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TWST: Joan, are there any characteristics, any dynamics of hard lines retailing that are different in some way from those associated with other sectors of retail?

Ms. Bogucki-Storms: I would say that compared to soft lines, most, but not all, merchandise in the hard lines specialty retail sectors is not as fashion-oriented or as seasonally driven as apparel sales.

TWST: And for the most part, are these bigger-ticket items?

Ms. Bogucki-Storms: The average ticket varies according to the particular hard lines sector merchandise, which ranges from books to arts and crafts, to sheets and towels, to gourmet cookware, and fine jewelry.

TWST: Joan, you’ve touched on the trends that are driving spending on the home and on home-related products. What do you see for the rate of growth of this segment?

Ms. Bogucki-Storms: During the last expansion period, the home goods industry grew at a mid- to high single-digit growth rate on an annual basis according to industry sources. Going forward, I would estimate that growth would be at a lesser rate or in the low to mid-single-digit range. However, although activity in the housing market has slowed, it still remains at relatively high levels and lower mortgage rates should help to support this growth. A potential negative related to a point Alan mentioned before is that consumer installment debt levels have increased significantly over the past few years and, therefore, we will need to see an increase in consumer confidence before people are really going to open their wallets again. Many companies in our universe are attempting to incorporate slowing growth into their forecasts with the intention of making the estimates achievable from a quality of earnings point of view.

TWST: Joan, what happened to earnings at Bed Bath & Beyond (Nasdaq:BBBY), Linens ‘n Things (NYSE:LIN) and Williams-Sonoma (NYSE:WSM) in the fourth quarter?

Ms. Bogucki-Storms: Bed Bath & Beyond has a February year-end and we are budgeting comparable-store sales at the lower end of a 3%-5% range and EPS of $0.21 versus $0.17. BBBY is a high quality retailer that has not missed an earnings forecast since they became a public company in 1992. Therefore, we have a high degree of confidence that the company will meet our forecast.

TWST: Joan, what, in your view, are the characteristics of the hard lines retailers that are going to be most successful, going forward?

Ms. Bogucki-Storms: I think it’s really going to depend on demographics and the spending trends of the two biggest generations — the baby boomers and the echo boomers, who have differing wants and goals. Baby boomers are spending on their home while teenagers are buying clothes. I think that spending trends are constantly evolving, and what we’re trying to figure out as analysts is which sectors are going to be the most attractive to follow within hard lines retail. More generally, the concept has to make sense and must offer the value equation that I referred to earlier that includes convenience (service), quality, and price.