Good afternoon, ladies and gentlemen, and welcome to Tractor Supply Company's conference call to discuss third quarter results. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) Please be advised that reproduction of this call in whole or in part is not permitted without prior written authorization by Tractor Supply Company. And as a reminder, ladies and gentlemen, this conference is being recorded. I would now like to introduce your host for today's conference, Ms. Erica Pettit of FD. Please go ahead, Erica.

Thank you. Good afternoon, everyone, and thank you for joining us. Before we begin, let me take a moment to reference the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. This conference call may contain forward-looking statements that are subject to significant risks and uncertainties including the future operating and financial performance of the company. Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included in the company's filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed. Investors should not assume that the statements will remain operative at a later time. Lastly, Tractor Supply Company undertakes no obligation to update any information discussed in this call. Now I am pleased to introduce Jim Wright, Chairman and Chief Executive Officer. Jim, please go ahead.

Thank you, Erica. Good afternoon, everyone. I'm here today with Tony Crudele, our Chief Financial Officer, Greg Sandfort, our President and Chief Merchandising Officer, Stan Ruta, our Chief Operating Officer. Our team did an outstanding job as we, again, delivered higher-than-expected net income driven by significant improvement in gross margin and modest top line growth. As you recall we are cycling against a number of factors that benefited our performance from last year including landfall hurricanes in both Louisiana and Texas which created high demand for emergency preparation and response items, volatile fuel prices that created early sell through of heating products and high inflation levels which provided tail winds for our sales. We recognize that this will be a challenging quarter and I'm even more pleased with our achievements in light of the headwinds that we faced. We took a proactive approach towards planning and we executed our strategies very well. Let me go into more detail about the strategies that allowed us to win in the third quarter and are continuing to position us for success for the remainder of this year and beyond. First, our merchandise assortment supports our customers' everyday lifestyle needs. We have a thorough understanding of what is relevant to our customers, our core consumable, usable or edible or [Q] categories are very attractive to consumers looking for a one-stop destination for products that fit their rural lifestyle at a compelling value. These items, including animal and pet related products, repair and maintenance parts for machinery and lubricants are continuing to drive footsteps into our stores. We are pleased that we delivered positive comp transaction growth for the sixth consecutive quarter. We continue to explore opportunities to build upon the strength of our [Q] categories. In the last few weeks we've introduced a select…

Thanks, Jim. And good afternoon, everyone. As Jim noted, we are very pleased with our results for the quarter as we continue to proactively navigate through a number of headwinds. On a year-over-year basis we grew sales and EPS, effectively managed our margins, generated an increase in customer traffic and reduced our per-store inventory levels for the eighth consecutive quarter. For the third quarter ended September 26, 2009 net sales grew by 1.9% to $747.7 million. And net income grew by 38.5% to $22.0 million or $0.60 per diluted share. Total comp store sales in the period decreased 5.1% compared to last year's 6.2% increase and non-comp sales were $51 million or 6.8% of sales. We estimated that comp sales were negatively impacted by approximately 110 basis points as a result of cycling last year's emergency preparation and response sales related to the two gulf hurricanes. We estimated inflation was approximately flat and had no significant impact on comp on a year-over-year basis in Q3. While we have seen some deflationary pressure in certain categories such as livestock, feed and fencing, there has also been some retail price increases in areas such as pet food and finished steel products. We continue to gain customers and our customers are continuing to shop more frequently primarily for essentials that support their rural lifestyle. The comp transaction count increased 5.9% and we are very pleased that we continue to drive footsteps into the store. This is even more favorable when considering the traffic generated last year from the hurricane activity and pre-selling of heating fuel. The average comp ticket decreased 10.4% resulting principally from softness in the sale of big-ticket items such as stoves and furnaces. Our core consumable, usable and edible categories including animal and pet related products, continue to be the…

Thanks, Tony. As we enter the final quarter of 2009, I'd like to review the tremendous strides we’ve made throughout this recessionary period to both grow and to improve our business. Now, we recognized the downturn very early in the cycle and adjusted to the near-term realities of our business without losing sight of our long-term outlook for Tractor Supply Company. Now more than ever, this environment has accentuated the value of our relationships with our customers, the significance of swift execution, and the critical role of our team members. Early in 2008 we developed a plan to proactively address a challenging macro environment and we then enlisted and aligned our team around that plan. We refined our merchandising strategy as we observed our customers' changing spending behaviors. With a more conservative mindset, consumers have dedicated their spend to nondiscretionary and to essential merchandise, deferred items that did not fit that criteria, and reduced their credit card purchases. We saw a shift away from big ticket items while sales of basics continued on their growth trajectory. We believe our emphasis on [Q] items and the compelling value proposition has helped to offset this pressure. At the same time we've controlled and reduced expenses across the organization. We recognized it would be important to find ways to cut costs as far away from the consumer as possible. In many cases we've discovered we can do more with less. We optimized our marketing program to ensure that we were driving profitable traffic and sales with every event, and frankly, every cut in every event. In doing so we eliminated TV costs in favor of more efficient and productive direct marketing. We're able to track the success of this effort and ensure that it's producing the way we planned by measuring our gross…

(Operator Instructions) Our first question comes from the line of Jack Murphy – William Blair. Jack Murphy – William Blair & Company: Good afternoon. Just a couple of questions. Jim, wonder if you could give us a little insight into how you view the sustainability of the traffic trends that you've seen so far. You’ve obviously done a nice job through the downturn, but what initiatives you have in place for the fourth quarter and beyond that could give us a sense of the sustainability of those traffic gains.

Sure, Jack, a couple things, probably a couple key factors. One, as we look at the knowledge that we continue to gain and refine on customer segmentation, the number of households that we attribute customer name and address to and our increasing ability to refine our direct response marketing efforts, we believe that we'll be able to drive increased frequency of visits with existing customers as well as begin to use that media to prospect for new customers. So I feel very good about the advertising reach. Also, as we've reported several times, our pet food, which is a high frequency business, and our large animal feed have grown now for several years at a rate exceeding that of the overall chain, yet when we look at our relative market share, it's lower. We’re pleased with our growth. Our market share is frankly rather de minimus compared with our opportunity and we are confident that we can continue to grow those businesses. And now that we have added the two most significant major brands of large animal feed we're very confident that we can grow that also recognizing that those customers are amongst our most valuable. Jack Murphy – William Blair & Company: Great. Just one last question - I wonder if you could just update us on your thinking in terms of the timing or potential timing of acceleration and square footage growth, how you're seeing the retail real estate market out there right now and how that might factor into your square footage plans as you look a few quarters out here?

Yes, you bet. Again, we've not yet seen a significant change in the space availability or pricing, somewhat on the pricing side, not significant, not a lot of change on the price of construction, however. So the overall availability of retail sites in rural America has not changed significantly. Obviously we are committed at this time for 2010 and our number will be in the 75 to 80 stores for next year. We have a little bit of time before we have to begin filling the pipeline for 2011 and at this point, I would suggest we're probably going to be at 9% growth again but reserve the right to accelerate that if we see a turn in consumer behavior and consumer confidence in the next, let's say, five to six months.

Your next question comes from the line of Dan Wewer - Raymond James.

Tony, a few years ago you guys were talking a lot about the silver mile strategy in an approach to reduce your occupancy cost. In your prepared comments you did note that your new store volumes are running in line with your plan. But could you remind us how your budgeting first year sales with the silver mile strategy compared to the gold mile strategy? And then also in terms of are we seeing the benefits in reducing occupancy expenses that you were anticipating?

Yes, a couple points on that, Dan, and then I can turn it over to Stan for any other additional comments. But generally when it comes to sales the differential between the golden mile and the silver mile is not significant. So we did not anticipate either a decline or an increase in the sales level for store. The sales level for store generally is driven by the location of the stores. And in some areas of the country they're going to be a little bit lower sales volumes, other areas there'll be higher sales volumes. So that really is more the driver than the silver and the golden mile. Relative to the silver and golden mile, the silver mile we would expect to have lower costs and we have seen that as we've had a shift to the silver mile from, I believe we were up to about 60% or lower, I guess, when it came to the silver mile and shifting to the silver miles. We have seen an expense reduction. Stan, if you wanted to add any points to that.

I think you covered very well, Tony. We did quite a bit of analysis before we really started focusing on the silver mile and at that time, Dan, really didn't see any significant difference in store volumes in the markets we served. Of course, usually the smaller markets, the distance between the golden mile and the silver mile is just across town or down the road. So it continues to be a good strategy for us. It's helping us maintain good store growth at a reduced cost.

Can I just have a follow-up question, if I could? I think that you noted that suddenly the pet food prices were actually increasing year-over-year. Was that at the wholesale level to you or Tractor being able to push through the price increases on pet food?

This is Greg. Dan, it is a combination of really the prices holding in some cases or slightly becoming elevated and us literally as we've always done kind of move with the market as the cost would increase. We're not seeing a real deflation yet in pet food. And that's something that we're watching closely. But there have been some slight increases. We've taken advantage of those and moved with the market. And we also, with you, anticipate the first half of the year possible some prices coming down. But we really just don't know at this point.

Your next question comes from the line of Robert Higgenbotham - Goldman Sachs.

I wanted to dig into gross margin a little bit. And Tony touched on much of this. But I’m hoping for some incremental color. When you talked to the third quarter performance, you broke out the 70 bips of impact from freight, certainly a big number. The overall FIFO margin was up nearly 200 basis points. I'm wondering if you can help us quantify or at least sort of bucket those other two factors between better markdown performance and vendor support.

Yes, Robert. Basically what we've seen is - and from our internal reporting we break these out and why I try not to get too granular when it comes to the specific break outs is because a lot of times you allocate either vendor support or promotions or discounts as part of the direct margin. And so I try not to get too granular as far as how we break that out. Generally the initial margin, purchase price margin was probably about 20 basis points less. And we saw generally in those categories of volume support or rebate again improvements in sort of the 10 to 20 basis point range. And then as far as we can best quantify markdown management, there is probably somewhere between the 70 to 80-basis point improvement there. So hopefully that gives you some sense of the magnitude of the various categories that we're talking about. But, again, between freight and the management markdowns how you allocate that to your direct margin can be a little bit subjective. But for the most part, those are your three key components.

Understood. That is actually very helpful. And on mix shift was there no positive mix impact? I kind of would have thought that to the extent that you had lower sales of your alternative heating products, which I imagine would have lower margins, that you would have seen some positive impact there. Is that not correct?

Yes. Interesting, as far as mix goes we actually had a negative impact. And a lot of that is a result of the shift to some of our consumables in the feed line that have just a slightly lower-than-chain-average margin. But we were doing some significantly higher volumes. So in this case we had a negative impact when it came to mix, which I would agree with you is a little counterintuitive to the impact that normally the slowness in the large-ticket items would prevail.

And lastly, on your comments around 4Q margins, did I understand you correctly to say that you're expecting a net decline in FIFO gross margins in the fourth quarter?

I said - yes, I said flat to slightly negative.

And - I'm sorry. I may have interrupted.

No, I was just saying on an ex LIFO basis or a FIFO basis we are looking to flat or slightly down.

Right. And I guess I understand that you may have cycled through your average cost of inventory from your biggest price negotiations. It still seems like year-over-year though that you would see some further benefit from that. I might be missing something.

Again, a lot of it has to do with the mix and looking at the mix and the way it's been trending as well as the management of those price decreases that we've attained and how much we've passed on to the customer, etc cetera. So but based on our forecasting we're looking at a FIFO basis of flat to slightly down.

Your next question comes from the line of Vincent [Senisey] - Bank of America. Vincent [Senisey] - Bank of America: Yes, first question, regarding your outlook for 4Q deflation you said potentially you think there could be 2% worth of deflationary headwinds in the quarter. Just wondering if you can give, Tony, a breakdown there by category, if that is strictly taking into account the livestock feed and the fencing you had mentioned or if there is anything else in there.

The categories I mentioned initially that were deflationary were two of the larger categories that would drive this inflation for the most part. Other than that, we don’t provide too much guidance and some of it is speculative as to directionally where it could be headed. We basically will take a look at what our current pricing is and try to extrapolate that as to where we see the pricing going at year end. But we believe that overall given what prices were last year, looking at it on a year over year basis that we would expect to have some deflationary pressure. Vincent [Senisey] - Bank of America: Okay, then just one quick follow-up, if I may, your CapEx came down minimally only about $5 million. Is that just strictly timing, or is there anything else in there?

A combination of timing and obviously a good portion relates to our store expansion program and those expenses came in a bit less than we anticipated as well. But the majority relate to the timing of some projects that are getting pushed into 2010.

Your next question comes from Matt Nemer - Wells Fargo Securities.

My first question is around the branded feed product introduction, when did that actually find its way into stores and is that increase margin per bag or is it designed to drive new customers? What is the thinking behind that?

Sure. Well, Greg why don’t you take that.

Matt, it went in around the early part of October, officially around the 10th would be the date and to be honest with you, as we went in with the pricing structure against this, it was very similar to what you would find at local markets so there really wasn’t any margin gain out of this. It was pretty much typical to what you would find in our relative margins across other feed, so no great margin gain here. This was a strategy to go acquire new customers.

All right. Maybe then you can just give us a quick update on additional product launches or merchandising initiatives we should look for towards the end of this year or early next year.

First of all, the wraparound of branded feed as it goes into the first part of next year is going to be a big plus. And secondly, I would say the fourth quarter from a merchandise execution strategy on gifting and on the positioning of product throughout the store targeted toward a usable gift is… We have taken a much stronger stance on this than we did last year as I mentioned earlier, it worked well for us. This year, we believe it will work even better. I would tell you that we have also repositioned the location in the store where this product is going to be found. It is now down the center court where a year ago it was up in the left hand corner in what we call the seasonal area. This year, that positioning is for all heating and for what we call warm wear products. So we are feeling very good about how the fourth quarter should translate to sale on seasonal products.

In turning to the balance sheet, quickly, your cash balance, I think is at or close to a record high. You didn’t draw down on your revolver which would be sort of typical for this time of year. What do you expect in terms of cash build and your philosophy into deploying that back into shared purchase?

Currently, we look at the shared purchase program and again, each quarter we will look at our matrix and will fine tune the matrix relative to some internal calculations that we do around the share pricing. As you may sense, the stock price had a nice movement throughout the quarter and therefore, moved away from the matrix which we had established so that the purchases were minimal. We will continue to look at how to deploy the cash. We have set targets internally as far as what we would like to maintain as our cash balances. We are slowly approaching those targets and as we move into 2010, we will continue to look at alternatives as far as returning cash either to our shareholders or deploying it in what we believe are the most efficient growth potentials. We will be able to provide more clarity as we move into 2010 and give guidance on the 2010 forecast P&L and balance sheet.

Okay, if I could just sneak one more quick one in, can you just give us an update on the point of sale system and all that?

Yes, Matt. Point of sale is, as Tony mentioned earlier, right now, we have got it at about 174 stores. We are going to stop at 174 for this year. We are going to focus on fourth quarter business and right after the first of the year, we are going to start rolling the POS out to the rest of the company. The feedback from our stores has been extremely favorable on the system in the 174 stores that we have rolled it out to in all phases. It’s initial feedback is a big win for the stores and for our customers and we plan on having a full roll out completed by the end of queue one of 2010.

Your next question comes from Peter Keith – Piper Jaffray. Analyst for Mitch Kaiser – Piper Jaffray: I’m calling in for Mitch. I wanted to follow up a little bit on Robert’s gross margin question. I apologize if it is repetitive, but just to make sure I fully understand. On the financial margins, you do expect some small benefit from freight and mix, but then is it the impact from the average inventory costing will more than offset that so that you think it will be flat and slightly down?

Yes, that is one of the drivers and I also mentioned that we do not anticipate having the same performance in shrink as we had on a year over year basis last year. So that will be a tough comparison for us and again, as we move in… and some of the promotional… we are a little uncertain as to the promotional environment. So we will look at that as far as the fourth quarter. But we feel that on the direct margin, again, you have to look at the year over year comparison and look at some of the categories in the mix. But potentially, that would be one of the drivers as far as pulling down the margin relative to the two anticipated drivers as far as improvement in the margin which is freight. Obviously, being the lead candidate there. Analyst for Mitch Kaiser – Piper Jaffray: Okay. And is that, does that dynamic now starting in Q4, is that something that we might continue to expect in some of the quarters in early 2010?

Well, we feel very confident that we can continue to manage in a low inflationary or low deflationary environment. Again, it is a matter of how those costs cycle though. When we get to cost savings in a deflationary period, and how we can manage our pricing. Clearly, if the retail price is maintained, and have a certain stickiness to it, it gives us an opportunity for those costs to move through our costing and therefore, we have a better matching of the costs and the retail price to maintain the margin. So, again, several variables, but we believe that as we have shown in the first three quarters that we can mange through a low inflationary and to a certain extent, a deflationary period as well. Analyst for Mitch Kaiser – Piper Jaffray: All right, okay. That helps. Then, one unrelated question, but we haven’t heard much about it apparel. I know you’re moving into apparel heavy Q4 with some of the outerwear. Would you update us with any trends that you are seeing there at this point?

Yeah. Peter, I failed to mention in some of the fourth quarter initiatives, the rollout that we started in third quarter of CE Schmidt For Her which has been very, very positive. We also are seeing some early solid indications that the cold weather products insulated and the boots and such cold weather gear is going to perform well. We have our inventories in great shape. They are fresh inventories, no carry-over from a year ago. So we are very bullish on that and I think that we really structured in apparel, more of a price point program for this fall and that is also benefitting us. The consumer really relates to, I hate to say this, but item price. We are very much a key item [inaudible] START FILE 6 sat on the floor right now and it is working very well for us.

Your next question comes from the line of Kristin [Applegee] - Sun Trust Robinson. Kristin [Applegee] - Sun Trust Robinson: You said earlier that you expect the big-ticket items to remain under pressure. And I was wondering if you expect the recovery there, the shift from repair back to replace to basically be in line with whatever happens in the macro economy.

Well, I think we have to recognize that there is - that consumer behavior and the declared end of the recession are likely to be decoupled. Consumers continue to deleverage their balance sheets. They continue to be credit adverse. They continue to save. And as we know, every dollar that goes into debt reduction or savings is a dollar that does not go into retail. So I think we are going to have to wait and see but I do think that the discretionary spender, big-ticket spender probably lag the official end of the recession. Eventually it'll come back. Eventually the consumers repair capital goods cannot be repaired forever. At some point that one actually becomes more economical to replace over term.

Your next question comes from the line of Jay McCanless - FTN Equity.

Two questions - first one, on the 5.9% transaction increase year-over-year, could you all talk about how much of that is actually boots coming into the store versus people ordering online? Just wanted to see if you're actually pulling people in or they're taking advantage of all the internet promotions and email promotions I've seen.

Yes, that's all store traffic. That's the same-store foot traffic, actually, same-store transactions, not traffic, transactions.

And then my other question on - with the increases we've seen since the beginning of the quarter in oil prices and some of the other commodities am I reading it correctly with the way you're capitalizing those input costs now that we won't see any affect in Q4 if oil prices and grain prices sort of keep going up but we might see some pressure in fiscal '10? Is that the right way to think about it?

Generally since our turns are close to three it could take four months on average for the cost to cycle through, the inventory costing, so the freight cost matching up with the turns. Now obviously the turns are different for various categories, so some of it may be accelerated through. So some of it could impact a little bit earlier. But generally, on average, you're looking at sort of a three to four-month lag when it comes to the oil prices impacting freight and subsequently the P&L through the inventory capitalization.

Have you all seen anything? I know you talked a little bit about deflation. I'm guessing that's lagging from earlier this year. But have you all seen any other or new recent price increases from any of your vendors or anything you didn't expect in the way of coming price increases?

No, we have not, to be honest with you. We continue to challenge the vendor community to bring prices back down. And we've been for the most part successful in that. It's been - they've been receptive.

Your next question comes from the line of David Strasser - Janney Montgomery.

I was kind of a little bit looking at sort of the mix of sales as it relates debit versus credit. Are you seeing any incremental, I guess, refusals at the register? Is that having an impact on the bigger ticket? And how are you thinking about that going forward?

Yes, generally what we're seeing is that the applications themselves have declined and that is because the consumer just isn't looking to make that big-ticket purchase. The declines that we're actually getting from the credit company generally is just slightly less but it's not something that is overly significant. So what we're seeing is that people just generally are not applying for the credit.

I mean, so when they're - because people who are applying - but inside the store, I guess, as it relates to the credit cards, you're not seeing anything incremental or mixed towards cash. It's more just people not buying the stuff or applying as opposed to a mix towards cash away from credit.

Yes, when we look at sort of the cash/debit mix we see that cash/debit/check has increased year-to-date about 130 basis points.

How significant a number is that? Like, do you think of that, is that something that you step back and say, wow, or is that something that's more just maybe just kind of not a big deal to you?

It's not overly dramatic especially in light of the trend that debit had prior to the economic situation. So we saw significant movement towards debit and that continued. However, the movement to cash and check has increased and that had gone in the other direction prior to. So we definitely see the consumer being more conservative and only spending what he has in his pocket.

One other clarification, I'm sorry, but when you were talking about some new grounds on the pet side having Purina.

Purina and Nutrena, they're both within the livestock side.

Your next question comes from the line of Christian Buss - Thomas Weisel Partners.

You'd mentioned the deleverage impact from newer stores on the SG&A. Could you help us quantify what that was?

I could probably help you quantify it but we generally don’t give that type of directional information. As in the past few years, we know that the real estate and to a certain extent some of the payroll new stores, until those stores reach maturity those stores will have a deleveraging impact. We felt that through - as we moved into 2010 that that would become a much - that difference would moderate and probably be in the 20 to 25-basis point range and that we could eventually overcome that with our other SG&A management. With a negative comp sales, that obviously becomes more exaggerated. So in a range you're probably looking somewhere between sort of the 15 to 40 basis point range at any given time depending on the comp sales volume.

And maybe a follow-up there, is there any way you can help us gauge the hurdle for new stores as a percent of revenue at that 9% store growth rate that you guys have slowed to, sort of what the hurdle is there to hit the inner targets?

I'm having a hard time translating the question. When we look at a particular store, it doesn't necessarily matter what the sales level is. It's obviously the whole economics of the box itself. So we'll be looking at it over a 10-year period and we'll do a discounted cash flow for that 10-year period. So a store, depending on its cost structure, could be very successful at $2.2 million or very successful at $4.4 million.

(Operator Instructions) Your next question comes from the line of Chris Horvers - J.P. Morgan.

Tony, can you talk about how the markdown management benefit trended over the past four quarters? You had mentioned it was roughly 70, 80 basis points this quarter. I'm curious if 4Q is just a tough compare in spite of it sounding like being stronger on seasonal is more a comparison issue versus the execution.

Well, it's probably a little of both. It has built throughout the course of the year. Some of it - again, I think we need to go back to some o the history but Greg joined us near the end of 2007, so his first year coming through in 2008, we started to experience the improved inventory management and obviously cycling through some of our older goods and moving those out. So the freshness of the inventory really had a significant impact and as we continue to cycle that is really when we started to show the benefit, so obviously the cycle year-over-year 2009 compared to his first quarter 2008 had less of an impact and as we continue to show that improvement throughout his tenure, we continue to be able to improve that markdown management focus. So, there has been a slight improvement from a sustainability standpoint. I believe that we can continue, but not necessarily at the pace that we saw in the third quarter, but we believe that there will be some benefit as we move into Q4.

So, that 70 or 80 basis points sticks, it’s just that some of the cycling shrink of a year ago and some of the vendor allowance dollars; that’s the tough compare, not necessarily the mark down management. Is that fair?

I think as we move into Q4, that’s a fair statement. The benefit on the mark down management may not be to the extent that it was in Q3, but we do believe that we will be able to have enhanced performance on a year-over-year basis.

And then on the freight side, you turn inventories three times per year, so for freight to have 70 basis point improvement in the quarter being the biggest of the year, that is a little counterintuitive, so perhaps [inaudible] the driver there and is it some of the supply chain effort coming thorough in driving that and why is that not sustainable in the 4Q?

Clearly we will have a benefit in Q4. We just don’t think it will be to the extent of the 73 basis points, but we do believe that it will be substantial. As we cycle through and compare to last year, we did have very high costs in the summertime months and the majority of that did cycle through in the fourth quarter, so we believe that we will have some significant benefit there. But, as gas prices have increased, obviously, throughout this year we may not have the benefit that we had in Q3. But, you are correct, on a year-over-year basis, freight expense was very high last year coming into the fourth quarter. So, we will have some substantial benefits, we just believe it will be slightly less than the 73 basis points we experienced in Q3.

Then, all told, ex LIFO, you are thinking that the direct margins are going to be down 60 to 70 basis points and freight comes in plus 50, ballpark, directionally.

I don’t believe the initials will be down as significantly as that. I think it will be less than that as far as initial margins. Again, it’s a matter of how you allocate the promotional dollars, as well. But net net, the big eternal will be the shrink. And we believe that, obviously, the markdown managements will be a positive contributor. But, when it comes to the initial margin, net of the discounts, we are probably looking at more the 20 or 30 basis point level.

Down?

Down, correct.

And then finally, if I could just sneak one in, you hear a lot of, like, the apparel retailers; even some home furnishings guys, seeing some renewed, maybe pent-up demand on big ticket. Just curious, if as the quarter progressed or even into October, if you saw any signs of life on the big ticket side of the mix.

I think we have to temper what we are hearing from certain retail sectors against how far they fell last year. So, they are seeing improvement on a year-over-year basis, but their rate of decline, I guess, in Q3, certainly Q4, last year was much more severe than ours was. So, I guess the answer is no, we are not anticipating any significant improvement on trend for ourselves.

Thank you very much.

You’re welcome. We have time for one more call.

There are no further questions. Please continue with any closing comments.

Great! Well, thank you all very much, delighted with our results, glad that you are with us on our growth journey and look forward to talking to you with final year results. Thank you.

Ladies and gentlemen, this does conclude our conference call for today. You may all disconnect and thank you for participating.