Question-and-Answer Session
Operator
Your first question comes from the line of Matt Fassler with Goldman Sachs.
Matt Fassler – Goldman Sachs
A couple questions if we could. First on the gross margin side and your strategy of taking a lower gross profit per vehicle how do you think that worked out for you. It’s a bit of a departure from how you had come at the business prior to this quarter. Were you satisfied with the results and is it something you would expect to continue to pursue in 2008?
Tom Folliard
In fiscal ’09 we expect to be able to run flat margins year over year. We believe that our projection for comps sales reflects our ability to be able to deliver that and deliver in that range of comps. In terms of the strategy for moving margins to move sales, I talked about it at the end of the second quarter and that was at a time when we didn’t believe it would have had much of an impact. As things continued along the way they did over the next several months we thought it made sense to try and help spur sales a little bit with slightly lower margins.
How did it work out is very difficult to say. We are pleased with our sales results for the quarter, how much of that can we directly attribute to the lower margin is very difficult to say.
Matt Fassler – Goldman Sachs
A couple questions on credit. To the extent that you took the discount rate up to 17% from 12% if you could give us a sense as to the thinking behind that and whether that covers prospective securitizations, I don’t believe it does and what the implications of that higher discount rate are for sale ratio going forward?
Keith Browning
The discount rate covers everything that we have obviously financed so far. I can tell you that our forecast for next year does include anticipation of a higher discount rate at similar levels. We don’t see the stress caused by the global credit market changing dramatically next year and so it contemplates that we are going to see discount rates at similar levels. The thinking was generally that we saw credit spreads dramatically raise. If you go back since the end of the third quarter we’ve seen them raise over 200 basis points. It was hard to stand on our old discount rate of 12% given that dramatic increase which was really unprecedented in our history.
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