Timothy J. Reid - VP, IR Bob Sasser - President and CEO Kent A. Kleeberger - CFO

John Zolidis - Buckingham Research Group Mitchell Kaiser - Piper Jaffray Stacy Turnof - Merrill Lynch Dan Wewer - Raymond James David Burman - Burman Capital Patrick McKeever - Avondale Partners Jeffrey Sonnek - Friedman, Billings, Ramsey & Company Joan Storms - Wedbush Morgan Securities Paul Trussell - JP Morgan David Cumberland - Robert W. Baird & Co William Keller - FTN Midwest Securities Adrianne Shapira - Goldman Sachs Christine Augustine - Bear Stearns

Good day and welcome to this Dollar Tree Stores Incorporated Second Quarter 2007 Earnings Release. As a reminder today's call is being recorded. At this time, I would like to turn the call over to Mr. Tim Reid, Vice President of Investor Relations. Please go ahead.

Thank you, Tom. Good morning and welcome to the Dollar Tree conference call for the second quarter of fiscal 2007. My name is Tim Reid. I am Vice President of Investor Relations. Our call today will be led by Bob Sasser, our President and Chief Executive Officer, who will provide some insights on our performance in the quarter and recent developments in our business. Kent Kleeberger, our Chief Financial Officer will provide a more detailed review of our second quarter financial performance and financial guidance for the third quarter and full fiscal year 2007. Before we begin, I would like to remind everyone that various marks that we will make about future expectations, plans and prospects for the Company constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors included in our most recent press release, most recent current report on Form 8-K, quarterly report on Form 10-Q and annual report on Form 10-K, which are on file with the SEC. We have no obligation to update our forward-looking statements and you should not expect us to do so. At the end of our planned remarks, we will open the call to your questions, which we ask that you limit to one question and one follow-up question, if necessary. And with that said, I would like to turn the call over to Bob Sasser, our CEO. Bob?

Thank you, Tim and good morning everyone. This morning we announced earnings for the second quarter of $0.33 per diluted share. This represents a 18% increase over last year's $0.28 per share and it is at the high end of our latest guidance. Total sales for the quarter were $971.2 million, which is an increase of 9.9% over the second quarter of fiscal 2006. Comp store sales increased 4.4% for the quarter and was a result of 3.3% increase in store traffic and 1.1% increase in our average ticket with the largest increases coming in the month of May and July. As a reminder these sales results were on top of the 4.2% comp store sales increase for the second quarter last year and this was the sixth consecutive quarter of comp store sales increase of 4% or better. Several key merchandise initiatives grew by a performance. First of all, our seasonal excitement was strong throughout the quarter, beginning with the Mother’s Day Build a Basket promotion and continuing through the 4th of July red, white and blue celebration. Memorial Day was especially strong with our picnic promotion and our steak sale was a real hit with the customers. Can you steaks for a buck? Our customers did and I really love them. Throughout the quarter our cool summer savings promotion added excitement with an emphasis on beach toys and picnic supplies and beverages and snacks and sun glasses and many of the things that you need for the beach, all for just $1. Our store teams really get behind this promotion. They have a lot of fun and good natured competition aimed at leading their district in sales during this period. Secondly, and in addition to our seasonal business, our assortment of high value basics continue to gain sales…

Thanks Bob. Good morning everyone. As Bob mentioned, our earnings per share this quarter was $0.33, which was above the high-end of the range of our initial quarterly guidance and represents an 18% increase over the last year’s $0.28. The improvement in diluted earnings per share for the quarter was driven primarily by the comparable store sales increase and improvement gross margin. For the next few minute, I will talk about the components of gross margin as well as SG&A expense, balance sheet management, and cash flow metrics followed by comments on guidance for both the third quarter and remainder of the year. For the third quarter… or second quarter rather, gross margin was 33.6%, 40 basis points above the 33.2% in last year second quarter. Several factors contribute to this performance improvement. First, we had improved mark-up on merchandised deliver this quarter. Next, the negative impact from the planned shift toward more consumables continues to diminish. The sales penetration of lower margin consumable merchandise increased approximately 1% in the second quarter this year versus an increase of about 2% for the second quarter last year. Also, while the Deal$ stores continue to negatively impact our margin rates somewhat, the margin rate of the Deal$ stores continue to improve. Hence, the other components of gross margin, we benefited from the possible leverage on buying distribution and occupancy cost associated with the increase in comparable store sales. Moving down the P&L, SG&A expenses were 28.1% for the quarter, expressed as a percent of sales of 40 basis points increase from 27.7% in the second quarter last year. The increase in the rates was driven primarily by an approximate $0.02 per diluted share charge to cover settlement of certain employment related litigation when combined with legal fees amounted to 30 basis points…

Thank you, Kent. I want to lead you with a few summary observations before we go to questions. For the sixth quarter in a row, we have had a very strong top line performance and we remain on track to accomplish our long range goals. We continue to hone our new store size for optimum performance, which we believe to be in the 10,000 to 12,000 square foot range. Our investments in infrastructure are translating into better inventory management, more efficient stores, improved in-stock position and better overall shopping experience for our customers. And we continue to demonstrate the ability to self fund the growth of our business, while generating substantial free cash and rewarding our long-term shareholders by buying back stock. During the first half of this year, again, we have spent over $228 million on share repurchases. We are confident in this Company's ability to continue generating a significant amount of free cash flow and we remain committed to use that cash to drive shareholder returns. Looking to the third quarter, we know that our customers face a myriad of challenges, especially from high and uncertain energy prices. In this environment, we believe that Dollar Tree can be part of the solution for millions of consumers across the country, besides delivering great value to our customers, dealing in-stock and basics that people need and providing a bright, friendly, fun convenient shopping experience. We have made great progress this year and we look forward to an exciting fall season. We are now ready for the questions so that we can accommodate as many callers as time permits, I would ask that you limit your questions to two per person. Question and Answer

Thank you. The question-and-answer section will be conducted electronically. [Operator Instructions]. We will take our first question from John Zolidis with Buckingham Research.

Hi, good morning.

Good morning John.

A few questions for you. Second… first question, looking at the second half, do you still anticipate the improvement in gross margin that you have been talking about earlier in the year? I guess when we started this year, the guidance or suggestion was that gross margins will be under pressure in the first half. And in fact, they have risen and now we are looking to the second half, does that mean that they are going to accelerate? And then my second question is on the inventory, I thought… is there some possibility that maybe we are a little bit too light on the inventory particularly in the seasonal category? Is there a possibility that can pull back in the same-store sale performance heading into 3Q? Thank you.

As far as gross margin goes on the second half, John, I think, we always have been pointing people top see some slight improvement in the second half. Again, yes, I have to remind people that’s on a 52 week comparison versus a 53 week comparison because we did get some artificial leverage if you will in the buying an occupancy cost because of that 53rd week. But I think, to say that it’s going to accelerate, I think we probably get a little bit ahead of ourselves, though, John. I think we are comfortable. We are pleased with the increase in mark-up particularly in the first half. We would like to see that continue, but we are not going to get greedy and expect any acceleration in the near-term.

On the inventory, John, there is still room for us to continue to improve our turnover. We still are seeing opportunities to flow the product more smoothly, better to the stores, closer to the time that they need that. Having said that, I do believe that we missed some seasonal business in some of our stores throughout the first half of the year. Now, that’s mostly resolved still refining our allocations and our replenishment giving the right amount to the right stores. Those high volume stores, I think we may not have still fed them enough inventories yet. I see that as an opportunity for next season, and going into fall and holiday, I feel like we are just better than we have ever been, better positioned, inventory flow come in and is better. There is no disruption that I can see out there and our DCs are handling it really marvelously right now.

Thank you.

We will take our next question from Mitch Kaiser with Piper Jaffray.

Thanks guys. Good morning. I was just wonder if you could comment on the multi-price point initiative, you had in the 25 stores, kind of the results that you are seeing there, that you said that you are going to rollout an additional 25 in the existing Dollar Tree Stores kind of where you are in that process?

Mitch, just to refresh everybody’s memory, we talked about testing, a concept we call oops and the concept is… in 25 stores, we are testing 20 feet on the wall of product that was over $1, less than $5 and less, but more than $1. And the concept is oops, we know it’s not a dollar, but the value is so good, we couldn’t pass it up, so we are passing the savings along to you, right now won’t last long and we will roll that out into 25 stores. One of the things I want to find out was our customer acceptance on that where our customers accept the fact that we had 25 feet products that wasn’t $1 even if we were selling them up front. The answer to that is I did accept that the customer acceptance we have a very little confusion, we had very little… very few comments really from our customers that they didn’t like it. What we found was if the value was good they bought it. And it didn’t bother them that there was product in the store that wasn’t $1. As long as we priced it and signed it and really kept it segregated, they didn’t see any problem with that. So what we are doing is we are going forward with testing 25 more stores. We haven’t roll that out yet that will be sometime in the third quarter that we are rolling out the 25 additional stores. And in addition to testing customer acceptance broadly and testing the execution, ability to execute in the stores, we are also going to do advertising on these next 25 stores and see if we can drive some bigger sales through this test. So far it’s been… the answer to our question have been positive and there has been so far good acceptance by the customers and good sales on the items that show the great value. We will know more as we rollout the next 25 through the best part of the year and we do some advertising.

Okay. Would you be wiling to quantify any type of benefit you are getting on ticket and then if you like the… here the results the next 25, what might… how should we be thinking about what a plan to further extend the program might look like. Is it something that you would potentially do in big ways, so would you kind of scale that as we go forward or how should we think about that?

As far as quantify it is really too small and too early and too soon to say much about. I will tell you that the results have been good, again I was really looking to see what our customers… that we have think for more than $1 on the shelves and they didn’t. And frankly, they accepted it and them bought it as long as the item was a value. So, the learning so far basically has been that let’s go forward and let’s test 25 more stores. But it’s really so early on that I can’t tell you where that’s going to go. We are going to test these stores in next… in the middle… right in the best part of the year, going into third, fourth quarter. And we are going to advertise it and we are going to see how much business that we can drive through the 25 stores. Looking past that obviously one of the things I am looking for now as our ability to execute to this across a broader range and I think we are learning lot about that, being able to roll it out across the more stores. I think we can do that. The outlook going forward into next year is going to determine on how well we do in these next 25 stores. So, while I am excited about it, I really can’t tell you that it’s going to be a 000 stores or 200 stores or 5 stores or really where we are going to past the 25 because I really want to see what we can do in these market… these new markets. I will let you know more. We will know more next time.

Okay. But it something that you could scale pretty quickly if you wanted to then.

I believe, it scaled very quickly and fill some impact, assuming it was good, fill some impact in next year.

Okay. Thanks guys. Good luck.

We will take our next question from Stacy Turnof of Merrill Lynch.

I had a comment on rent and working on your lease time. I don’t one of the big initiatives was for you to start to negotiate out much further and I was wondering where you were in that process?

Well, Stacy when we are in the real estate committee and most of the deals that get presented are roughly five year terms. And what we try to do is we try to nail down the terms to five years and then we tell our deal makers to go back to see what sort of economics we can get if we were to go either to a seven or 10 year term which either is a function of lower rent and/or lower camp charges or increased construction allowances. I would say this is an initiative when we started in the last half of last year. It’s probably a little too early to tell we are having some impact on that and I think it’s a friend of mine to the deal makers now.

And then my second question is any… could you maybe quantify how that gap is now in between deals and the core Dollar Tree Store and when do you actually feel like its going to start to be on par?

The… from a margin standpoint, the Deal$ stores continue to improve and come closer to the Dollar Tree but they are not there yet. The new deal stored and we have only opened the few so far… five new stores so far. But the new Deal$ Stores where we are opening with a… instead of a converting of an old concept into the new concept where we are opening as a new Deal$ Store and new concept, those are performing better than the ones that we converted. So, the margin is continuing to rise, its not there yet. I think its going to say a little more time. We are sort of finding our way too with the mix of products than these stores. And as far as the sales, we have got… we have some stores that really are doing great and some that aren't doing as well. So, we still have to work-through some of those answers. And of course, we are trying to new products and new mix and new merchandise and new standards and things. So, there are so many moving parts on that right that I believe… I still say that our best test is as we go into third quarter and start opening up more of then these new Deal$ Stores, I believe we are going to see more clearly what this concept can do. I am looking forward to be as a model that we… as a higher volume model. I am looking forward to a model that we could use in higher costs, reasons of the country because we can with a higher volume of leverage fixed cost. And I am looking for the margin to approach or be something consistent with the Dollar Tree market.

Great. Thank you.

Which means it’s only been a short while since we have opened new stores or relocated. We did a handful I think to start to end of first quarter little bit second quarter. And I guess what I would say is we are very encouraged and very encouraged, especially about the new relocations that we did recently.

Thank you.

We will take our next question from Dan Wewer from Raymond James

Bob, the information of the ticket size at Deals$ was helpful. Can you tell us how that translates into sales per square foot? How those stores are performing now prior to you adding the right point to dollar?

Dan, we haven’t broken that out probably… frankly we don’t… we haven’t shared any of that kind of information. I am unable to able to give you some of the numbers I have shared with you that as a matter of color on the direction that the Deal$ Stores are going but we haven’t broken sales per square foot out.

On the new stores you had noted that the margins are performing better than the Deal$ Stores that you would converted. Can you remind me are new Deal$ Stores going to be smaller, more in the 11,000 square foot prototype that you use for Dollar Tree?

Well the new Deal$ Stores are pretty consistent with the size of Dollar Tree 11,000, 12,000 square feet. The new Deal$ Stores and the old Deal$ Stores, frankly we have got some of the old… the stores that we have acquired ranked from probably about 7000 square feet up to 17,000 square feet. So, the Deal$ Stores that we required, it was pretty broad range or sizes there. The new ones were open though… we are looking for the same 11,000, 12,000 square foot. We believe that could be… should be the right size for the Deal$ Stores.

Okay. Let me ask question this way, if you were to look at the new store profit model on the new Deal$ Stores, the way you talked about Dollar Tree in the past, the sales per square foot, operating margins, return on cash investment. Do you think that these new Deal$ Store would be generating even higher returns than Dollar Tree because of the expanded price point selection?

At some point. Yes, that’s what we are looking for as a model as it says… a model that has the ability to grow. That has the ability to serve markets that we maybe can get to with Dollar Tree. The contribution that we need from the Company… it’s just too early to say what that is. We acquired, we integrated and now we have begun to open some new stores. And it’s just really too early to start claiming victory either way. I am excited about the concept there. The concept… this model fist a need out there across the country. And we… I believe have the best chances of improving that model. But we still got a lot of work to do and I don’t have enough new stores yet to really tell where we are in that process.

We will take your next question form David Burman with Burman Capital.

Hi guys. I was wondering if you could share with us a little bit deeper about your thoughts on consumer impact of the… what you are reading about macro is having on your business. And then secondly, if you could just talk about the repurchase program. Than you very much.

Well the impact from the consumer on our business with the recent opportunities out there in the housing market I guess to your point to and all the problems of late. We really are seeing that impact on our customers. I believe and I have said this for some time now that the biggest potential impact on our customers has to do with fuel prices and energy prices and mostly in times of rapidly increasing fuel and energy prices. So, the problem that we see in the economy is the problems with home sales, the problems with foreclosures. We really haven’t seen… I can’t relate that to my customer as my business directly. I haven’t seen it yet.

Okay. Thank you. And the repurchase?

Well we have about $198 million remaining under the authorization of $500 million that was approved last November. I guess in hindsight we are going to burn that pretty quick but yes we have been opportunistic I would say, in relation especially in the recent market correction. But at the end of the day, we are not just that smart by guessing market timings so you will have to stay tuned for any future activity.

Why you being so aggressive, Ken?

Well, I just believe that stock is trading at a discount and we have a variety of financial models and how we evaluate the stock price and our vowels would suggest that any thing below $45, $47 range is attractive.

Okay. Well, thanks a lot.

We will take our next question from Patrick McKeever with Avondale Partners.

Thanks very much. Good morning everyone. Thinking just over the next few years about where the gross margin rate could go, do you think it could go back to the historical level of around 36%? It was so consistent there a few years back. Is that where the greatest opportunity is in terms of driving margin back to your goal, which I think is around 10%. I mean there is certainly an SG&A opportunity, as well but maybe seems sales-stores moderate a little bit. It’s a greater opportunity on the gross margin line or--?

Well… yes, I think at the end of the day, we want to get back to 10% and while the current expense is nice, we are not going to get there as quick as you focus your improvement on the gross margin line. So obviously, the biggest portion that’s going to come in merchandised margin arena, primarily an improved mark-up but than there is other areas that we can impact. We continue to see leverage on our distribution and occupancy cost. We are not adding a substantial mode on distribution capacity in the near terms, so that’s one area. We do feel pressure from the occupancy line because inherently there is building inflation factors on an annual basis to both right and camp charges. But I think part of what we are trying to do is to take a look at lease terms and drive better economics in order to drive some of the rent down that we can charge. That also helps out in the gross margin line, the related store depreciation if we can spread that over a longer period of time for five to seven say even up to 10 years that’s going to give some relief on the overall operating margins.

And how about private label how does that factor into the potential gross margin opportunity out there. Where is private, has that been growing as a percent of sales recently and can it grow further?

Patrick, private label is something that we have early on for almost past several years begin to… continue to develop our own products available only at Dollar Tree and it doesn’t have Dollar Tree’s name on it, it says things like Max Gray socks. Those are in private label. That percent of growth has grown in the past year and it has grown as our ample of percent has grown back towards that 39% to 40% range that we used to have. So, going forward, there is more opportunity of private label that exist and some of our long lead time basics that exists in our seasonal business and branding of things like our April bath and showers. If you go in our stores now, you will see pretty big and expanding bath shop displays across the chain and those that’s all private label all product that our buyers have developed. So, I don’t know how to answer your question expect that’s a focus as we go forward for couple of reasons, one, to drive sales and value, because you can't find it anywhere else, only at Dollar Tree, and also to help improve our margin on merchandise mark-up as we go forward private label fits that strategy.

Okay. That’s great, very helpful. Thank you, Bob.

Thank you.

We will go next to Jeff Sonnek with Friedman, Billings, Ramsey. Jeffrey Sonnek - Friedman, Billings, Ramsey & Company: Thanks guys. Great quarter. Can you talk about… update us on some of these metro market task that you have out there? And do you have any of these Deal$ stores in those types of markets that you might be able to talk little bit more about.

Well, Jeff, just pretty short… sort of the Readers Digest version of the Metro markets are some of our highest performing sales per square foot stores, and we like the metro markets. We like where there is a lot of people. And as you point out the Deal$ strategy, we have in the third quarter several stores. We are venturing out of the Midwest and into the Northeast with several stores. So, stay tuned for that. We don’t have them opened yet, but some time in the third quarter; we will have a few Deal$ opened in some of these very dense highly populated markets in the Northeast. I think that’s a strategy. I believe the Deal$ can provide higher sales volumes which will give us better leverage on operating expenses in these metro markets. The sales are there for Dollar Tree, the cost of getting them a little higher thought, as you know. Jeffrey Sonnek - Friedman, Billings, Ramsey & Company: And then can you give us an update on this frozen refrigerated program? I think historically you talked about a same-store sales lift in the 600 to 800 basis point range, when that gets rolled out, if that’s still consistent?

Jeff, the sales… it’s actually I would say that we… when we originally got involved in the program, we expected the 6% lift on the consumable side of the business and 1% to 2% on the non-consumable side of the business, which is a higher margin portion of our stores. I mean the good news is that at least in the initial year rollout, we are seeing increases higher than that. So, that’s probably one of the reasons why we accelerated the rollout last year, and why we are coming up with 300 as opposed to 250 this year. It’s giving us a nice lift. It’s giving us a lift in traffic. It’s giving us a lift in tickets. So, it’s been very good. Jeffrey Sonnek - Friedman, Billings, Ramsey & Company: And then on the Deal$... are those Deal$ stores now in the comp base towards the end of the summer?

Yes, they are. Jeffrey Sonnek - Friedman, Billings, Ramsey & Company: Great. Thank you, guys.

We will take our next question from Joan Storms with Wedbush Morgan.

Hi, good morning.

Good morning.

Couple of quick questions. I was wondering if you could comment a little bit more on the advertising about your shift going from less electronic and more print. And then also for housekeeping if you could give us some idea number of store openings and closures you expect for the third quarter?

Joan, the advertising was centered around our pre-Memorial Day ad and last year, we ran the same of that covered about 600 stores. This year, we expanded the event to cover over 1,100 stores this year actually had the tabloid inserted in the newspaper or mailed out. Now all the stores have the tab and they had the merchandize. So, it was a really chain wide event. We took money away from electronic. We put it more into print. We expanded the number of stores that we mailed or inserted the circular for and we had really good results, with a good trade.

And just adding onto that, are there any anticipation for second half, any changes in advertising that you might be doing. Would that be similar?

Well, there will be a little more that I can add, but I will share them with you after we run them. We don't tell people where we are going to run, but we are planning to do a little more advertising in the second half of last year and taking off on the good results that we had with the print and tying the merchandise and the items and the in-store selling with the advertising, the vehicle, the print vehicle and getting that out in front of our people, our customers. We have had good results, so you will see more of that as we go into the second half.

And John your question on, I guess, housekeeping in terms of our store cadence opening for third quarter. I would expect that if third quarter is going to be a big quarter, it will be over 100 new stores that will open along with relocation probably in the 42 to 45 range. So, it is a lot of stores. We will probably end up closing roughly about 8 to 10 stores I think.

Okay. Perfect. Thank you very much.

Yes.

We will take our next question from Charles Grom with JP Morgan.

Hi, good morning. This is Paul Trussell for Charles Grom. Question on the Deal$ stores, Bob could you provide us a little bit more color around….

Hello. Hello.

It looks like his line has cutoff. We will go next David Cumberland.

David?

One moment.

Hello.

And your line is now open Mr. Cumberland. David Cumberland - Robert W. Baird & Co: Can you hear me now?

I can hear you now, David. David Cumberland - Robert W. Baird & Co: Great. First question did the initial Q2 EPS guidance or the prior ’07 guidance include the $0.02 of the legal cost?

No. David Cumberland - Robert W. Baird & Co: And my other question, can you comment on if the retail calendar shift has an impact on your comps in the second quarter or on your comps outlook for Q3 or the second half?

That really, I think, you may be referring to the back-to-school shift and sales tax holidays and like. Obviously still keep in touch with people on the specialty apparel side and I think it has more of an impact to their business than it does to ours. David Cumberland - Robert W. Baird & Co: Thank you.

We will take our next question from William Keller, FTN Midwest.

Good morning everyone.

Good morning.

Just describe a little bit if you are seeing anything on your toy sales or really any general merchandise coming from China, regarding some of the rather unfavorable press as of late? Thank you.

There is a lot of press on lot of activity over that issue. I can’t tell you that I have seen any direct response by our customers in our stores. Our product being $1 type goods, very basic kinds of products and some are seasonal at this point. We have… we do take that very seriously, though, and we have had testing program for several years that everything that we bring out of China that have to meet a federal regulation or standard. We have third party testing on that and we have actually stepped up our testing so that we are… we always require this product before it leaves China to have a pass testing result. We are now testing a couple of kinds in the process, early on and the manufacturing of the product and then just as a product is about finished being manufacturing. So we stepped up our diligence on it. We are very sensitive to it for our customers and… but I can’t tell you that I have seen any negative response from our customers on that.

Great. Thank you very much.

And we do have our question back now from Charles Grom with JP Morgan.

Hello.

Good morning.

Lost you.

Hi, this is Paul Trussell for Charles Grom. Hey, Bob could you just provide us a little bit of further commentary on the new Deal$ stores that you all are opening. I know that there are some changes from the stores that you acquired in regards of the exterior as well as the category applications.

Paul, the new Deal$ stores are the vision of what we think that customer are looking forward. And one of the things that you will see in the new Deal$ stores as oppose the stores that we acquired is that we have shrunk footage… square footage that we allot to our frozen and refrigerated products and also to our grocery products. The existing Deal$ stores have these coffin coolers. We have taken those out of the new stores and we are putting in the stand-up wall unit, like we use in Dollar Tree. We are able to make better use of the square footage in the store by doing this, and the categories that we have expanded include some of the ones that we are so, I believe we are good at Dollar Tree and that would be our seasonal business, our party business as well as some of the business that we have consumer products and health and beauty care and our cleaning supplies. So, as you walk into a new Deal$ store, you would see a little different look on the front of the store. And as you walk into the stores, you are going to walk into a more general merchandise selection, more of the seasonal selection that we offer. And I think the overall appeal of the store from what we found from our customers is that they liked it and it was easier to shop and it was fun to shop. And at every corner almost, there was something new and something exciting, something that exceeded their expectations of what they can get. And sometimes it’s $1 sometimes it’s $5, but always exceeding the expectations of our customers. I mean we had from back-to-school; we had kids’ athletic shoes for $5 in our stores. And those are the kinds of surprising values that we can offer deals that we in the past have had access to the product, but we just have to pass it up because although it’s a great value for $5, I couldn’t still sell it for $1 and so our Dollar Tree buyers would have had to pass that up. We are taking advantage of that in Deals and it seems to be thrilling our customers.

Thank you, very helpful. Second question, I know that you all mentioned that May and July were the better performing months. Could you just talk a little bit about the rationale for the weakness in June?

Well, I didn’t say there was a weakness in June, but that’s the best few months of the quarter were beginning and the third month of the quarter. And that has more to do with the holidays that are available in May with Mother’s Day and Memorial Day. And then in July with the 4th of July and leading into back-to-school. June was not weak, it was just not… if you have three months one has to be a number one, one has to be number three.

And ladies and gentlemen we have time for one final question today. That come from Adrianne Shapira with Goldman Sachs.

Thank you. Bob, you had just mentioned that you are not seeing the macro impact on your consumer, but some of your competition are being pressured. And I am just wondering as a result, they are seeing inventory build and they are having to move… mark down more aggressively to move things out. As a result are you seeing anymore competitive aggressiveness as due to these markdowns seems as if more people are drifting down to your price point?

Adrianne maybe, I just don’t maybe see it, but I cannot for the life of me, I have look and I had asked and I have been out in the stores and we have done some research. And we just can’t see the impact of the macro economy right now on our consumer. And as I have looked around at the competition, I don’t know if you are referring to the other guys with dollar in their name or if you are referring to just a discount industry in general. But our price point, $1 is very honest, it’s a valued proposition with our customers. It’s simple, it’s straightforward and now that we have added more of the things that people shop more frequently. We are seeing increased traffic and if anything, right now we are seeing maybe people gravitate to us because of our value, because of our price point and now that we sell more of the things that you need. We could be the place to go to. The thing that concerns me, if you are asking the question is as always, I have always said that the biggest impact on Dollar Tree is the rapid rise and these are fuel costs or energy prices. And those are the things that we have in the past for short-term struggled with… because of its pressure that it puts on our consumer, many of which, probably 20% of which are living in that lowest economic level pay check to pay check.

Thank you.

And we actually have time for one final question, and it is Christine Augustine with Bear Stearns.

Thank you. I was wondering, if you were seeing any sort of regional variation in sales in the second quarter? And then last quarter, you talked about tying incentive compensation for the field organization and the buying team to get your team focused on operating margin improvement. Did you see any results from that? Is it sort of too early? When could we maybe start to see some improvement there? Thank you.

Well, we have got the incentive compensation for the deal as far as, across the whole field now, we took first part of the year doing that, as well as the buying team. Everyone has a component of gross margin as part of their incentive and their bonus plan now. As far as seeing the results, I really don’t think, I can tell you that it’s going to be one quarter over the next. It’s more of a movement toward, but I fully believe that by incenting people for the results that we desire that they will be able to achieve those results. So, I would expect improved gross margins based on incenting people to do that. It’s just a right thing to do. We just had our field management meeting last week, we had over 500 people from all across the country here and that was one of the topics that we talked about. Our field is enthusiastic about it. They are understanding the components of gross margin better now than ever. We are able to give them more information now on gross margins, so they can track their success now better than ever and that’s going to pay back. I just don’t know that I can… I can’t tell you a number and a date that’s going to happen. It’s going to be more of an improvement over time.

As far as regional comps, while we typically don’t give that information. Now I think we have been pretty open to say that we have had some challenges out in California and that from Central California and Northern California. They are lagging shall we say balance the company, but the good news is we are starting to see some improvement out there.

Great. Thank you very much.

And Mr. Reid this does conclude the question and answer session. I will turn the call back over to you for any closing remarks.

All right Tom, thank you very much and thanks to all of you for participating on the call. Thanks especially for your long-term interest in the Dollar Tree story. Our next conference call is scheduled for November 28, 2007, when we will discuss third quarter results. Thank you again.

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