After a strong fiscal 2006, we faced a difficult sales environment in fiscal 2007 and thus had a disappointing year of financial results. However, we do not believe that this weakness in our sales performance is indicative of any impairment of our long-term prospects, but rather resulted from certain temporary trends noted below that we believe affected all players in the maternity apparel business.

Our sales for fiscal 2007 decreased by 3.5% to $581.4 million, driven by a 4.8% decrease in comparable store sales. Our comparable store sales decrease was driven by a number of factors that we believe affected all players in the maternity apparel business, including the difficult economic and retail environment, unusually unfavorable weather reducing seasonal merchandise demand during many portions of the year, and, importantly, the negative impact from the more pregnancy-friendly fit of certain popular fashion trends in the non-maternity women’s apparel market.

We had a net loss of $0.4 million, or $0.07 per share, in fiscal 2007, a significant earnings reduction from fiscal 2006. This weak earnings performance resulted primarily from the decrease in our total sales and comparable store sales, and the resulting negative expense leverage, despite our continued sharp focus on expense control. Our earnings were also hurt by increased legal expenses and by the charges related to our early redemption of debt during the year. Excluding the charges related to our repurchase and redemption of our Senior Notes, our adjusted net income for fiscal 2007 was $5.4 million and our adjusted diluted earnings per share was $0.87 per share, compared to adjusted earnings per share of $1.72 per share for fiscal 2006.

We are very pleased with the significant progress we made during fiscal 2007 in reducing our debt level and ongoing interest expense. We reduced our debt balance during the year by approximately $25 million and, in April 2007, we completed the redemption of the remaining $90 million of our 11¼% Senior Notes through a new, lower-cost term loan financing. Our strong focus on reducing our debt level and refinancing our debt has resulted in us dramatically reducing our interest expense (net of interest income) from $14.5 million in fiscal 2006, to $9.8 million in fiscal 2007, to a projected amount of slightly in excess of $7 million for fiscal 2008. This reduction in our financial leverage and interest expense shows our commitment to increase shareholder value through capital structure initiatives.

Looking forward, we are optimistic about delivering stronger financial results for fiscal 2008, as we expect to see an improved sales trend for the year as we begin to anniversary weaker sales results from a year ago and continue to refine our merchandise assortments and in-store merchandise presentation. We continue to focus on developing great maternity product under each of our brands and providing our customer with the very best and most innovative products to address her maternity apparel needs. An example of this focus is our groundbreaking new patent-pending product, The Secret Fit Belly™, which is made of seamless super stretch fabric that can be utilized in all types of bottoms (such as denim pants, other pants, shorts and skirts) to provide a great, comfortable fit with a seamless look. We are very excited by the initial sales results of our products using the Secret Fit Belly and we plan to expand our use of this innovative garment feature. We also expect our earnings to benefit from our reduced interest expense, the continued rollout of our multi-brand stores, and increased sales from our marketing partnerships and internet sales channel.

We plan to continue to expand our multi-brand store base, including our Destination Maternity® Superstores, which we believe will help us drive higher sales per store and improved store operating profit margins through the efficiency of operating one larger store rather than multiple smaller stores in a single market. We have 14 Destination Maternity Superstores as of the end of fiscal 2007, and are targeting to open 6 to 8 additional Superstores in fiscal 2008, including 5 locations already identified and negotiated. We believe that we have the potential to expand the Destination Maternity chain to 50 or more total Destination Maternity Superstores in the United States.

We continue to leverage our relationship with our customers, who are entering a major new life stage that drives widespread changes in purchasing needs, making our maternity customer a valuable demographic for many consumer products and services companies. Thus, we generate revenues, which we expect to continue to grow, through a variety of marketing partnership programs utilizing our opt-in customer database and in-store marketing initiatives. We also continue to expand futuretrust®, our MasterCard®-based college savings program that we market through our stores and our internet sites to help our customers in achieving their dream of providing a college education for their children.

We are, far and away, the leader in maternity apparel in the United States, and we believe that we have a significant opportunity to use this leadership position and unparalleled skill set in maternity apparel to develop international sales beyond our current footprint of the U.S. and Canada. We are in the early stages of analyzing and evaluating some of these international opportunities, and we anticipate that our long-term international strategy may include both licensing arrangements with foreign partners as well as potentially developing our own international operations.