible value to our customers, the attractiveness and value of the product leads to outstanding margins generated by sales with fewer markdowns. Our substantial margin increase for the third quarter reflects the early and strong sell-through across the overall product mix and the effect of much improved year over year results in our seasonal sales. Our 2009 Halloween and harvest merchandise has been a big success. We started somewhat slowly this year in the third quarter as we noted in our last report to the public, but as we predicted sales accelerated throughout the quarter and produced strong gross margin dollar gains over last year. We were able to exit Halloween and harvest merchandise on schedule and above both plan and last year in sales and margin. Also, throughout September and October, our…

(Operator Instructions) Our first question comes from David Magee from SunTrust Robinson Humphrey. David Magee – SunTrust Robinson Humphrey: Just a couple of questions, if I could -- with regard to the real estate and you sort of hinted at this already but Mike, could you just hit on what you plan to spend per store and what you might reasonably expect with regard to landlord incentives and what the pay-back period might be, or the pay-back rate in the first year might be.

Well, if you use kind of the last two years as the best guide, given we kind of zeroed in on the right, or the type of property we are going after. It’s typically to build out plus your inventory investment is about $200,000 to $250,000 and that is net. That includes the contribution from the landlord. And then the payback, we shoot for a payback that will be 100% in the first year of operation and that’s really what we have seen out of the class of 2009. We’re mindful of the goings on in the real estate markets and how that might impact it, but right now that is what I would say. David Magee – SunTrust Robinson Humphrey: Thank you. Are there any parts of the country that might be emphasizing more than others as you look for new stores?

David, I think we will continue to be very sunbelt oriented from Southern California to Southern Florida and then sort of north into maybe Pennsylvania, Maryland, Virginia and we still would be looking in the northern Midwest, Chicago area. But primarily in the sunbelt states, because we have a lot of replacement opportunities still left there for good mall stores that are in proven markets and we also have some in-fill that is still possible. We’d like to see new center development begin to pick up. I don’t think it’s possible to get much out of the ground, even if the markets began to turn in a different way within 2010 but hopefully by 2011, which would allow that to be more vigorous. David Magee – SunTrust Robinson Humphrey: It seems like some other retailers are having bigger problems finding the real estate. Some of them are in smaller markets, I guess. Is it the fact that you are in mid to larger markets helping you out in that regard?

I think it’s a combination of several things. I think we have been in the market and doing business in 2009 when a lot of people had been on the sidelines and so we have some momentum with developers that maybe some others don’t have. We have a very strong financial position to present, which is very helpful to them in financing or in looking at a solid center. We present a use, which is interesting to them and produces high traffic rates and so that is helpful. We also take stores in a variety of sizes from as low as sort of high five to 6,000 feet up to 10,000 to 12,000 square feet, which is helpful because we are able to fill a lot of slots that other retails that are much more static about their store size. We are also able to work in unusual configurations where some people are much more rigid about the shape of their store and their frontage and other things, so I think we have a great deal of flexibility to offer the landlords. And we have good relationships with landlords. We have been at work with them for a long time and we are constantly out there working with them, so I think we -- I don’t say that we are not going to have any problems because I noted in the script that we are seeing some resistance on the price side and I think the landlords are seeing the supply begin to work in their favor a little bit because of the lack of new development. And also there have not been as many shutterings and closings of stores as I think everyone widely predicted in the aftermath of the fall 2008 situation. So if conditions don’t get worse economically, we could see a continued tightening. David Magee – SunTrust Robinson Humphrey: Thank you, Robert. And the last question, maybe for Mike, an operating margin of close to 10% would be very, very impressive. I am assuming that would be very, very impressive. I am assuming that would be net of any incentive compensation differences year to year?

Yes, it is. That takes all of that into account. David Magee – SunTrust Robinson Humphrey: Great. Thanks a lot, guys, good luck.

(Operator Instructions) Our next question comes from Maria Vizuete from Piper Jaffray.

I am wondering if you can talk a little bit, I know you guys touched on it a bit but just on some of the product categories that you are seeing that are working well currently and then how you see that going as we go further into the holiday season.

Well, as we talked about in the script, obviously the seasonal category is doing extremely well this fall both in Halloween and harvest and in Christmas year to date or season to date. Mainly what is out there now is -- that’s been selling has been the decorative side of our Christmas offering and we changed that up quite a bit this year and I think we made some great changes that our merchants drove and it’s been extremely well-received and we will be sort of after next weekend and Black Friday, we will be shifting into the more giftable side of that as we sell the decorative piece of the mix down. But as I noted in the script, we’ve had really, really good sales and margin results across the entire mix and it’s kind of -- as Kirkland’s goes, as does wall decor, furniture, candles and lighting and textiles and decorative accessories -- those categories along with others like floral and garden and the typical things that you see in our store, they really represent who Kirkland’s is to the customer and we’ve continued to have very, very nice results and so we expect as we move into next year for that not to change very much. We will always tweak the open to buy money and direct money toward success. That’s a very typical thing to do and you may see some incremental changes in spend in certain categories or within certain classes within categories but I don’t think that you will see the Kirkland’s store change very much in terms of this offering. We will potentially try a few new things next year as we continue to test product but we will talk about that as it happens. It’s a little early yet.

And then just one follow-up -- are you guys comfortable with your current price point positioning longer term and into the holiday season?

We are. We are always value-driven and we price extremely well to the marketplace and we think that we have great new product that is different and unique and it is offered at a great price and I think the margin results and the turn and the sales level speak for themselves in terms of how well that is being received. I think if we were off on the price point that the customer would be telling us, we’d be having more sales resistance than we are seeing right now.

Speakers, there are no further questions at this time. Please continue with your presentation or closing remarks.

Okay, guys. Thank you very much for your time and interest today. We appreciate you being on the call. We look forward to talking with you after the Christmas season.