Kevin Mansell - Chairman, Chief Executive Officer, President and Member of Executive Committee Wesley McDonald - Chief Financial Officer, Principal Accounting Officer and Senior Executive Vice President

Mark Miller - William Blair & Company L.L.C. Bernard Sosnick - Gilford Securities Inc. Dana Telsey - Telsey Advisory Group Michelle Clark - Morgan Stanley Lizabeth Dunn - FBR Capital Markets & Co. Richard Jaffe - Stifel, Nicolaus & Co., Inc. Robert Drbul - Barclays Capital Daniel Binder - Jefferies & Company, Inc. Adrianne Shapira - Goldman Sachs Group Inc. Kenneth Stumphauzer - Sterne Agee & Leach Inc. Wayne Hood - BMO Capital Markets U.S. Deborah Weinswig - Citigroup Inc Jeffrey Klinefelter - Piper Jaffray Companies Erika Maschmeyer - Robert W. Baird & Co. Incorporated David Glick - Buckingham Research Group, Inc. Lorraine Hutchinson - BofA Merrill Lynch

Good morning. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kohl’s First Quarter 2011 Earnings Conference Call. [Operator Instructions] Certain statements made on this call, including projected financial results, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Kohl's intends forward-looking terminologies such as believes, expects, may, plans or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause Kohl's actual results to differ materially from those projected in such forward-looking statements. Such risks and uncertainties include, but are not limited to, those that are described in Item 1A in Kohl's most recent annual report on Form 10-K and as may be supplemented from time to time in Kohl's other filings with the SEC, all of which are expressly incorporated herein by reference. Also, please note that replays of this call will be available for 30 days, but this recording will not be updated. So if you are listening after May 12, it is possible that the information discussed is no longer current. Thank you. I would now turn the conference over to Wes McDonald, Senior Executive Vice President and Chief Financial Officer.

Thank you. With me today is Kevin Mansell, our Chairman, CEO and President. I'll start off with financial performance, and Kevin will talk about our marketing and merchandising initiatives. I'll talk a little bit about our store experience and give you some guidance for the upcoming quarter and year, and Kevin will make some closing comments, and then we'll take your questions. Financial performance. Total sales for the first quarter were $4.2 billion this year, an increase of 3.1% over last year. Comparable store sales for the quarter increased 1.3%, driven by a 1.1% increase in transactions per store. Average transaction value is up 0.2%, reflecting a 2.9% increase in average unit retail that was largely offset by a 2.7% decrease in units per transaction. Kevin will provide more color on our sales by region and line of business in a few minutes. Our credit share for the quarter was approximately 53%, an increase of 535 basis points over the first quarter of 2010. Moving on to gross margin. Our gross margin rate for the quarter was 38.1%, 3 basis points above last year. This was below the guidance of the 10 to 30 basis point improvement that we expected, primarily due to aggressive clearing of transitional merchandise and low demand for seasonal spring merchandise. For the second quarter, we expect our gross margin rate to be flat to last year to up 20 basis points over last year. SG&A increased 3.2% for the quarter, below our expectations of a 5% to 6.5% increase. Credit and store payroll expenses leveraged for the quarter. The remainder of our expense areas, advertising, DC, corporate, store, other and IT did not leverage for the quarter, but did grow slower than we planned. We would expect SG&A expenses to increase 3% to 4.5% for the second quarter. Depreciation expense increased approximately 3% for the quarter, primarily due to new stores and remodels. This was significantly better than our guidance due to timing of in-service dates related to our investments in e-sign, e-commerce and other IT projects. Depreciation is expected to be approximately $167 million in the second quarter. Operating income increased approximately 3% for the quarter to $362 million. Operating income as a percent of sales was 8.7%, flat to the first quarter of 2010. Net interest expense was $29 million this year and $31 million last year. Net interest expense is expected to be $28 million in the second quarter. Our income tax rate was 36.5% for the quarter compared to 37.8% in the prior year. The reduction was due to favorable settlements of various state tax audits. We expect our tax rate to be approximately 38% in the second quarter and for the remainder of the year. Net income for the quarter was $211 million, $12 million higher than the first quarter of 2010, an increase of 6%. Diluted earnings per share was $0.73 for the quarter, an increase of 14% over first quarter 2010. Moving on to some balance sheet and other metrics. We currently operate 1,097 stores compared to 1,067 stores at this time last year. Gross square footage was 96 million at quarter-end 2011 compared to 94 million at quarter-end 2010. Selling square footage increased from 79 million at quarter-end 2010 to 81 million at quarter-end 2011. Moving on to the cash. We ended the quarter with $1.7 billion of cash and cash equivalents, a decrease of $720 million from the prior year quarter end. Reduction in cash is primarily due to the retirement of $300 million in debt during the quarter, and our share repurchases during the current quarter as well as the fourth quarter of 2010. Substantially, all of the cash and cash equivalents are in money market bonds and commercial paper. Our inventory levels reflect continued strong inventory management. Total inventory was up 5.8% compared to the prior year, and inventory per store is up just under 3%. Our capital expenditures were $226 million for the first quarter, approximately $35 million higher than the prior year quarter due to new stores and increased remodels. Accounts payable as a percent of inventory was 43.8% versus 46.8% last year. The decrease is primarily due to lower inventory turn. And for your model calculations, weighted average diluted shares for the quarter were $290 million. And for your modeling purposes, I would use $282 million for diluted shares in the second quarter. We'll move on to Kevin, who'll talk about our sales, marketing and merchandising initiatives.

Thanks, Wes. As Wes mentioned, comparable store sales increased 1.3% for the quarter. Our Apparel businesses were significantly affected by the drop in our seasonal categories. In first quarter 2010, seasonal businesses comped up mid-teens in supporting our 7.4% comparable sales increase last year. This year, those same businesses were down mid-single digits. Non-seasonal businesses comped the same in both years. From a line of business perspective this year, Home reported the strongest comps driven by strength in tabletop, food prep, electrics and bedding. Men's and Accessories also outperformed the company average. Men's was led by active, dress clothing and basics, while Accessories was led by watches and sterling silver jewelry. Children's and Women's also achieved positive comps. Children's had strength in toys and infants and toddlers, and strong performance in Women's included active wear, updated sportswear and intimate. Footwear, which has consistently outperformed the company in recent years, reported a low single-digit comp sales decrease. Women's shoes were the strongest category in the Footwear business, and athletic shoes were the most difficult, driven by drops in the toning category. Our private and exclusive brands continued to increase in penetration, as they were 50% of our sales in the first quarter, up approximately 240 basis points. Private brands such as SONOMA, SO and Apt. 9 performed very well, while exclusive brands like FILA, Food Network, Lauren Conrad, Simply Vera Vera Wang and Candie's continued their strong double-digit sales increases. From a regional perspective, the Southeast region reported the strongest comps for the fifth consecutive quarter. The South Central, Mid-Atlantic and the West regions reported low single-digit comp increases. The Midwest region reported the lowest comps for the quarter with a negative single-digit comp decline. Our E-Commerce business continues to report significant sales increases and is well on its way to becoming $1 billion business this year. For the quarter, E-commerce sales were $187 million, up 47% over last year. Looking forward, we expect an increase in comparable store sales for the second quarter in the 2% to 4% range. We expect all months to be consistent with quarterly average. Moving on to our merchandise initiatives. We're very excited about our new partnership with VF Corporation and becoming the exclusive provider and marketer of the Rock & Republic brand. This contemporary lifestyle brand will launch in Men's and Women's apparel, as well as Footwear in spring 2012. The collection may expand into Children's, Accessories and Home, over time. Our team also continues to work diligently on this fall's Jennifer Lopez and Marc Anthony brand launches. Jennifer continues to generate positive news with her appearances on American Idol and her recently released album, and we're very optimistic about the excitement that this publicity will add to the launch this fall. We also plan to invest significantly in the third quarter to support the dual brand rollout. Moving on to inventory. Total inventory per store is down 2% in units and up less than 3% in dollars, while clearance units per store go down approximately 20% in units and approximately 30% in dollars. We continue to closely monitor apparel inflation. Spring apparel product costs are up in the low single digit. As we had indicated previously, we continue to expect significant increases across all apparel categories this fall, approximately 10% to 15% overall. We do have a few data points in denim, Men's basics and Children's in the first quarter, where out the door price increases in the high single digits resulted in unit declines in the low single digits, which result in sales dollar increases of mid-single digits. We have more widespread testing in place to run through June to give us time to react to the back-to-school season. Apparel inflation is clearly real, but we do believe we've had the time, the tools and processes to work through it effectively and as a result, have a competitive advantage for both us and our consumer. We've proven over the past that Kohl's value proposition resonates strongly with our customers, and we've clearly established ourselves as the leader in providing great value and savings. And we're committed to maintaining that leadership position going forward. Looking forward, we would expect our inventory dollars per store at the end of the second quarter to be up low single digits on a per store basis, similar to our expectations for the year. As we indicated earlier, we expect gross margin for the second quarter to be flat to 20 basis points higher than last year. We believe the increased penetration in private and exclusive brands, some pent-up demand in our seasonal businesses, as well as continued better inventory management will help drive that result. On the marketing front, our #1 customer concern continues to be staying within their budget. As a result, we will continue to drive home our value message using our highly effective The More You Know, The More You Kohl's platform. We'll continue to differentiate ourselves from the competition through our no hassle return policy, our world-class exclusive brands, our no exclusions approach to value-added offers, Kohl's Cash, and of course, our Kohl's Charge program. History has proven that Kohl's Charge cardholders are our most loyal customers. They shop our stores more often and have a significantly higher annual spend than non-Kohl's Charge holders. As a result, we'll continue to focus on adding to our mailable credit card base, particularly in our mild and hot markets. We've recently made changes in our incentive to open Kohl’s Charge account that will hopefully attract more occasional shoppers and help them turn into Kohl’s brand lovers. Finally, we're pleased with the launch of our new discount program for our 60 and older shoppers at the end of the first quarter. And we believe it will be another differentiator from our competitors going forward. Let me turn it back to Wes to touch on our store experience and provide some earnings guidance.

Thanks, Kevin. We opened 9 new stores this quarter and plan to open another 31 stores in the fall season in September. We continue to expect to remodel 100 stores in 2011, significantly more than 85 stores in 2010 and the 51 stores in 2009. We continue to become more and more efficient in our remodels. In 2007, the average remodel required 12 weeks to complete. In 2011, we expect the average remodel to be complete in 7 weeks. This reduction has reduced the sales drop in our first wave of remodels this year during construction to less than 1%. In the same wave of openings, we have experienced a high single-digit lift post re-grand opening, better than any performance we have seen in the past few years. We have added marketing to attract customers throughout the year to our remodeled stores and expect to see the benefit of that and the majority of that benefit will fall on the fall season. With that, let me share with you some details behind our guidance for the second quarter and then for fiscal 2011. For the second quarter, we would expect a total sales increase of 4% to 6%, comp sales of 2% to 4% and gross margin flat to up 20 basis points over last year. We would expect SG&A to increase 3% to 4.5%. This would result in earnings per diluted share of $0.96 to a $1.02 for the second quarter. As a result of our first quarter performance, as well as our second quarter share repurchase estimate, we are raising our fiscal 2011 guidance from $4.05 to $4.25 per diluted share to $4.25 to $4.40 per diluted share. It is important to note that this guidance does not reflect any future fall share repurchases. I know there's been some questions about that, but it does reflect what we expect to repurchase in the second quarter. With that, I'll turn it over to Kevin for some closing remarks.

Thanks, Wes. In closing, while we weren't happy with our sales performance in the first quarter, we were very pleased to achieve the high end of our earnings goal. We've strengthened our marketing for the second quarter and believe that we will see some pent-up demand for seasonal businesses, which would allow us to achieve a better comp in the second quarter. We continue to be excited about our E-commerce performance as we remain on track to achieve $1 billion in E-commerce sales in 2011, and in order to achieve that goal, we'll continue to invest in the business. We just purchased this quarter a third E-Commerce fulfillment center in Maryland that will be online to support holiday 2011 peak season. Our biggest sales opportunity remains in our mild and hot markets, and we're happy to see the Southeast continue to lead the company in comp sales. We have much more to do to achieve our goals in those markets, but we continue to move forward positively. Our increased penetration of private and exclusive brands, along with very strong inventory management, continues to benefit us on a gross margin rate and we see no change in that going forward. Our inventory level also remains in great shape. As we expected, inventory levels are on plan, and clearance levels are significantly below last year on a per store basis. In addition, our merchants and planners reacted to the sluggishness in seasonal sales, and we have appropriate levels of inventory in those categories entering the second quarter. We also continue to make great progress in the SG&A line. After being a headwind in 2010, our credit business provided significant leverage in the first quarter as our bad debt expense continues to drop towards pre-recession levels. Leverage and store payroll expenses continue to be driven by sustainable productivity improvements, such as the rollout of electronic signs. And many of our other areas experienced just slight deleveraging with our below plan comp, as they actually manage their expense dollars below plan. Finally, I think you can see that our capital structure provided flexibility in a quarter where the top line was less than we had hoped. We believe that our stock is undervalued at its current level and we were more aggressive about share repurchase, buying approximately $445 million of our own stock during the quarter. We would expect to buy at least this amount in the second quarter. We're committed to being good stewards of capital, and we will continue to prioritize profitable growth and reinvestment in our stores while returning any excess cash to our shareholders. I think this is evident, as you see our earnings per share increase of 14% over last year, as well as the initiation of a dividend. With that, Wes and I would be happy to take some questions.

[Operator Instructions] Your first question comes from the line of Jeff Klinefelter of Piper Jaffray. Jeffrey Klinefelter - Piper Jaffray Companies: A couple of questions. First on SG&A. Wes, in terms of what Kohl's demonstrated in Q1, despite coming in below your sales plan and given the stepped up marketing efforts for second half with this launch, the significant Jennifer and Mark launch, can you help us appreciate what sort of levers do you have to manage through the sales volatility going into the second half? And then second one would be on the Jennifer and Mark launch. In terms of the marketing dollars year-over-year, are you stepping those up on a net basis? And also how about the price points relative to average?

Yes, I'll take that. You were fading out a little bit, Jeff, so I'll take the SG&A question. I mean, if you flow through our second quarter guidance, our guidance for SG&A growth for the year remained at 3% to 4.5%. It may move across quarters as we go throughout the year, but that's our guidance for the year. The levers I see from an SG&A perspective, the store's organization did a great job this quarter with the volatility that we saw in sales by month. I mean, they basically leveraged at a flat comp in store renovation and got a few basis points of leverage there. So I suspect they'll be able to do that going forward as well. The other thing I think that's been a big benefit, kind of mentioned it a little bit on the call, is credit. Last year it was nothing but a headwind, with all the legislative changes. This year, we're seeing very nice results in our bad debt expense as people are starting to pay down debt and feel better about themselves and the economy. I expect those results will continue moving forward and expect that will provide us some flexibility as well. And I'm sure advertising productivity will be much better in the remainder of the year than it was in the first quarter. I'll talk to Jennifer and Mark. That's included our guidance. It will be a step up in third quarter spending. We're not going to quantify it, but it's very significant, somewhere to the launch of Vera Wang that we did a few years ago, and I'll let Kevin address the merchandising side of that.

Price points on Jennifer and Marc are positioned to be in our contemporary best category. So for purposes of comparison on Women's apparel, contemporary best are brands like Vera, Simply Vera Vera Wang, so you can think about price points to be pretty much the same as those are.

Your next question comes from the line of Dan Binder of Jefferies & Company. Daniel Binder - Jefferies & Company, Inc.: A couple of questions. First I was curious in the test where you've had some price increases going through with only low single-digit unit declines. Has there been any specific regional differences that's worth noting?

I think the short answer is no. I mean, I don't have all the specifics on that, to be honest with you, Dan. But I did have a chance to look at the totals and no, I think it's been pretty consistent. Daniel Binder - Jefferies & Company, Inc.: Okay, and then a second question if I could. You mentioned on the call that you had made some changes to the card program to attract more users. I was just curious if you could add a little bit more detail about what you're doing there.

Well, we're not -- it's not -- I don't want to get into all the detail, but we've improved the amount of investment we've made in our stores in order to solicit charge card holders and time it according to our marketing calendar. And then we've also improved the incentive for our customer to sign up for a charge card. So we've given them a better offer. Daniel Binder - Jefferies & Company, Inc.: Okay, great.

Your next question comes from the line of Adrianne Shapira of Goldman Sachs. Adrianne Shapira - Goldman Sachs Group Inc.: Wes, maybe on the gross margin, I think your original plans have been for flattish for the year, but better in the first half versus the back half. Maybe if in light of Q1 slightly lower than your guidance, what your thoughts are for gross margin for the year?

Adrianne, our thoughts for gross margin in the year are really unchanged. We consider it to be still flat to 20%. And we're a little disappointed in our performance on gross margin, but given the fact that we ran down mid-teens in seasonal products which will carry a higher margin at this time, I think the performance was pretty good. Sure, one of our competitors reported down margins yesterday. I'm sure that's going to be the remainder of the case that other people reports. So it's not where we wanted to be, but we don't see any reason to change the guidance. Adrianne Shapira - Goldman Sachs Group Inc.: Right. And then, Kevin, just on the sales, it sounds as if the culprit for sales was really the seasonal swing. Maybe help us think about, as you've obviously grown to be much more of a national player, how it does still seem to be quite -- Kohl's results are much more weather sensitive than we would expect, maybe kind of talk us through. Obviously we all saw the weather and it wasn't a help, but how you were thinking about perhaps mitigating the weather sensitivity going forward.

Sure. I mean, I think it's true that over the years, our sales have been much more spiked when weather is favorable and less so when weather is unfavorable than I would say the peer group that we compete against. And I think first quarter last year compared to the first quarter this year is like a perfect example of that. I think it's driven by 2 things, Adrianne. One is we still do have a relatively higher level of stores in the Midwest and Northeast which, of course, are the most weather sensitive in the spring season and swing periods like March and April. I think that's the smaller of 2 factors. The bigger factor is I think our customer is very focused on buying close to need. And so when she doesn't have a need, which she really didn't have in March and April, she delays buying. And then we historically have seen that when that need comes, she will buy really aggressively. So I think those are kind of the 2 factors, I would say the buying close to need is the bigger of the 2. But the proportionate number of stores by region is also definitely a factor for us. In terms of how we're approaching that for the second quarter, we're really -- we're thinking that we're probably going to get some pent-up seasonal demand but to be honest, that's not factored into our guidance. If we did get that, that would be great. But we're looking at the second quarter independently of that. I mentioned that we have strengthened our marketing. I don't want to get into the specifics on that because I think it's more proprietary, but we've made sure that we've included it in our marketing calendar, particularly in June and July, ways to drive traffic into our stores more aggressively. Adrianne Shapira - Goldman Sachs Group Inc.: Great. That's helpful. And then maybe on the e-signage, maybe give us an update where that's -- how the rollout is progressing, what you're learning, what the benefits are, and how you see that helping SG&A going forward.

Well, we still expect to have around 400 stores by the end of the year. It's working very well in the stores that we've piloted in and that we've additionally rolled out towards the end of last year. We're achieving the savings that we expect, but it will reduce SG&A, but it will also increase in D&A. So from a P&L perspective, we're not really viewing it as a positive at this time. We're going to reinvest the excess savings back into the stores to put more people on the floor, more people in the fitting room. But we're very pleased with the results thus far. Adrianne Shapira - Goldman Sachs Group Inc.: Okay. And then Wes lastly, just if I could just ask on the buybacks. It sounds as if by Q2, it seems that you'll probably be on track to achieve about $900 million of the buyback. I think at the start of the year, we were assuming that $1.2 billion for the year. Are you still on track for the $1.2 billion for the year, or could there be some further opportunity, given that surprise.

We didn't give any -- I mean, since you guys all build repurchase into your guidance, I was tired of you guys telling everybody what our earnings per share should be. So we updated it for second quarter repurchases. And you're correct that the run rate would be about $900 million by the end of the second quarter. However, our guidance doesn't include any future fall repurchases, and I would expect us to be more aggressive than the $1.2 billion, since we're already going to have roughly $900 million done by the end of the second quarter. But I mean one quarter at a time.

Your next question comes from the line of Bob Drbul of Barclays Capital. Robert Drbul - Barclays Capital: Kevin, I guess the first question is, I wonder if you could clarify, when you're talking about some of the price tests and price experience so far, was the unit decline in inflationary categories, was that a same store number or a total number?

Those are same. Everything we've talked about is same stores essentially. So each of these examples is a little different, Bob, and I don't want to have to go through every single case, because we have some Children's examples in our private brand. We have some denim examples. We have some basics examples, but the consistency in them so far is that we've had cost increases, which have been anywhere from, I would say, low single digit up to and including low double digit, which have resulted in lower unit sales per store. But the increase in average unit retail was greater than that drop in units, and the resulting sales dollars were very positive. Again, it's a positive. I would say they're all positive in their examples, but they're relatively small when you consider what we'll be looking at in fall where price increases are kind of across the whole store. Robert Drbul - Barclays Capital: Got it. And then just I have one merchandising question and then one marketing question for you. On the merchandising side in the stores, there seems to be a theme around crochet front, woven tops and back tops and handbags and sweaters. Is that a theme that is gaining any traction and something that can carry your Women's business here?

I don't know if it can. First of all, I'm stunned by your fashion knowledge always, Bob. So you've got me on it. I doubt that it can carry our Women's business, given the scale of our Women's business. But it is a positive trend. So I think you've identified something that's been good in our business for sure. Robert Drbul - Barclays Capital: Okay, and then just a marketing question. On the J. Lo launch, would it be possible -- are you picking out your favorite J. Lo song in terms of what will be playing in the stores or in the commercials when that launch rolls out in the fall?

I'm not thinking that Julie Gardner, our Head of Marketing, is going to allow me to pick anything out in marketing. So, no. Short answer to that is no.

Your next question is from Lorraine Hutchinson with Bank of America. Lorraine Hutchinson - BofA Merrill Lynch: Just another question on the price increases. Have you noticed any difference in customer acceptance between good products versus better and best?

There's examples I would say in each. So in denim, the brand is our more premium brand right now. And in Children's, it's our opening price point private label. Again I would emphasize to you, Lorraine, these are relatively small -- they're important categories. I mean, Jumping Beans is the brand I'm talking about. It's the most important we have in that business. But the scale of these changes are not broad enough that I would jump to any conclusions. It's always good to be positive though, and it's been positive so far.

And we have more extensive testing that we're doing now that would run through the end of June to allow us to make pricing decisions for back-to-school. And those are in much broader range of categories in terms of good, better, best, as well as lifestyles in terms of classic, modern classic and contemporary. So basically testing into what you guys -- you always refer to from time to time as our nine-box grid, and so we'll be able to better draw our conclusions at the end of June. Lorraine Hutchinson - BofA Merrill Lynch: Okay, and then what are you hearing from your vendors about your ability to chase bestsellers in the back half?

I think, I mean, generally chasing bestsellers is difficult always. It doesn't matter whether it's a wholesale relationship or it's our own in-house developed relationships. We're more in control of our own private exclusive brands, so about 50% of our business, I think you'll hear us generally talk much more confidently about our ability to chase. When you're not in control, when you have to depend upon a partner, then the execution is going to be more varied, I would say.

Your next question's from Deborah Weinswig with Citi. Deborah Weinswig - Citigroup Inc: Can you discuss the performance of your remodeled stores in terms of returns? And is it in line with your expectations so far?

It's actually above our expectations so far, as I mentioned on the call. We're up about 7% post re-grand opening. It's the biggest lift we've gotten in the last 3 years for sure. We have marketing programs in place to affect that wave that actually kick in here with the credit event in May, and they'll be running through the remainder of the year. So we've always gotten a pretty good lift in pre re-grand opening -- or excuse me, post re-grand opening. Never this big, but what I'm most excited about, we have a good program to touch this customer multiple times throughout the year to get them to become, as Kevin mentioned, move from occasional Kohl's shopper to Kohl's brand lovers. That's going to be really critical to getting the lifts. If we get this lift that we've gotten that would exceed -- even if that continues throughout the year, it would exceed our expectations. We need about a 5% lift to hit where we want to be. Deborah Weinswig - Citigroup Inc: And then, Kevin, I know you don't want to dig too much in the details in terms of the marketing plan in the second quarter. But can you just elaborate, is it focusing on your kind of core credit card customer, or is it more broad focus?

No, it's definitely broader. I mean, it's -- our Credit Card business is 50% of our business. So it's an important part of what we've strengthened. But we definitely are looking beyond the Credit Card business, so it's also strengthening vehicles that would be more appealing to the non-Kohl's credit card customer as well. Deborah Weinswig - Citigroup Inc: Okay, and then lastly, can you talk a little bit about the performance of the small format stores, and how are you finding availability of real estate?

The small stores continue to perform better in terms of an ROI, which is really what we're measuring them against because obviously, they're not going to be as helpful in top line because most of them are in smaller markets with less sales potential. Real estate availability remains good. We're excited about some of the smaller stores that we're opening in more suburban markets. Those are really to come next year, but that's given us a lot more flexibility, I think than we had in the past, maybe 3 or 4 years ago when we were predominantly focused on the 88Ks. It's also, I think, a smart strategy going forward, as the E-Com business for both us and others increases. That business is an incremental, and so as more people shop at home and get it delivered to them at home, you might not need as big a footprint going forward.

Your next question comes from the line of Michelle Clark of Morgan Stanley. Michelle Clark - Morgan Stanley: Kevin, Wes, in terms of the seasonal markets, have we seen a bounce back here in May, as temperatures have warmed in Northeast and Midwest?

I mean, we don't obviously, Michelle, we don't comment on sales in the month in which we're in. But I would stick with what I said to you earlier, which is we've got a pretty consistent historical pattern that as weather moderates more into the zone where customers are motivated to buy these categories, our sales do improve a lot. Michelle Clark - Morgan Stanley: Okay. That's fair. And then, Wes, in terms of credit expenses, I was wondering if you can provide us a little bit more detail in terms of how much was it down in the first quarter year-over-year, and what should we be looking for, for the full year?

Well, we don't really get into the detail. I would suspect it'll continue to be a positive. We're building more of it into our expectations. But I suspect that if the bankcard trend continues, we'll continue to keep what we forecast internally. But we're not going to get into the level of detail. I hope to make back what I lost last year of the big picture. Michelle Clark - Morgan Stanley: That's helpful. And then lastly, maybe touch upon the productivity of hot and mild markets where we stand today. How much they're off the company average and then the opportunity go forward.

On the mild and hot markets, I mean, broadly you probably want to think about them as 90% of an average store. They obviously vary by market in each of the markets that we're in. So we still -- as we kind of indicated in the call, we know we still have a hill to climb here. We have 10% more sales that should be coming in every one of those stores across the country. On the positive side, for the fifth consecutive quarter, the Southeast led the company in performance in sales. So we are making headway on the goal of getting those stores to the average level. I think broadly as it was last year, this is going to be a tailwind for us going forward because we're very focused on it.

Your next question comes from the line of Richard Jaffe of Stifel, Nicolaus. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: Wes, can you just remind us how many stores you've remodeled and how many stores you think you'll accomplish this year, and therefore, how many will be left to remodel? And then if you'd comment on marketing spend on dollars you anticipate this year versus last year or at least the percent change.

I think I'll take the remodel question. From a remodel perspective, we're going to remodel 100 this year. That's going to be basically our run rate going forward. Over the past 4 or 5 years, we've probably remodeled 300 stores, I guess, all in. But it's an ongoing process. So the way we like to characterize it is that every year we're going to remodel 100 stores. So that will mean in any 5-year rolling period, half our chain will be either open in the last 5 years or remodeled in the last 5 years. And we think that that's a competitive advantage. But the run rate going forward is 100 remodels, approximately $270 million a year in capital.

It's Kevin, Richard. On the marketing, I mean, I think the way you want to think about marketing is we are clearly spending and going to spend more marketing dollars than last year. That assumption that we're going to spend more on marketing dollars, though, is within the overall guidance on SG&A that we've given you for both the quarter and for the year, and the marketing team which has been very successful at this, have been able to use those dollars to still continue to improve productivity. So our expectation is we still, on the year, will get improvement in productivity. We mentioned 2 things, strengthening marketing in the second quarter, which is in the guidance we've given you in SG&A, and we've mentioned the launch of Jennifer Lopez and Marc Anthony being a major effort for us in the third quarter. But that's also within the guidance we've given you for the year.

Your next question comes from the line of Erika Maschmeyer of Baird. Erika Maschmeyer - Robert W. Baird & Co. Incorporated: Could you talk a little bit more about your strength in the Home? Is that really more about the recovery or a specific internal initiative that you have going, like the extension of Simply Vera Vera Wang into that category?

No, I think first of all, it's a continuation of a trend, I would say. And as you know, Home is a category that is not so susceptible to the big weather swings. And so naturally in the first quarter, their trend of business sort of continued along a pattern that had been one. That trend is being driven I think by just strength broadly in Home across the country. I expect we're not unique in that. But also that team has merchandise initiatives where we're extending brands, the example you gave was Vera Wang into Home, that's helped that sales trend as well. Erika Maschmeyer - Robert W. Baird & Co. Incorporated: Great. And then could you just clarify a little bit more, give a little more detail on how you're thinking about your planning for back-to-school? You mentioned that you'll be able to test price increases through June to help you position yourself. I guess what's your drop dead date to make a decision and with your lead times, does that vary by category? Also any update or thoughts on the competitive environment?

For the pricing strategy, it doesn't really vary by category, it's more driven by a marketing calendar and what the timetables are that we have to reach to get into the print schedule and the direct mail schedule and the broadcast schedule. That's why we've been kind of focused on doing these tests from mid-April to early June so that we can make all those dates and use the information we gather from the tests in pulling the marketing triggers that need to happen for back-to-school. So I'm pretty confident that we'll know from the tests those changes we need to make, and we'll be on a timetable to be able to do it. Erika Maschmeyer - Robert W. Baird & Co. Incorporated: Any update on the competitive environment, things you're seeing?

Overall, yes. I mean, I think it's more of the same. It's a market share fight. And it requires us to be progressive, which is what we're trying to tell you, that we're going to be aggressive in the second quarter and the third quarter to continue the trend we've had. And I don't see that changing at all. This layering on of increased apparel prices is just another element that gets kind of thrown into the mix, and we just want to make sure we're fully prepared to understand that.

Your next question comes from the line of Liz Dunn of FBR Capital Markets. Lizabeth Dunn - FBR Capital Markets & Co.: I guess just a couple of questions. First, would you buy more than $1 billion this year? Would you consider levering up to buy back stock because you seem to be under levered relative to the other department stores?

We don't need to lever up. I mean, we're going to refinance the $400 million. We've got a significant amount of cash. We already said we're going to buy $900 million at least in the spring. We have an ample capacity to do that. We're just not giving guidance for fall share repurchases yet, we want to see what unfolds. But we certainly have the capacity to buyback more than $1 billion without adding to our leverage ratio. We want to maintain that 2x debt to EBITDAR ratio by refinancing that $400 million. We'll basically be there at the end of the year, and that will give us capacity assuming continued income growth of adding leverage in the future years as well. Lizabeth Dunn - FBR Capital Markets & Co.: Okay. So you may in future years think about optimizing your balance sheet a little bit more by incurring debt.

We're going to refinance the $400 million that we've paid back this year, most likely in the third quarter, assuming interest rates remain similar to where they are. We happen to believe the 2x debt to EBITDA ratio is the right ratio for us, that the company provides us a lot of flexibility in the downturn, people seem to have forgotten 2008 already, when banks didn't intentionally want to other banks, let alone other people. So I think that's prudent to be conservative. Lizabeth Dunn - FBR Capital Markets & Co.: Okay. And then just on your credit share, how high is high? Like where do you think it can go from 53%? And then also, I apologize if I missed it, but how much did E-com add to the comp?

E-com added about 150 basis points to the comp. In terms of credit share, it is somewhat affected by the quarters. We don't expect it to be 53% the entire year in the fourth quarter. We get a lot of people shopping, not just people that hold our credit card. The non-credit card people shop in the fourth quarter. But we do have markets that are north of 60%, and we have plenty of markets in mild and hot markets that are newer that are in mid-30s. So we have a lot of opportunity to continue to grow that share. Lizabeth Dunn - FBR Capital Markets & Co.: Okay, great.

Your next question comes from the line of Bernard Sosnick of Gilford Securities. Bernard Sosnick - Gilford Securities Inc.: Following up on E-commerce, you were up 47%. I'm wondering if you could give us a little bit of color with respect to the categories that are strong. E-commerce started well with Home and you've been building, I presume, in Apparel. And could you just give us color on that?

I don't have it right with me right now, Bernie. But it was very broad. We had big increases across the entire spectrum of our merchandise offering. I think, and I'm pretty sure I'm right on this, Home ran little faster still than the Apparel categories, but I think that was more influenced by the same things that our brick and mortar business were influenced by. So the thing that makes us excited about the E-com opportunity is the consistency of the growth and the breadth of the growth. So it's not in one particular category. It's not being driven by one particular business. It's really across the whole store. Bernard Sosnick - Gilford Securities Inc.: I can see your confidence there. What I'm curious about is whether or not you're running ahead of plan in the first quarter and feel very confident about meeting or perhaps beating the $1 billion number.

Well you never -- I mean, you know especially Wes and I never want to get ahead of ourselves, but I think sort that at the beginning of the year, we qualified our E-com opportunity for the year as around $1 billion. That would have implied a growth for the year of about 40% roughly. We actually ran up 47% in the first quarter, and we have strategies in place we think that actually accelerate the rate of growth. So you don't want to get ahead of yourself again, Bernie, but certainly the actual growth in E-com in the first quarter was well ahead of plan. Bernard Sosnick - Gilford Securities Inc.: No, I'm impressed with that. With regard to new store openings, I think you said that the new stores are getting started very well. I know you're not yet ready to talk about future growth plans. But from what you're seeing, does it appear that there's some opening for an acceleration of growth going forward?

Well, I think the way you described it is the right way. We don't want to get ahead of ourselves in talking about next year's number of stores, but what we've tried to reinforce with everybody is this great confidence we have in our small store prototype and concept. And that's built on real results over the last few years. Those results are getting reinforced in the opening of the stores we're having now. And we're trying to focus everybody around the fact that we think that concept provides a lot more flexibility in real estate for us. And it does give us at least a platform to open up more stores faster. There a lot of other factors as you know as well, but the small store concept we think is a really solid concept that we've built up a lot of history on. Bernard Sosnick - Gilford Securities Inc.: Would it be correct to say that future growth in units would be more likely skewed to the hot and mild markets because those are your newer ones? And they might start out slower than average, but you're encouraged by the developments in the region?

I can't really talk beyond this year, Bernie, and so to talk about 2012 and after and start discussing what percentage of our stores that we're going to open are going to be in mild and hot versus our core markets is definitely getting way ahead. We're definitely very happy with the results and the trend of business in our mild and hot markets. So we're not where we want to be yet, but the progress that the team has made has been very significant over the course of the last 2 years. So it does start to give us a little more confidence in our ability to have more stores in those markets going forward. Bernard Sosnick - Gilford Securities Inc.: That's very helpful.

Your next question comes from the line of Mark Miller of William Blair. Mark Miller - William Blair & Company L.L.C.: So beyond this quarter, I want to understand what you're thinking about the new product launch with J. Lo and based on your market research, do you think your bigger opportunity is to expand the appeal to a broader demographic, so a new customer in the store? Or do you anticipate more of the sales lift coming from increased share of wallet?

I mean, just because we do have almost 1,100 stores, there a lot of customers who are aware of Kohl's and there are within driving distance of a Kohl's store. So it's going to be a mix of both, Mark. I suspect that though, given we touched so many consumers in America already, that our biggest dollar opportunity is going to be converting shoppers who are maybe infrequent or casual shoppers of Kohl's who haven't believed to date that we've offered enough from a style and aspirational aspect in our assortments to consider Kohl's. And we've seen that in the growth of some of the brands like Vera Wang and Dana Buchman and Chaps that we've launched. So I suspect that's probably the bigger opportunity. But attracting new customers is also very important. There's a whole bunch of customers who probably don't consider Kohl's a true alternative for their apparel needs that are currently shopping in the mall, specialty stores and perhaps the traditional anchor store in the mall. And with these kinds of brands, will start to consider Kohl's. Mark Miller - William Blair & Company L.L.C.: So then with that perspective, can you share any more about your marketing plan behind this launch, because there seems to be disconnect with your enthusiasm and share repurchase relative to the valuation of the stock. Implicitly, investors don't seem to share that. So given what you have, can you say anymore about how you're going to try to communicate the newness you have in the second half?

I mean, the short answer is no, not really. I mean, we're trying to say to everybody this is a very important launch for us. It's the biggest launch the company's ever undertaken in both the prep for the categories and therefore, it's going to get support from a marketing perspective to the greatest degree that we've ever done. And we think it's from a timing standpoint, it couldn't be any better for both of the individuals involved with the brand, both Marc and Jennifer. Here we've been very consistent on the share repurchase. From any perspective, Mark, historical performance, we've outperformed. So we have a track record. Looking at opportunities to grow earnings in the future, we've had a theme with investors of making sure they understand our earnings per share growth is more solid, we think, than other retailers because it's fundamentally built on a number of factors, not just top line growth but margin expansion, SG&A leverage, share buyback, and from a total shareholder return perspective, a dividend that we hope to grow over time. So I think Wes has been as aggressive as he can be in saying that when our share price is $53 or $54, we're going to be buying back shares very aggressively.

Yes, I mean, our pace went from $1.2 billion to $1.8 million, if you want to do the math. So I think if the stock stays where it is, that's what we think today. If stock stays where it is, it could even be more aggressive.

I mean, put it another way. If you think about it in looking backwards in the last 2 quarters, we've bought back almost $1.5 billion of our own shares. So we're telling people that it is clearly undervalued in our estimate based on our future growth expansion, and we're trying to act accordingly. Mark Miller - William Blair & Company L.L.C.: Okay, that's clear.

Your next question comes from the line of David Glick of Buckingham Research. David Glick - Buckingham Research Group, Inc.: Most of my questions have been answered. Just a quick follow-up, Kevin, on the J. Lo launch. I'm wondering how you look at this with respect to your productivity in the West and the Southeast where you're underdeveloped relative to the rest of the chain, and whether you think these brands will have a particular appeal in those regions and a net positive impact on your overall comp? And then secondly, when might we start seeing the merchandise in your stores?

Yes, I mean, we're definitely -- we suspect that those 2 brands will even outperform further in the markets in which we have the most opportunity to grow our per store productivity, which are the mild and hot markets. Just the style aesthetic of the 2 brands and of course, the 2 personalities involved in the 2 brands are really on target for that consumer in a huge way. We also have historical perspective to look back at, which is how do we perform in contemporary best brands in those markets, and they totally outperform. So I think it gives us a lot of confidence from that standpoint. What was the second part of your question? David Glick - Buckingham Research Group, Inc.: When are we going to start seeing the merchandise?

You should see it very late in August, early in September. The planned target launch is mid-September. David Glick - Buckingham Research Group, Inc.: Okay. And then just a quick follow-up for Wes, just to put into context the seasonal businesses and the trend impact on your overall comp, what percent of your business in the spring do the seasonal categories represent?

It's Kevin. I mean, it's roughly in the spring season, and I was going to say in the first quarter. In the first quarter, it was roughly around 20% of the business, a tad less than roughly about 20% of the business. I don't actually have the answer for you in terms of last year for the spring. David Glick - Buckingham Research Group, Inc.: Obviously, higher?

Second quarter would be higher. David Glick - Buckingham Research Group, Inc.: Okay, great.

Your next question comes from the line of Ken Stumphauzer of Sterne Agee. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: Just a couple of quick questions. I want to follow up on the price elasticity question you guys were answering earlier. I'm just curious. When you look at the actual sales growth on the items on which you took price increases, did they accelerate from the prior quarter? Or are you just saying that you do not see a sales decline?

No, they accelerated in all the cases that we have. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: Okay. And secondly, as far as the E-commerce trajectory goes, do you guys feel that, that might slow, say, when we get to 4Q, and you guys are anniversary-ing the kiosk installations? Or do you think that's not an issue?

It's a nonissue. We did $30 million from the fall season in kiosk.

I mean, I think, actually, and again, you never want to look forward too far, but fundamentally, the building blocks we've put in place around fulfillment, because we've now automated completely our second fulfillment center and have now opened and we'll have running our third fulfillment center this holiday, give us the ability to service the customer to a much greater degree, which gives our marketing team the ability to be much more aggressive in terms of how they reach out to the customer. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: The implication being is you guys had stockouts in the E-commerce DCs...

No, it's not stockouts. It's just, I mean, to put it simply, we held back our marketing to the online customer because we really didn't feel we had the capacity and fulfillment to serve them properly. And we want to be right there in terms of being able to service the customer always, and so we were never going to let marketing get ahead of that. So we've really held back marketing and to some extent, merchandising, and that will not be the case this fourth quarter. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: That's helpful. And then just one last question. Trying to scale what the potential contribution could be for Marc Anthony and J. Lo, can guys give us an idea, maybe something like Vera Wang, how big it was at launch, or what it contributed to the comps, any kind of scaling or parameters?

I mean, I'm not being smart when I say this, but the short answer is no. I mean, we don't provide detail on individual brand volume. I've tried to put it in the context for everybody that just because this is both a Women's and a Men's at the same time and the breadth of the categories is the greatest number of categories we've ever done, we expect it to be the biggest impact. Beyond that, there's really nothing to say, Ken.

Your next question comes from the line of Wayne Hood of BMO Capital Markets. Wayne Hood - BMO Capital Markets U.S.: Just continuing on this topic of E-commerce for a second. From a marketing standpoint, I was curious how you think you'll respond to the growing pre-shipping programs that are in the marketplace on lower minimum orders for back-to-school and holiday. And what dollar level of order is it no longer profitable or dilutive to returns on capital when you think about that segment of E-commerce and how you increase share?

Well I mean, at a high level, Wayne, we know that shipping is going to become a bigger and bigger tool used to drive online business, and we're prepared for that. We've got it in our thought process in terms of how we're going to market and how we're going to communicate to consumers, and we recognize that. Beyond that, to get into the detail of how the P&L breaks down and at what point free shipping is good and what point it's not as good, that's kind of level of detail we wouldn't want to get into. But all of this is in our thinking on our Online business. So we know we're not in a vacuum here. And we need to be very competitive in order to continue to grow the business. Wayne Hood - BMO Capital Markets U.S.: Okay. And 2 other questions, and I'll get off here. As you approach the back-to-school season, what kind of out the door price point spread on key branded product do you expect to achieve when you take into account the cash rewards or credit offer? In other words, everybody's going to come at the same branded price, but you can show better value proposition with the cash rewards and credit. At what level of spread do you think you can get out the door compared to your competitors to take share?

Yes, I mean it's almost impossible, honestly, to answer that. We've tried -- the research that we've done on our average unit retails historically have pretty consistently shown, not ours but secondary research, that Kohl's price points are below the department stores we compete against, and clearly way below the specialty stores in the mall. We want to keep that spread. So we want to keep that value proposition. As I've said in our marketing comments, our #1 customer concern today still remains that she wants to and needs to stay within her budget. So we know that. Wayne Hood - BMO Capital Markets U.S.: Okay. And then, Wes, just for you. I guess I was curious, when you think about Texas, the Pacific Northwest and California, those less productive stores, I know it's still early with Capital One, but did they see an improvement in the approval rate in credit penetration so that gives you some confidence as Capital One flows on more programs that you can even accelerate that penetration in the back half of the year?

Yes, it's a great question, Wayne. We've made a few changes thus far that's raised our approval rates roughly 300 basis points.

Your next question comes from the line of Dana Telsey of Telsey Advisory. Dana Telsey - Telsey Advisory Group: As you think about the cost increases, besides raw materials, what's happening with the other buckets in terms of labor and transportation? And how are those being managed? And if you think beyond J. Lo, is there another new product initiative that we should be watching for in 2013?

Well, I think from a labor and transportation cost, we just finished our ocean freight negotiation. We feel pretty good about the outcome on those. I think they'll be modest impact, not a big deal from that perspective. Labor rates, especially on apparel, our production is less China-centric. We do significant business in Indonesia, Vietnam, Bangladesh and other countries, Central America, various countries down there. So we've been able to mitigate somewhat the labor pressures in China. But the increases are a majority, like you mentioned, all about the raw material increases, and hopefully some of the things we're seeing in futures will play out. So spring will be a little better than what fall's looking like, but that's a little early to tell.

On the brand side, Dana, obviously, we've talked a lot about Jennifer and Marc's new brand launch. We do have a new brand launch for next spring which we think it could be a blockbuster because it's -- while it's a lifestyle brand, it's fundamentally anchored in our denim category, which is the biggest single category that we sell in our store. And we think that, that could be a big factor of sales next year. We know that brands are important to our growth, and so we're working hard at developing new strategies, both for next year and for 2013. I would say that we believe that the whitespace that's still available for us is definitely in the modern and contemporary area. We've introduced, especially with Jennifer, Mark and Rock & Republic coming, a lot of contemporary brands coming and so we're probably more focused in the modern area, the modern category. So if you think about our lifestyle that's classic to modern to contemporary, modern has a lot of room to grow, and so we're trying to put a lot of attention on that.

There are no further questions at this time.

Okay. Thanks, everybody.

This concludes today's conference call. You may now disconnect.