Good day, ladies and gentlemen, and welcome to the Urban Outfitters Incorporated fourth quarter fiscal 2008 earnings call. (Operator Instructions) The following discussions may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please note that actual financial results of the company for the periods being discussed may differ materially from the financial results projected or implied in the forward-looking statements. Additional information concerning factors that could cause actual financial results to differ materially from projected results is contained in the company’s annual report on Form 10-K and in other documents filed by the company with the Securities and Exchange Commission. The company disclaims any intent or obligation to update forward-looking statements. No recording or rebroadcast of this call is permitted without the company’s express written permission. I would now like to introduce your host for today’s conference, Mr. Glen Senk, CEO. Sir, you may begin.

Thank you and good morning and welcome to the Urban Outfitters quarterly conference call. I am joined today by Dick Hayne, our Chairman; John Kyees, our Chief Financial Officer; Ted Marlow, President of Urban Outfitters Brand; Meg Hayne, President of the Free People Brand; and our senior executive staff. Earlier this morning the company issued a press release outlining the financial and operating results for the 12- and 3-month periods ending January 31, 2008. I will begin today’s call by reading prepared comments regarding our performance. The team and I will then be pleased to answer any questions you may have. As usual, the text of today’s conference call can be found on our corporate website, www.urbanoutfittersinc.com. Our 4th quarter performance was the pinnacle in what was a turnaround year. Total company sales increased by 29% to $465.4 million, a company quarterly sales record. Total company comparable store sales grew by 11%; Anthropologie and Free People achieved impressive double-digit comp increases of 18% and 19% respectively, and Urban Outfitters achieved a 6% comp, signaling an exciting recovery in the business. Direct-to-consumer sales surged by 39% with all three brands contributing meaningfully to the result. Free People wholesale revenues increased by an impressive 34%. Operating income grew by 66% to $80.3 million or 17.3% of sales, just slightly below our fourth quarter record in fiscal 2004 and better than the rate in the fourth quarter of fiscal 2006, when we achieved an annual operating margin of 19% for the year. Finally, the company earned a record $53.6 million for the quarter, a 50% increase from the prior year resulting in earnings per diluted share of $0.32. I’ll now go into more detail on each of the metrics of our business, starting with sales. New and non-comparable store sales accounted for $46.6…

(Operator Instructions) Our first question comes from Kimberly Greenberger of Citigroup.

Great. Thank you. Good morning and congratulations on a terrific fourth quarter. Glen, I was just hoping you could expand on your concept to market discussion. Where are you in that initiative? What are the next steps and when do you think you’ll fully realize the benefits of CTM in merchandise margin and in the assortment?

Kimberly, great question. I don’t think we’re prepared to answer that fully. I certainly don’t think we’re prepared to answer fully when we expect to fully realize the margin improvements. I think it’s a multi-year process. If I laid out a timeline, I would say we are probably 25% to third of the way where we want to be. Barbara and her team and the merchant team and the design team have done just an exceptional job. The kind of big to-do right now is we are doing a proof of concept on a software package that will help us enormously. We are in the process of considering opening up an overseas office. We are in the process of consolidating factories. So we’ve got a lot of work to do in the current year and probably the year or two thereafter.

Great. Thanks, Glen.

Our next question comes from Brian Tunick of J.P. Morgan.

Thanks and congrats, guys, again. Can we get a little more color on the Urban Outfitters division, either sort of the gross margin recovery story, sort of where are we and the categories inside Urban Outfitters? Sort of, you know, what were the laggards in the quarter?

Brian, I think that we -- you know, we never really release margin information by brand and I’d be loathe to start doing so now. And we also tend not to give specific information by merchandise category. As I said on the call, all divisions were at least single-digit positive, so there is a lot of traction in the business. I also said that the regular price selling penetration was up nicely, that we ended the quarter with 44% less markdown inventory, so I think you can draw inferences as to what is working, what the margins could look like in the first quarter going forward. Ted, do you want to add anything?

No.

All right.

Our next question comes from Margaret Whitfield of Sterne, Agee. Margaret Whitfield - Sterne, Agee & Leach: The tax rate is higher than I had expected for this year. I wonder if there’s any strategies afoot to bring it down in the out years.

Margaret, I think the approach I would recommend for future years is to use around 36.5%. We are at this point can’t totally control what happens on state taxation and unitary tax moves, so 36.5% is a pretty good number. Margaret Whitfield - Sterne, Agee & Leach: But if you focus on an overseas office, that might change things, right, John?

Yeah, that will be in the future. Margaret Whitfield - Sterne, Agee & Leach: Okay.

Our next question comes from Barbara Wyckoff of Buckingham Research.

Hi, everyone. Great job. If you could do Urban and Anthro’s fourth quarter over again, what would you do differently I guess in terms of flow, classification mix, et cetera?

That’s a -- I don’t know how to answer that. I think we are -- you know, we all have hindsight meetings at the end of every quarter and of course there are things that we would do differently but I have to tell you, I think with an ROS that’s the second-highest in our company’s history, with a turnaround at Urban that is faster than what we committed in May, with high double-digit comps at Free People and Anthropologie, with extraordinary gains in the direct-to-consumer business, I’m happy. You know, Dick for a long time has always used the analogy of a target, a bow-and-arrow target and you know, we talk about whether or not we hit the bullseye or a couple of rungs out. I think that Free People and Anthropologie came very close to hitting a bullseye in the fourth quarter and Urban is hitting the target, so I’m pleased. Ted, do you want to add anything?

Well, the only thing I would chime in on, Barbara, I think that the assortment challenges that we’ve had in Urban, getting the assortment balanced the way that we want to drive the business is something that we have not had as much issue with in the direct side and our marketing package in direct I think has done nothing but treat us exceptionally over the past year. So there is content there that the customer has responded very favorably to and I think we’ve had really good learnings for turning the corner into this year. I expect the business to continue to deliver where we have been, if not improve.

I’d like to add a couple of things; I mean, clearly we believe there’s significant margin upside at Urban, because the markdowns were unfavorable to plan and to last year, but we also believe that there is significant opportunity at all of our brands. Free People achieved a staggering run-rate of just under $1100 a foot this year, but Meg and her team believe that there’s opportunity there. Anthropologie is just below $800, and I’ve said publicly for a while that I think we can pick up a significant amount of productivity against that number. We’ve talked about, and John certainly in all the conferences has talked about IMU and markdown opportunity. We’ve talked about opportunity to continue to leverage occupancy, so while I am very, very pleased with the quarter, I didn’t mean to imply that there’s not a ton of opportunity going forward.

Thank you.

Our next question comes from Lauren Levitan of Cowen & Company. Lauren Levitan - SG Cowen & Company: Glen, can you give us some further insights into the own brand penetration versus the private label? You talked a lot about it on the Urban side. I’m wondering if you can give us some of those same thoughts on the Anthropologie side. Do you expect to be at either brand using or developing additional brands and labels to accomplish these goals? And are you seeing substantially different lead times currently between your own brand and your private label assortment? Thanks very much.

Okay, so the own brand business at Free People is, other than denim, is virtually 100% of the apparel business. At Anthropologie, the own brand business comprises roughly 50% of the women’s assortment and as we said at Urban, in the fourth quarter it was 18%. I think for Urban and Anthropologie, 50% to 60% is a healthy number. Dick’s vision that dates back probably more than 30 years was always to have an eclectic mix of market product and own brand product, so that we could leverage the risk or mitigate the risk. In terms of reaction time, there really is no difference between our own brand product and the market product at this point. We are big enough at this point where we can’t go into a market vendor and buy product that’s hanging. They have to cut to order for us. On the other hand, as I said a while ago, Barbara has made tremendous accomplishments, progress with chase. Literally, we were at an Anthropologie meeting on Monday and there was an item, a best-selling knit-top ever in the history of the company, I believe, sold 30% its first week. Barbara was able to get a re-order in two weeks. I mean, that was unheard of. That would have been unheard even a year ago. So the re-orderability and the maneuverability are relatively equal. If anything, we are probably more maneuverable internally than we are externally and from a strategic point of view, for Urban Outfitters and Anthropologie, I think 50% is a good number and obviously at Free People, it will be higher. Lauren Levitan - SG Cowen & Company: And how about brands and labels at Anthro and Urban? Obviously at Free People we know you are using Free People, but I’m curious at Anthro and Urban what we should be watching for and what we should be thinking about.

Well, I think the whole essence of own brand, what we are trying to accomplish is we are trying to make the product that we design and manufacture ourselves compete with the very best labels in the industry and I think it was about a year, year-and-a-half ago where Dick and I were brainstorming and he challenged me to start a wholesale business at Anthropologie. And my first reaction was that it was a bad idea because I didn’t want to share what I felt was proprietary information at Anthropologie. And after talking it over with Dick, he challenged me to think about the fact that if we created a wholesale label, it would cause our internal team to have to compete with the best and there would be tremendous benefits that accrued back to our own brand product. And we did a lot of research and we rethought the process and thanks to Dick and the Anthropologie team, we launched Leifsdottir. It’s entirely possible that we will launch other brands, wholesale brands in the company. And then within our stable of owned brands, I mean, there’s a tremendous emphasis on making them better. Each brand has to have a strong DNA and handwriting. Each brand has to have a consistency to the way it’s marketed, a consistency to the details and so on. Lauren Levitan - SG Cowen & Company: Thanks very much and good luck.

Our next question comes from Liz Dunn of Thomas Weisel Partners.

Obviously very strong sales trends, strong gross margin trends -- can you talk to us a little bit about SG&A in 2008? What will be the leverage point? Where are you seeing incremental spending? Where are there maybe some opportunities and how much will some of these growth initiatives cost?

I think SG&A this coming year will probably leverage at 3.5% to 4% comps, so we would expect it not to grow much more than 20%, which makes us pretty comfortable in terms of SG&A leverage going forward.

Okay, and then anything qualitatively, like where exactly you’ll be spending and where there may be some opportunities?

The only issue would be Terrain, where we would expect to swallow, as we’ve said, several times a couple million dollars a year in incremental SG&A expense, and we are very comfortable with that as an R&D process that helps develop that brand. Outside of that, there really aren’t any other significant SG&A additions. We’ll continue to add designers but those get charged to product and not to SG&A.

Okay, great. Very helpful. Thanks. Congratulations.

Our next question comes from Neely Tamminga of Piper Jaffray.

Glen, could you talk a little bit about -- I mean, I think it’s a matter of public record that you are on a board of a beauty company and I’m just wondering if you could talk a little bit about what the role of beauty as you might be learning has at Anthropologie? Is that what you are referring to in terms of taking up the productivity of this concept? Is it new category expansion or -- you know, I’m just wondering what we should be thinking about because obviously you’ve done the pricing up and then bringing it back in. What should we be thinking about for Anthropologie?

First of all, my participation on the board at Bare Essentials really has no bearing on my role at Urban Outfitters. You know, Urban and Anthro have been in the kind of soaps and lotions business for years and I will expect that they will continue to do so. When we look at productivity, we look at it in many, many ways. I love this part of the business. First, we look at the fuel, so the product. And we have learned that good inventory flow will drive the business, so newness -- the more we can improve our flow and increase our flow, the more accurately we can get the right product to the right store at the right time, the more we are going to drive our business. I’ve said numerous times we do not use price promotions or marketing, traditional marketing to drive our business. We use product to drive our business and we think there is opportunity with the CTM project to improve the fuel content. Okay, that’s number one. Number two, store sighting -- you know, store locations and store design is a way that we impact productivity. I’ve mentioned on several conference calls that we’ve gotten -- we’ve invested in analytical tools. I think we’ve gotten much more disciplined in the way we approach our real estate selection process. I think we’ve also gotten a lot more discipline in the way we design our stores and I think there is continued opportunity to do that. I liken it to designing a sailboat. A store that is highly productive, every square inch of it works properly. There’s a lot of opportunity. We’ve made a lot of progress but there is continued opportunity in the way we manage our stores -- something as simple as the way we staff on an hourly basis to something more complex, like the way -- our selling culture. I’ve talked about the CRM package which launched at Anthropologie this past year, which I believe long-term will be at all three brands or four brands. We are driving across country without a map right now in our retail business. Eighty-four percent of our business is driven by bricks and mortar and we don’t know who is shopping there. Imagine the impact in productivity when we know recency -- when we have recency, frequency, monetary, and type information on our retail database, I think it will be profound. So those are a few examples of how we expect to increase productivity. Now of course we’ll jigger the assortments. We have since we’ve been in business, and remember, Dick’s concept from day one is that we are a customer expert, not a category expert. So as categories become increasingly important to the business or less important to the business, we maneuver floor space and inventory accordingly. But that’s just one part of the way we drive our business.

That’s immensely helpful. Thanks and good luck.

Our next question comes from Christine Chen of Needham & Company. Christine Chen - Needham & Company: Thank you. Congratulations on a fabulous quarter. I just wanted to ask -- you had mentioned in the past that the balance of the assortment at Urban would be where you would like it to be by the spring quarter. I’m wondering the progress of that, if it’s ahead of schedule, on schedule, or if there is still certain things that you are working on. Thank you.

I don’t think I said that -- I don’t think I’d ever make a categorical statement, you know, kind of point in time. If I did, shame on me. I think what I said is that I felt we would return to a positive state of business within six to nine months and again, congratulations to Ted and his team for doing that. I think that getting the assortment really where we want it, I think it looks much better than it did six months ago but I think that we will have a significant opportunity for many, many months to come. Ted, do you want to -- okay. Christine Chen - Needham & Company: Thank you.

Our next question comes from Richard Jaffe of Stifel Nicolaus.

Thanks very much, guys. A question regarding I guess leadership, first of the Anthropologie business and then in general. As the company grows by leaps and bounds, is there a need to staff up on a senior management level, not only with Anthropologie but some of the brands you are developing on the wholesale side, as well as the retail side?

Richard, that’s a great question and as CEO, I think hiring and developing the leadership of this company is my number one job. Bill and his group have done an exceptional job supporting me and the rest of the group and the company. As I mentioned, Bill hired 68 people just in the home office this past quarter and some fantastic talent. In terms of the Anthropologie job search, we still are down to a very narrow field. We have three good candidates. It’s a critical job and we are not going to make the decision before we are ready to make the decision but we certainly intend to make that decision in the near future. In terms of the rest of the leadership, I feel very, very good about the leaders in this company. We have, for example, the woman who’s running the Leifsdottir brand started with us as an associate buyer I think seven or eight years ago. We have people -- just looking at Meg. Meg has someone who helps run the Free People brand -- I mean two people. Chrissie Meehan has started with us as our national sales manager six years ago. Sheila Harrington has started with us as the very first buyer in the company I think five or six years. Ted has Jim Bret, he has a gentlemen named John Hauser running the stores organization. John’s been with us, Ted, 15 years? You know, at Anthropologie I’ve said repeatedly I think the reason why we’ve been able to run the business is five of the six leaders in that business have been there since their jobs were created. Now having said that, one of Bill’s priorities and Freeman’s priorities for the year that we are just entering is to put in place a senior development program for leadership. Dick and I have spent many hours talking about the old development program at Federated and we are very committed to reinventing that for our own company as we move forward. It’s an important topic and it’s top-of-mind with all of us, so thank you for bringing it up.

Thank you.

Our next question comes from Marni Shapiro of The Retail Tracker

Congratulations on a great quarter and a good start to the year. If you could just give a little bit more color around some of your wholesale businesses, both at Anthro and Free People. You talked about the new brand at Anthro. If you could talk a bit -- is it knit or woven-based? How many SKUs? Would you set up the department like you’ve set up Free People? And the same thing for Free People, with We the Free -- will you set up separate in-store sites, or would it be part of -- would you house it with Free People at stores like a Bloomingdale’s, for example?

Why don’t I ask Meg to comment first on intimately Free People and We The Free and then I’ll follow-up with Leifsdottir.

We The Free will be in its own department in some of the larger department stores and then in boutiques, we’re going after a different account base, so they will be separate from Free People. And in our own stores, We The Free select stores will be merchandised in the Free People stores.

We The Free won’t be even on the same floor, say in a Bloomingdale’s, as an example?

It will be on the same floor but will have its own little section.

Okay, great.

And then in terms of Leifsdottir, it will be a very -- as I said during the prepared comments -- very, very narrow distribution, roughly 60 doors in the first year and a very, very branded approach. So you will see shop build-outs, specific -- numerous specific kind of marketing paraphernalia, anything from the hangars to the fixtures, hang tags, and you know, as I -- I kind of debated whether or not to include who it would sit next to in a place like Bergdorf Goodman or Bloomingdale’s but I chose to do that because I think it will help you kind of visualize what the line is going to look like. So if you think of it sitting next to DVF or See by Chloe or Marc by Marc Jacobs, it will feel like that.

Great, and about the number of SKUs you’ll launch with that line?

I think that’s a good question. I should know it. I think we showed 70 styles for the first delivery and I imagine the average store like Bloomingdale’s will probably open the first delivery with about 30 to 35 styles and continue to build on that. I think Bloomingdale’s, for example, the shop will open at about 500 square feet. I’m not entirely positive but that’s what I believe we’re talking about.

Great. Congratulations. Good luck. I’m looking forward to it. I’m tired of Juicy taking over the floor there.

Thank you. The show room is open, by the way, so if any of you -- I know several of you have gone to see the product. Meg and the Free People group very kindly gave the Leifsdottir team their old showroom, so it has a lot of good karma. It’s at 209 West 38th Street on the seventh floor and it was redone and the show room opened on February 7th.

I used to work in that building. Great, thanks.

Our next question comes from Holly Guthrie of Janney Montgomery Scott.

Thank you. Good morning. I was just curious about the timing for mining the direct and retail business at Urban Outfitters. I know you’ve had great success with the catalog at Urban, oftentimes leading the store and I’ve seen some displays which look very similar as the catalog. But I was wondering if you could talk about when -- if it’s already rolled out, when you rolled it out and/or what else we can look forward to going forward.

As far as mining the opportunity, as Glen mentioned a little earlier, we have very good information on the direct side of our business in regard to our customer database. We do not enjoy the same thing in regard to retail and we are putting some actions in place to develop a customer program on the retail side for getting information and building a database and realizing more opportunity in regard to cross channel marketing. When we drop the catalog, the catalog goes to customers that we know as direct customers; that is, they’ve shopped with us through direct or we are prospecting with them off of other direct lists. We drop no catalogs to drive retail business in proximity zip code wise to retail stores because we don’t have good database information. So this is work that we feel can be very beneficial for the business that honestly we are just getting underway on. The last couple of days we’ve been involved in about eight of conversation on the subject, so that’s a key piece of the puzzle. That being said, the other area of opportunity is I think over the last -- I would say about a year to year-and-a-half at this point, getting a consistency and a cohesive message in regard to the creative that we are developing for catalog, website, and in-store, is work that we’ve been underway on and that we like how that’s been progressing and what it’s done for the productivity of the business.

Thank you.

Our next question comes from Roxanne Meyer of Oppenheimer.

Great, thanks and let me add my congratulations. I have questions regarding Anthropologie. I guess first I’m just curious -- I know the loyalty program is still relatively new but how long do you think it will take before you are able to extract some of that really valuable customer data and where perhaps you then can translate that into a nice sales lift? I also wanted to know how much room the shoes are going to be consuming within the stores and what it is going to be replacing in terms of space. Thanks.

Roxanne, when we spoke about the CRM strategy at Anthropologie initially, we said it would be a two to two-and-a-half year rollout and we are on track for that. It’s really three phases. The first phase was to use a third-party service provider to help us collect the data and analyze the data. By the third quarter of this year, we will decide how to proceed more permanently, whether or not to use a third-party service provider or to buy a program and do it in-house. As we have a relatively limited functionality at this point with that third-party service provider. As we work with that group and/or bring it in-house, I expect we will have more functionality. Having said that, we do have some ability to kind of slice and dice the data now on the 200,000 people who signed up and we’re beginning to do that, survey those customers, test different assumptions and so on. So that’s what I meant when I said we were refining the program. And the second part of your question, in the 23 stores that have shoes, the average store will, in selling square footage, have about 200 to 250 square feet devoted to the project, and then back of house will be somewhere -- roughly maybe 600 to 700 square feet.

Okay, great and is there anything specific that is going to be coming out of the store in order to make room for the shoes?

No, the 23 stores that it’s launching in are stores that are larger than the kind of average of maybe 7,000 selling square feet, so the stores that can accommodate it. We’re not sure we’ll be able to carry shoes in all 108 Anthropologies ever. That’s something that we’ll figure out based on what we learn in the first six months or so.

Okay, great. Thanks and best of luck.

Our next question comes from Samantha Panella of Raymond James.

Good morning and congratulations. Glen, just curious; what trends are you currently seeing in women’s apparel and are skirts becoming a more important category? Thank you.

Sam, I love you but you know I can’t tell you that. It’s the same thing I say every single time -- go to the stores. If it’s not marked down, it’s selling. If you want to know what’s not selling, go into the sale room. This is -- I mean we -- joking aside, this is extremely important competitive data that we have to keep close to our vest. What I will say is there’s a lot of trend in the business, in all three businesses -- all three brands and across the company, so there’s a lot of good data to get our teeth into right now.

Okay, thanks.

Our next question comes from Betty Chen of Wedbush Morgan Securities.

Thank you. Glen, I was wondering if you could speak a little bit about pricing and price point in various tiers. I know you had spent most of last year working on refining the price points at Anthropologie in particular. We’ve heard a lot of other retailers talk about pricing being so important for that shopper. Can you talk about receptivity to some of your higher price point items versus maybe the more entry level categories? That would be very helpful.

Betty, and again I have to credit Dick for this, because it goes back to the beginning of time; unlike other retailers, we have never had a narrow band of price points. If at Urban Outfitters, the average price point of a blouse is $48, they may have renewal blouses that are $18 and they may have something by Charlotte Ronson that’s $248. And prices may change over time based on demand. So if we -- I’m sure most of you on this call studied economics and it’s really a question of supply and demand, and if we are early in a fashion cycle and we have things that our competition doesn’t have, then typically there is less price or more price elasticity. As we get later in the cycle, then we have more price pressure. In general, we are not seeing any price pressure in our business. We did not see any price pressure in the fourth quarter, as evidenced by our average unit retail and average transaction. And I don’t think -- and Ted and Meg, jump in if you like -- I don’t think there’s any kind of pattern in our business that would indicate that what’s selling as being particularly price motivated right now.

No, not at all.

No.

Yeah, so I think -- and just to clarify; when Anthropologie in the fall of 2006, when Anthropologie's prices got too high, it happened primarily in the accessory area and it was not a strategy. It was a mistake, so that was -- it was not a failed strategy. It was just an outright mistake. Over time, and John can work with you offline on this, I believe our average prices have increased low single digits on a consistent basis year-in, year-out, and I don’t see anything happening in our business that would suggest it will change.

Thank you and good luck.

Our next question comes from Michelle Tan of UBS.

I was wondering if you could just give us an update on Europe, how the stores that you have there are going and any update on the growth opportunity that you have there.

In the European business, they had a -- I’d say reasonably productive year this last year. They were up against very strong business in the previous year and they produced in the back-half in the single-digit comp range, up against very strong high double-digits the year before. We will be opening five additional stores in the market this year. Actually, we are opening Belfast tomorrow and as well this year, we will be taking the business into Germany with an opening in Hamburg. The productivity of the business is on a four-wall basis, obviously our more mature stores, we’re getting return on sales out of those stores that are in excess of company average and I would say the one experience that we’ve had going all the way back to our second store in the market, which was in Dublin, we have a tendency to open with a pretty strong opening and then people getting to know us, we go through some lag time, and then business kicks in and starts to be very productive. So what we have seen here over the last couple of years has been very true to that. Taking the business on to the continent in Copenhagen followed that same model -- opening strong, softening, and then getting strong again. And at the present time, we like how the business is treating us overall. Both sales as well as we’ve taken the bottom line profitability of the business up, approaching double-digits.

Thank you.

Our next question comes from Dana Telsey of Telsey Advisory.

Good afternoon, everyone and congratulations. Can you talk a little bit about the direct opportunity -- what you see in terms of the business, how it coordinates with the stores, and what you are seeing just in terms of the cost structure, particularly on the catalog side -- the paper costs, paper, printing and postage costs? And then I know that store construction costs have been an area of focus for you guys, where lowering the store costs. Is there more opportunity on that and if so, how? Thank you.

Dana, we are -- you know, the direct part of our business over the last five years is the fastest growing part of our business and we are tremendously excited by the opportunities that lay ahead. We think, as I said in the prepared comments, that there’s a real paradigm shift in the way people are shopping the direct-to-consumer business. Quite simply, they are using the web more and more. They are using the web to do research prior to going into a brick-and-mortar store. They are using the web to find out -- to shop with their friends. They are posting what they like and what they don’t like on Facebook and we’ve had many strategy sessions internally and we always joke that we’re probably in the Model T stage right now in terms of direct-to-consumer and website, and probably none of us are even smart enough to imagine what it’s going to look like in 10 years. We all believe that it’s going to continue to increasingly penetrate the total sales volume, and we are very, very focused. We spent a lot of time speaking to the youngsters in the company because they are much more in touch with the technology than many of us sitting around this table are, and we certainly look for inspiration at people like Google and eBay and all of the leaders in that field. In terms of the catalog, it’s true that some of the fixed catalog expenses, such as paper and postage, are going up but we are getting -- the web is working much harder than it used to in terms of driving our business, so we are able to have fantastic sales increases with either less circulation or in some cases decreasing circulation. It’s not really been a challenge to us. In fact, we think that long-term, the profitability on the direct business will be far higher than the profitability on our bricks-and-mortar business. So we are just -- on every account, we are very, very excited about our direct business. In terms of the store construction, I’ll let you cheat because it’s kind of a second question, but in terms of the store construction, Dave and his group just did an outstanding job this year. I think there’s still opportunity for improvement but at a much, much lower rate. You know, quite honestly I’d be happy with a couple of percentage points reduction, particularly with cost of goods going up in the construction area. John’s making faces and holding up multiple hands to Dave because he wouldn’t be happy with that, but I think we have to set Dave -- we’re certainly very cost focused but we also want our stores to be beautiful. We want them to brand our business. We are in this business for the long-term and our store design is a critical, critical part of our strategy and we need to balance both store design, execution, and costs and we’ll continue to do so.

Thank you.

Our next question comes from Jeff Black of Lehman Brothers.

Good afternoon. A very nicely detailed call, Glen. On the Urban side, I had understood there was a style component as well as an SKU component to the merchandise fix. And are we correct to infer that there is still room to go on the SKU part of that? And if so, will there be implications on the margin for 1Q and possibly into 2Q? Thanks.

Just so we’re clear, let me tell you how we can grow style count by 20% and keep SKU count flat. You basically offer less color choices or print choices within a style and what we said back in May was we felt that there was too much monotony in the assortment, that there wasn’t enough variety, that we weren’t hitting enough customers, and a lot of the changes that Jim and Liz and their respective teams made really addressed that. I have not worked with Ted and Jim to understand what -- where we can go from today over the next six to nine months. My guess would be that we want to keep the SKU count relatively flat and still maybe increase the style count by another 5% or so. I don’t think -- while the style and SKU count impact the margin, I don’t think there is a direct correlation. What I was talking about before in terms of improving the flow, we are very, very comfortable with where the Urban inventory is right now. Improving the flow, improving the way we take markdowns so that we take them earlier, deeper, faster, turn the product faster so that we convert the bulk of the floor to regular priced selling, those are the kinds of things that positively impact and maintain margin and we are making good progress there.

Thanks for the color and continued good luck, guys.

Our next question comes from Randy Konik of Bear Stearns.

Thanks very much. Glen, just a quick question; you know, you listed a number of initiatives today. Can you just point us to what you think are the top three initiatives we should be focused on in monitoring the business in 2008? And then, as you are adding more in terms of going international, wholesale, new brands, et cetera, can you just talk about maybe some of the changes or involvement in the role of Freeman Zausner, as he’s come back out of retirement and/or any plans to hire a chief operating officer?

Okay, that’s a great question and they are kind of all important. I was actually pretty proud of myself that I narrowed it down to just four or five by brand. I think -- really the number one priority for me is people because without people, I can’t get any of this done. So when I look at how I spend my time and the people that I work with and what I do on a day-to-day basis, people is my number one priority. I think the second priority is growth and a lot of -- you know, you can take those -- I think it was four for Anthro, four for Free People, so that makes eight, and five for Ted is 13 -- you take those 13 initiatives and the bulk of them support growth. We have, since the day I joined this company -- almost 15 years in a couple of weeks -- Dick has publicly said that he wants to grow sales at 20% or more and profit faster than sales. So I as the CEO am responsible for delivering that objective. And then the next thing really is kind of the quality of growth, so my last group of initiatives is productivity, profit, expense control, sustainability, consistency, and so on. And that’s where I get to the profit faster than the sales growth. So I guess without thinking a lot about it, that’s how I would break those three strategies down. In terms of Freeman, Freeman is an unbelievable asset to this organization, an unbelievable partner to Dick and to me. There is not a day that goes by where I probably don’t speak to Freeman 10 or 15 times, we are basically in offices next to each other and he is involved in many, many parts of the business. Of course, he supervises David Ziel directly and partnered with Dave in Dave’s tremendous accomplishment. He supervises Calvin Hollinger directly and partnered with Calvin over the last several years, to the point where I think we just have a -- you know, a best-in-class technology system. He hired and partners with Bill [Cody] in Talent, and just a remarkable turnaround in that organization. He supervises Matt Kaness. He does strategy for us and Matt works really directly with Dick and with me and with Freeman. So Freeman touches a lot of parts of the business. Freeman has the energy of maybe a 15-year old. He runs circles around most of us and I expect and hope that he will continue to be as involved in the business for years to come, as he is today. With regard to a COO, that is absolutely something that we are considering. We have started to speak to some potential candidates and we do believe that we need a COO in the not-too-distant future. Great question. Thank you.

Our next question comes from Dutch Fox of Friedman, Billings, Ramsey.

Good afternoon. Actually, I just had a quick question regarding your divisional -- your square footage by division and I was also wondering if you guys could give us a little bit of guidance where you think CapEx is going to come in this year? Thank you.

The square footage at the end of the quarter for Urban was 1,184,147; for Anthropologie, it was 806,744; and Free People was 23,636. And CapEx for this coming year should be around $120 million.

Thank you very much. I appreciate it.

Our next question comes from Marc Bettinger of Stanford Group.

Good afternoon. Congratulations. Glen, are you seeing anything to indicate any increase in competition for any of the brands?

You know, that’s a great question. In my closing comments, I said that we really define ourselves as a purveyor of experiences and I think that to a certain extent, that insulates us from other obvious competitors. What it doesn’t do is insulate us against less obvious competitors, so when we think about our competition, we think about everything from the travel industry to the entertainment industry. I do think that people today define themselves more by the experiences that they have and less by the possessions that they have, so it really kind of broadens the competitive field. We know when we speak to our customers for all three of our brands that they are hard-pressed to identify direct competitors and I think that again was kind of a brilliant strategy early on in our development and it served us well. Having said that, I believe that people have a limited amount of money to spend each month and if they are not spending it with us, they are spending it elsewhere and it’s our job to understand where they are spending it. I think that the idea for example to get into the garden center business was brilliant because I think that people are spending an increasing amount of their disposable income in their gardens. People are absolutely spending more money on odd forms or exotic forms of travel. They are spending -- the restaurant industry has certainly grown faster than the retail industry over the last several years, so we have to watch out what’s going on there. In terms of the group themselves, I think Ted, Meg, and I, we spend a lot of time in the traditional mall, so we understand what the competitive landscape looks like. Our teams really don’t do that. They get their inspiration from far off places in the world. I would rather have them be in Helsinki or the hinterlands of Japan than I would in the [inaudible] mall. We leave that to the senior management to worry about that.

Okay. Thank you very much and congratulations again.

Our final question comes from Janet Kloppenburg of JJK Research.

Glen, did you ask them for me to be last?

Your first-to-last with me.

Thanks. Just a question on how you look out on your top line growth going forward. It sounds like you have a lot of new businesses in the hopper on the wholesale side -- International, Terrain -- and I know, Glen, that it’s important that you keep the base of Urban Outfitters and Anthropologie exclusive, so as we go forward, should we expect a mix change in terms of square footage or top line growth, you know, non-store growth revenues maybe becoming a bigger part of the business? Should we expect an evolution in the top line growth components? Thanks.

Janet, that’s a great question.

And by the way, congratulations to all of you and Ted, really a fabulous comeback.

Thank you, Janet.

Janet, that’s a great question and what we know about our business is that we are a retailer of experiences. We know that we are really good serving an upper middle market, relatively sophisticated customer in all of our brands. This is a customer who is college educated, who travels, who reads the right papers and magazines and so on. Whatever we do, we will be defined by those things. I think we will not necessarily -- the other thing we are committed to is protecting our brand equity, so you are absolutely right. We will not grow any of our brands beyond the point or to the point where we feel we are threatening the brand equity. If anything, we will err on the side of conservatism and that’s been something -- you know, when I first joined the company, I remember Dick getting in front of the investment community and saying there could be I think 35 Urban Outfitters and maybe 50 Anthropologies, and he knew he was erring on the side of conservatism and that’s our comfort zone. We will not add stores at a rate or to an absolute number that jeopardize the way our customer perceives us. So by definition of that, Janet, the complexion of the business is going to look different 10 years from now than it does today and I think that we will be a portfolio of business, of experience based businesses that target this kind of upper, middle-class sophisticated consumer. And what we sell and how we generate the revenue is to be seen. Those are the kind of things we’re talking about now.

Glen, what’s Space 15 Twenty-one? Is it a concept or is it a lab? What’s going on there?

I’ll ask Ted to talk about it.

The idea behind Space 15 Twenty is very experiential in that we’ve had this kind of as a working idea in our group tied to culture, commerce, and community. We are seeing it as a space obviously that we would be part of the business, along with other businesses, not necessarily national businesses that you I think commonly would think of but a smaller format, compatible businesses that would marry and with the lifestyle that we serve in our business and that our customer would be looking for. We are very open to what those businesses would be. Everything from food to possibly entertainment, possibly beauty, fashion, possibly gallery. There will be space --

Is this like Dover Street market in London or something like that? Is that what’s happening?

Dover Street being a multi-level, under one roof --

Right.

Perhaps to some degree but that certainly is not how we have framed it up in our thoughts. We are coming at it more from there would be -- I don’t know of opportunity for entertainment at Dover Street. We --

No, but I think there’s gallery space.

-- we see other things being part of this. So it really is meant to address the business side of what we do, the culture that our customer lives in and what they are looking to do in their social time other than simply shop. And as well, be a place in the community for people to gather and simply enjoy themselves, whether they shop or not. The backside of the project is a very active farmer’s market on weekends and I think it’s really an ideal location for us to try the idea.

Oh, so it’s by the farmer’s market in Hollywood?

No, it is not. There is a farmer’s market off of Sunset that takes place on the backside of this location. There are also other retailers within that neighborhood that are very compatible to what our customers are looking for lifestyle wise.

And do you look for this to be expandable over time into other cities?

Well, we would like to think that. We are playing with some other ideas as well. We are trying some smaller formats. We just opened in St. Denis, which is in Montreal, a smaller format store that is women’s apparel, accessories, gifts. The idea is that we can support that with the infrastructure of our larger store in Montreal, so we are trying different ideas in regard to format. Again, back to Glen’s call out, is all driven by the idea of growth -- different things that we can do to grow the productivity and the experience of the brand.

Well, it sounds very exciting to me. Congratulations and good luck this year.

(Operator Instructions) Mr. Senk, I’m not showing any further questions. Would you like to continue with any closing remarks?

Thank you so much to everybody for joining us this morning and for your support.

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may all disconnect. Everyone have a great day.