Detailed presentation of performance over the last 3 months at the just held Q2 Earnings Call. Read for more

Michael S. Jeffries

Good morning everyone. The second quarter proved to be more difficult than expected due to weaker traffic particularly in July and continued softness in the female business. The reasons for the weak traffic we've seen in the U.S are not entirely clear.

Our best theory is that while consumers in general are feeling better about the overall economic environment, it is less the case for the young consumer. In addition we believe youth spending has likely diverted to other categories. We assume that these affects will abate at some point.

But until we have some clear evidence of that we are planning sales , inventory and expense levels on a conservative basis. Despite the challenging environment, we were very pleased by strong growth in our direct-to-consumer business for the quarter, which was up in all regions with particularly strong growth in Asia. We now have a big fast growing and highly profitable international direct-to-consumer business, reflecting the benefits of investments we've made over the past few years. We're also pleased by a continued strong compstoresalesgrowth in China, up around 60% for the quarter.

We now have six Hollister stores in Mainland China, running at an annualized volume of around $40 million.