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

Neely J.N. Tamminga - Piper Jaffray Companies, Research Division Robert Scott Drbul - Nomura Securities Co. Ltd., Research Division Robert Scott Drbul - Barclays Capital, Research Division Oliver Chen - Citigroup Inc, Research Division Matthew R. Boss - JP Morgan Chase & Co, Research Division Paul Trussell - Deutsche Bank AG, Research Division Heather N. Balsky - BofA Merrill Lynch, Research Division Heather N. Balsky - Morgan Stanley, Research Division Michael Binetti - UBS Investment Bank, Research Division Charles X. Grom - Sterne Agee & Leach Inc., Research Division Lizabeth Dunn - Macquarie Research Daniel T. Binder - Jefferies LLC, Research Division Mark R. Altschwager - Robert W. Baird & Co. Incorporated, Research Division Dana Lauren Telsey - Telsey Advisory Group LLC

Good morning. My name is Ginger, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kohl's First Quarter 2013 Earnings Release Conference. [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 statements 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 So if you are listening after February 27, 2014, it is possible that the information discussed is no longer current. At this time, I would like to turn the call over to Wes McDonald. Wesley S. McDonald: Thank you. With me today is Kevin Mansell, Chairman, CEO and President. I'll walk through our P&L and Kevin will talk a little bit about our merchandising and marketing initiatives, and then I'll conclude the call with our guidance for our fiscal 2014. Comp sales for the quarter decreased 2%. As a reminder, our actual comps and our guidance excluded the 53rd week in fiscal 2012. Some of our competitors, especially in specialty retail, report on the shifted calendar, which excludes the first week of the 2012 fiscal quarter. On this shifted basis, our sales -- our comp sales decreased 0.4% for the quarter. Our average transaction value increased 2.8%, the largest increase in more than 2 years. AUR was especially strong, up 3.6%, partially due to significant reductions in our January clearance sales. Transactions per store were slightly negative during the holiday season, but fell off significantly in January. For the quarter, transactions were down 4.8%. Kevin will provide more details on our sales in his prepared remarks. Our gross margin rate for the quarter increased 71 basis points, consistent with the low end of our guidance. We are especially pleased with this performance given the shipping challenges that we experienced in the quarter in our E-Commerce business. A shortened holiday shopping season, inclement weather and our own operational challenges in our fulfillment centers all contributed to higher shipping costs as we use faster, more expensive shipping methods to fulfill our customers orders. We also saw a higher percentage of our online sales during the highly promotional Thanksgiving and Cyber weeks. Our SG&A expenses were 2% higher than last year, which was more than our expectations of a 75 to 125 basis point increase. Higher fulfillment expenses for our online business were the primary reason for our actual costs exceeding our original guidance. Marketing expense also exceeded our original plans. Depreciation expense increased 5% over the fourth quarter of 2012 to $224 million. The increase is primarily due to depreciation at our E-Commerce fulfillment centers and IT amortization. Net interest expense increased $2 million to $87 million for the quarter. The increase is primarily due to the September 2013 debt issuance. Our income tax rate was 36% for the quarter, a full percentage point lower than our expectation of 37%. The change was primarily due to favorable state audit tax resolutions. Net income was $334 million for the current year quarter and $889 million for the year. Diluted earnings per share was $1.56 for the quarter, $0.03 higher than the guidance we provided earlier this month, as final gross margin was stronger than expected. We opened 12 new stores this year, bringing our current store count to 1,158, our gross square footage to 100.3 million square feet and our selling square footage to 83.7 million square feet. We expect to open 5 new stores this spring, including one relocated store. We also plan to permanently close 2 stores and temporarily close one store for a complete rebuild. We expect to open another 4 stores in the fall, including the rebuilt store. So for 2014, we'll have a net increase of 5 stores. We remodeled 30 stores in 2013 and expect to remodel approximately 35 stores in 2014. We ended the quarter with $971 million of cash and cash equivalents, an increase of more than $400 million over a year in 2012. We generated $1.1 billion of free cash flow in 2013, almost 3x the level generated in 2012. Our capital expenditures were $643 million for 2013, $142 million lower than 2012. The decrease reflects multiple changes in our capital expenditures, including fewer remodels in new stores and lower E-Commerce fulfillment center spending, partially offset by higher IT spending. We expect capital expenditures in 2014 to be approximately $725 million. Our inventory -- our January inventory balance was $3.9 billion, a 3% increase over January 2013. On a per-store basis, inventory at cost increased 1%. The increase is primarily due to our renewed focus on national brands, which have a higher cost than our private and exclusive brands. Kevin will talk more about inventory management in a few minutes. AP as a percent of inventory was 35.2%, 30 basis points higher than last year. The increase reflects lower markdowns and better payment terms, partially offset by slower inventory turn. Weighted average diluted shares were $215 million for the quarter. We repurchased 4.6 million shares during the quarter and 15.4 million shares for the year. To reduce some confusion, we are now separately presenting our share repurchases and shares withheld on restricted stock vesting separately in our statement of cash flow. On February 26, our board declared a quarterly cash dividend of $0.39 per share, an increase of 11% over our previous dividend. The dividend is payable March 26 to shareholders of record at the close of business on March 12. I'll now turn over to Kevin who will provide additional insights on our results.

Thanks, Wes. As Wes mentioned, our fourth quarter comps were down 2% on an unshifted basis and down 0.4% on a shifted basis. We're very pleased with the results in the November and December holiday season. By extending our hours on Thanksgiving, we were able to be the first stop for our customers and she responded well, driving significantly higher sales on the Black Friday weekend. We set record levels of both transactions and sales, both in stores and online, on individual days several times over the holiday period. Sales for the combined November and December period were well above plan. This momentum did not carry into January as lower levels of clearance inventory resulted in sales which were significantly lower than our expectations. Earlier this year, we completed our E-Commerce re-platform. The re-platform provided the backbone to support current and future omni-channel initiatives. From a customer-facing perspective, the re-platform provided an improved checkout experience and effectively handled the incremental holiday traffic. E-Commerce sales increased 16% for the quarter. The customer responded very well to our offerings, and we posted strong results during 2 of the most important weeks of the year at Thanksgiving. For the year, E-Commerce sales totaled $1.7 billion. Our E-Commerce sales have now almost doubled since 2011 and have increased at a compounded annual growth rate of almost 40% over the last 5 years. On a regional basis, the Southeast, West and South Central regions reported the strongest counts for the quarter, while the more weather-sensitive regions, the Northeast, the Mid-Atlantic and Midwest, underperformed the company average. Looking at our results by line of business, apparel categories outperformed non-apparel categories. Men's reported the highest comp on strength and outerwear and active. Women's also outperformed the company on strong outerwear and active sales as well. Children's apparel was consistent with the company average. Toys was slightly positive after posting a 25% increase in the fourth quarter of the year before. In home business, the customer responded well to our new premium electronics offerings, which included Beats headphones and speakers and LG televisions. In accessories, strong results in our bath and beauty categories as a result of our beauty remodel program and the new brand launches were offset by lower jewelry sales. And finally, in footwear, footwear saw strength in both juniors and active. Our renewed emphasis on national brands continues to generate positive results. In recent years, we introduced many successful new private and exclusive brands, Jennifer Lopez, Mark Anthony and Rock & Republic as examples. We continue to aggressively support these brands, but believe it's important to rebalance our product offering between our quality Only-at-Kohl's Brands and our iconic national brands to drive maximum customer traffic and to maximize sales. During the fall season, national brands consistently outperformed the company total. On the inventory side, we're very pleased with our efforts to bring down our inventory levels in 2013. We decreased our fall receipts significantly in order to ensure we ended the season clean. On a unit basis, our inventory per store, excluding E-Commerce, is down 4%, with our clearance units per store down 15% from last year. National brands are flat on a unit-per-store basis, while private brands are down 7% and exclusive brands are down 10%. Moving over to marketing. During the holiday season, we focused on delivering strong value, while finding new, exciting and more disruptive ways to reach our customers in the channels they use most. From powerful broadcast integrations to exciting new product offerings in store and online, our efforts resonated. This spring, we're building on that positive momentum with Wink of Pink, an omni-channel campaign that leverages the trend color of the season to tell a compelling story from a board assortment of merchandise to meaningful, new national initiatives that build on our commitment to women's health. We expanded our loyalty program to California and the Pittsburgh market in the third quarter of 2013 and plan to roll to additional markets. After that spring rollout, the program will be available in approximately 30% of our stores. We continue to be very pleased with the sales lifts that we are seeing in our current loyalty markets, and we now expect to have loyalty rolled out to all markets in the company by the end of the fiscal year. In closing, as we look forward to 2014, we do so with a renewed focus on connecting with our customers and providing their families with the amazing product, easy experience and incredible savings that they expect from Kohl's. This year, we'll add several new brands to our portfolio. In the spring, we'll combine the magic of Disney, one of the most recognizable brands in the world, with our highly successful Jumping Beans brand. In only 5 years, the Jumping Beans brand has become our fourth largest brand with annual sales in excess of $600 million. We'll also launch the next DesigNation designer, Peter Som. We'll roll out 2 new brands in the fall, IZOD and Juicy Couture. The IZOD rollout will be one of the largest menswear rollouts in our history. The Juicy Couture brand will be part of our efforts to capture more of the athleisure market. We also will continue to strengthen our current mega brands. In 2013, Croft & Barrow, SONOMA and Apt. 9 reported a combined $3.7 billion in sales, almost 3/4 of all Kohl's consumers purchase one or more of these brands last year. We continue to see good results from our national brands as investments in inventory and in-store presentation and marketing led to their outperformance in the fall season. Our renovated beauty department brings an exciting new shopping environment to customers in approximately 280 stores. Early sales results continue to be very promising, with increases in beauty sales of 20% to 30%, and we expect to roll out an additional 200-plus stores this year. We continue to experiment with different in-store environments for beauty in order to maximize our return on investment. With these renovations, international beauty and fragrance brands that we launched this September, we believe Kohl's is becoming top-of-mind might as our customer chooses where to shop for their beauty products. We're making significant investments to create an exciting omni-channel experience for the customer, whether she's shopping in one of our stores, from her phone or from her laptop, we're creating a consistent experience to ensure she can connect with us wherever and however she wishes. And with that, I'll turn it back to Wes to provide our annual guidance. Wesley S. McDonald: Thanks, Kevin. For the fiscal year, our guidance is as follows: Comparable sales, flat to up 2%; total sales, up 50 basis points to 2.5%; gross margin improvement of 10 to 30 basis points; SG&A expense dollars increase 1.5% to 2.5%; depreciation expense of $950 million; interest expense of $342 million; tax rate of 38%; and share repurchases of $1 billion and estimated average diluted shares of 204 million shares. This results in earnings per diluted share of $4.05 to $4.45 for fiscal 2014. And with that, we'll be happy to take your questions at this time.

[Operator Instructions] Your first question comes from Neely Tamminga from Piper Jaffray. Neely J.N. Tamminga - Piper Jaffray Companies, Research Division: Obviously, November, December, I'd love to talk a little bit more about that. In terms of the loyalty program and some of the initiatives you said, could you give us a little bit more color as to -- maybe just isolating November, December, how that new loyalty program performed relative to balance of chain or some sort of control group? And just one other big picture question for you, Kevin, if you will. On mobile, for 2014, I would imagine mobile continues to be the significant source of additional growth for your E-Commerce business. Are there any sort of key initiatives we should be looking for in '14 as it relates to mobile? Wesley S. McDonald: I'll take the loyalty one, and Kevin can take the mobile one. Loyalty, we've just been seeing relatively consistent results. I'd say the lifts, depending on market, have ranged from 1.5% roughly on the low end to 3% on the higher end. Interestingly, our biggest lift has come in Pittsburgh, which is our highest credit penetration market in the tests so far, so that's very encouraging. In some of the markets that we're rolling out in the spring, we're going to roll it out to additional high-credit penetration markets to see if we can replicate that lift. But we're very encouraged with the loyalty program thus far. We're making some tweaks to it in terms of making it more than just about encouraging transactions at Kohl's to make a more emotional connection. And Michelle has been working on that quite feverishly over the last few months, and that'll be something that will be integrated in the loyalty program as we roll it out by the end of the year.

Neely, on the mobile side, the largest percentage of our total investments in CapEx for this year are in technology. And within the technology investment, the largest percent by far is in omni-channel and personalization initiatives that we're launching this year. There's a whole bunch of mobile-enabled customer experiences that we plan to begin to roll out. They include things like the next chapter of loyalty, an effort to create a new tablet-centric site, enhancing our mobile wallet experience and then developing and launching a whole series of in-store experiences around location-based marketing, personalized offers and more product information. So we're highly focused on it. Obviously, mobile is driving visits and it's important that we have best-in-class mobile experience.

Your next question comes from Bob Drbul from Nomura. Robert Scott Drbul - Nomura Securities Co. Ltd., Research Division: I guess, the first question is, on the mix versus the gross margin, can you just give us updated thoughts around how you see this playing throughout 2014 around some of the mix shift with the national brands and gross margin implications -- the current thinking on that? Wesley S. McDonald: Sure. First of all, national brands increased in penetration in the fall season, both in the third quarter and the fourth quarter. So we're very happy to see that take hold. I reran the numbers yesterday, so it's a good question. If 100 basis points goes up in national brands in terms of penetration, if it comes out entirely of our private brands, which we would not expect, we would expect it to be more likely from the exclusive brands, it would be 7 basis points of headwind. If it came out of entirely of our exclusive brands, it would be 4 basis points of headwind. The shifts were not going to be dramatic on an annual basis from our penetration in national brands. We're certainly going to pick up quite a bit in 2014 in the back half when we roll out IZOD. But I don't think there's going to be any gross margin pressure at all from any shift in terms of moving more to national brands. It'll be offset by the fact that we're going to try to improve our gross margin through inventory management in all 3 types of our brands. Robert Scott Drbul - Barclays Capital, Research Division: Got it. And on the fall brands, the Juicy line, is that a line that the men's piece will be a big portion of? And Wes, would you be expecting to use your employee discount on a lot of the Juicy products? Wesley S. McDonald: No, I think it's pretty much just going to be on the women's side of the business. But it is athleisure, so who knows.

Your next question comes from Oliver Chen from Citigroup. Oliver Chen - Citigroup Inc, Research Division: Regarding your gross margin outlook, what are the main drivers for the nice look forward to the upside there? And also, as we look at the comp going forward and you engage in the national brand and beauty side, what are the main enthusiastic drivers in terms of what will support the comp in terms of unit versus transaction and traffic?

This is Kevin, Oliver. On the margin, I think the way you want to think about the margin is, as Wes said, the move to more aggressively support our national brands is really sort of neutral. I don't think we expect really any significant change in our margin performance because of that. We're working, as you can tell, really hard on managing our inventories more effectively. So I think the tailwind that we see on margin would be the continued execution of our inventory management strategies, which would lead to improved sell-through, lower clearance levels and therefore, better merchandise margins. The headwind that, of course, we're facing is the impact of the growth of online because our online business does operate at lower merchandise margins, primarily due to merchandise mix, more than anything else. So the improvement in our merchandise margins and brick-and-mortar is obviously more substantial than the overall improvement we're guiding to because of the headwind from the other side. On the comp performance, there's a series of initiatives that we think we're really -- have been talking about probably now for the last 2 quarters that we think are going to drive sales. National brands is obviously one of them. Our recommitment to that is important to get the customer more engaged. Our loyalty program is working. It's being expanded, and we fully expect to have it completely rolled out by the end of the year, but more importantly, a more comprehensive program that would enable us to engage on more things other than just a better transaction for the customer -- a lower-price transaction. Beauty is working, as we said. Comp increases in beauty in the beauty stores compared to the non-beauty stores are anywhere between 20% and 30%. New brands. We've been, in the last couple of years, efficient on new brand introductions. You heard about a whole bunch of new brand introductions beginning this spring and then more aggressively in the fall. All of those things, I think, are really positive from the sales side. I don't know if I missed anything, Wes. Wesley S. McDonald: Yes, I mean, I think the biggest thing that's going to drive comp, we have to get transactions per store moving in a better direction. The average transaction value that was up this quarter, we fully expected given our performance last year, especially on clearance in January. So it was no -- we knew AUR was going to be up pretty significantly this quarter, but that's not going to be an ongoing thing. And for -- in order for us to drive comps better than what we've been running the last few years, we've got to get transactions per store, more visits per store moving in the right direction.

Your next question is from Matthew Boss from JPMorgan. Matthew R. Boss - JP Morgan Chase & Co, Research Division: [indiscernible] comp at the higher end of the range for this year, what would be the underlying traffic and ticket components as we think about it? Should we think about the year as second-half loaded? And any comments on February so far? Wesley S. McDonald: Yes. I mean, I think we're obviously thinking that comp's going to come mostly from traffic. I can't tell you if it's going to be 1 and 1 or traffic's up 2%, ticket's flat. I'm hoping that we get a slight ticket benefit just from better management of our inventory. So AUR's going to be up slightly, not to the extent that it was in the third quarter. Definitely, with the new brands coming in the back half with IZOD and Juicy, we would expect fall to be a little bit better than spring. And in terms of February, our business hasn't been any different than everybody else that's reported already. It was pretty slow in the beginning of February and it's picked up recently. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Okay, great. And then on the marketing front, can you just -- can you talk to some of the things that Michelle is working on and what we should look for as the year progresses on that front?

Yes. I mean, we test on a few of them frankly during the course of the call. If I was prioritizing them, I would say #1 priority that Michelle has been focused on is to evaluate our current loyalty program and create a more improved platform to go forward with. And so I think she's happy about the fact that she has something to work with, but she also knows that it could -- it needs to be enhanced substantially for it to be most effective. So we're getting lifts. So that's really encouraging, just the fact that we're getting lifts. We're definitely highly focused on identifying new customers. So there's a whole series of initiatives that Michelle is focused on, from the way we deliver our marketing, literally in our print and in our broadcast to the loyalty initiatives and other initiatives that she's working on, and it's highly targeted towards expanding our reach. So as I said, our #1 priority is to identify ways for us to broaden the reach, to improve transactions. Loyalty is probably, right now, the #1 way we're going to get there, but there are a whole series of other ideas that she's working on. And we've had some success; she had some great success in a few instances in the fourth quarter, particularly around the Thanksgiving Day period and we benefited greatly from it. As you saw, our November, December sales were almost up 1% comp so we had some great success.

Your next question is from Paul Trussell with Deutsche Bank. Paul Trussell - Deutsche Bank AG, Research Division: Wes, if you can just go back and talk about some of the hurdles in the fourth quarter with shipping and just maybe kind of outline to us how that -- you plan to improve upon that? For this upcoming year, any investments that need to be made on the shipping side? Wesley S. McDonald: Sure. Well, I think the issue, it really comes in to 2 different buckets. I guess, the first thing I'd say is our peak, I think, is a little bit different than other retailers. The week of Thanksgiving, we get 10x our average volume. So that creates a pretty big spike, and we planned for that backlog. We just didn't execute in all of our distribution centers. We did a really good job in one of them. On the West Coast, we did -- we were affected by weather in our Dallas DC as other people were in that area. But we have to solve the throughput problem. So in order to that, a couple of different things we're doing. We're taking our ship from store -- number of stores up to at least 500 for this year, that will help significantly. We're also moving more units to our regional distribution centers. That's our brick-and-mortar. They're going to handle the more bulky stuff that has to do ship alone anyway. So those are 2 things we're focusing on. We're also looking at a bulk, another bulk distribution center, whether we run it temporarily or we use a third-party service provider to do it. So again, alleviate that peak demand. We're also really working on practicing peak everyday in the off season where we're trying to drive as many units as we can on a daily basis out and getting as many units out in one day as we possibly can. The shipping costs, that was really -- so that was really all about expense. The shipping costs really just occurred as we had to use more expensive units or methods of shipping with FedEx and UPS as we got closer to Christmas. I don't think we were alone at that. I think we are all going to have to, in retail, rethink the cutoff dates because there's only so much capacity in the pipeline that FedEx and UPS can provide. And I think everybody read about some of the issues they have on the shipping side with just meeting the demand that's out there. So we all have to be -- in a business -- more realistic as to what we can get delivered those last few days before Christmas. Paul Trussell - Deutsche Bank AG, Research Division: That's helpful. And then just on the balance sheet. I know this past fall, you went to the markets and got some debt. Is there any expectation to lever up this year in order to complete the $1 billion in buyback? Wesley S. McDonald: No. I mean, the function of really completing the $1 billion in buyback this year, we were light. I have to put in a 10b5-1 plan the third week of November, and it just runs automatically. And the way that we built the grid, it wasn't able to complete what we thought given the movement of the stock price. No, I don't expect to go to the markets. We ended the year with almost $1 billion in cash. We're going to generate another $1 billion in free cash flow next year, I believe, as well. So I think we'll use the free cash flow to buy back the shares and then take the cash balance down a little bit towards the end of the year. We don't need to necessarily have $1 billion at the end of the year. I think we've been targeting somewhere around $500 million or $600 million. So no need to go to the markets in 2014.

Your next question comes from Lorraine Hutchinson from Bank of America. Heather N. Balsky - BofA Merrill Lynch, Research Division: It's Heather Balsky on for Lorraine. I was hoping you could just talk about your outlook on inventory over the course of the year and also for the long term. In addition, address some of your plans to better manage inventory during the year. Wesley S. McDonald: Yes. I mean, I think our goal, really, over the next 3 years, we've been pretty consistent with this, is to try to take inventory down roughly 5%, mid-single digits on an annual basis. So we're a little high now due to the mix of the business. We'll work through that, and we'll be more aggressive as we move through the year. I would expect, at the end of the year, if we're talking a year from now, we should be -- our inventory should be down somewhere, x E-Comm, mid-single digits. Heather N. Balsky - Morgan Stanley, Research Division: All right. And can you also just talk about your strategies in terms of pickup from store and how you're thinking about that for this year? Wesley S. McDonald: Sure. We're -- from ship from store I mentioned earlier, we're doing about 500 stores. Pick up from store, we're doing tests in 2 significant markets. What we would expect to do is read those tests, and we'll have the ability to do it in more markets, just this question of reading the test. One of the things we want to make share we can do is deliver, obviously, on the promise to the customer on the pickup and make sure that they can identify -- our store associates can identify the items in the store and pick them quickly. And we just have to figure out, as we test that, whether that's 1 hour, that's 4 hours, whatever the right level is, we want to make sure we have that figured out before we roll it out to more than just those few markets.

Your next question is from Michael Binetti from UBS. Michael Binetti - UBS Investment Bank, Research Division: If you -- can we talk a little bit about the E-Comm? I think you said 16% growth in the quarter. Was that right, Wes? Wesley S. McDonald: Yes. Michael Binetti - UBS Investment Bank, Research Division: Okay. And then so obviously, there was some fulfillment issues in those. Just want to think about how that trend should stretch into early 2014, both on the top line -- is that where -- where you think the throughput issues are contained in the quarter? And just due to capacity or should we think about a more muted growth rate than we saw in the early part of last year? Wesley S. McDonald: No, I think the throughput issues are really a 2-week issue. So we won't have any throughput issues, for sure. I think we need to regain some trust from the customer and we're working on that. We disappointed some people and we've tried to make them whole the best that we can. But we won't be limited in terms of throughput any time in the first 3 quarters. It's really about getting them to the site. Kevin talked about mobile. One of the things that we worked on last year, as you guys all know, was our re-platform. We did not put a lot of effort into enhancements on our tablet app and our smartphone apps because we were focused on doing the re-platform. You'll see a lot more change on both tablet and smartphone this year, which is going to help our conversion rate. Desktops have a better -- higher conversion rate than tablets, which have a higher conversion rate than smartphones. With a lot of the traffic moving to mobile, we have to develop a much better app for both tablet and smartphones in order to drive the conversion rate. Michael Binetti - UBS Investment Bank, Research Division: Okay. And then I guess, just bigger picture and longer term, as you think about so much of the world shifting to E-Commerce and online and certainly, we get a lot of questions about whether the consumer had a tipping point with how they are going to conduct their holiday shopping going forward. When you guys think about the store portfolio at 1,100 stores, is that still the right number of stores for you guys long term? Wesley S. McDonald: Yes. I mean, I -- we talked about -- we're closing a couple of stores whose leases came up. I think you'll see that more in the future. We have a watchlist of stores that are negative cash flow; there are about 5 to 10 that we look at on an annual basis. A lot of those have improved over the last year, so -- and it's not significantly cash flow negative. What I think we need to do a better job of is utilizing those stores as multipurpose assets, if you will. Ship from store is certainly going to be used in more and more stores. I'm not sure if it needs to be in every store. There's some very high-volume stores that we have where they're probably busy enough servicing the customer in those stores to worry about shipping from the store. But at some point, buy online, pick up in store is going to be everywhere. And that's going to be, I think, a big help because it drives traffic to the store. And as I've read through some of the notes from our other competitors, they're seeing store visits and store shopping from those pickups as well. So I think we just have to do a better job of making our stores multipurpose. Michael Binetti - UBS Investment Bank, Research Division: And finally, as you think about the CapEx for the year, is there -- and maybe some of the planned spending in stores and the investment that you guys do in the stores? Is that -- can you -- is that a composition of what you think you'll be spending on this year in the stores? How is it different from some prior years or what are the priorities in store here? Wesley S. McDonald: Well, the majority really is -- or not the majority, but we're spending about $275 million in IT. That's actually a little bit less than this year, but we don't have the re-platform. I think a lot of what you'll see in store is more about merchandise presentation. So obviously, with the IZOD and Juicy rollouts, you're going to have some pretty impactful strike points in the stores as well. We've put in the infrastructure to do ship from store and to buy online, pick up in store in those couple of markets I talked about. We're also doing RFID and in certain merchandise categories in most of our stores now. Those are the -- and then obviously, beauty, we're rolling out to over 200 stores. I think it's 214. We are testing in beauty, I think we mentioned it in the script, a sort of in-between concept. We have a full shop and then a relatively inexpensive retrofit. What we've seen so far is in our high-volume stores, the full shops are doing very well. In our lower-volume stores, what we need to do is put more of those less expensive retrofits. What we're trying to figure out from an investment perspective is, in the middle-volume stores, what's the best way to treat beauty. So we have developed a prototype that's kind of in between in terms of cost, and we're going to be testing that as part of the 214 stores. And that should give us a good read as to how quickly we can roll out beyond this year.

Your next question comes from Charles Grom from Sterne Agee. Charles X. Grom - Sterne Agee & Leach Inc., Research Division: Just on the omni questions, at what point will your inventory systems be able to speak to one another so you can essentially do all that, including site to store to door? Wesley S. McDonald: They do today. Charles X. Grom - Sterne Agee & Leach Inc., Research Division: They do today, okay. So at some point in the next couple of years, you should be able to do the whole platform -- site to store to door, pick up store...

Well, I think our -- I mean, the truth is, Chuck, that we can do that right now, and we have the capability of doing buy online, pick up in store and ship from store now. What we're feeling our way through is how many stores do we want to use ship from store on that would give us the highest level of productivity because, as Wes said, high-volume stores are probably not the stores we're going to use for that. We'll use stores that are in the more middle of the pack or lower end of the pack of stores to ship from store because they're geographically across the whole country anyway, and they'll make those stores a lot more productive, we believe; at least in the initial test, that's what we're finding. And then on buy online, pick up in store, that's just how fast we're going to move on it. And we're going to launch it and we're going do it in major markets, and we can roll it out as aggressively as we want based on what we learn in the findings. Charles X. Grom - Sterne Agee & Leach Inc., Research Division: Okay, great. And then on the fourth quarter, the shipping and -- the higher shipping costs and the higher fulfillment costs, any sense of magnitude that you like to share with us for how much that cost you guys?

No. I mean, it's hard to -- there's so many elements to that because if you start to go down that road a little bit, you also get into, well, how much did it impact the sales. So if people were dissatisfied, did they not come back later in December and buy. It's a significant number. I mean, we had incredible success in the 2-week period, of the week before Thanksgiving and the week after Thanksgiving. And at the end of the day, we weren't able to deliver the traditional customer service that we would expect, to those customers online in terms of shipping it. And then we felt the aftereffect of that between then and the Christmas Day. Wesley S. McDonald: Yes. I mean, I would expect to be more productive in 2014 in the fulfillment center. So hopefully, we'll do better on the SG&A line. I couldn't tell you right now on the shipping cost part just because we're going to have to ship things more expensively to meet the peak demand. That's one of the things we learned last year. And I do think that the capacity that the FedExs and UPSs of the world that they won't -- they're going to have -- they only have a fixed capacity. So it's going to move back, I think, in terms of what they're willing to promise all of us as shippers that they can deliver in time for Christmas, so...

Again, we're back to why ship from store is really important [indiscernible] Wesley S. McDonald: And pickup.

[indiscernible] Buy online, pick up in store and why that's so important. Charles X. Grom - Sterne Agee & Leach Inc., Research Division: Exactly, right. Okay. And then on that AUR increase, is that mainly a function of the -- down 2.4% from a year ago or was it because of the increase in penetration in national brands? Or was it some cost inflation? Wesley S. McDonald: I'd say it was more about the January clearance. If I look at the AUR through November, December, it was up a little. But not to the -- it was significantly up double digits in January.

Yes, it's all -- it's just about the mix. We had so much lower level of clearance. Charles X. Grom - Sterne Agee & Leach Inc., Research Division: And then just on the comp for the full year, is there any shifts in between quarters, marketing events? So just -- as we kind of start to put the model out by quarter, is there anything we should think about? Wesley S. McDonald: No, except for the Easter shift, we're almost back to normal.

I mean, the only thing, as Wes mentioned, I think the earlier question or maybe in the call, the weight of our new initiatives, as you heard in the call, have a tendency to be -- beginning more in the second quarter and accelerating into the third quarter. So whatever implication that would have on our expectation, that would move it, I would say. Charles X. Grom - Sterne Agee & Leach Inc., Research Division: Okay, okay. And then just on that February comment you made earlier, I mean, have you guys taken a look at your good weather markets versus your bad weather markets? Do you think that slowdown in the front half was mainly a weather issue? Or do you feel like that the consumer is under a little more duress lately?

I think that -- I mean, I think the consumer's definitely under duress, no question about that. When we look at the business, in both January and February, frankly, our West Coast business, which has had good weather, particularly for spring selling, has performed really well, I think, Wes, consistently very well. So that gives us a lot of optimism relative to the product offering and availability of selling spring once there's more reasonable weather in particularly the Midwest and Northeast. Wesley S. McDonald: Yes, it's minus 3 this morning, Chuck, out here, so Kevin and I are not updating our polos yet.

Your next question is from Liz Dunn from Macquarie. Lizabeth Dunn - Macquarie Research: I was -- wanted to circle back on the loyalty program and just sort of understand what kind of a penetration are you achieving? And does it vary in markets like Texas or -- versus Pittsburgh, where you might have a different penetration of the card? And then are any of the things that you're learning about loyalty impacting some of the card benefits? And then finally, what's the -- what are you doing for marketing in terms of increase in dollars for 2014? I would imagine that's an area you continue to kind of distort spending.

On the loyalty thing, the penetration, frankly, is pretty consistent across the whole country. And to be totally honest with you, that's probably a little bit -- has been a bit of a surprise to us because we had some expectation that markets which had really high credit penetration might not be as successful on loyalty, because there were just so many existing credit card customers that the opportunity to attract new customers that are non-Kohl's card customers might be less. That's actually not proving out to be the fact. And in fact, one of the highest credit card penetration markets we have is the Pittsburgh market in the whole country. And we chose that market as one of the test markets just to see the impact of loyalty in that market, and that has been an incredibly successful loyalty market. It actually might be the most successful loyalty market that we have. So we're -- that probably fuels a lot of optimism about the fact that loyalty is actually not in essentially any of our highly penetrated credit regions. So it's not in the Northeast, it's essentially mostly not in the Mid-Atlantic or the Midwest to any significant amount. So that's a big positive as we see it. The amount of new customers, so that's outside of the current credit card customers who might also sign up for loyalty, I mean, I think they're running pretty close to 50%, I think, right, Wes? I mean, about half of the -- if we have x number of loyalty customers in a test store, a little more than the cap [ph] of... Wesley S. McDonald: A little higher than non-credit, yes.

Are non-credit. So that's really exciting. That was always the big objective is get these new customers engaged more effectively through loyalty. There are really are no impact to the card benefits. The card customers get everything they always got. They just get a little more. And as I said, I think Michelle's excitement is focused around the delivery of loyalty, what does loyalty look like, how does it get engaged online, what are the benefits that are outside of just the transactional benefit of maybe getting an additional $1 back on a purchase. And I think she's pretty excited about some of the ideas that are being generated. There is a new level of loyalty marketing that is going to be launched this year -- completing a new campaign. It looks totally different. The communication is totally different from what we've done, but it's built fundamentally on the learnings that we had during the course of the test. So as you can hear, I'm very optimistic about loyalty. And I think every day that goes by, I get more confident about the possibility in loyalty. On the marketing side, we're essentially pretty much holding our marketing for the year overall. But obviously, loyalty is getting a pretty big increase. So some of that money comes out of more traditional marketing that hasn't been as effective for us.

Your next question is from Dan Binder from Jefferies Company. Daniel T. Binder - Jefferies LLC, Research Division: Just following up on this discussion of loyalty. I'm curious, what percentage of the transactions in these test markets are -- what percentage of sales are with loyalty cards? And then I think with the credit card, there is some sort of profit-sharing relationship with the bank. And I'm just curious, when you get a credit card customer that signs up for the loyalty card, are they doing anything in terms of picking and choosing events and how to use the card that would cause the economics of the credit card to erode?

No. Wes can add some value on the credit card piece. On the percent of business, I think we're just not at a point we want to share that because we'd send you down a path that might turn out to not be true when we expand it because we're essentially only in roughly 25% of the stores. So we don't have a big enough base to speak confidently about that. And secondly, as I said, loyalty is going to look very different going forward in terms of the customer face of it. And so that could very well change what we're experiencing. We're not thinking it's going to be negative. We're thinking it's going to be an accelerant, for sure. Generally, our credit card partner, Capital One, has been our partner on loyalty. They're engaged on this issue. We've made them a partner every step of the way, and we've actually accelerated their engagement. So they understand that loyalty is not a threat at all to the card business that we have to them. It has nothing to do with the profit-sharing arrangements. So that's... Wesley S. McDonald: Yes, we haven't seen any change in behavior where people would be using their bank card more often. It's a good question, Dan. It's one of the things I was a little concerned about in the beginning. But we have enough data now that I'm not real worried about that anymore. What we've seen is they've continued to use the credit card whether or not it's a credit event or not. Daniel T. Binder - Jefferies LLC, Research Division: Okay, great. My second question is on brands. You obviously had a few that you've already announced and are planning to roll out this year. I'm just curious from a pipeline perspective, is -- I'm assuming you're not stopping there. Is there any other potential brands you could announce this year, even if you don't want to be specific today?

We're definitely pushing hard on this topic. The way I would characterize it -- I think over the course of the next few months, we're going to probably be sharing a little bit longer-term view of what we see as the sort of accelerants to our business and trying to provide more detail about the implications on that on our future -- next 2, 3 years business. Brands are an important element of that, and they're particularly important as we'll share with you in certain segments of our business where we think we can take a really leadership position. So I don't want to get ahead of myself on that, but there are certain areas in the store and certain areas of customer interest that we're going to heavily focus on, and that, to some extent, will drive the areas that we're most interested in accelerating our brand penetration. An easy example would be active and wellness. Active is an area that we're highly penetrated in, both in apparel and footwear, and we know we have a huge opportunity to expand that platform into other categories and also to increase what we're doing in active in the existing world. And those would be, for instance, one of the things we'd probably be talking to you about, and that would therefore, imply really be focused on new brand initiatives in that world. Daniel T. Binder - Jefferies LLC, Research Division: And then just the final thing was on expenses. You've done a remarkable job managing in the last few years, and I think you had some consultants helping you get some costs out of the back non-customer-facing parts of the cost structure. I'm just kind of curious if you can give us an update on where you are in that process and what you're doing this year to still manage that pretty tightly. Wesley S. McDonald: Well, we've -- when we've uncovered them, we've obviously put them in the budgets and taken the work out where appropriate. I would say that we've built it into our guidance. So if you do the math, we expect to leverage at a 2% comp, that's what we guided to. The remaining initiatives from that, lie mostly in IT and credit and they're related to finishing some IT work on some projects that we have planned for this year. So we have a lot built into the next -- for this year. We have a little built in for '15, and then we'll have to relook at it because we have to continue to improve.

And then your next question is from Mark Altschwager from Robert W. Baird. Mark R. Altschwager - Robert W. Baird & Co. Incorporated, Research Division: I just want to follow-up again on the marketing side. Can you just talk a bit more about the response to some of the changes on that front with the higher profile ad buys and focus on broadcast and social media? And then it sounds like the budget is saying relatively consistent. So maybe where are you pulling back with your greater emphasis on loyalty and these higher cost avenues?

Well, we definitely have had some successes. Michelle likes to talk about those as green shoots, so things that she's been able to focus on in a very short period of time with her team and create change, and we've seen some really exciting results around that. Probably the one that's the easiest to understand that I'm sure you saw was our effort prior to the Thanksgiving event around the MAs and an effort with Jennifer Lopez, and that had a tremendous amount of impressions and a tremendous amount of excitement generated and it translated into traffic and it translated into sales. Obviously, she knows full well that those small steps have to now translate into bigger steps. We have an initiative underway right now. One of the color trends of the season is, for sure, pink. And there's an initiative that launched just at Presidents' Day and has been ongoing around that. I think those kinds of things you're going to see a lot more of, an awful lot about loyalty. Obviously, it's a 0-sum game, so we're planning on spending essentially anymore in marketing. And if we're going to fund loyalty and we're going to fund some of these big ideas, then there are other areas of funding that have occurred in the past that we've identified that haven't produced results. And Michelle is focused on those, and those are the areas that are going to be pulled back. Print is clearly one of those areas, for sure. Mark R. Altschwager - Robert W. Baird & Co. Incorporated, Research Division: Great. And then following up on the beauty side, any data you can share on how the tests are impacting frequency of visits in those stores? And then any data you have on the costs associated with the further rollout? Wesley S. McDonald: Well, we've seen -- it's very early, so I don't want anybody to read a whole lot into this. We've seen low-single digit overall lifts in the stores, which is critical to the success of the program. So from that perspective, I think we're very pleased with what has been going on. In terms of investment, it really varies. I don't want to really get into specifics. It's -- at the low end, it's tens of thousands of dollars in investment; at the higher end, it's hundreds of thousands of dollars. And like I mentioned earlier, we're just trying to find the right mix in terms of looking at the sales volume because that's important. Obviously, a 1% lift in a store that does $12 million is a lot different than a 1% lift in a $24 million store. So that's something that we're going to work on and finalize this year. We'll have a really good plan to roll out the balance of the chain in '15 and beyond.

Your final question comes from Dana Telsey from Telsey Advisory Group. Dana Lauren Telsey - Telsey Advisory Group LLC: As you think about remodels, we've heard a lot about marketing and the loyalty program. Connecting it with the stores and the remodel program, how do you see the stores matching the marketing program and sending the message? What should we be looking for in the remodels this year that may have been different than last year?

I think -- yes, Dana. I think one of the things we're looking at in remodels, we're going to continue to do a significant amount of total store remodels going forward. But more and more, we're highly focused on identifying new initiatives that would require capital that could make the store look different and also generate very specific returns, both in the business and in the overall store traffic. A good example of that is beauty. So as we looked at spending a fair amount of money on the beauty initiative, because it's a significant capital expense both last year and this year, we were looking at the results of that and saying that, "Hey, it would be better for us to roll out beauty to the whole company quickly in various formats," depending upon what gives us the best return than it might be to remodel completely 20 other stores because we're looking at the lifts and the lifts are good. Loyalty, the implications of loyalty in the in-store environment would be another thing. Moving customer service to the front of our stores, from where it was in the back, in some cases, that might be another thing. New brand initiatives require capital, and we're saying that we're serious about new brand initiatives, particularly national brands like Disney, like IZOD, like the DesigNation, definitely like Juicy Couture. Those require capital -- significant capital investments. And we're seeing better results by accelerating those kinds of initiatives, again, than we're necessarily seeing from remodeling a whole store somewhere. So I just -- we're going to spend just as much money on investing in our existing infrastructure. Wes talked about some of the operational pieces like buy online and pick up in store and what that requires or ship from store and what that requires or mobile enhancement in-store and what that requires. We just believe it will be spent a little differently than maybe historically we've looked at investing in our store base. Wesley S. McDonald: Yes, most things will touch every store instead of just a few. Okay. Thanks, everybody.

Ladies and gentlemen, this does conclude today's conference call. Thank you for participating. At this time, you may now disconnect.