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

Nathan Rich Charles X. Grom - Deutsche Bank AG, Research Division Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division Kimberly C. Greenberger - Morgan Stanley, Research Division Lizabeth Dunn - Macquarie Research Daniel T. Binder - Jefferies & Company, Inc., Research Division Jessica Schoen - Barclays Capital, Research Division Gregory Hessler - BofA Merrill Lynch, Research Division Matthew R. Boss - JP Morgan Chase & Co, Research Division Patrick McKeever - MKM Partners LLC, Research Division Dana Lauren Telsey - Telsey Advisory Group LLC David J. Glick - The Buckingham Research Group Incorporated

Good morning. My name is Marley, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kohl's Quarter 3 2012 Earnings Release 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 terminology, such as believes, expects, may, will, should, anticipates, 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 recording will not be updated. So if you're listening after November 8, it is possible that the information discussed is no longer current. I would now like to turn the call over to your host, Wes McDonald, Senior Executive Vice President, Chief Financial Officer. Sir, you may begin your conference. Wesley S. McDonald: Thank you. With me today is Kevin Mansell, our Chairman, CEO and President. I'm going to go over our financial results, and Kevin will talk about some more specifics regarding merchandising, marketing, stores. And then I'll follow-up with our guidance. Kohl's sales for the quarter increased 2.6% to $4.5 billion. Comp store sales increased 1.1%. The comp increase reflects a 0.6% increase in average unit retail, a 1% increase in units per transaction, resulting in a 1.6% increase in average transaction value and a 0.5% decrease in number of transactions per store. Year-to-date sales increased 1.2% to $12.9 billion, and comparable store sales decreased 0.5%. The year-to-date comp decrease reflects a 3.9% increase in average unit retail, offset partially by a 2.2% decrease in units per transaction, which resulted in average transaction value of a positive 1.7%. Transactions per store for the year are down 2.2%. E-Commerce sales increased 50% over the third quarter 2011 to $295 million. Year-to-date, E-Commerce sales have been $782 million, 41% higher than the first 9 months of 2011. The effect on our comp was 230 basis points for the quarter and 190 basis points year-to-date. Kohl's charge sales penetration increased 70 basis points to 58% of total sales for the quarter, and our year-to-date credit share is 57%, an increase of 165 basis points over the first 9 months of the year. Kevin will provide more color on our sales in a few minutes. Our gross margin rate for the quarter was 38 1 -- 38.1%, 44 basis points lower than the third quarter of last year, but considerably better than our expectations of a 60 to 80 basis points decline. SG&A dollars increased 0.6% for the quarter, consistent with our expectations of down 1% to up 1%. SG&A as a percent of sales leveraged approximately 50 basis points for the quarter and 40 basis points year-to-date. Kevin will provide some more color on expense management as well in a few minutes. Depreciation expense was $210 million in third quarter this year and $202 million in the third quarter of last year. The increase is primarily due to IT projects. As a percentage of sales, depreciation was 4.7% for the quarter, 5 basis points higher than last year. Year-to-date, depreciation increased 6%, primarily due to new and remodeled stores and IT projects. Net interest expense was $80 million this quarter and $243 million year-to-date. The $5 million increase over the third quarter of 2011 and a $20 million increase over the first 9 months of 2011 are primarily due to the $650 million of long-term debt issued in October of last year. Our income tax rate was 37.8% for the quarter, slightly below our expectations of 38%. Diluted earnings per share increased 14% to $0.91 for the quarter. Net income was $215 million for the current-year quarter and $609 million year-to-date. Year-to-date, diluted earnings per share was $2.54 this year and $2.56 last year. Moving on to square footage. We currently have 1,146 stores with gross square footage of 99.58 million square feet and selling footage of 83.09. Square footage is approximately 1% higher than last year at this time. We ended the quarter with $550 million in cash and cash equivalents. Capital expenditures were $641 million for the first 9 months of 2012, $114 million lower than the first 9 months of last year. The change reflects multiple changes in our capital expenditures, including fewer remodels and fall new stores, partially offset by higher IT spending. As a reminder, we opened 12 new stores this fall compared to 31 last fall. And capital expenditures are projected to be $800 million for 2012, $25 million less than our previous guidance. Our October inventory balance was $4.8 billion, a 17% increase over October of last year, and AP as a percent of inventory was generally consistent with last year at 50.5%. Weighted average diluted shares were 235 million for the quarter and 240 million year-to-date. Earlier this week, our board approved a quarterly dividend of $0.32 per share. The dividend is payable December 26 to shareholders of record at the close of business on December 5. I'll now turn it over to Kevin, who'll provide additional insights in our results.

Thanks, Wes. Let me start by adding some color to our sales results. As Wes mentioned, comparable store sales increased 1.1% for the quarter. Footwear was the strongest category of the strength in athletic shoes. Men also outperformed the company average for the quarter with notable performance including casual sportswear, pants, basics and active. Children's reported a low single-digit increase on notable strength in toys. Home is positive, but below the company average. Better performance included bedding, electrics and bath. Women's was essentially flat for the quarter. Active was the strongest category with a double-digit increase. Updated and contemporary sportswear, classic sportswear and intimates also outperformed the company. As we expected, the juniors business continued to be challenging. Sterling silver jewelry was the strongest category in accessories. Handbags and small leather accessories and bath and beauty also outperformed the company. From a regional perspective, the South Central was the strongest region. All regions ran from slightly positive, slightly negative. From a brand perspective, 53% of our third quarter sales were private and exclusive Only-at-Kohl's Brands, an increase of approximately 150 basis points over the third quarter of 2011. This increase was the result of our new exclusive brands, Jennifer Lopez, Marc Anthony, Rock and Republic and Princess Vera Wang, as well as strong sales in Chaps, LC Lauren Conrad and FILA SPORT. On Wednesday of this week, we launched the first of our DesigNation collections. This limited edition collection was designed by Narciso Rodriguez and was inspired by his recent travels to Istanbul. On the gross margin front, as Wes indicated, our gross margin rate for the quarter was approximately 40 basis points lower than the third quarter of 2011. We enter the holiday season with an improved understanding of how our customer responds to our pricing, fresh inventory and normalized inventory levels. Total inventory units per brick-and-mortar store are up approximately 14% over October 2011 and 3% over October 2010, meeting one of our goals in getting inventory units in the stores back to those levels. The vast majority of these increases are due to our gift and great value programs, as well as in the areas that are performing well. Our expectation by the end of the year is that unit and cost increases per store will continue to converge as we gain benefit from the lower-cost fall receipts. We will be bringing in significant amounts of transitional goods in December and early January to be better prepared for spring selling. Our expectations would be that inventory per store on a dollar and a unit basis would be up low double digits per store at the end of the fourth quarter. On the SG&A line, we performed as expected. Our store organization continues to drive payroll efficiencies. Our fixed costs generally were flat as a percent of sales. We also reported significant leverage in our corporate operations, primarily due to lower incentive costs. Marketing costs did leverage in the third quarter, despite spending to support brand launches, including this quarter's Princess Vera Wang launch and to reemphasize the many great ways to save at Kohl's. We would expect marketing to leverage in the fourth quarter as well. Our credit operations slightly deleveraged to last year. Our performance will be predicated on the future on our portfolio growth and managing the customer servicing and marketing functions more efficiently. I would expect our profitability to grow in the fourth quarter versus last year, but perhaps not as fast as sales. Distribution centers also did not leverage as we continue to develop the infrastructure for our growing E-Commerce business. We opened 12 new stores this quarter, bringing our current store count to 1,146. All but one of these 12 new stores are small stores with less than 64,000 square feet of retail space. We expect to open 12 stores in 2013, 9 in the spring and 3 in the fall. Consistent with this year's new stores, we expect all but one of the 2013 stores to be less than 64,000 square feet. Year-to-date, we remodeled 50 stores. We expect to remodel 30 stores next year. Most of these remodels will occur in the fall season. As you know, we've temporarily reduced our remodel program until we have final results from tests we are doing in our home, accessory and beauty areas. We will make changes to our remodels based on the results of these tests and expect to accelerate our remodel program back to a more normalized run rate of approximately 100 stores per year beginning in 2014. Last week, we announced our integrated marketing campaign emphasizing gifts to dream of at unprecedented values this holiday season. Our fourth quarter marketing will emphasize the unbeatable savings opportunities that Kohl's offers. This year, shoppers will have extra days to both earn and redeem Kohl's Cash. In addition, every day between Black Friday and Christmas Eve, Kohl's will pick up the tab for one randomly selected shopper in every store and Kohls.com as part of our Dream Receipt promotion. We will also, once again, open nationwide at 12 a.m. on Friday, November 23. Stores will be open for 24 straight hours from 12 a.m. until midnight on that day. From a media mix perspective, we intend to significantly increase our digital marketing and broadcast spending in the fourth quarter. In closing, our improved third quarter sales results are, hopefully, a harbinger of good things to come. As we enter the critical holiday season, we believe we're in a great position. On the merchandising front, we have several brands which are new to the holiday season: Princess Vera Wang, Rock and Republic and Narciso Rodriguez. And we've reenergized several of our existing brands, Chaps, LC Lauren Conrad and FILA SPORT. As I just mentioned, our marketing program focuses on the gift opportunities and great values that are available at Kohl's. We've made a significant investment in inventory in order to improve our in-stock position. And we've invested in the Kohl's store experience, and as a result, our customer service remains best in class. We know that the economy is going to be tough, but we believe that the focus on value and gifting will win over the consumer in what we expect to be, as always, a very competitive holiday season. Earlier this week, our Board of Directors reaffirmed our commitment to return value to our shareholders by increasing our share repurchase authorization. Our existing share repurchase program was increased by $3.2 billion, up to a $3.5 billion level. Our expectation at this time would be to repurchase the shares over the course of the next 3 years. With that, I'll turn it back to Wes to provide our fourth quarter earnings guidance. Wesley S. McDonald: Thanks, Kevin. Our fourth quarter earnings guidance is as follows: total sales increase of 7% to 8%. This includes the 53rd week; comparable sales increase of 3% to 4%. We expect November to be below that, December to be at the high end of the range and January to be at the low end of the range; a gross margin rate decline of 80 to 110 basis points; SG&A expenses, including the 53rd week, will increase 3.5% to 4.5%. Excluding the 53rd week, we expect SG&A to increase 1% to 2%; depreciation expense is forecasted to be $212 million; interest expense $86 million; and a tax rate of 37.8%. Our guidance also assumes 230 million diluted shares for the fourth quarter and 237 million shares for the year. This assumes $300 million in share repurchases in the fourth quarter at an average price of $55 per share. Including these estimated share repurchases, we expect our earnings per diluted share to be $2 to $2.08 dollars for the fourth quarter. Reflecting our current results and our fourth quarter projection, our fiscal 2012 guidance has been updated to -- excuse me, $4.52 to $4.60 per diluted share from our previous guidance of $4.50 to $4.65 per diluted share. And included in these results are the following estimated impacts of the 53rd week in fiscal 2012: sales of $180 million; SG&A, $30 million; net income, $20 million; and diluted earnings per share, $0.08 per diluted share. We will give you those exact amounts at year end in order to adjust your go-forward earnings models. And with that, we'll be happy to take your questions at this time.

[Operator Instructions] Your first question comes from the line of Deborah Weinswig with Citi.

This is Nathan Rich filling in for Deb today. I first wanted to ask about E-Commerce. It looks like you guys had the strongest E-Commerce growth that you've had in almost 2 years. Can you talk about what's driving that? Wesley S. McDonald: I mean, I think from our perspective, it's just continuing to gain market share with the customer. I think we've invested a lot of money in digital marketing this year to drive traffic to the site. Our conversion rate is also improved over the course of the first 3 quarters. We just installed guided navigation recently, and we expect that to be a benefit for the holiday season. And we've also increased the number of SKUs we have available online. So I think it's just -- are starting to mature as a business there. And we've been behind in terms of some of our competitions, but we're catching up very rapidly.

Great. And then if I could ask one question on holiday. You guys provided a lot of color around what you're doing from an inventory and marketing standpoint. I wanted to ask how you're using technology differently this holiday season. Wesley S. McDonald: I mean, I think from a technology perspective, we're testing a few things mostly related to E-Commerce. We're fulfilling not only from our E-Commerce fulfillment centers, but we're sending ship-alone SKUs from our 7 retail DCs. We're also testing order online, ship from store. That's just a very small test if -- and we'll get a lot of learnings in that -- from that, and that'll be very beneficial for next holiday. We have electronic signs up in almost all of our stores now, so that should save us a lot of money in terms of our ad set quantities. But those are probably the main things.

Your next question comes from the line of Charles Grom with Deutsche Bank. Charles X. Grom - Deutsche Bank AG, Research Division: My first question is on the fourth quarter guidance. It looks like you tweaked it down a little bit from your former implied guidance that you guys gave out back in August. Just wondering if you could kind of walk us through what changed from your perspective.

Sure. I mean, I think, fundamentally, it's about sales. We pulled sales down a little bit from what we might have been thinking about for the fourth quarter, and there isn't anything really specific in there. And we definitely have been impacted in November by the hurricane on the east coast. That's certainly an impact. I think our expectation -- our hope is that we'll get at least some of those sales back, but it's definitely part of the process. And I think the other one is just overall, I'm trying to make sure we're taking a kind of conservatively rational view of the opportunity. We had a good third quarter, but it was essentially in the middle of what our expectation was. And so mainly, the difference in the fourth quarter is about sales. Wesley S. McDonald: Yes. I would say, Chuck, we basically -- the reason we guided November below the end of the range, we're just assuming we make our plan the rest of the way. So obviously, we didn't make our plan the first week because of the hurricane. If we get some of those sales back, that would be upside to what we just guided to. Charles X. Grom - Deutsche Bank AG, Research Division: Okay. And then just a follow-up to that. How are trends sort of outside the Northeast? Has there been any CNN effect or election effects for you guys?

Well, I mean, there's the seasonality in the business when you get down to that element of business by day or pre-election, postelection. We kind of looked back historically at past election years to sort of plan the days, so that's sort of built into our plan. I mean, typically, there is some impact pre-election and... Wesley S. McDonald: A little postelection.

A little postelection, and the business kind of accelerates. But that's sort of built into our planning process. Wesley S. McDonald: You can never plan Halloween or Election Day too well. Charles X. Grom - Deutsche Bank AG, Research Division: Fair enough. And then just the obvious concern continues to be kind of the inventory level. Can you maybe walk us through a little bit more detail in terms of the content by category? Where are you placing the biggest bets?

Sure. I mean, from an inventory perspective, I would say I'd kind of break it into 3 things as we go into holiday and then one additional thing as we transition from holiday out. On the 3 things going into holiday, first and foremost, was we've been working hard at managing inventory levels and service levels, are the percentage of times we're in stock for the customer, up, year-over-year. Because we know we disappointed a lot of customers last year in our ability to do that. So there's a general focus on ensuring that we're in stock by size and color across the portfolio of the store with particular emphasis around areas that are trending, categories that are doing particularly well. Second, we know last year that we were not well positioned for gifts, and we lost share to others when it came to the gift-giving categories. And so there's been a very big focus on creating a gift headquarter strategy for November and December for the customer for holiday. And you should be able to see that in our stores in both our in-aisle and in-department outposts and presentations. It's built around this marketing handle of dream for Christmas, and that's been a focus area as well. And then the third area, probably just as important as the gift, has been our great value program. And the great value program generally is about opening price point items throughout the store in every single category that are -- probably lean more towards basic, I would say. They're not all basic items, but they have a tendency to lean that way. So those are kind of the 3 things where we've focused inventory going into the holiday. And then the last thing, which is really important, is last year, with the results that we had, we did a very poor job of transitioning into new spring selling. And so in many parts of the country, as we moved into December, we didn't have new fresh receipts coming in to be prepared to service the customer in January and February and March, and that's been a major course correction for us. So those are kind of the 4 elements. Charles X. Grom - Deutsche Bank AG, Research Division: Okay, fair enough. And then my follow-up question is just -- in the past few months, there's been some positive developments in your business with traffic getting better and some better trends in the non-credit customer. When you looked ahead, how confident are you guys that those trends are going to continue?

Well, I mean, all the elements are in place. I mean, I think we've spent a lot of time studying what went wrong in the fourth quarter last year and continued into the spring, as you know. And a lot of it was about servicing the customer properly, being competitive and being a gift headquarters for holiday and -- with particular emphasis on these kind of narrow and deep really important items, we call them the great value items, they're really key items, and a constant flow of receipts. So I mean, I guess to the extent that you can be confident coming out of a quarter that had improved sales results, October was a really good month for us. We saw it building, so all very, very positive.

Your next question comes from the line of Lorraine Hutchinson with Bank of America. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: Just wanted to get a little bit more color on the remodeling program. I thought that you were going to expand that program pretty dramatically in 2014. Can you talk a little bit about how those remodels have trended recently? Wesley S. McDonald: Well, I think, actually, we've taken a step back when we've been testing some of these things in home and beauty. We remodeled 100 stores as recently as last year so -- or maybe 2 years ago, 2010. But that's the run rate we need to achieve -- basically, to achieve our goal of remodeling a store on average every 10 years. So the remodels continue to trend up low single digits. The reason we've cut back the remodels and tried to test some different things in terms of in store and home accessories and beauty is to try to raise that to a mid-single-digit comp, which is kind of the comp we would like to have in order to achieve a return as good as a new store, for example. So that's why we're testing the 2014 acceleration to 100, assume that we can make some progress in achieving that goal. Quite honestly, if we can only get to a low-single-digit remodel, we still will continue to remodel that 100 a year because we feel like that's something we have to do, from a strategic perspective, to continue to invest in our fleet and make our stores look better than the competition.

Your next question comes from the line of Erika Maschmeyer with Baird. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Can you -- I guess just a follow-up on Lorraine's question, talk a little bit about some of the early learnings and kind of how you're feeling about the tests that you're doing in home and beauty.

I mean, the short answer is no. We're planning to talk about that for sure. It's part of our plan to talk about it at our year-end call. Some of the categories that we're focused on, as you know, in those efforts are very intensive fourth quarter kinds of categories. So holiday, home, home accessories, beauty. And so to be fair, I think, to give us a complete and full read, we're planning on dealing with it in February. I mean, we feel good about some things and, as you can imagine, not good about other things. But we'll talk about it more in-depth on that call, Erika. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: That is fair enough. And then on that gross margin side, is kind of why shouldn't gross margin sequentially improve a little bit in Q4 versus Q3? I guess could you walk through the puts and takes for those margin -- merchandise margins? And how do you expect AUC to play out for you over the next few quarters?

Well, I mean, from a margin rate perspective, what's driving our margin rate is really kind of 2 big factors. Obviously, one is this very focus that we have on being value right. That's a critical element, and we want to be very competitive for the holiday season. The second thing is that some of the categories that we're looking to intensify in the holiday season are lower margin. And so categories like home, which is an integral part of our gift strategy; toys, which is an integral part of our gift strategy, are both lower margin in the overall store. And as you can imagine, our online business, which also carries a lower merchandise margin as well is growing, it had its biggest growth in the third quarter with a 50% increase, is growing a lot. And from a mix standpoint, that also impacts it. So I'd say the way I'd think about it is it's sort of mix, and that's mainly online. It's classifications that we're driving, which are categories like home and toys that are big parts of our gift strategy, and then it's an intense focus on making sure we have great value as witnessed by the great value item program.

Your next question comes from the line of Richard Jaffe with Stifel, Nicolaus. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: Just a follow up on the E-Commerce rapid growth. Historically, that's been not as robust a gross margin business as your regular businesses because of its emphasis on home. And are you seeing a rebalancing in your E-Commerce business and, as a result, some higher margins coming out of that business?

No. I mean, I still think that overall, the factors that drive the margin lower than the brick-and-mortar margin are still in place. I mean, we're still -- those categories are growing rapidly, and they're a headwind from strictly a margin perspective now. I think you know, Richard, that while merchandise margin is really important for us to manage, we're also really focused on our returns. And our return on investment in our online business is really, really healthy, and we see a bright future in that. So you don't want to get too focused on just the absolute merchandise margin rate. But I think, Wes, the factors are all still on in play. Wesley S. McDonald: Yes. I mean, shipping costs, obviously, are a big part of merchandise margins in E-Commerce. And that's something that continues to be very competitive in the fourth quarter, especially most people that have shipping with thresholds drop them to $50. We do the same for competitive reasons. So with E-Comm, actually, overachieving their plans. That's put a little pressure from a mix perspective on the fourth quarter.

Your next question comes from the line of Kimberly Greenberger with Morgan Stanley. Kimberly C. Greenberger - Morgan Stanley, Research Division: Wes, I'm wondering if you can talk about the inventory management. And is -- the 3% increase in inventory units relative to 2010, is that comp store inventory? Does that exclude E-Commerce? And how does that compare to your store volumes today versus 2010? Wesley S. McDonald: That's store only. So E-Comm, obviously, the growth over 2010 is a lot higher than that. And our store volumes since 2010 -- obviously, last year, we ran basically a flat comp. We're down 0.5% today, so pretty similar. I guess you can count new stores would be, well, not as much. From our perspective, this is the right thing to do for us. Last year, we only got -- cut units significantly. We're investing, as Kevin mentioned, in the 3 categories: gifts, great value and areas that are trending. So our exclusive brands, for example, year-to-date, are up 11%. That is mainly concentrated in our update in the contemporary businesses. So their inventory units relative to 2010 are up double digits in both men's and women's. Other areas, such as home decor, which aren't trending this year, are actually down double digits to 2010. So we've tried to invest in the areas that make sense. And it's not inconsistent, to be honest, what we've been telling everybody since February. This is the results of our strategy, and we hope our sales continue to improve. And if we're able to run the kind of comp that we've guided to, we'll have a good fourth quarter. We'll continue to invest in inventory as we move into the spring as well, because obviously, it's been well documented and we've talked about it quite a bit. We missed a lot of business this spring as we continued to chase inventory to catch up with our price reductions. Kimberly C. Greenberger - Morgan Stanley, Research Division: So as you will get like a normalized level of inventory, do you think that you do need to have higher inventories relative to your sales per store, sales per square foot going forward? Or do you think this is just sort of temporary? I'm just looking at the store sales being flat to down 0.5%. And since inventory's up 3%, it just -- there seems to be a little bit of mismatch. Wesley S. McDonald: I would tell you this is our strategy. I would expect dollars and units to grow faster than sales until we get to the fall of next year. And then we'll be normalized, and we'll start to focus on bringing our inventories growth less than sales. I'd -- we missed gross margin in the fourth quarter -- I actually mean the first quarter this year. Prior to that, we've grown gross margin or made our gross margins most of the time in the almost 10 years I've been here. In second quarter and this quarter, we also made our margin. So we're managing the business how we think it should be managed, but we need to get the stores in a better in-stock position.

Your next question comes from the line of Liz Dunn with Macquarie. Lizabeth Dunn - Macquarie Research: My question is on the juniors business. Can we just have an update on -- obviously, that's been an area where there's been a bit more of a content problem instead of a quantity problem. How are you feeling about that business? And when do you think we might see -- start to see some better merchandise?

I mean, I think our expectations for the fourth quarter in juniors are to continue to trend similarly to the way we've trended in the third quarter. So that's not good. It's far below the rest of women's, but it's kind of baked into our sales assumptions that we've given you for the fourth. So we're really kind of focused on transitioning into the first quarter of next year in a better place in juniors. But our assumption is, Liz, that the fourth quarter in juniors, while it might be modestly better, is not going to be a whole lot different than it's been. And that's a little bit less from a performance standpoint than the rest of women's. Women's has outperformed juniors consistently over the course of the year. Lizabeth Dunn - Macquarie Research: And it's mostly a tops problem, is that right?

Yes. It's definitely driven by tops. No question about it. I mean, in the third quarter, we made a big commitment, for instance, to colored bottoms. And colored bottoms were very successful and drove our overall bottom business to a better performance. But yes, it's definitely driven by our top business. Lizabeth Dunn - Macquarie Research: Okay. And then just one more, if I may. In terms of the buyback, should we think about that $3.5 billion as being somewhat linear over the next 3 years? And how should we think about that in terms of your preference for dividends versus buyback? Wesley S. McDonald: Well, I think from my perspective, that would be the best way to model it if you're looking out 3 years. How we actually do it will obviously depend on the stock price. In terms of dividends, assuming that you buy back that number of shares over the next 3 years, that would pretty much build in a double-digit dividend increase every year, holding the actual payout in dollars to be about $300 million. So that's how we're kind of modeling over the next 3 years.

Your next question comes from the line of Dan Binder with Jefferies. Daniel T. Binder - Jefferies & Company, Inc., Research Division: I had 2 questions. First, around the gross margin guidance. I think last year, [indiscernible] guidance you were kind of positioning yourself to be able to respond to competition, as needed, and it turned out a little bit better. I was just kind of curious, when you think about the promotional environment going into fourth quarter, what you're assuming and how much leeway you've given yourself as you drive the gross margins today.

Right. I mean, I think what you're just asking is without the rationale that, I think, behind the gross margin guidance, which really is about -- primarily about mix, and it's this dramatic increase in our expectation for our online sales. We just finished the third quarter when we were -- in which we were up 50%, which is the best performance we've had in a long time, and it does operate on lower merchandise margins. And then secondarily, the categories in which we're focused in both our gift and our great value programs have lower merchandise margins in them. So categories like home, which is a really big part of our gift strategy, and toys, which is a really big part of our gift strategy, have lower margins than the overall store. I think those are the 2 big things, Wes. Wesley S. McDonald: Yes, I mean, I'd just try to make it simple. If you assume we were to run 44 basis points down in the fourth quarter versus last year, the difference between that and our guidance, about 1/3 of it's gifts and about 2/3 of it's E-Comm. Daniel T. Binder - Jefferies & Company, Inc., Research Division: Right, okay. But from a promotional standpoint, what are you guys sort of planning for or what are you expecting out of the industry this coming fourth quarter? Wesley S. McDonald: Well, I don't know if it's more promotional. I think it's really, just as Kevin mentioned, the mix. I mean toys, fragrances and small electrics carry lower margins than our average, and we're investing a lot more inventory in those to drive traffic and, hopefully, other sales in the store. Daniel T. Binder - Jefferies & Company, Inc., Research Division: My second question was just around inventory levels. You've given us a lot of detail already. I'm just curious, at these levels, what would you assume? Sort of is markdowns sort of the normal course of markdowns in the business after the season get back to levels that we saw in 2010? Or do they end up being higher? And then if you could give us an update on sort of the inflation-deflation situation that we're looking at.

Well, I mean, we're coming -- we're planning to come out of the fourth quarter, I think, in a low double-digit range. So from a flow standpoint, that's being driven by a focus on transitioning into the spring season much more aggressively than last year. Because last year, we made a big tactical error in not doing that. So just strictly thinking about what's assumed in terms of how to move through inventories in the fourth quarter, we're kind of assuming it's going to be very promotional Christmas, similarly to last year, maybe not any more so, but probably certainly not any less. And the margin rates are slightly lower because of the mix of our business driven by our online, and our gifts and great value programs are driving that a little bit lower. So that the overall markdown mix, as it relates to our level inventory, is kind of the same. There's really no difference than last year. Wesley S. McDonald: Yes. I mean it's pretty simple, Dan. If we run a 3 to 4 comp, we're going to make the earnings we said. If we run a flat comp, we'll have margin issues like any other fourth quarter. It's not really related to the investment in the inventory. If in the fourth quarter, you don't run the comp you think, you've got to get rid of the units. Daniel T. Binder - Jefferies & Company, Inc., Research Division: Yes, okay. I guess what I was getting at was really just the level of markdowns that you would typically see in the business. So I'm assuming last year, it was very low. This year, it goes up a little bit, back to sort of normal. But maybe if we could just move on to the inflation -- or excuse me, sorry, the deflation. Wesley S. McDonald: I mean, I think the short answer really is we're focusing on the out-the-door retails on like items being lower than last year. So that's going to really involve more promotional markdowns than clearance markdowns. If our strategy works, we should have similar clearance markdowns in terms of percentage of inventory leftover in January as we had last year.

Your next question comes from the line of Jessica Schoen with Barclays. Jessica Schoen - Barclays Capital, Research Division: I was wondering if you could talk a little bit more about the investments in technology. And what kind of impact you've seen -- in addition to the strong performance in the E-Commerce business, what impacts have you seen that you feel are a direct result of those investments? Wesley S. McDonald: Well, I mean, I think the biggest impact this year has been the rollout of electronic signs in our stores. That's allowed us to reduce our ad set payroll by about 90% in the stores that have them. I think we're down to about maybe 100 stores left that we'll do in January. That's probably the biggest thing that I can talk to you about from an SG&A perspective. We made an awful lot of investments in E-Commerce in terms of giving the ability for people to develop gifts, the guided navigation I talked about earlier, product reviews online, all that's really contributed to our growth in E-Commerce being so robust. We continue to work on longer-term projects involving the merchants in the stores. We have a pilot on our system we call merchandise locator system, which allows us to find product more easily in the back room, which would cut down on replenishing the floor. That's working out very well in the pilot stores so far, and we'll continue to roll that out. And we're working on various systems to allow our merchants to be more effective in terms of planning their assortments regionally. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Okay, great. And then I know you've answered a lot of questions on the gross margin. But I was wondering if you could tell us about how the mix between private exclusive and national brands impacted the beat in the quarter and your expectations for the fourth quarter.

I think the mix on private exclusive is about 53%. It's pretty much what we kind of expected. So that really didn't have a meaningful impact on how we came out in the third quarter. And it's sort of thought -- the way we're thinking about the fourth quarter is that, that mix will probably hold very similarly to what it's been trending at, which is a little bit higher than last year. Not a lot higher, but a little bit higher than last year. Wesley S. McDonald: I mean, the biggest improvement in terms of comps was actually with national brands. They were still negative, but negative low single digits versus negative mid-single digits. So that helped us as well. Private and exclusive, as Kevin said, were pretty much the same.

Your next question comes from the line of Greg Hessler with Bank of America Merrill Lynch. Gregory Hessler - BofA Merrill Lynch, Research Division: So my question is just a follow-up on the buyback piece. How should we be thinking about that in light of your commitment to the high BBB credit rating and kind of your leverage target? Is that something where you could increase the pace by funding with incremental debt?

Are you asking about the pace of the buyback? Wesley S. McDonald: I think -- you were cutting in and out, but I think I got the gist of it. We're going to continue to manage our buyback with a debt-to-EBITDA target of 2 to 2.25. It's been communicated to the rating agencies. They're comfortable with that. That would allow us to take modest leverage on every year of roughly $300 million, whether we do that or not is really up to the interest rate environment. In terms of the pace of the buyback, as I mentioned earlier, the best way to model is probably equally. But if stock seems cheap, we'll buy more quicker. If it's expensive, we'll buy less like all you guys out there.

Your next question comes from the line of Matthew Boss with JPMorgan. Matthew R. Boss - JP Morgan Chase & Co, Research Division: So you've spoken about 5-phase SG&A deep dive longer term. As we look out, how should we think about the fixed cost leverage points and efficiency opportunities going forward in the model on the SG&A side? Wesley S. McDonald: Matt, I think the goal for us has always been, from a long-term perspective, to leverage at a 2% comp. We're obviously going to do better than that this year for 3 main reasons. Stores have done a phenomenal job in terms of managing the payroll. We've also gotten the benefit of the electronic signs I mentioned earlier. Incentive comp, obviously, is a lot less than last year, given our performance thus far. And we continue -- although the benefits in credit weren't great in the third quarter, we did get strong performance in the spring season. Those are something we expect to continue to achieve going forward. The 5-phase thing that we're working on right now is really to drive incremental cost out. The goal is to allow us to drive enough savings to maintain that 2% comp leverage point going forward. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Okay, great. And then on the gross margin front, I think you did a really good job of breaking out the different buckets for 4Q. As we think to next year and beyond, do you -- is there opportunity on the gross margin front? Or is this is a line that we should be modeling flattish going forward? Or just kind of any color around longer-term gross margin. Wesley S. McDonald: Well, I think there's opportunity going forward. I would plan it modestly up 10 or 20 basis points a year. We've -- that's really with the assumption that costs continue to decline. We've seen that obviously in the fall. We've mentioned that. All-in, our cost decline is probably around mid-single digit depending on the category. We're seeing cost reductions so far on some of the spring receipts we've placed for next year. Assuming that continues, I think we can have modest gross margin improvement. If we can out-comp 2% comp, obviously that could provide more opportunity than the 10 to 20 basis points I talked about.

Your next question comes from the line of Patrick McKeever with MKM Partners. Patrick McKeever - MKM Partners LLC, Research Division: Could you talk about the impact of weather on your business in last year's fourth quarter, just given the fact that it was so warm across much of your geographic footprint? And just what kind of weather outlook do you have baked into or assumed with your 3% to 4% same-store sales guidance for the fourth quarter of this year? Wesley S. McDonald: Well, our -- we have a couple weather services we use, and they're basically saying, starting next week, through the balance of the quarter, it should be colder than last year. So that's certainly built into our thinking. Obviously, the weather affected the results early on in November with the hurricane and now you guys, I guess, East Coast are getting a snowstorm today or yesterday. So we think that's going to be good for business. But outerwear as a category has declined in importance the last few years as more people have been layering. But colder, for our business, is always better this time of the year. Patrick McKeever - MKM Partners LLC, Research Division: And then just on -- maybe you could give us a little bit more color around the impact of the hurricane, how many stores you had closed, that sort of thing. Wesley S. McDonald: Well, I mean, with the peak, the first day, we had about 200 stores closed and then it went down to 60, down to 30s for balance of the week. And then by the following Monday, we had every store opened. For the most part, we had some generators and a lot of stores that ran out of fuel, but you're talking about double digits by the weekend. We do have one store that's going to be closed for a significant amount of time in Caesar's Bay in Brooklyn. That will be closed through at least the fourth quarter.

I mean, the hurricane impact really hit a significant number of stores, as it did, I think, for most national retailers across both the Mid-Atlantic and, of course, particularly the Northeast. And that hangover lasted more than just a day or 2. So it dramatically impacted the first week of November for sure.

Your next question comes from the line of Dana Telsey with Telsey Advisory Group. Dana Lauren Telsey - Telsey Advisory Group LLC: I was wondering if you'd comment -- as you think about the fourth quarter and promotions and clearance and the balance between the 2, is there a difference between the margin on clearance and the margin on promotion and how that trends during the year?

Sure. I mean, our merchandise margins, because of the type of selling proposition we have, which is highly promotional, we were very event-driven. Our merchandise margin results are primarily driven by our promotional markdowns. And of course, the fourth quarter, of all the quarters, the impact of transitioning out of holiday goods into spring is proportionally a little bit higher than it is in any other particular quarter. But I would say -- and Wes should jump in here, but I think, for sure, the promotional markdown rate is what drives our merchandise margins up or down. Wesley S. McDonald: Yes.

And then the mix of our business, as we've talked about, is a really important factor on that as well. So I don't want to make it sound like clearance and how we clear goods is not impactful to our performance of margin. It is. But it's not the most important factor. Wesley S. McDonald: Yes. I mean, most quarters throughout a number of years, we've ended the quarters with clearance less than last year. So as Kevin said, it's really about the promotional markdowns.

And we do have time for one final question, which comes from the line of David Glick with Buckingham Research. David J. Glick - The Buckingham Research Group Incorporated: Just a couple quick questions. Wes, could you just clarify your November guidance? I think you said below 3% to 4%. But I was just wondering, are you expecting a positive... Wesley S. McDonald: Positive, but below 3% to 4%. David J. Glick - The Buckingham Research Group Incorporated: And then more importantly, in terms of the non-credit sales and traffic, obviously, that helped you improve your trend in Q3. I'm just wondering how you'd strategize the fourth quarter on that front and how you've geared your marketing spend. You mentioned digital and broadcast as being increased. How much are you increasing your overall spend? And how disproportionate is that increase in digital and broadcast? And obviously, I think it's geared towards driving the non-credit customer and traffic overall. But if you could just give us some color on that, I'd appreciate it.

Sure. I mean, I think Wes -- this is Kevin, David. I think Wes guided to a 7% to 8% total sales increase for the fourth quarter with the impact of the additional week on our accounting calendar. In the context of a 7% to 8% sales increase, we do expect marketing to leverage. So it's less than an increase of 7%. But that's a significant amount of dollars because the marketing dollars in the fourth quarter are very, very significant. The areas of digital, particularly, are dramatically higher than that. I don't even actually have a specific number, but it's double, probably, the rate of our overall marketing increase. So if sales are up 7% to 8% and marketing is up, but not up 7% to 8%, let's just say 5% or so, then digital, particularly, is well more than double that rate of increase. Broadcast is also higher, but not as increased as digital. So hopefully, that helps you. Wesley S. McDonald: Thanks, everybody.

Thank you for your participation. This does conclude today's conference call. You may now disconnect.