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TWST: Joe, what are the macro issues that investors are focused on or should be focused on as we move through 2001?

Mr. Grillo: Clearly, one thing to remember is don’t fight the Fed, because retailers, as Jeff mentioned, are early-cycle companies. If you look at what these stocks have done since the end of November, you’ve seen pretty amazing run-ups and, frankly, even though the quality names have continued to move along as they should, in our opinion, a lot of the increase in market caps or the movement of these stocks has been in what were really some of the lesser names. I think that investors ought to take pause and perhaps look at the underlying fundamentals, and which of these operators are gaining share at this point, since we’ve had such a run-up in some of the names that have not executed. With respect to underlying fundamentals, clearly we still have a loosening bias with respect to the Fed. They’re on our side. That’s good news for retail investors. But remember that these stocks discount that into the prices early, and by the time the Fed gets around to stopping the decreases in rates, the run-ups in these stocks will have ended.

TWST: Is there another that approaches the quality of Kohl’s (NYSE:KSS) or another stock that you would also consider a strong buy at this point?

Mr. Grillo: That’s currently our only strong buy-rated stock. We have a buy rating on Federated (NYSE:FD), a company that I believe has done a lot to invest in the equity of their store brands. Federated has, in my opinion, among the best merchants in the industry. If you look at their performance through the back half of last year, while many of their competitors were taking major hits in terms of gross margin and had very difficult department store performance, Federated really managed through a period of slower demand and came out of it in pretty good shape. However, the company did have the Fingerhut situation to deal with over the last two years since that acquisition happened. Federated had a meltdown of the credit card business at Fingerhut that they subsequently had to take reserves for and are now rationalizing that business. I believe the company has taken the steps necessary to decrease the likelihood that Fingerhut will burn them again. It’s interesting to me that what is approximately 10% of their revenue gets 90% of investors’ attention, and what gets ignored is the fact that they have actually executed quite well on their core department store business. That’s something that we’re quite sanguine about. So we have a buy rating on Federated and we think that it’s an excellent vehicle to play the improving investor sentiment in the sector.

TWST: What’s the growth plan going forward? Are there any plans to expand the growth of some of Federated’s core businesses?

Mr. Grillo: We expect operating margin improvement, share buybacks and mid-single-digit square footage growth to combine to a normalized earnings per share growth rate somewhere in the neighborhood of 13%-15%. Company Concerns