SG&A Expenses Pension (Income)/Expense Depreciation

($ in millions) 2008 2007 SG&A expenses $ 5,395 $ 5,402 As a percent of sales 29.2% 27.2%

SG&A expenses were well managed across the entire organization in 2008, decreasing $7 million despite the addition of 26 net new stores. In 2008, we realized the first full year of benefit from our workforce management tool that facilitates efficient staffing levels. The rollout of this tool provided a positive impact on associate productivity, as well as store payroll expense. Store salaries declined on a dollar basis, but were not leveraged against sales and increased about 40 basis points as a percent of sales. Total marketing costs were slightly under the prior year, but as a percent of sales increased 50 basis points. In addition, despite approximately $160 million of incremental costs associated with non-comparable stores, all other expenses, including store occupancy and utility expenses were well managed, but were up about 110 basis points. Total SG&A expenses as a percent of sales experienced approximately 200 basis points of de-leveraging as a result of the sales decline.

Pension (Income)/Expense

($ in millions) 2008 2007 Primary pension plan (income) $ (133) $ (97) Supplemental pension plans expense 43 52 Total pension plans (income) $ (90) $ (45)

Total pension income doubled to $90 million in 2008 from $45 million in the prior year. The main driver of the increase was the primary pension plan income due to asset growth from strong capital market returns as measured on February 3, 2008.

Depreciation and Amortization Expenses Depreciation and amortization expenses in 2008 increased $43 million to $469 million, or approximately 10.1% compared to $426 million in 2007, reflecting new store openings and store renovations.

Pre-Opening Expense During 2008, we opened 35 new stores compared to 50 in 2007. As a result, pre-opening expense decreased to $31 million from $46 million.

Real Estate and Other, Net

($ in millions) 2008 2007 Real estate activities $ (39) $ (39) Net gains from sale of real estate (10) (10) Impairments and other 24 3 Total (income) $ (25) $ (46)

-28-