Williams-Sonoma (WSM)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses consist of non-occupancy related costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection)

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and corporate administrative functions. These costs include employment, advertising, third party credit card processing and other general expenses.

Due to their distinct distribution and marketing strategies, we experience differing employment and advertising costs as a percentage of net revenues within the retail and direct-to-customer channels. Store employment costs represent a greater percentage of retail net revenues than employment costs as a percentage of net revenues within the direct-to-customer channel. However, catalog advertising expenses are greater within the direct-to-customer channel than the retail channel.

First Quarter of Fiscal 2009 vs. First Quarter of Fiscal 2008

Selling, general and administrative expenses decreased by $46,132,000, or 17.8%, in the first quarter of fiscal 2009 compared to the first quarter of fiscal 2008. However, selling, general and administrative expenses as a percentage of net revenues increased to 34.9% in the first quarter of fiscal 2009 from 33.2% in the first quarter of fiscal 2008. This increase as a percentage of net revenues was primarily driven by the $9,350,000 early lease termination benefit received from a landlord in the first quarter of fiscal 2008 that did not recur in fiscal 2009, asset impairment and early lease termination charges of $6,082,000 for underperforming retail stores in the first quarter of fiscal 2009 and the deleverage of employment costs due to declining sales. This increase as a percentage of net revenues was partially offset by reductions in total advertising costs resulting from the continuation of our catalog circulation optimization strategy.

In the retail channel, selling, general and administrative expenses as a percentage of net revenues increased 330 basis points in the first quarter of fiscal 2009 compared to the first quarter of fiscal 2008. This increase as a percentage of net revenues was primarily driven by a fiscal 2008 early lease termination benefit received from a landlord that did not recur in fiscal 2009 and asset impairment and early lease termination charges for underperforming retail stores in the first quarter of fiscal 2009, partially offset by a decrease in our employment costs associated with our infrastructure cost reduction program.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of net revenues decreased 70 basis points in the first quarter of fiscal 2009 compared to the first quarter of fiscal 2008. This decrease as a percentage of net revenues was primarily driven by a reduction in total advertising costs resulting from the continuation of our catalog circulation optimization strategy, partially offset by the deleverage of employment costs due to declining sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses consist of non-occupancy related costs associated with our retail stores, distribution centers, customer care centers, supply chain operations (buying, receiving and inspection), and corporate administrative functions. These costs include employment, advertising, third party credit card processing and other general expenses.

Due to their distinct distribution and marketing strategies, we experience differing employment and advertising costs as a percentage of net revenues within the retail and direct-to-customer channels. Store employment costs represent a greater percentage of retail net revenues than employment costs as a percentage of net revenues within the direct-to-customer channel. However, catalog advertising expenses are greater within the direct-to-customer channel than the retail channel.

Fiscal 2008 vs. Fiscal 2007

Selling, general and administrative expenses decreased by $129,554,000, or 10.6%, compared to fiscal 2007, however, as a percentage of net revenues, selling, general and administrative expenses increased to 32.5% in fiscal 2008 from 31.0% in fiscal 2007. This increase as a percentage of net revenues was primarily driven by the deleverage of our employment costs due to declining sales, asset impairment charges of approximately $33,995,000 related to our underperforming retail stores, and severance related costs of approximately $10,344,000 associated with our infrastructure cost reduction program. This increase was partially offset by an approximate $16,000,000 benefit related to a gain on the sale of our corporate aircraft, a net benefit of $11,023,000 associated with the reversal of performance-based stock compensation expense, a $9,350,000 incentive payment received from a landlord to compensate us for terminating a store lease prior to its original expiration and reductions in other general expenses. Although total advertising costs as a percentage of net revenues increased due to declining sales, during fiscal 2008 compared to fiscal 2007 we saw a reduction in catalog advertising expenditures due to our catalog circulation optimization strategy.

In the retail channel, selling, general and administrative expenses as a percentage of retail net revenues increased approximately 230 basis points in fiscal 2008 compared to fiscal 2007. This increase as a percentage of net revenues was primarily driven by impairment charges of $33,995,000 associated with our underperforming retail stores and the deleverage of our employment costs due to declining sales, partially offset by a $9,350,000 incentive payment received from a landlord to compensate us for terminating a store lease prior to its original expiration.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of direct-to-customer net revenues increased by approximately 120 basis points in fiscal 2008 compared to fiscal 2007. This increase as a percentage of net revenues was primarily driven by the deleverage of our employment and advertising costs due to declining sales, partially offset by reductions in other general expenses. Although total advertising costs as a percentage of net revenues increased due to declining sales during fiscal 2008 compared to fiscal 2007, we saw a reduction in catalog advertising expenditures due to our catalog circulation optimization strategy.

Fiscal 2007 vs. Fiscal 2006

Selling, general and administrative expenses increased by $62,787,000, or 5.4%, over fiscal 2006. Selling, general and administrative expenses as a percentage of net revenues decreased to 31.0% in fiscal 2007 from 31.1% in fiscal 2006. This 10 basis point decrease as a percentage of net revenues was primarily driven by certain asset disposal and asset impairment costs incurred in fiscal 2006 that did not recur in fiscal 2007 and lower advertising costs due to a higher percentage of direct-to-customer revenues being generated in the Internet channel, which operates at a lower advertising cost than the catalog. Partially offsetting this favorability, however, were increased employment costs, primarily driven by higher incentive compensation, as well as an

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$8,600,000 net benefit recorded in fiscal 2006 that did not recur in fiscal 2007, from “Unusual Business Events” (unredeemed gift certificate income due to a change in estimate and the Visa/MasterCard litigation settlement income, partially offset by the expense associated with the departure of our Chief Executive Officer and the expense associated with the Hold Everything transition).

In the retail channel, selling, general and administrative expenses as a percentage of retail net revenues decreased approximately 30 basis points in fiscal 2007 versus fiscal 2006. This decrease as a percentage of net revenues was primarily driven by retail asset impairment charges recorded in fiscal 2006 that did not recur in fiscal 2007 and increased income from unredeemed gift certificates and gift cards, partially offset by increased employment costs primarily associated with the growth of the emerging brands.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of direct-to-customer net revenues decreased by approximately 60 basis points in fiscal 2007 compared to fiscal 2006. This was primarily driven by lower advertising costs due to a higher percentage of direct-to-customer revenues being generated in the Internet channel, which operates at a lower advertising cost than the catalog, a reduction in other general expenses and increased income from unredeemed gift certificates.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of non-occupancy related costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection), and corporate administrative functions. These costs include employment, advertising, third party credit card processing and other general expenses.

Selling, General and Administrative Expenses

FACE="Times New Roman" SIZE="2">Selling, general and administrative expenses consist of non-occupancy related costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and
inspection), and corporate administrative functions. These costs include employment, advertising, third party credit card processing and other general expenses.

SIZE="2">Stock-Based Compensation

We account for stock-based compensation arrangements in accordance with Statements of Financial Accounting
Standards (“SFAS”) No. 123R, “Share-Based Payment,” by measuring and recording compensation expense in our consolidated financial statements for all stock-based compensation awards using a fair value method. For stock
options and stock-settled stock appreciation rights (“option awards”), fair value is determined using the Black-Scholes valuation model, while restricted stock units are valued using the closing price of our stock on the date prior to the
date of issuance. Significant factors affecting the fair value of option awards include the estimated future volatility of our stock price and the estimated expected term until the option award is exercised or cancelled. The fair value of the award
is amortized over the requisite service period. Total stock-based compensation expense was $12,131,000, $26,812,000 and $26,759,000 in fiscal 2008, fiscal 2007 and fiscal 2006, respectively, and is recorded as a component of selling, general and
administrative expenses.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses consist of non-occupancy related costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection) and corporate administrative functions. These costs include employment, advertising, third party credit card processing and other general expenses.

Due to their distinct distribution and marketing strategies, we experience differing employment and advertising costs as a percentage of net revenues within the retail and direct-to-customer channels. Store employment costs represent a greater percentage of retail net revenues than employment costs as a percentage of net revenues within the direct-to-customer channel. However, catalog advertising expenses are greater within the direct-to-customer channel than the retail channel.

Third Quarter of Fiscal 2008 vs. Third Quarter of Fiscal 2007

Selling, general and administrative expenses decreased by $37,354,000, or 12.6%, in the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007. However, selling, general and administrative expenses as a percentage of net revenues increased to 34.6% in the third quarter of fiscal 2008 from 33.2% in the third quarter of fiscal 2007. This increase as a percentage of net revenues was primarily driven by an approximate $12,280,000, or $0.07 per diluted share, asset impairment charge associated with four underperforming retail stores and the deleverage of our total advertising and employment costs primarily due to declining sales, partially offset by reductions in other general expenses. Employment costs include an approximate $11,023,000, or $0.06 per diluted share, benefit associated with the reversal of performance-based stock compensation expense.

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Although total advertising costs as a percentage of net revenues increased for the third quarter of 2008 compared to the third quarter of 2007, we saw a reduction in catalog advertising expenditures due to the second quarter of fiscal 2008 rollout of our catalog circulation optimization strategy. Due to this, we expect to see catalog advertising expenditures continue to decline through the remainder of fiscal 2008.

In the retail channel, selling, general and administrative expenses as a percentage of net revenues increased 370 basis points in the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007. This increase as a percentage of net revenues was primarily due to an approximate $12,280,000, or $0.07 per diluted share, asset impairment charge associated with four underperforming retail stores and the deleverage of our employment costs primarily due to declining sales, partially offset by reductions in other general expenses.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of net revenues increased 120 basis points in the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007. This increase as a percentage of net revenues was primarily driven by the deleverage of our total employment and advertising costs primarily due to declining sales, partially offset by reductions in other general expenses. Although total advertising costs as a percentage of net revenues increased for the third quarter of 2008 compared to the third quarter of 2007, we saw a reduction in catalog advertising expenditures due to the second quarter of fiscal 2008 rollout of our catalog circulation optimization strategy. Due to this, we expect to see catalog advertising expenditures continue to decline through the remainder of fiscal 2008.

Year-to-Date 2008 vs. Year-to-Date 2007

Selling, general and administrative expenses for year-to-date 2008 decreased by $75,349,000, or 8.9%, compared to year-to-date 2007. Selling, general and administrative expenses as a percentage of net revenues decreased to 32.8% for year-to-date 2008 from 33.0% for year-to-date 2007. This decrease as a percentage of net revenues was primarily driven by a benefit of approximately $16,000,000 related to a gain on the sale of a corporate aircraft, a benefit of approximately $9,350,000 related to an incentive payment received from a landlord to compensate us for terminating a store lease prior to its expiration and reductions in other general expenses. This decrease was partially offset by the deleverage of our employment costs primarily due to declining sales and an approximate $12,280,000, or $0.07 per diluted share, asset impairment charge recorded in the third quarter of fiscal 2008 associated with four underperforming retail stores. Employment costs include an approximate $11,023,000, or $0.06 per diluted share, benefit associated with the reversal of performance-based stock compensation expense. Although total advertising costs as a percentage of net revenues were relatively flat for year-to-date 2008 compared to year-to-date 2007, we saw a reduction in catalog advertising expenditures due to the second quarter of fiscal 2008 rollout of our catalog circulation optimization strategy. We expect to see catalog advertising expenditures continue to decline through the remainder of fiscal 2008.

In the retail channel, selling, general and administrative expenses as a percentage of net revenues increased 120 basis points for year-to-date 2008 compared to year-to-date 2007. This increase as a percentage of net revenues was driven by the deleverage of our employment costs primarily due to declining sales and an approximate $12,280,000, or $0.07 per diluted share, asset impairment charge recorded in the third quarter of fiscal 2008 associated with four underperforming retail stores, partially offset by a benefit of approximately $9,350,000 related to an incentive payment received from a landlord to compensate us for terminating a store lease prior to its expiration.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of net revenues increased 50 basis points for year-to-date 2008 compared to year-to-date 2007. This increase as a percentage of net revenues was driven by the deleverage of our employment and total advertising costs primarily due to declining sales, partially offset by reductions in other general expenses. Although total advertising costs as a percentage of net revenues increased for year-to-date 2008 compared to year-to-date 2007, we saw a reduction in catalog advertising expenditures due to the second quarter of fiscal 2008 rollout of our catalog circulation

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optimization strategy. We expect to see catalog advertising expenditures continue to decline through the remainder of fiscal 2008.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses consist of non-occupancy related costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection) and corporate administrative functions. These costs include employment, advertising, third party credit card processing and other general expenses.

Due to their distinct distribution and marketing strategies, we experience differing employment and advertising costs as a percentage of net revenues within the retail and direct-to-customer channels. Store employment costs represent a greater percentage of retail net revenues than employment costs as a percentage of net revenues within the direct-to-customer channel. However, catalog advertising expenses are greater within the direct-to- customer channel than the retail channel.

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Second Quarter of Fiscal 2008 vs. Second Quarter of Fiscal 2007

Selling, general and administrative expenses decreased by $23,803,000, or 8.6%, in the second quarter of fiscal 2008 compared to the second quarter of fiscal 2007. Selling, general and administrative expenses as a percentage of net revenues decreased to 30.9% in the second quarter of fiscal 2008 from 32.3% in the second quarter of fiscal 2007. This decrease as a percentage of net revenues was primarily due to a benefit of approximately $16,000,000 related to a gain on the sale of a corporate aircraft and reduced advertising costs due to the rollout of our catalog circulation optimization strategy, partially offset by deleverage of our employment costs due to declining sales.

In the retail channel, selling, general and administrative expenses as a percentage of net revenues increased 180 basis points in the second quarter of fiscal 2008 compared to the second quarter of fiscal 2007. This increase as a percentage of net revenues was primarily due to deleverage of our employment costs due to declining sales and an increase in other general expenses.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of net revenues decreased 70 basis points in the second quarter of fiscal 2008 compared to the second quarter of fiscal 2007. This decrease as a percentage of net revenues was primarily driven by reduced advertising costs due to the rollout of our catalog circulation optimization strategy, partially offset by deleverage of our employment costs due to declining sales.

Year-to-Date 2008 vs. Year-to-Date 2007

Selling, general and administrative expenses for year-to-date 2008 decreased by $37,995,000, or 6.9%, compared to year-to-date 2007. Selling, general and administrative expenses as a percentage of net revenues decreased to 32.0% for year-to-date 2008 from 32.9% for year-to-date 2007. This decrease as a percentage of net revenues was primarily driven by a benefit of approximately $16,000,000 related to a gain on the sale of a corporate aircraft, a benefit of approximately $9,350,000 related to an incentive payment received from a landlord to compensate us for terminating a store lease prior to its expiration, partially offset by deleverage of our employment costs due to declining sales. Although total advertising costs as a percentage of net revenues were relatively flat for year-to-date 2008 compared to year-to-date 2007, we saw a reduction in catalog advertising costs due to the second quarter of fiscal 2008 rollout of our catalog circulation optimization strategy. We expect to see catalog advertising costs continue to decline throughout the remainder of fiscal 2008.

In the retail channel, selling, general and administrative expenses as a percentage of net revenues increased 10 basis points for year-to-date 2008 compared to year-to-date 2007. This increase as a percentage of net revenues was primarily driven by deleverage of our employment costs due to declining sales, partially offset by the incentive payment received from a landlord to compensate us for terminating a store lease prior to its expiration.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of net revenues increased 20 basis points for year-to-date 2008 compared to year-to-date 2007. This increase as a percentage of net revenues was primarily driven by deleverage of our employment costs due to declining sales. Although total advertising costs as a percentage of direct-to-customer net revenues were relatively flat for year-to-date 2008 compared to year-to-date 2007, we saw a reduction in catalog advertising costs due to the second quarter of fiscal 2008 rollout of our catalog circulation optimization strategy. We expect to see catalog advertising costs continue to decline throughout the remainder of fiscal 2008.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses consist of non-occupancy related costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection), and corporate administrative functions. These costs include employment, advertising, third party credit card processing, and other general expenses.

Due to their distinct distribution and marketing strategies, we experience differing employment and advertising costs as a percentage of net revenues within the retail and direct-to-customer channels. Store employment costs represent a greater percentage of retail net revenues than employment costs as a percentage of net revenues within the direct-to-customer channel. However, catalog advertising expenses are greater within the

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direct-to-customer channel than the retail channel.

First Quarter of Fiscal 2008 vs. First Quarter of Fiscal 2007

Selling, general and administrative expenses decreased by $14,192,000, or 5.2%, in the first quarter of fiscal 2008 compared to the first quarter of fiscal 2007. Selling, general and administrative expenses as a percentage of net revenues decreased to 33.2% in the first quarter of fiscal 2008 from 33.5% in the first quarter of fiscal 2007. This decrease was primarily driven by a benefit of approximately $9,350,000 related to an incentive payment received from a landlord to compensate us for terminating a store lease prior to its expiration, partially offset by the deleverage of our employment and advertising costs due to declining sales.

In the retail channel, selling, general and administrative expenses as a percentage of net revenues decreased 180 basis points in the first quarter of fiscal 2008 compared to the first quarter of fiscal 2007. This decrease was primarily due to the benefit related to an incentive payment received from a landlord to compensate us for terminating a store lease prior to its expiration and a reduction in catalog advertising expenses, partially offset by the deleverage of our employment costs due to declining sales.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of net revenues increased 110 basis points in the first quarter of fiscal 2008 compared to the first quarter of fiscal 2007. This increase was primarily due to the deleverage of our advertising and employment costs resulting from declining sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of non-occupancy related costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection), and corporate administrative functions. These costs include employment, advertising, third party credit card processing and other general expenses.

Selling, General and Administrative Expenses

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses consist of non-occupancy related costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection), and corporate administrative functions. These costs include employment, advertising, third party credit card processing, and other general expenses.

Due to their distinct distribution and marketing strategies, we experience differing employment and advertising costs as a percentage of net revenues within the retail and direct-to-customer segments. Store employment costs represent a greater percentage of retail net revenues than employment costs as a percentage of net revenues within the direct-to-customer segment. However, catalog advertising expenses are greater within the direct-to-customer channel than the retail channel.

Third Quarter of Fiscal 2007 vs. Third Quarter of Fiscal 2006

Selling, general and administrative expenses increased by $14,800,000, or 5.2%, in the third quarter of fiscal 2007 compared to the third quarter of fiscal 2006. Selling, general and administrative expenses as a percentage of net revenues increased 10 basis points in the third quarter of fiscal 2007 from the third quarter of fiscal 2006 primarily due to higher e-commerce related marketing costs.

In the retail channel, selling, general and administrative expenses as a percentage of retail net revenues increased 30 basis points in the third quarter of fiscal 2007 compared to the third quarter of fiscal 2006 primarily due to an increase in other general expenses.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of direct-to-customer net revenues increased 10 basis points in the third quarter of fiscal 2007 compared to the third quarter of fiscal 2006. This increase was primarily driven by higher e-commerce related marketing costs, partially offset by a decrease in other general expenses.

Year-to-Date 2007 vs. Year-to-Date 2006

Selling, general and administrative expenses for year-to-date 2007 increased by $34,512,000, or 4.2%, over year-to-date 2006. Selling, general and administrative expenses as a percentage of net revenues increased 10 basis points for year-to-date 2007 compared to year-to-date 2006. This increase was primarily due to a net benefit for year-to-date 2006 of approximately $8,600,000 associated with unusual business events (unredeemed gift

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certificate income due to a change in estimate, litigation settlement income, the expense associated with the departure of our Chief Executive Officer and the expense associated with the Hold Everything transition) and increased costs associated with the growth of the emerging brands, partially offset by increased income from unredeemed gift certificates, reduced stock-based compensation and reduced advertising expenses as a percentage of net revenues.

In the retail channel, selling, general and administrative expenses as a percentage of retail net revenues increased 20 basis points for year-to-date 2007 compared to year-to-date 2006 due to increased costs associated with the growth of the emerging brands, partially offset by increased income from unredeemed gift certificates.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of direct-to-customer net revenues decreased 50 basis points for year-to-date 2007 compared to year-to-date 2006 due to reduced advertising expenses as a percentage of net revenues and a reduction in other general expenses.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses consist of non-occupancy related costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection), and corporate administrative functions. These costs include employment, advertising, third party credit card processing, and other general expenses.

Due to their distinct distribution and marketing strategies, we experience differing employment and advertising costs as a percentage of net revenues within the retail and direct-to-customer segments. Store employment costs represent a greater percentage of retail net revenues than employment costs as a percentage of net revenues within the direct-to-customer segment. However, catalog advertising expenses are greater within the direct-to-customer channel than the retail channel.

Second Quarter of Fiscal 2007 vs. Second Quarter of Fiscal 2006

Selling, general and administrative expenses increased by $16,915,000, or 6.5%, in the second quarter of fiscal 2007 compared to the second quarter of fiscal 2006. Selling, general and administrative expenses as a percentage of net revenues increased 80 basis points in the second quarter of fiscal 2007 from the second quarter of fiscal 2006. This increase was primarily due to a net benefit in the second quarter of fiscal 2006 of approximately $10,000,000 associated with unusual business events (unredeemed gift certificate income due to a change in estimate, litigation settlement income, the expense associated with the departure of our Chief Executive Officer and the expense associated with the Hold Everything transition) and increased costs in the second quarter of 2007 associated with the growth of the emerging brands, partially offset by lower advertising expenses as a percentage of net revenues, primarily in the Pottery Barn and PBteen brands, reductions in other general expenses, and the elimination of all selling, general and administrative expenses associated with the Hold Everything brand.

In the retail channel, selling, general and administrative expenses as a percentage of retail net revenues decreased 20 basis points in the second quarter of fiscal 2007 compared to the second quarter of fiscal 2006 primarily due to reduced advertising expenses, partially offset by increased costs associated with the growth of the emerging brands.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of direct-to-customer net revenues decreased 90 basis points in the second quarter of fiscal 2007 compared to the second quarter of fiscal 2006 due to lower advertising expenses as a percentage of net revenues and reductions in other general expenses.

Year-to-Date 2007 vs. Year-to-Date 2006

Selling, general and administrative expenses for year-to-date 2007 increased by $19,712,000, or 3.7%, over year-to-date 2006. Selling, general and administrative expenses as a percentage of net revenues increased 10 basis points for year-to-date 2007 compared to year-to-date 2006. This increase was primarily due to a net benefit for year-to-date 2006 of approximately $8,500,000 associated with unusual business events (unredeemed gift certificate income due to a change in estimate, litigation settlement income, the expense associated with the departure of our Chief Executive Officer and the expense associated with the Hold Everything transition) and increased costs associated with the growth of the emerging brands, partially offset by reduced stock-based

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compensation, reductions in other general expenses, increased income from unredeemed gift certificates, reduced advertising expenses as a percentage of net revenues and the elimination of all selling, general and administrative expenses associated with the Hold Everything brand.

In the retail channel, selling, general and administrative expenses as a percentage of retail net revenues increased 10 basis points for year-to-date 2007 compared to year-to-date 2006 due to increased costs associated with the growth of the emerging brands, partially offset by increased income from unredeemed gift certificates.

In the direct-to-customer channel, selling, general and administrative expenses as a percentage of direct-to-customer net revenues decreased 80 basis points for year-to-date 2007 compared to year-to-date 2006 due to reductions in advertising and other general expenses.