Good day, ladies and gentlemen, and welcome to the third quarter 2009 Kroger Company earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Ms. Carin Fike, Director of Investor Relations. Please proceed.

Good morning and thank you for joining us. Before we begin, I want to remind you that today’s discussion will include forward-looking statements. We want to caution you that such statements are predictions and actual events or results can differ materially. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings, but Kroger assumes no obligation to update that information. Both our third quarter press release and our prepared remarks from this conference call will be available on our website at www.kroger.com. We recognize that the third quarter results we reported earlier today differ significantly from the outlook we shared with you when we reported Kroger’s second quarter results in September. For that reason, we are modifying the structure of today’s call from our typical format. Today our prepared remarks will address the factors that caused our third quarter results to differ from our internal projections. We aim to provide you with a better understanding of our current business environment and our plans going forward. We do not plan to use this time to repeat financial information provided in Kroger’s third quarter earnings release. Finally, our prepared remarks will be shorter in order to allow more time to address investors’ questions. I will now turn the call over to David Dillon, Chairman and Chief Executive Officer of Kroger.

Thank you, Carin and good morning everyone. Thank you for joining us today. With me today to review Kroger’s third quarter 2009 financial results are Rodney McMullen, Kroger’s President and Chief Operating Officer, and Mike Schlotman, Senior Vice President and Chief Financial Officer. The operating environment has proven to be more difficult than we expected and our performance during the quarter clearly reflects it. We came up short in several aspects of our performance. We have deflation in sales, making expense leverage difficult, a sharply more competitive environment that is now widespread, and cautious consumers. These factors led to results below our expectations. However, our short-term results obscured some otherwise strong fundamentals in our performance such as exceptional tonnage growth, market share gains in key segments, increases in loyal household count and good cost control. These fundamentals are important to our long-term success and creating shareholder value. For the second consecutive quarter, deflation accelerated in most grocery categories. Last year at this time, we had estimated inflation of 6%. This year we estimate deflation to be minus 0.8% -- a nearly 700 basis point swing year-over-year. More important, deflation was particularly acute in categories like milk, produce, meat and grocery. We certainly sold more units, as any associate who stocked dairy or produce departments can attest, but at much lower retail prices. Based solely on our tonnage, we had a solid quarter. In fact, our tonnage during the quarter would have generated identical supermarket sales above our original annual guidance were it not for the continued deflation. As a result of continuing deflation affecting our sales and higher tonnage and customer count, which increases workloads throughout our organization, it has been more difficult to leverage expenses. In addition, the current economy has slowed employee turnover rates, increasing average hourly wages…

Thank you, Dave. Good morning everyone. Customer traffic in our stores continues to improve and growth in loyal households continues to be strong. Loyal households represent our very best customers. Our data show these customers are making more trips to our stores and buying the same number of items per visit they did during the same period last year. So, over the course of a month, these households are buying more items from Kroger than they were a year ago, which indicates they are consolidating more of their spend with us. In addition, visits from all households we track rose in the third quarter. This is driving outstanding unit growth for our business. During the first half of the year, we initiated several pricing programs to attract and retain cautious customers. These programs have cost us more than we originally anticipated. They have also resulted in tonnage increases much higher than we anticipated, an excellent trend in the long-term. But in the current environment, more intense and pervasive competitive activity coupled with deflation that has yet to moderate as we anticipated, led to results below our expectations. We are seeing more sales at promotional levels as customers in all segments have become more conservative in their spending. At the same time, we have noticed a marked change in pricing programs at many competitors as retailers compete aggressively for every dollar. We have revised our plans in order to respond effectively. As I mentioned before, strong overall tonnage growth was driven by Corporate Brand and national brand sales. Our Value Brands are clearly winning with customers who in previous downturns shopped elsewhere for this value proposition. National brand grocery tonnage was also up for the quarter. Tonnage growth was particularly strong in Dairy, Meat, Produce and Grocery as customers responded positively…

Thanks, Rodney. Good morning, everyone. As you saw in our release, we have taken a non-cash asset impairment charge in the quarter that reduced Kroger’s earnings by $1.62 per diluted share. The impairment charge was the result of several factors. First, the economy in California is as weak as any in the country. Unemployment in California is at record levels at 12.5%, well above the national average. Over two-thirds of those who are unemployed live in Southern California, where Ralphs operates. High unemployment and population declines have caused us to revise our near-term profit projections for Ralphs. Finally, valuations for businesses are at historic lows. Due to all of these factors, we were required to write off the goodwill. Let me spend a minute on fuel -- as expected, lower fuel margins also pressured Kroger’s quarterly earnings. As you may recall, in last year’s third quarter, our retail fuel business experienced exceptionally strong margins of $0.239 per gallon of fuel sold. This year we earned, on average, $0.119 per gallon of fuel sold at our convenience stores and supermarket fuel centers during the quarter. Lower fuel margins explain approximately $0.08 of the year-over-year decline in Kroger’s earnings per diluted share for the quarter. On a rolling four-quarters basis, the cents per gallon fuel margin was $0.107 this year compared to $0.156 for the same period a year ago. A normalized margin for this business is approximately $0.11 per gallon, and that is incorporated into our full-year earnings forecast for fiscal 2009. We continue to see positive identical gallon growth. Expanding our convenient fuel centers is an important part of our “one-stop shopping” value proposition for customers. Turning now to use of cash flow, in light of the current environment, we have reduced our internal capital plans by approximately $1 billion over the next three fiscal years. Our original plans did call for continued capital expenditure growth. We now expect capital expenditures to average under $2 billion a year over the next three years, based on current conditions. We plan to focus our capital expenditures on store remodels, infrastructure projects and expense reduction initiatives. This will strengthen Kroger’s free cash flow. We expect to use free cash flow to maintain our current debt coverage ratios and reward our shareholders. Now, I will turn it back to Dave.

Thanks, Mike. We hope our comments today give you a better understanding of what is happening in the current environment and our plans and priorities going forward. It should be clear that our strategy is based on customers and volume. In periods of deflation, this strategy helps us build market share and strengthen our long-term market share position, but clearly the short-term financial results suffer. Conversely, in periods of inflation, sales rise more significantly but tonnage movement is not as strong. We are confident that with the adjustments we are making, and as the inflationary picture improves, Kroger will be better positioned than many of our competitors. There are other changes we could have implemented that would have improved short-term results. But, in our judgment, they would have hampered our ability to grow market share, provide a good shopping experience for our customers and create value for our shareholders and opportunities for our associates. We would now be happy to take your questions.

(Operator Instructions) You have a question from the line of Deborah Weinswig with Citigroup.

Thanks for all the details on the quarter. Kind of digging a bit more into how things played out by month, can you go through either by detail or even just at a higher level how month by month sales played out? Can you talk a little bit about the paycheck cycle and is there any impact on your business by more consumers being on food stamps or the impact of EBT?

Well, let me start with food stamps -- food stamps continued even just this last month of November, continued the last three months at as high a level as we have ever experienced, at least as far back as we’ve looked. And the last three months were a little bit higher than the months preceding, so if you looked at our third quarter, that means the first month of the third quarter would have been a little bit less food stamps and then it increased from there a little bit -- not a lot because it was already at a pretty high level. It affects the sales cycle in every state differently because each state has a different process to how they pay out the food stamps. Sometimes it’s the first of the month, sometimes it’s scattered between the first and the 10th and sometimes it’s stretched all through the whole month. But on the whole, we have seen an exaggeration of what’s happened at the beginning of the month and the end of the month. The end of the month for us has been poorer than we are used to seeing; the beginning of the month a little bit stronger than we have been used to seeing. And certainly the electronic benefits have increased dramatically when you compare say to three years ago. You go back to three or four years ago, the food stamp volume we are currently running is not quite double but it’s a lot higher, so it’s very significant. Now, as to the trends through the third quarter, Mike may want to check my facts on this but generally speaking, at the time of our earnings announcement for the second quarter release, would have been about four weeks into the third quarter, at that time we gave you a sense of where sales were. And from that point forward, they gently dropped in dollar sales but our tonnage continued reasonably strong and so it became a different quarter for us, almost -- I’d say almost from the moment we hung up the phone but it wasn’t quite that dramatic, but clearly it became more deflationary and it became more competitive from that point to the present time. Does that give you a sense of what you are asking, Deborah?

Yeah, that’s incredibly helpful -- and if you had to go back and obviously you’ve been in this business for a very long time, as has the management team as a whole -- if you were to go back, could you describe another environment in the past 20 or 25 years that was like this one and did the competition react similarly to how they have now, or is this kind of a new game?

Well, the environment itself, I would characterize as a new game. I have not ever seen anything like this or if I have, my ability to understand what was going on around me was so long ago that I maybe didn’t perceive what was happening. But put that aside and I think just use conventional knowledge of what typically happens and I think what we saw from a competitive point of view is pretty simple -- is that sales, as you’ve seen, many of our competitors, in fact most of our competitors, have reported negative sales, negative IDs, and when you are in that position it is pretty normal to try and reach out to say what can I do to try to change that. That automatically makes a market a little bit more promotional and a little more focused on price. So we shouldn’t have been really surprised that that occurred but it did occur clearly differently and a little more pronounced in the last half of the third quarter than what we had experienced earlier in the year. So I think that the behaviour you are seeing is actually pretty consistent with patterns in past cycles but I think the environment is a clearly different environment than what we have experienced before.

Okay, and I just want to close it out with it sounds like you are gaining share with I think a very important customer base, which is your most loyal households. Is there anything you are doing different in terms of communicating with them to drive the additional footsteps or is that you think that they are just more aware in terms of some of the values that you are offering to them?

Well, remember, put this in context -- remember we’ve been on this journey now for multiple years and while it has a lot to do with price, it has an awful lot to do with other things. We talk about our four keys, well, price is one of the four keys but the other three keys are pretty important to our customers too and I think Rodney said it pretty well -- if you were to put a piece of masking tape over our sales dollars and look at all of our other data inputs, you’d go away saying well, this is a pretty good quarter. Our cost control was good, our growth in loyal households -- our growth in households even not looking at just a loyal but households on the whole grew. And in fact, all of the dimensions in the way we typically look at customer reaction has been strong, and so I would say that we believe it’s the accumulated affect of all of the things that we have done that came before. One of the mistakes that we made in not just this quarter but earlier in the year is we committed a whole lot of our plan to some pricing strategies that we put in place much of -- most of which was put in place early in the year. We didn’t leave ourselves a lot of gun powder for later in the year if the market got more competitive, which it ended up doing. But we think some of the price positions that we took earlier in the year and other things we did helped generate what we are seeing today. These things have a long tail and they don’t produce results immediately but as a result of things we’ve done earlier in the cycle, I think gave us the good results that we’ve achieved with customers. Rodney, do you want to add to anything?

Well, I was just going to add a couple of comments on a couple of Deborah’s questions -- one, when you look at the cycle, if you go back and look at certainly from a recession standpoint, generally the supermarket industry lags by about six to 12 months on a cycle. And certainly if you look at where we are in the process right now, it certainly would suggest that that would be a similar type lag this time. Obviously the economy is starting -- it appears has stabilized and starting to get a little bit better in some spots, so if our historical trend is similar this time, it would be a similar type lag, I would expect. The other thing in terms of what it looks like different today than before is our decline in average selling price per unit would be more this time than before. We think a lot of that is because before customers that we would lose in a recession, today we are keeping them and we think some of that decline is because of that. But if you look at -- certainly if you look at our average selling price per item, the decline is more this time than it would have been before. And we would have not had deflation to the degree that we have today.

Okay, well thanks for all the color and best of luck.

Your next question comes from the line of Karen Short of BMO Capital Markets.

Just a couple of housekeeping first and then some questions on your unit volumes. You normally give your product cost deflation and also private label as a percent of units and a percent of sales in the quarter. Do you have those handy?

The private label units were 35% and the percent of sales were -- I don’t have it right in front of me -- 26%.

Okay.

So basically the same as the last quarter but still a growth over last year’s third quarter. Not as big a growth, but --

It was a slight growth from third quarter last year. We’ve now had I think four quarters in a row of about -- five quarters in a row of almost 35% or in the range of 35% of the units in grocery have been in Kroger corporate brands.

If you look at our corporate brand unit growth is basically double-digit range, very low. And that would have been on top of double-digit growth a year ago in the same quarter, so that’s actually stacked two quarters on top.

Okay, and your product cost deflation?

It would be a negative 0.8% based on the way we estimate it.

And that I tried to emphasize in my comments, that doesn’t really give you a good clear picture because that number, while a big swing from last year, seems like a small one but when you look at where the deflation occurred, it was in meat and produce and dairy and grocery are the biggest areas and those are really important areas. And so that’s really why I would emphasize that point. We had some inflation in, as I recall, in general merchandise and in pharmacy and that tended to offset a little bit of the percentage that we would report as a total number. So I think it’s important to look at some of the categories that it occurred in.

Most of that inflation is driven by tax increases on cigarettes.

Yeah, the GM is mostly -- don’t draw any other conclusion other than the fact that cigarettes went up.

When taxes go up 25% or 30% --

Okay, and are you seeing deflation in grocery as in the center store excluding dairy now?

Yes, if you take dairy out, it’s not quite as deflationary as it is with dairy but it is still deflationary more than 1% deflationary, and --

Last quarter was inflationary.

Yeah, and that’s a good point -- Mike looked at last quarter for us and last quarter, grocery without dairy was actually an inflation number slightly and this quarter grocery without dairy was deflationary, so that’s a big change. And in fact, I think that’s the primary change I’m describing when I talk about the more deflationary environment than we experienced in the quarter before it.

So on your tonnage, you gave that 8.5% unit volume in the quarter, or sorry in the Q for the second quarter and I just had one clarification on that -- first of all, was that unit volume at your stores or from your warehouse? And then I guess the second question is can you provide us with that number for the third quarter? Because it would see that it is higher this quarter than it was in the second.

It was at the stores and it’s just a little bit better than what was in the Q last quarter.

Okay, and then just turning to your triple B rating, I guess you had said that you needed -- if EBITDA declined by 2% for this full year, you would still maintain your triple B rating -- I guess with your new guidance, even at the high-end of the range on earnings, I get an EBITDA that is declining by about 4%. I know you also reduced your CapEx, so I’m just wondering where that situation may shake out in terms of maintaining your triple B rating.

That 2% estimate on that was actually the rating agencies when they put out their press release when we went to triple B flat. As you saw in the quarter, we did reduce debt and our net total debt to EBITDA ratio did improve over the same quarter last year. It went from 195 to 193. We would expect to be able to maintain our coverage ratio in the range that we need to to maintain our credit ratings and the reduction in capital over the next three years is to help us to satisfy that and reward shareholders.

Okay, and then my last question is just on Ralphs in general, I mean, I guess could you address whether or not part of the situation with the write-down was your specific positioning in the market, because that would be the one market where you are viewed more as a quality operator as opposed to price, so could you maybe talk about that a little bit?

Well, I actually think the write-down came as a result of the change in values of businesses in that market, as hard hit as that area has been hit by the economy, and because of the impact of the economy on our customers on our current and future forecasts for cash flow from that division based on the consumer. We are quite bullish on Ralphs in particular. In fact, we believe in the last six months that our market share has actually grown slightly and that’s based on looking at A.C. Nielsen tracking data. We think that the market itself has shrunk a little and that’s actually what creates a lot of the problem. So I wouldn’t read anything into that write-down having to do with how pleased we are with Ralphs except that we are pleased with that team and their strategy and we believe in the long run that that’s going to be a good market for us. The positioning, we would tend to be -- actually we are in lots of markets there, so it’s not just upscale. I don’t think -- what you are describing I think is maybe it’s hurt more proportionately because of upscale features but I don’t think that’s the case.

Okay, great. Thanks very much.

Your next question comes from the line of Neil Currie of UBS.

Could I just confirm what you said about tonnage growth, because I missed part of the answer, I’m sorry about that -- did you say that tonnage growth was higher in the third quarter than the second quarter and did you put a figure around that?

We didn’t give a specific figure. In the Q last quarter, we disclosed it was 8.5% and it was slightly stronger than that in the third quarter.

Okay, so -- I mean, that’s -- so that’s just private brand? [Multiple Speakers]

No, that’s total tonnage.

I wanted to make sure I was using the right number.

Okay, so total tonnage is up more than 8.5% in the third quarter, so -- I mean, you must be very satisfied with that and for the long-term, that set you up very well. So really what I wanted to ask about is the cost of achieving that and whether you think that getting your gross margins down at these levels is a price worth paying for that tonnage growth?

Well, that’s a great question and I alluded to that earlier when I said that the strategies we put in place earlier in the year spent pretty much what we had projected to spend -- in fact, actually as I think we earlier indicated, spent a little more than we had originally planned because they were more successful than we had originally planned. And as a result then when the markets got a little more competitive, we needed to react to that situation requiring that we invest additional dollars. So we would have to say for the quarter, we were disappointed in where our earnings ended up being but very pleased at where the tonnage was and how our customers reacted to our plan, so I think you could argue that yeah, in the quarter, maybe it was too much investment but we couldn’t roll the clock back very easily on what we had committed earlier in the year and we believed as I closed the discussion with, we believed that we didn’t want to make short-term changes that we thought would cause us bigger penalties in the long run, so that’s why we maintain the course.

I’d agree with that statement -- I’m just wondering more about the reactionary investment that you had made. Considering that your tonnage growth is so -- was so strong and you are happy with the planned investments, do you feel the need to respond to everything that competitors do? Wouldn’t 7% tonnage growth be great?

Well, that’s -- actually, yes it would and I agree with your point -- we do not need to respond to everything competitors do. We make a judgement call in each case, whether or not what the competitor is doing and how the consumers are responding is an important situation or not and we are responding to those that we think are important in protecting our franchise with the customer but we are -- we didn’t -- we did not in the third quarter and do not plan in the future to respond to every little thing that happens. We make judgement calls on each of those and I didn’t really specifically comment on Thanksgiving -- we gave you the sales so far, or a good indication of the sales so far this quarter and Thanksgiving of course is in the fourth quarter but Thanksgiving and sales and results were softer than we would have liked. And it was a pretty competitively contested holiday and so it fits the characterization you have, except that at holiday times we found with customers, it’s real important to make sure you protect your franchise. And so that’s actually one of the elements that is in our minds as we give you the new guidance for the rest of this year.

Okay, because my next question was going to be that obviously you missed by $0.10 in the third quarter but the fourth quarter you’ve taken guidance down by I guess another $0.20, so that wouldn’t imply that you are going to take your foot off the pedal in terms of reactionary investments, or are you just being over-cautious here?

Well, I won’t say we are being over-cautious but I will indicate that we felt that we did not properly read the market in the second quarter release when we were telling you where the third quarter and the rest of the year would come out, and I fault myself and as we looked at that, we did not read the market right and we are trying to stand back from it now and read it more accurately for you and to try to describe all the factors that we know about. And given that the two major holidays in the fourth quarter, one of them has already passed, we already know the data and we can share with you that it was a soft holiday for us in sales and the earnings results were softer than what we would have liked to have and so when we take those things into account and look at how unpredictable this environment has been, we had to leave a lot more room than we might ordinarily have left with only one quarter left in the year.

Okay, and then on 2010, I mean, historically you have really focused on the top line and your stated policy is really to hold operating margins relatively flat but given the sort of investment that you have seen this year, would you maybe in the second half of 2010 and beyond be now looking to recover some of this over-invested margin?

Well, I think what we are going to see next year is we will have to see it as we go but we would expect things to improve, particularly in the second half, from what we have experienced this year. But as we have indicated, we think the first quarter or two could be rough because -- for a lot of reasons, one of which is that we don’t know when deflation actually will turn. We also haven’t rounded fully the year when we had the price investments that we have made. Those are just some examples and we can’t predict where competition is going to be yet in the year either, so ordinarily we give the full-year guidance for 2010 in March, which we still plan to do. We did though want to give you an indication of what we saw ahead, so that you would have some way at least to bracket where the world is and that’s why we indicated that our -- both our sales and earnings per share we expect to be higher in 2010 than what we are projecting for 2009.

And the CapEx cut for over the next three years -- will you look to give that back to shareholders?

Mike.

Well, as I said, our use of free cash flow, that obviously will strengthen it and we will strike an appropriate balance between maintaining our triple B rating, which we think is important in this environment as well as returning to shareholders.

Thanks. Well, well done on the tonnage and unlucky on the margin.

Your next question comes from the line of Andrew Wolfe of BB&T Capital Markets. Andrew Wolfe - BB&T Capital Markets: Just on the increase in tonnage and you tied it into variable costs and that is how you run the business -- is it one for one? I mean, is your -- I assume it isn’t but could you give us a sense of how much hours or store labor hours you have to add for every increase in tonnage so we can do some sensitivity analysis around that?

If you look -- every department is obviously different but if you look at it overall, it’s usually about 60% of our hours would be variable, 40% would be fixed. Now that would depend on where you start out on the volume of a store and the department of the store. But as a rough rule of thumb, that’s going to be pretty close. Andrew Wolfe - BB&T Capital Markets: Okay, so we’re talking tens of millions of dollars per quarter with this kind of tonnage run-rate of increased variable costs against department contributions because the unit profits are down and aren’t that great -- I mean, is that sort of how the department P&L shake up?

It would certainly be tens of millions. The other thing that would mitigate that to some extent is we continue to make process changes in our stores to improve productivity, and I said stores but we are doing the same thing in our manufacturing and our warehouses, continually looking at ways to do the same work more efficiently and effectively and that would mitigate some of that increase in hour needs. Andrew Wolfe - BB&T Capital Markets: Got it. And I just -- the other thing I wanted to ask about was as you looked at as of third quarter I think you indicated got tougher towards the end, particularly versus where you set guidance, was it more being forced by the consumer and how they are behaving and maybe more unexpected markdowns to clear out perishables and things like that? Or is it more out of the competitive environment when you have sort of gone back and done your post-mortem on where things are and how the quarter shook out?

Well, the post-mortem for me says that deflation was more pronounced from the -- when we had the last call to the present. Deflation was more pronounced than what we had expected it to be. I actually thought it was going to begin turning but I guess I was looking through rose-colored glasses, so that’s the first item. Second is I think based on where the industry was seeing its sales, you saw a lot more reactions throughout the industry, more competitors and more geography with competitive reactions and that was -- I wasn’t surprised to see some of it but it was more widespread than I had expected. And those are the two biggest areas that I think we just didn’t see properly. With hindsight, we can see a little bit more clearly. With deflated sales, particularly when we weren’t able to get a higher margin for it and in fact had a lower -- clearly a lower margin for it -- that doesn’t leave a lot of dollars to pay the bills and our bills came in in regular bills because the labor we have to spend is for the tonnage, not for the dollars. Andrew Wolfe - BB&T Capital Markets: Okay, and I just want to really follow-up on Neil’s question on the guidance, particularly when you add back the $0.08 swing, you know, the quarter clearly wasn’t nearly as bad as it looked, as the reported number on the core business ex fuel, which makes -- and I think I just look back and I think Q4 was pretty neutral on fuel last year, which really makes your numbers, your Q4 look pretty scary or pretty conservative and could you just give us sense of that -- are you saying what you are seeing lately and with Thanksgiving is just making you that cautious? Or are you trying to build in some kind of conservatism so you don’t surprise investors?

Well, I’m probably not going to -- in fact, I won't call it conservative as an estimate because I don’t think it is. I don’t think that’s an accurate description. I will tell you that it is more conservative relative to where we see our current forecast than it was when we gave it in the second quarter in September. At that time, we gave you a forecast that we believed to be accurate but it was pretty much right where we were seeing things. So we’ve built in a little bit of room for the fact that we got surprised on the downside and so we are expecting that that could easily happen this quarter, particularly with the very important holiday of Christmas ahead of us and given what happened in Thanksgiving, I’m not as bullish about where Christmas is going to come in for the industry and as a result, that doesn’t mean we are being conservative -- that means maybe that we are being realistic about the current environment. Andrew Wolfe - BB&T Capital Markets: Thank you.

Your next question comes from the line of Meredith Adler of Barclays Capital.

I would like to talk just a little bit about tonnage. I had the same sort of question when Safeway was talking about tonnage when they reported their third quarter numbers -- tonnage always goes up when perishable costs or prices go down. To the -- are you seeing more tonnage growth than you would have expected given the amount of deflation in those perishable categories?

You are correct that in categories like produce and certainly parts of, maybe not all of meat, when you have commodity costs go down, typically tonnage always goes up. That would be accurate. I don’t think that I felt this was just a reaction to what happened with commodity prices though and I would turn to maybe grocery as a good indication of that, is that our grocery tonnage was solid too. And while it had some deflation in it, as I’ve pointed out, I think that the tonnage growth that we are seeing is more a reflection of our customer. So look instead at the data that we get from our loyalty card -- we are growing the number of loyal households that we serve. Those loyal households are shopping more often with us, making more visits -- that’s not new news, that’s old news. They are buying more items in a month’s time -- that’s also the same news as we had last time. The only change that we are seeing in that is a positive change and in this quarter, the one we just finished, we are actually seeing the number of units they buy per visit of the loyal households has become flat. It’s no longer a decline. It was a decline the last several quarters on a per trip basis, but now on a per trip basis, they are actually buying more items -- not more, the same items as they bought the year ago, so I see that as it’s a small development but I see it as a positive development and I think it is reflective of our overall program is connecting well and producing the tonnage. Now if you had a sharp swing in the other direction on inflation, I think you would see some contraction in tonnage. The best example I can think of is milk. If milk costs go up, and we do expect that they will go up some -- in fact, they already have a little -- as milk costs go up and as retails go up, we do expect some of the gallonage to dissipate that we have gained. But we think that there’s still lots of tonnage out there to be had based on the combination of our strategy for connecting with our customer.

The only thing I would add on tonnage is it’s pretty broad-based -- it’s not just the perishable department, so if you look across the whole store, it’s pretty strong across the whole store. The only place there would be weaknesses are more things that are economic related in terms of discretionary type items -- if you look at seasonal items and some of those kinds of things would be where you would see the softer tonnage.

Thank you, and then a follow-on question with that -- when you look at the frequent shopper date, I know you have more households in general. Does the data show that people are buying more than just the promoted merchandise, that their baskets -- you know, that they are bringing you more of their total purchases, even if they are not what you would consider a really loyal customer?

That’s a hard one to answer because the market has gotten a little bit more promotional and as a result, the items that customers buy, their basket would be a little more promotional too. So I don’t know that I can answer it any different than that. We think our gains remain solid, even in the face of the promotional side of this, is how I think I would characterize it.

I guess I meant are you just getting people coming in and cherry picking you and that’s why households are up.

Well, households are up but so are loyal households and loyal households require a household to be something more than a cherry picking customer. They actually have to buy with a combination of frequency and dollars over time to qualify for that description and that category is clearly growing. So that would not be a customer who comes in and buys just the featured item and leaves.

Okay. When you think about the inflation outlook for dry grocery, we have almost nearly an entire year coming up, at least four quarters, of inflation to compare against -- is that right?

Three quarters would have -- if you take dairy out, I think that’s right. Rodney.

I was just going to say in the first quarter, wouldn’t expect to see much different than where we are today. In the second quarter, I think we will start seeing some categories changing. If you look at dairy, I think it will change sooner rather than later; if you look at other categories, I think it will probably -- a little later if you look at traditional grocery.

Okay. And then my final question is about the impairment charge -- I try to remember, I was around a long time ago but I’m not sure my memory is very good, but I don’t believe that you had good will on your books for any other markets besides southern California and so you didn’t have to do the impairment test anywhere else but would it be fair to say that the impairment doesn’t mean that Southern California is necessarily worse than anywhere else?

Mike.

I’m not sure what you mean by not necessarily worse -- there are a lot of places where we do not have any good will. We still have over $1 billion of good will on our books, as you can see on the balance sheet, and it’s spread over a lot of different geographies. There is no more good will on the books for Ralphs. That has been entirely written off with the combination of what we wrote off at 04 and what we wrote off that we announced today. I wouldn’t characterize it as any worse than anywhere -- you just don’t have to do a calculation like you do for when you have good will for other entities that don’t have it, and it’s the combination of factors that we spoke about -- the tough economy, the cautious consumers, the high unemployment, as well as just general market conditions. When you apply a multiple to a revised cash flow based on that environment yields you a value lower for the entity than you would have gotten at this time last year.

And the physical value of the assets clearly, clearly a decline in value in California.

Right.

Right. Okay. Thank you very much for answering my questions.

Your next question comes from the line of Jason Whitmore of Cleveland Research.

David, you talked briefly about making some adjustments -- I’m not sure if I picked up on what exactly those adjustments might be, whether they be near-term or moving into 2010 and I think maybe more broadly, have you thought differently about your business mode for the next couple of years, assuming that this value emphasis sticks with us for a while, or whether the macro or competitive environment remains stickier longer than expected.

Yeah, we’ve given a lot of thought to that, actually. First of all, I did not describe specifically what adjustments and for your thinking, you should think about as we look at our business, we are looking at adjustments in our gross margin and in our cost structure. But both of the areas that we are looking at are, I would characterize them as not significant changes, not radical changes, not big changes, not the kind of thing that you would see some difference in our numbers next week or next month but would help in our judgment would help make the current strategy where we are more affordable. What we are not doing, if you go back to the closing comments I had right before we came to Q&A -- in fact, let me just read the sentences to you again because I think they are real important -- there are other changes we could have implemented that would have improved short-term results. But, in our judgment, they would have hampered our ability to grow market share, provide a good shopping experience for our customers and create value for our shareholders and opportunities for our associates. We did avoid and are continuing to avoid making significant changes, abrupt kind of short-term changes that probably five and 10 years ago we would have been more inclined to make. That doesn’t mean though we are going to stick our head in the sand and ignore what the operating environment is. I think the biggest thing that I am watching for is the area of inflation and deflation. If we were to continue with a very deflationary environment, which is what I would think of as the current moment to be, I think we would have to re-ask ourselves what do we want to do on our price strategy and I think we’d have to push ourselves a little bit more on gross margin. But because we believe it is of more limited duration, we are holding the course a little bit more straight than we might have done if we thought it was a more permanent change in the economy. I don’t know that I can spell it out any clearer than that.

That’s helpful. I think -- I was curious within -- regardless of the competitive environment, which obviously has changed in the last three to six months, do you think all in for 2009, it’s been a year of learning at how to re-establish or define value within your product offerings or within your stores? Not just private label but opening price points and all in with the basket, which seems to be where the greatest amount of pressure has been. And I don’t know if that’s baseline or the promo mix or just all that sort of noise from all the deals that have shown up in the channel, some supplier driven, some retailer driven -- but is that mix getting re-evaluated all-in, is that what you are talking about with gross margin?

I think we have done a really good job of evaluating how to create value for our customers in this environment and we started doing that actually a couple of years ago but it became very strong in late 2008 and in the beginning of 2009 and I actually think it’s because we’ve done a good job on that point, I think that’s one of the reasons that our identical sales are positive and that our tonnage is strong. There’s not many retailers, food retailers out there who can say that and we think we can say it because of the things we did actually some time ago on exactly the points you are making. That value proposition and the combination of what are the right items, what are the right prices, what is the right promotional strategy, and it’s not a fixed target. It’s a moving target as you go through each month and see how the customer is reacting and changing and what the competitive environment is but on that, I would give us pretty good marks. I think we’ve done a good job there.

And to follow-up on your expense or cost structure comment, has that moved up in priority or urgency internally to help find other ways to offset some of this pressure?

Yes, one of our longer term disappointments right now is that we have not yet found as many process changes that produce large dollars and implemented those changes as we had hoped we would have. We found a lot of the opportunities but we’ve not been able to turn it into actual dollars as much as we had expected and it is an important part of our strategy going forward. We are not giving up on that point. We are pressing ahead and pushing that point even harder because we believe that we can make some permanent reductions in some of our costs through process change in ways the customers won't feel abandoned and it won't be short-term and it will make more affordable the strategies that we have in mind. And that is a disappointment for this year but it’s a long-term disappointment. It’s not something that I can say today we are going to change and you will see a difference next week or next month or even frankly next quarter. We hope you will see some changes next year. We are pushing ourselves hard to make that true because that is an important part of our strategy.

Great. Thank you much.

Your next question comes from the line of Charles Cerankosky of Northcoast Research.

First, sort of a macro question -- when you are talking about deflation, is it tied up with trading down? I mean, how easy is it to tease those things apart because it seems to me the consumer is buying very often at the lower end of a category’s price point range and so you are buying in lower price point merchandise.

If you look at the way we are estimating our deflation, it would not be as much because it’s more looking at the price of what we are paying and selling product for. If you look at individual cost per item, the deflation number would be significantly more than that 0.8%. So if you look at for an identical item that customers are -- if you looking at what’s within each basket that customers are buying, that average price per item is significantly more deflationary than the 0.8% is. And that we are not reflecting in the 0.8.

Gotcha, so the -- I don’t know, a mix adjusted rate of deflation would be significantly greater than the 0.8%, to paraphrase what you just mentioned, Rodney?

Right, yes. That would be our estimate. I mean, you know, obviously you could get a PHD before you know for sure, but that would be our estimate, or our expectation.

Okay. Thank you. Mike, when you look at the CapEx budget contraction over the next three years, how fast does that drop? You know, you divide a billion by three, you get $333 million a year but is it more back-end loaded or can you cut projects faster? How should we look at that?

Well, we are certainly looking at 2010 as we speak but we are not in the mode of wanting to spend a dime to save a quarter. By paying something to delay a project or incurring a penalty to delay a project, we just don’t think that would be prudent at this point. So we are looking at 2010 and trying to make sure projects that are -- we are legally committed to, we don’t do anything to incur a big penalty or a big charge as a result of it. But we are trying to moderate the program in not just 11 and 10 but -- or not just 11 and 12 but 2010 as well.

It will be more back-end loaded though.

We would certainly expect 11 reduction to be more than 10 and 12 to be more than 11, but 10 will still be meaningful.

All right. When you look at what you describe as loyal households, what percent of Kroger sales do they generate?

That’s one where -- it’s a good question. I’m not sure that we would want to answer that one because that one is pretty proprietary. But it’s a meaningful number is about all I can really say, Chuck.

Okay. And did you give us an actual number for your ticket and traffic in the quarter? If you did, I missed it.

We did not. If you look at it the way we historically measure it, traffic would have been more than 100% of our sales growth. Average basket would have actually been a decline. And if you’ll remember in the prepared comments, we talked about it relative to households versus each -- you know, the transactions themselves.

All right. And again, back to this whole pricing and deflation question, is a pick-up then in -- well, a reduction in deflation, some movement towards flat pricing or even inflation, how much does that help you if the consumer is buying carefully and buying at the lower price points within a category?

Well, it obviously depends on what items change and that is the whole ballgame anyway -- I mean, that’s true even on deflation. Some items that change are harder to move in a market and others are not, so I think it’s -- the proof is ultimately in what the customer does. I don’t know that there is any better answer.

The only other thing I would add is at some -- if you look in the second quarter, we start cycling some of the significant deflation from the current year. So you don’t have that headwind that we are going against. Now, the mix change can go either way because if the economy improves a little bit, customers could also start trading up a little bit too.

That is what it sounds like -- the economy is your biggest challenge right now and it’s almost a waiting game for the stronger players.

Yes.

All right. Gentlemen, thank you very much.

Your next question comes from the line of Scott Muschkin of Jefferies & Company. Scott Muschkin - Jefferies & Company: I want to kind of hit on some points people asked before but just to Rodney, I think you said that the supermarkets trail the economy by about six to 12 months. I actually concur with that. So as we look at next year, clearly this quarter was really tough but as we look at next year, it looks like we have employment inflecting, it looks like food at home sales actually already inflected real, and it looks like inflation is inflecting probably by the second quarter. So if I listen to what you guys are saying, how you are really focusing on the expenses, it looks like we could enter a period with Kroger growing EBITDA dollars faster than sales sometime next year. I was wondering if you had any comments on that. I know that’s been something that’s been hard for you guys but if we enter that period, do you think it could last for a while?

Well, to me it’s one of those where as we gave the guidance that Dave talked about, what we are assuming is the world stays kind of where -- what we see today. To the extent that it gets better, that would be obviously the up-side. To the extent that it would be worse would be the other side. To commit today on your number, I wouldn’t necessarily commit to it today. It will be something when we normally give more description on the 2010 guidance in March we will do that, but I wouldn’t want to commit to that at this point because I still think -- you know, one of the reasons why the range is so wide that we gave for the fourth quarter, there’s still an awful lot of uncertainty and an awful lot of moving parts out there and I think it’s too early to say those moving parts have stopped. Scott Muschkin - Jefferies & Company: But Rodney, if I can maybe jump in and do a follow-up there, I mean, we’ve talked about in the past EBITDA dollar growth not really keeping up with sales growth. Is it -- as you guys look at the customer first strategy and look past this economic kind of abyss that we entered about a year ago, is it the idea that you really want to get those EBITDA dollars growing faster than revenues?

Well, if you look, our long-term strategy is to have slightly improving operating margins and in order to have slightly improving operating margins would take EBITDA dollar growth slightly in excess of our sales growth. Scott Muschkin - Jefferies & Company: And then I guess I just have one other question -- and it goes to your -- if I look at your, for your best customers that have a Kroger credit card, receiver your mailers, buy all your gas with you guys, it’s unclear to me that you are actually even priced above Walmart when you put all those factors in. And I guess my thought is do you think that’s right, number one? And if yes, do you think you are able to communicate this well enough with your customers because your tonnage growth is great but if it’s that much of a value, maybe you could argue it should be even more?

I would answer yes and yes. I really believe that that’s a correct statement, is that our customers, our very best customers, see the combination of what we offer and they like it, even from just a cost or a price point of view, they like it better than what others offer. But I also would add that they like our storage better too, in addition to the pricing position.

You know, when we do research, clearly customers rate us very highly on our people, shopping experience, and products and our best customers, our advocates would understand the price value they are getting and that’s the reason why they love us so much and it is our responsibility to make sure every time a new customer comes in that they can see that total value, because that’s what’s in it for all of us for the long-term. And that’s what we are really focused on doing. Scott Muschkin - Jefferies & Company: So do you think the message is good enough for new customers though? I mean, it seems to me that people would be coming to you in droves if it’s yes and yes to those two -- you know, yes to the answer that you are just as good a value, maybe even a little better than Walmart. It seems like that would create a huge amount of growth in market share if communicated optimally.

Therein lies our opportunity.

And when you ask me, on anything, I’m never going to say that it’s good enough, so that’s just -- I think all of us are that way. Scott Muschkin - Jefferies & Company: All right. That’s all I have for you guys. Thanks for taking my questions.

Your next question comes from the line of Kim [Gale] of [inaudible] Investments.

Kim, are you there?

A couple of questions -- a technical question on the impairment. My understanding was that it was -- impairments are typically taken for a permanent loss of value and you talked about the cycle and things being somewhat temporarily depressed, so I was wondering if you could amplify it a bit on that. Secondly and perhaps more core to the strategy, I’m wondering if you could just talk a little bit about what you are seeing in terms of elasticity of demand? Clearly people want to save money and price is very important but I’m wondering if you are seeing the kind of results from price investment now that -- you know, the kind of results, if you can compare them to what you are seeing now versus what you might have seen a couple of years ago.

Mike, do you want to comment?

On the impairment, there’s really -- the literature doesn’t allow you a lot of flexibility on looking at an aberration in the market today. There’s a little bit of flexibility of looking at market valuations today compared to the historic valuations but you certainly aren’t going to sit here today and assume you are going to get back to the historic highs of market valuations as well and just with where the economy is in southern California, the unemployment in Southern California and the effect that is having on the consumers in Southern California adjusted for maybe not current market valuations but not overly robust market valuations either. It just wound up being a trigger event in the quarter that caused us to have the need to write the good will off.

Let me answer the last half of your question about elasticity of demand. I think we are seeing more reaction to our pricing programs, both regular price that is everyday shelf price and also promotional prices and I think that’s a result of the customer becoming more sensitized to pricing in this environment and in this situation. So the customer wants it, is reacting more -- that’s one of the reasons we pointed out that the pricing program we put in place earlier in the year or the pricing programs, plural, that we put in place earlier in the year that we felt we got a stronger reaction than we had actually expected based on the past.

I mean, it’s clearly a tough quarter and the deflation throws sort of a monkey wrench into all of this but just looking at gross profit per foot, this is the first down quarter I’ve seen in a very long time -- you know, 53 week years, 52 versus 53 week years accepted, so -- and you clearly talked a little bit about not wanting to react on the short-term versus your long-term thinking but I guess I can read into your answer there then that you certainly think that there is still more to be gained from price investment and that that should while perhaps depressing margins result in higher gross profit per foot over time?

Well, we definitely think there is more room for us from a pricing perspective, but we also are moderating that view and balancing that view with our ability to pay for it. We think that’s important. As for shrinking gross profit per square foot or other ways you might want to measure it, we hope that this quarter and the quarter we are in now and perhaps another quarter or two are aberrations in that regard. We do not expect that to be a permanent part of our strategy.

Okay. And then maybe just amplifying a little bit on Chuck’s questions, could you just go through a little bit of the methodology that you use to calculate your deflation number? Because it sounds -- I don’t know if it’s sales weighted or if it’s like an even weighting of items or exactly how you do that but that might be helpful.

It’s in the categories -- it’s the cost of what we are buying the item for this year compared to the cost of what we are buying the item for in the two-year period compared, combined. And then it’s weighted by the velocity of those going out the door.

So it’s based on your cost then, so it doesn’t take into account your actual selling price?

No, it’s cost and the velocity of the tonnage going out the front door -- it does not take into account the price.

So to the extent that you are sharper in price this year versus last year, your deflation could well be quite a bit worse than that number?

Sales deflation would be, but not product cost deflation.

Right, but I’m thinking sales, just from a top line perspective.

Sales could be deflated by more than our product cost deflation as a result of that, yes.

Okay, great. Thank you very much.

Thanks, Kim. I think we have time for a couple more questions.

Your next question comes from the line of Edward Kelly of Credit Suisse.

I just want to ask you -- have your comps, at least in your mind, stabilized here? And I ask that question because you talk about Q4 IDs being the same as Q3, yet Q3 decelerated for most of the quarter, which would imply that maybe the first four weeks are better than call it the last four weeks of Q3. Your basket is flat, deflation at least looks like it’s maybe peaked so I was wondering if you could comment on that?

I think you’ve sized it up pretty correctly -- about the only exception in the four weeks we’ve had so far would be Thanksgiving was softer than what we would have liked, because when I made the comment about our [ident] sales now are about similar to or par with where we were in the third quarter, that’s where we were for the whole third quarter, which would be a little higher number than where we were in some of those later weeks. So I think that’s accurate. I don’t know that I can predict though whether this is really the bottom or not. And I’d have to say that it does play a little bit on our heads because we are not used to seeing, particularly in the last three, four years, we are not used to seeing numbers that are quite this small on our identical growth. So we’ve tried to look a lot more at our household growth and our tonnage growth to really see what’s the health of our business, and because we think it’s strongly healthy, I’m willing to get past some of these low ID numbers and -- so I’m hopeful that it’s sort of at the bottom but I don’t know that I can judge that for sure.

Okay. But your fourth quarter of last year I believe decelerated through a lot of the quarter, right, because holiday was fairly difficult last year -- is that right?

I think that’s right. I believe that’s accurate. Our IDs that quarter were 3.8 for the quarter -- I don’t remember exactly how it fell through the quarter but I believe that’s accurate.

All right. And then there’s been a lot of talk on the call about tonnage growth and tonnage growth is great but the gross margin is down over 100 basis points and I don’t think investors are going to give you credit for that unless you prove that you can keep it. So what is your confidence that the volumes that you are driving today as it relates to investment in price, you are going to be able to keep once we come out of this?

Well, it’s a hard question to answer but we believe that because we are connecting with the customer and not just buying them through hot promotions and having them come in and cherry-pick us, that we believe that that connection over time will produce somewhat consistency in our tonnage and our business with them. Now obviously as inflation comes into play, some tonnage will dissipate. One question often you all have asked is on Kroger Brands, when all this changes, the economy is better, what do we expect Kroger Brands to be? Well, I don’t really expect it to be 35% of the units sold in grocery but I also don’t expect it to fall back to our old levels. And if you go back just a year or so ago, that old level was down around 32% and so I think some of this gain is permanent but not all of it, and I think some of the tonnage gain is permanent but not all of it. And the biggest issue for us is market share and the connection with the customer as we measure our loyal households and I expect that to be solid going forward and our strategy is intended to try to keep it that way.

I’d only add one thing to Dave’s point -- the other thing, as you know, every quarter we measure how we perform with several thousand customers on how we are doing on delivering our basic services and customers continue to tell us that we are improving on the way our associates are treating our customers, that shopping experience and speed of checkout and some of those attributes, we continue to get better on those both on an absolute basis compared to us but also a relative comparison versus our competitors. And to me, that’s the other reason why I would add on top of what Dave said that gives us confidence that it is something that we can keep and maintain and grow from when the economy improves.

That’s a good point. I would agree with that.

Could you help us understand where the competition is coming from, Dave? Is it regional guys, is it national guys? Walmart’s clearly made a lot of noise about getting more aggressive on price. I’m not sure if you are seeing it on the ground or not but does that play a role?

We generally don’t talk about specific competitors but let me just give you four examples -- it would include of course Walmart, because you described that and that’s certainly accurate and that’s widespread; it would include Safeway, who has announced what they are doing; it would include Albertson’s, both sets of Albertsons’; it would include local and regional operators like Giant Eagle and HEB; and Meier, and all of those are illustrations of that it’s been more competitors and it’s more geography. And there are others too but those would be good examples, good illustrations.

All right, and then one last question for you hear on share repurchase -- I’m looking at the cash flow statement and you bought back about $130 million in stock year-to-date. Last year it’s over $600 million and I know you want to keep the rating and you’ve had concerns about the credit markets and a revolver but your stock is also $20. You are talking about the fact that you do think earnings will improve next year -- it would seem like now is the time to buy. So I was just wondering what your thoughts are on that.

Well, as we said earlier, we are going to continue to balance the use of our cash flow to maintain our credit rating and give value back to the shareholders and that would be one opportunity to do it but we are not going to commit to exactly in what form that will take.

Okay. Thank you.

But we would agree with you that based on all those circumstances, it looks like a good time to buy, so all those of you listening, [I would pay attention to that]. Thank you. Next question.

Your next question comes from the line of John Heinbockel of Goldman Sachs.

A couple of things --

And John, you are going to be the last question, I think.

Okay. It looks like vendor allowances have stepped up over the last six months, both food and non-food. Have you guys seen that as well and does that go higher from here?

Well, vendors are responding in lots of different ways. They are lowing some list cost and they are doing more promotional money and all of that to try to keep things moving. That’s pretty consistent with what we saw last quarter too. I think that’s one of the reasons you are seeing deflation in grocery is that you are seeing overall the costs of the products coming down and so yeah, I think that’s true.

Now, should that be helpful to gross margin or no, as you supplement your investments with vendor spending?

It depends completely on the items. Some items are so competitive that it almost doesn’t matter too much what the cost is because we got to have the right retail. Other items that are not as sensitive if we see a decline there, that actually should help gross margin a little and so we think in a deflationary environment, some items actually do help us but they didn’t help us enough to offset the ones that didn’t help us this last time.

All right, and where are we now on SKU rationalization and how do you attack that in 2010? You would think that would be a priority, a way to maybe get cost down and get sharper on items that matter most. Is that going to accelerate in 2010?

I wouldn’t necessarily say that it would accelerate. Assortment has been something that we worked with Dunnhumby on over the last couple of years and through that whole period of time, we’ve had pretty meaningful change in the SKU rationalization, and making sure that it’s store specific. That’s something that I think we will constantly have a debate in terms of how to improve and how to make sure we have what the customer wants.

All right, and then you look at the pressure you are under. Obviously there’s a lot of companies out there without your scale and without your comp momentum. You know, do you guys have a sense -- I mean, it’s hard to tell but you wouldn’t think that there would be a lot of dry powder for folks going into 2010, that there might be some moderation in the competitive environment. What’s your sense of that?

I don’t think I can comment on that very well, but I think you’ve assessed it pretty well.

Okay. And then as you guys look at 2010, what’s your best guess when -- do you have a sense when we go from deflation to inflation? Mid-year?

I would expect probably mid-year. I would expect in the second quarter for some categories we’ll begin to see it as we move through that quarter. But I think in terms of looking at us overall, I think mid-year is a good point to use.

All right, and your 2010, the comments you made about 2010, just so we are clear, you expect to comp better than 2% to 2.5% and you expect some level of earnings growth?

Correct.

Okay. We don’t yet know -- I guess -- if you look at the old model of a slight improvement in EBIT margin, and I think we always worked off of maybe a 3.4 EBIT margin for that number, you know, have we reset the bar to something lower than that or -- so we are working off of that new number or we don’t know yet?

I don’t think at this point we would be ready to give that kind of detail.

We’ll give further guidance in March.

Okay. All right, thanks.

John, thank you. We know it’s been a long call. We hope it’s helpful but before we sign off, I would like to share just a few additional thoughts for our associates who are listening in. As you heard, our third quarter performance was not as robust as we had hoped it would be. It is clear the operating environment continues to present challenges, some new and some we’ve already faced. The economy will continue to put pressure on our customers and our organization. We know the challenges ahead and we recognize the opportunities as well. Your individual -- your personal individual connections with our customers during this important holiday season will help strengthen our position into 2010. We appreciate your dedication and hard work as we focus on delivering the best experience for our customers. We wish you and each of you a wonderful holiday season with your family and friends. Merry Christmas, Happy Holidays. That completes our call today. Thank you all for joining us.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect.