Michael D. Casey - Chairman and Chief Executive Officer Richard F. Westenberger - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer Brian J. Lynch - President

Scott D. Krasik - BB&T Capital Markets, Research Division Taposh Bari - Goldman Sachs Group Inc., Research Division Susan K. Anderson - FBR Capital Markets & Co., Research Division Maria C. Vizuete - Piper Jaffray Companies, Research Division Anna A. Andreeva - Oppenheimer & Co. Inc., Research Division Carla Casella - JP Morgan Chase & Co, Research Division Steven Louis Marotta - CL King & Associates, Inc., Research Division

Good day, everyone, and welcome to Carter's Third Quarter Fiscal 2013 Earnings Conference Call. On the call today are Michael Casey, Chairman and Chief Executive Officer; Richard Westenberger, Executive Vice President and Chief Financial Officer; Brian Lynch, President; and Sean McHugh, Vice President of Investor Relations and Treasury. [Operator Instructions] Carter's third quarter -- Carter's issued its third quarter fiscal 2013 earnings press release earlier this morning. A copy of the release and presentation materials for today's call have been posted on the Investor Relations section of the company's website at www.carters.com. Before we begin, let me remind you that statements made on this conference call and in the company's presentation materials about the company's outlook, plans and future performance are forward-looking statements, and actual results may differ materially from those projected. For a discussion of factors that could cause actual results to vary from those contained in the forward-looking statements, please refer to the company's most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Also on this call, the company will reference various non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the GAAP financial measurements is provided in the company's earnings release and presentation materials. Also, today's call is being recorded. And now I would like to turn the call over to Mr. Casey. Please go ahead, sir. Michael D. Casey: Thank you very much. Good morning, everyone. Thanks for joining us on the call this morning. Before we walk you through the presentation on our website, I'd like to share some thoughts on our business with you. In the third quarter, we continued to outperform the market. We achieved a record level of sales and profitability, saw a higher demand for our Carter's' brand in all channels of distribution, meaningfully improved the profitability of OshKosh and gained market share. We also improved our capital structure in the third quarter by adding low-cost leverage, which funded an accelerated share repurchase plan. Our Carter's wholesale business drove the largest portion of our growth in the quarter, with sales up 16%. We saw higher demand in all 3 product markets: Baby, Sleepwear and Playwear. The core of our Carter's brand, our Baby business, continues to be our best performing product offering. Our wholesale growth in the quarter reflects high-single-digit growth in fall bookings, variable replenishment trends and the timing of shipments. Year-to-date, our wholesale sales are up about 6%, and we're expecting about 5% growth for the year. We continue to partner with our largest wholesale customers to invest in brand presentation. We view these investments as an important component of our brand marketing. Our objective is to help drive traffic to our wholesale customer stores with the best presentation of young children's apparel in the market. Spring bookings provide visibility into the first half of next year. We currently plan mid-single-digit growth in Carter's spring wholesale shipments. On our next call in February, we should have visibility on fall demand and product costs, which will enable us to firm up our plan for 2014. We also saw strong demand for our Carter's brand in our retail business, with sales up 16% in the third quarter, driven by door growth and over a 50% growth in eCommerce sales. Baby and Girls Playwear were the best-selling products in our stores. And online, we saw significant increases across all product markets with Sleepwear and Outerwear posting the highest growth rates. We're on track to open over 60 Carter's stores this year, and our new stores have been achieving their sales and earnings goals. We saw a good comp store increases through the back-to-school shopping period. Comp store sales in the United States were up about 2% to 3% for both Carter's and OshKosh through August. We began to see negative store comps mid-September and that trend continued into early October. This past week, with cooler weather arriving in many parts of the country and an end to the government shutdown, we've seen store comps trending better. We're expecting positive comps in the fourth quarter for both brands. We saw a strong growth in our eCommerce sales and profitability in the third quarter, with total sales up 50% and earnings up 100%. Consumers clearly love the convenience of shopping for our brands online. We launched a new website experience in the third quarter, which strengthened the shopping experience, especially for consumers using mobile devices. We also upgraded the eCommerce order management system to support our growth plan. This new system processes orders more efficiently at a lower cost and improves customer service. The outlook for eCommerce sales continues to be very good. We expect to exceed $200 million in sales this year. We made good progress this year improving the profitability of OshKosh. This has been a priority for us. Third quarter sales were comparable to last year. Our retail sales grew 5%. That growth was offset by lower wholesale sales. The Boys Playwear business was particularly strong in the third quarter. We focused on a compelling presentation of denim for the back-to-school period, and consumers responded very positively to that product offering. OshKosh eCommerce sales grew nearly 40% in the quarter. It's a very high margin business for us and has enabled us to improve the convenience of shopping for the OshKosh brand. Consumers are responding positively to our new side-by-side store initiative. They like the convenience of shopping for the children from a newborn to a 10-year-old child in one convenient location. We expect to have 24 side-by-side stores by the end of this year. We continue to see strong demand for our brands in international markets. Our growth in the quarter was largely driven by our business in Canada. The decline in earnings reflects the start-up cost in Japan. We're encouraged by the strong international demand for our brands online. Nearly 45% of our eCommerce sales are from international guests. Based on this experience, we see an opportunity to build eCommerce capabilities in international markets and plan to launch an eCommerce business in Canada by the end of 2014. We made good progress in the quarter with other key initiatives, which include consolidating our operations in Atlanta, improving our supply chain performance and strengthening our IT capabilities. With respect to the office consolidation, the move of our retail and finance teams from Connecticut to Atlanta is largely completed. The international team will also be based in Atlanta next year. They were previously based in New York. We are currently in the process of moving all of our Atlanta-based teams into a larger headquarters in Atlanta, and we expect to complete that move by the end of this year. We believe we've meaningfully improved the collaboration and effectiveness of our workforce by bringing these teams together in Atlanta. Our focus now is integrating many new employees who joined our company in this past year to support this important initiative. With respect to our supply chain performance, our direct sourcing operation is ramping up ahead of plan. We expect to source over 30% of our total units directly in 2014. Our plan is to source at least 50% of all units directly by 2017. As we shared with you on our last call, we saw some slippage in on-time deliveries from both direct and agent-sourced factories. To improve on-time deliveries, we have strengthened our capacity planning disciplines and have better systems to monitor production performance. We also organized a recent summit in Asia with our largest suppliers. We made good progress exploring opportunities to help them improve their performance for us. We're expecting better shipping performance as we head into next year. We've made very good progress this year strengthening our distribution capabilities. In the third quarter, we officially commenced multichannel operations in our new distribution center in Georgia. This new facility has enabled a 50% increase in eCommerce sales this year. It has helped reduce eCommerce fulfillment cost by $8 million, or 24%. It is also enabling a higher service level to our retail stores and wholesale customers. Additional cost reduction is expected as the facility becomes more fully automated in 2014. And with respect to technology investments, we've made good progress in the third quarter, upgrading key systems to support the growth we are achieving in our business. These investments are focused on supporting our new distribution center and our new headquarters. We're upgrading our enterprise order management system. And we're also upgrading our product development and supply chain systems. These investments are an important component of our long-term growth strategy. In summary, we believe we've made good progress this year by providing the best value and experience in young children's apparel, by extending the reach of our brands and by improving our profitability and capital structure. Our outlook for the balance of the year is consistent with what we shared with you in August. We believe we're on track to achieve a record level of sales and profitability this year. I'm very grateful for the support provided by all of our employees this year. Their passion for our brands and commitment to strengthen our business are reflected in the strong performance we're reporting this morning. With their help, we built a multichannel business model that has enabled us to weather a very challenging consumer market. We're expecting good growth in sales and earnings next year. We continue to evaluate the impact of rising labor cost in Asia, and we should have a better view on that exposure when we update you in February. Richard will now walk you through the presentation on the website. Richard F. Westenberger: Thank you, Mike. Good morning, everyone. Today's presentation materials are available on the Investor Relations portion of our website. I'll provide some highlights of our third quarter results and then comment on our expectations for the fourth quarter. Beginning then on Page 2, we delivered very good performance in the third quarter with strong top line results and solid growth in adjusted earnings. Net sales grew 14% compared to last year. This growth was led by the Carter's brand across all of its channels and our international business. Overall, unit growth drove our top line in the third quarter, with unit sales up 13% and average pricing up about 1%. Our adjusted earnings per share grew 10% to $1.12. This was ahead of our expectations, and we've estimated $0.03 to $0.04 of the outperformance to our forecast reflects favorable timing of some net sales and expenses favorability, which we expect to give back in the fourth quarter. Page 3 summarizes the drivers of our third quarter sales growth. Total Carter's domestic sales grew 16%, driven by good growth across our wholesale, retail store and eCommerce businesses. We had a great quarter at Carter's wholesale where sales growth was also at 16%. Third quarter sales benefited from approximately $4 million of volume that we had previously forecasted to fall in the fourth quarter but occurred in the third quarter due to strong customer demand. Third quarter OshKosh domestic sales were comparable to last year. eCommerce sales were strong at plus 39%. Retail comparable store sales grew 1%, which represents our best performance in several quarters. International sales increased 21% in the third quarter, driven by solid growth across the wholesale, Canadian retail and eCommerce components of this segment. Our new Japanese retail business contributed nearly $4 million in net sales in the quarter, which was in line with our forecast. I'll discuss business segment results more in a few moments. Our third quarter P&L is on Page 4. Note that certain line items are presented on an as-adjusted basis. We've included a reconciliation to our GAAP results in the appendix of today's presentation. Third quarter gross margin improved slightly versus last year to 40.7%, reflecting modestly higher average unit pricing and unit product cost, which were comparable to a year ago. Adjusted SG&A was consistent with our forecast expectations, increasing by 100 basis points over last year. Adjusted operating income grew 7%, with an adjusted operating margin of 13.7%. Our third quarter tax rate was favorable to last year, driven by a greater contribution of profitable international operations at lower statutory rates than here in the U.S. We're now forecasting our 2013 full year effective tax rate to be approximately 36% compared to 36.9% last year. The higher interest expense stemming from our recent financing transaction and the subsequent sale repurchase activity more or less offset each other and had a neutral effect on EPS in total in the third quarter. So again, our adjusted earnings per share grew 10% in the third quarter to $1.12. Now moving to Page 5 and the summary of changes in SG&A in the third quarter. Third quarter adjusted SG&A was $216 million compared to $183 million in the prior year. Our growth initiatives continue to be the principal drivers of the increase in SG&A. These initiatives include investments in new U.S. and Canadian retail stores, eCommerce, international and our new multichannel distribution center in Georgia. With respect to the increase in marketing expenses in the quarter, this largely represents a shift of our Count on Carter's marketing campaign into the third quarter versus the fourth quarter last year. The All Other bucket reflects legal and other administrative expenses and spending on technology initiatives. In terms of SG&A rate in the third quarter, the largest contributors to the year-over-year deleverage were our Japanese operations, which are not comparable to last year, and marketing. As we've said previously, we're forecasting the growth rate and expenses in the fourth quarter to be lower than our year-to-date experience, in part reflecting our expectations for lower levels of performance-based compensation versus a year ago. Pages 6 and 7 summarize our year-to-date performance through the third quarter and are provided for your reference. We've been pleased overall with our performance in 2013 with 10% growth in net sales and expansion in EPS at twice this rate. We had a busy quarter of balance sheet activity, and we've included some highlights on Page 8. Our balance sheet and liquidity remain strong. We ended the third quarter with a cash position of nearly -- of about $200 million. Consistent with our targets total liquidity, it's nearly $380 million when including our revolver availability. Quarter-end inventories increased 17% versus a year ago, reflecting our expectations for good sales growth in the fourth quarter, as well as planning for some of the operational transitions between our distribution centers as we exit the year. Inventory quality overall is very good. Consistent with our efforts to improve our capital structure and to take advantage of historically attractive interest rates, we executed a $400 million financing transaction in the third quarter. As previously announced, this debt has as an 8-year term and an interest rate of 5.25%. Also, as previously announced, we committed the full proceeds from the financing to share repurchase. During the third quarter, we executed an accelerated share repurchase transaction in the amount of $400 million. These transactions are reasonably common in the marketplace, but for those of you not familiar with them, at the initiation of the program, we paid $400 million to our counter-party, JPMorgan. JPMorgan delivered approximately 4.6 million shares to us up front, having a market value of $328 million. These initial shares have been retired, and we're now operating with a lower share count than before the transaction. We're now in the execution phase of the program, during which the ultimate number of shares repurchased under the SR program will be determined. This phase will take some time to complete, possibly up through April of next year. At the end of this execution period, we'll have some additional settlement to record, depending upon the movement in share prices. While we're awaiting settlement of the SR transaction, we do not expect to be in the open market making share repurchases. Prior to executing the SR, we also repurchased $16 million worth of stock in the open market during the third quarter. Through the end of the third quarter, our year-to-date open market repurchases totaled approximately $54 million or about 816,000 shares. We have approximately $267 million remaining under our board authorizations. In the third quarter, we also paid our second ever quarterly dividend of $0.16 per share, a distribution of approximately $10 million. Year-to-date dividend distributions have totaled $19 million. Between funds committed for share repurchase and dividends, we expect to return well over $400 million to our shareholders in 2013. Q3 year-to-date cash flow from operations was approximately $64 million, reflecting increased working capital related to inventory and receivables compared to the prior year period. This largely reflects expected growth in the business, as well as receivables for tenant allowances related to our new Atlanta headquarters. CapEx for the first 9 months was $130 million compared to $60 million over the same period last year. Significant growth investments this year include our new multichannel distribution center, retail stores in the U.S. and in Canada, information technology infrastructure to support our larger and increasingly complex business and the build-out of our new global headquarters here in Atlanta. Page 10 is a good summary of our business segment performance for the third quarter. At a high level, the growth in adjusted operating income was driven by improved profitability in the U.S. of both our Carter's and OshKosh businesses. These contributions were offset by a slight decline in profitability in international and higher unallocated expense driven by higher legal, administrative and benefits expenses. I'll spend a few minutes on our business segment results, starting with Carter's Wholesale on Page 11. Carter's Wholesale third quarter sales grew about 16% compared to last year. We had planned for solid growth in this business in the third quarter, and we exceeded that forecast. The upside was driven by about $4 million of net sales, which we had planned to fall in the fourth quarter but which moved into the third quarter at the request of our customers. We also saw a strong replenishment demand and lower-than-planned order cancellations. Season-to-date, fall 2013 over-the-counter selling at our major national customers is up in the low-single-digit range with prices up slightly to last year. Third quarter Carter's Wholesale segment income grew 6% and the decline in operating margin reflects higher product cost, increased airfreight expense due to the late delivery of product, the timing shift of the Count on Carter's marketing expense and start-up expenses related with our new distribution center. Looking ahead, our spring 2014 seasonal bookings are up in the mid-single-digit range, and by our next earnings call in February, we should have good line of sight to fall 2014 bookings. This year, we've continued our successful program with investing with our wholesale customers to make sure we have great presentation of the Carter's brand on the sales floor. Pages 12 and 13 contained views of recently refreshed Carter's shops at Kohl's and Macy's. We think these particular shops turned out great and really highlight what's possible in presenting the breadth and beauty of the Carter's brand. Moving onto Page 14 in Carter's Retail. We had strong overall sales growth of 16%, driven by the addition of 57 net new stores versus a year ago, as well as eCommerce sales growth of 53%. Carter's Retail store comp sales increased modestly in the quarter but were below our plans. As Mike said earlier, store traffic and sales were weak from about mid-September through the end of the quarter, and September is traditionally one of the biggest months of the year. We opened 17 new stores in the third quarter, and our new Carter's stores continue to perform well and are in line with our models. Carter's Retail segment profit grew 11% in the third quarter, driven by the segment's strong top line growth, as well as the continued growth of our high-margin eCommerce business. Retail store gross margins were at the highest in recent memory, reflecting the strength of our product offerings and successful promotional strategies. The decline in the Carter's' Retail segment operating margin was driven by some of the same factors affecting the Carter's Wholesale segment, namely the timing shift of brand advertising and higher distribution cost related to the start-up of our new facility. Moving to OshKosh Retail on Page 15. Third quarter net sales for the OshKosh Retail segment grew 5%, driven by eCommerce growth of 39%. Retail store comp sales increased 1%. At Retail, the strongest parts of the assortment in the quarter were Boys and Girls Playclothes and accessories. We opened 6 stores on a net basis in the third quarter, bringing our U.S. OshKosh store count to 170. In the third quarter, we continued to make very good progress against our goal of improving OshKosh profitability. Retail segment income improved by $2 million compared to last year, with profit improvement in both the retail store and eCommerce components of the business. Segment operating margin improved over 200 basis points, reflecting meaningfully better gross margins and a higher eCommerce contribution. Moving to Page 16 in OshKosh Wholesale. Third quarter sales declined 13%, reflecting lower demand. We're expecting that full year net sales in 2013 will be down in the high-single digits to around $73 million. Story here though is improved profitability, which you'll note went from $2.4 million a year ago to $4.4 million in this year's third quarter. One of the things we're excited about in the Wholesale portion of the OshKosh businesses is our Genuine Kids from OshKosh brand, which is an exclusive offering at Target. This is a licensed business for us, and Target's in the process of relaunching this brand in a meaningful way on its sales floor. We think the product and presentation look great and hope to see good continued growth in this important channel of distribution for OshKosh. Turning to our International segment on Page 17. Segment sales grew 21% in the third quarter, driven by wholesale channel sales, continued growth of our Canadian retail store business and the contribution of net sales from Japan. Canadian retail stores comped down approximately 4% in total. The co-branded Carter's and OshKosh stores comped down 1% and the legacy Bonnie Togs format stores comped down 6.4%. Sales in Canada were below our expectations in the third quarter and we attribute this to a couple of factors. First, is we've continued to migrate away from the legacy private label product within the Bonnie Togs stores. We haven't yet seen those sales fully replaced with sales of Carter's and OshKosh product. Canadian retail sales in the quarter were also affected by the late delivery of some product. As that late product has arrived in stores and weather has turned more consistently colder, we've seen stronger performance in Canada. Through the third quarter this year, we've opened 15 new stores in Canada. Our new store performance in Canada, particularly in Québec, continues to exceed our targets. We've also recently passed a milestone in Canada with the opening of our 100th retail store. We're making plans to convert the legacy 33 Bonnie Togs stores to the Carter's and OshKosh B’Gosh nameplate in 2014, which we believe will further strengthen our market position, particularly in Ontario where the Bonnie Togs stores are located. Our Japanese retail business contributed approximately $4 million in net sales in the quarter, with an operating loss of approximately $2 million, both in line with our expectations. Third quarter net sales in international wholesale grew 19%, driven by growth from U.S.-based multinational retailers. Our Canadian wholesale business continues to perform well overall, and we're pleased with the initial results of our rollout with Target. We expect to begin shipments to Walmart Canada in the fourth quarter as we further develop our multichannel strategy in Canada. Third quarter International segment adjusted operating income declined 9% compared to last year, principally due to the operating loss from our Japanese operations. Now turning to our outlook on Page 18. Despite a slow start to October, we're expecting a good fourth quarter. We're projecting net sales to increase approximately 9% to 10% with our Carter's U.S. retail and international business contributing the most to this growth. We expect adjusted earnings per share to increase 10% to 15% versus last year's adjusted $0.89 per share. This fourth quarter outlook takes into consideration the $0.03 to $0.04 per share timing benefit reflected in our third quarter results. For the full year, we're forecasting net sales to grow approximately 10%, which is at the high end of our previous guidance of 8% to 10%. Consistent with our previous outlook, we expect full year earnings per share growth in the range of 15% to 17%. We've made good progress with our investment agenda this year. We're projecting that full year CapEx will be in the range of $180 million to $200 million. Looking ahead to 2014, we expect capital spending as a percent of net sales to normalize to more historical levels. Lastly, we continue to expect good operating cash flow for the year. With those comments about our third quarter performance and our outlook, we're ready to take questions.

[Operator Instructions] And for our first question, we go to Scott Krasik with BB&T Capital Markets. Scott D. Krasik - BB&T Capital Markets, Research Division: Richard, can you just update us on where you are in terms of using third parties to facilitate any of your eCommerce business? And you referenced that the operating margins have been running about 20%. Where do you think that goes once you are fully in-house and you get the sales growth you expect next year? Richard F. Westenberger: Well, the most significant components of supporting the eCommerce business that were outsourced have now been insourced, and that includes the fulfillment function and now the order management system. That was a big transition that we effected in the third quarter. We have taken direct control of some of the other relationships, the website platform and such. And that -- while that is still a third party, we're managing it directly, which we think brings some efficiencies and some cost savings. I think the outlook for margins in eCommerce are good. I won't be precise about where they're going to go, but we expect them to go higher, certainly, as the business continues to ramp in its top line. The next step function of opportunity in terms of the cost structure is the more automated solution in our distribution center. Right now, it's a fairly manual approach to the fulfillment activities for eCommerce. And once all of the great automation and conveyor equipment, sortation equipment and such comes online in the new distribution center, that should meaningfully lower the fulfillment cost even further. So we're bullish on the outlook for the margin structure of the eCommerce business. Scott D. Krasik - BB&T Capital Markets, Research Division: What's the time frame then in terms of automating the system within the distribution center? Richard F. Westenberger: I'd say the middle part of next year. Scott D. Krasik - BB&T Capital Markets, Research Division: Okay. And then in terms of the OshKosh margin improvement, I mean, is this something that even though your modeling, especially wholesale sales, negative in the first half of next year, we should see similar margin improvement next year as well? Richard F. Westenberger: I think it's too early to comment on specifics on 2014, Scott. We're still working through those plans. I think OshKosh and Carter's, both have some headwinds as it relates to product cost. As Mike said in his comments, we're cautious on the outlook for labor inflation in Asia and working through what the net effect of that will be on our results for '14. Scott D. Krasik - BB&T Capital Markets, Research Division: Okay. And then Richard, you just left out -- you mentioned performance comp will be down in Q4. Was it up or down in Q3 year-over-year? Richard F. Westenberger: We had a slight benefit in Q3.

And for our next question, we go to Taposh Bari with Goldman Sachs. Taposh Bari - Goldman Sachs Group Inc., Research Division: I had a question about the revenue guidance. So you're taking out your revenue guidance for the fourth quarter, yet it seems like you're reiterating the Carter's and OshKosh wholesale estimates for the fourth quarter. And you spoke to a choppy start to the quarter on the retail front. Just trying to get a better sense of what's driving that revised revenue guide for the fourth quarter. Richard F. Westenberger: Well, we do have some timing issues as we referenced, Taposh. There is some volume that shifted into Q3 from the fourth quarter. On balance, I think we're bullish still despite the kind of soft start to October. We're bullish on the contribution that will come from our direct-to-consumer businesses, eCommerce, Retail, International. Those should contribute nicely. And so just more confidence, I'd say, that we'll be at the higher end of that full year range that we talked about. Taposh Bari - Goldman Sachs Group Inc., Research Division: Okay. And then Richard, this $0.03 to $0.04 timing shift, can you help me better understand that? I'm just trying to get the -- trying to do the earnings math run. At $4 million, wholesale shift doesn't seem like -- it seems like it's maybe $0.01 at that, so what else contributed to that timing? Richard F. Westenberger: Sure. That was some expense favorability and timing as well, Taposh. So that will move forward in the fourth quarter as well. So some expenses that we had planned to happen in Q3 will now, from a timing perspective, fall into the fourth quarter. That's the balance of the $0.03 to $0.04. Taposh Bari - Goldman Sachs Group Inc., Research Division: Okay. And then I wanted to ask you, just in terms of the way you guys disclose your store or your same-store sales, I think you're one of the last companies in retail to actually not include eCommerce. I think if you would actually include eCommerce, your comps would've been closer to, I think, 7%, if you can correct me on that figure, and just curious to see where you guys stand in terms of how you're going to, I guess, provide that disclosure going forward. Richard F. Westenberger: Well, we track both metrics. And certainly, to the extent investors find that helpful, we're happy to share. We gave you the components so that it's possible to put the pieces together. I think you're right in your math. The direct-to-consumer comp, if you will, for Carter's would be something on the order of 7% and 5-ish or so for the OshKosh. So both brands continue to gain a lot of traction in the direct channels with consumers, and we're happy to see it. Taposh Bari - Goldman Sachs Group Inc., Research Division: Okay. And just one more for you, Richard. In just the fourth quarter guidance, if you could help me reconcile -- if I take the midpoint of your revenue guidance, I guess, a, what kind of share count assumption are you using for the fourth quarter? I'm assuming, I think, 54.5. But it looks like you're embedding roughly a 50 basis point -- 50 basis points of compression to operating margin. I'm just trying to get a better handle of the components there. I know there is a lot of noise in the third quarter in terms of the marketing shift and also the airfreight. If you can help us kind of parse out those line items, that would be helpful. Richard F. Westenberger: Well, I'm not sure how much parsing I'll do. We expect good growth in net sales. I think gross margin, we're starting to see a bit more of the headwinds from product cost being a bit higher. So that's a bit of a change between Q3 and Q4. So we start to ship that spring '14 product, so expect little bit of pressure there. You do have the timing issues that I referenced, which are pressuring the previous forecast on spending, in particular in the fourth quarter. So on balance, we're expecting good revenue growth, good earnings growth for the fourth quarter. I wouldn't say it's meaningfully different than our previous outlook. There are some timing shifts between quarters, but on balance, we expect it to be a good quarter. Share count will be somewhat of a benefit. There's probably $0.01 or $0.02 net benefit from the capital structure work in the fourth quarter that's embedded in our guidance as well. Michael D. Casey: In the fourth quarter, we're starting to see a little bit of the spring -- impact of higher spring product costs. I think the last forecast I saw, I think the product costs are going up a little over 4% and our pricing is going up some portion of 4%. So I think there's a spread between pricing and unit cost in the fourth quarter.

And we go next to Susan Anderson with FBR. Susan K. Anderson - FBR Capital Markets & Co., Research Division: So I guess, I just wanted to touch a bit on OshKosh. Good job on the profitability there. But maybe if you could give a little bit more color on kind of how the malls are performing and the dual format, if you have any numbers around that yet, and just kind of any thoughts on -- for the brand going forward. It seems like wholesale is declining. So is it going to be more of a retail or online format? Just any thoughts you have there. Michael D. Casey: It's mostly a retail business. I think we're making good progress. The outlet stores showed good progress in the third quarter. This new side-by-side store initiative is showing promise. So a much more productive model -- store model than we saw with the mall store test. So we're -- you'll see us moving forward with the side-by-side store initiative as we roll into next year. I think by the end of this year, we'll have some portion of 24 of those new stores. If we hit the performance metrics on the first 24, it's likely we'll open up some portion of another 24 next year. I think we've had an opportunity to see the spring '14 product. We're selling that in -- shipping that out now in the fourth quarter. We've signed up on the fall '14 creative concepts within the last week or so. And so the thing that's been driving the performance is better product. We've got a talented merchandising and design team on it. And so we're optimistic about the future of OshKosh. I think we've made good progress this year. Our focus was improving profitability. I think we've achieved the objectives that we've had for improving profitability, so the arrow is pointing up on OshKosh. We're encouraged by the progress that we're making with it. Susan K. Anderson - FBR Capital Markets & Co., Research Division: Okay, great. And then on the comps. So I think you said that October had started off negative, but it sounds like over the past week it's improved. Is it now turning positive? I guess, I'm just trying to get a sense because you are up against a tougher compare in the fourth quarter, your expectations for the quarter, given the environment out there is pretty tough. Michael D. Casey: Yes. Look, for the quarter, we're expecting positive comps for both brands. We typically model to be low-single-digit comp store growth. I think, as of this morning -- we've seen this morning's results. I think as of yesterday, we're just still slightly negative for both brands, slightly negative. Susan K. Anderson - FBR Capital Markets & Co., Research Division: Okay. Great. And then just one housekeeping item. Is the accelerated share repo in the guidance or is that like something that's additional? Richard F. Westenberger: That's included in the guidance, Susan.

And we go next to Stephanie Wissink with Piper Jaffray. Maria C. Vizuete - Piper Jaffray Companies, Research Division: This is actually Maria Vizuete on for Stephanie Wissink. We're just wondering if you can provide a little bit of color maybe on the OshKosh brand at Target and how that's trending. Michael D. Casey: Good question. We were out with Target within the past month. They're very pleased with the Genuine Kids brand, its performance. It looks great on the floor. And we structured a new arrangement with them this past year, and I think they're seeing better performance with the brand. We're seeing higher profitability from that new model. Maria C. Vizuete - Piper Jaffray Companies, Research Division: Great. And then if you could just talk a little bit about the inventory from a perspective at retail and kind of how that reconciles with your current quarter-end inventory levels? Brian J. Lynch: It's Brian. A couple of things. In our stores on direct channel, our inventories are in good shape. Within the quarter we were down low-single digits in inventories. So we feel like, we're in good shape going into Q4. Out there in Wholesale, I would say the accounts are pleased with our performance thus far in fall. There's modestly slower over-the-counter selling based on some of the traffic slowdowns in September and early October with the macro factors that we mentioned before. I wouldn't say inventories are a concern at this point. However, there's a good amount of selling still to come for holiday, so that's always a risk out there. But we're monitoring it closely. We feel good about the opportunities for holiday, and we have accounted for any order movement or discount needs within our guidance in Q4.

And we'll go next to Anna Andreeva with Oppenheimer. Anna A. Andreeva - Oppenheimer & Co. Inc., Research Division: I had a follow-up on the fourth quarter guidance. I guess, are you expecting gross margins to be up for the quarter, just given some of the comments on higher sourcing cost? And then just looking out to 2014, obviously, we've had 2 very strong gross margin years for you guys. Maybe talk about some of the puts and takes on the gross margin line. I guess, do you think the magnitude of the eCommerce and supply chain initiatives offset some of the higher sourcing next year? And then also, maybe also talk about some of the initiatives in retail looking into the fourth quarter, just to ensure positive comps and, obviously, difficult landscape out there. And how should we think about your promotional activity in the fourth quarter? Richard F. Westenberger: Okay, Anna. Fourth quarter margins -- the gross margins, typically, we see a step up sequentially from the third quarter to the fourth quarter. We expect that will occur again this year. That's largely the benefit of the mix shift occurring that, in the fourth quarter, the direct-to-consumer businesses are a bigger piece of the pie than they are in the third quarter. So sequentially, I do see some improvement. In terms of year-over-year performance in the fourth quarter, I'd say gross margin's expected to be flattish to down slightly, and the difference would be the effect of the higher product cost that we're starting to see for the spring '14 product. I think for 2014, we've already sourced the spring assortment where product costs are up. Fall 2014, we're still in the process of sourcing those products. I think we have an indication that we're seeing a continuation of the trend towards product cost inflation, but we don't know with precision yet what those costs are going to be. So for full year, I think probably too early to comment in a lot of detail around 2014 gross margins. But we are concerned a bit around the trends towards product cost inflation. We'll do what we can in terms of pricing and other margin initiatives. We have a lot of good things underway to manage the supply chain, to drive improved productivity. This distribution center that we're standing up here in Georgia is an enormous investment for us, but we think it's worth it given the efficiency opportunities that will come with it. So that, along with other inventory management opportunities, pricing initiatives, promotional strategies, we feel pretty good about what the long-term outlook will be. But short term, we're facing some headwinds on the product cost front. Brian J. Lynch: In terms of the holiday marketing plans for our stores, I would first -- well, I think we're in a great inventory position going into the season, particularly in OshKosh, a better inventory position than last year. We've got strong promotions for Q4 to drive traffic and communicate that we've got the best value in young children's apparel. I would say the promotional activity will be comparable to last year. We've got beautiful holiday catazines. OshKosh is hitting homes this week. Carter's is going to hit the homes next week. We've all been out as a management team and have seen the holiday store sets. They're beautiful. I think the stores are going to look spectacular for holiday. We're going to continue some of the things with last year's successful holiday rewards program and leveraging our database to target consumers with the great offers that we do have. We're going to be also looking at some local marketing where we have stores clustered in certain regions. So we're going to do some targeted local marketing to make sure that we can drive traffic. But we feel good about the holiday season and our chances to do well. Anna A. Andreeva - Oppenheimer & Co. Inc., Research Division: Okay, great. No, that's very helpful. And just a quick follow-up. On Carter's wholesale, I think excluding the shipments forward, sales were still up 14%. Obviously, very robust number. I think you guys guided for high-single digits previously. Just anything to call out there. Michael D. Casey: The third quarter was up about 16%. If you recall in the first half, the growth was much less than that, and we're expecting about 5% growth for the year. Year-to-date, the third quarter performance takes us up 6%. We're expecting about 5% growth for the year, which is fully in line with our growth objectives. We expect the Wholesale business to grow for us on portion of 3% to 5% a year on average. And so their performance this year is fully line with what our growth objectives are.

[Operator Instructions] We go next to Carla Casella with JPMorgan. Carla Casella - JP Morgan Chase & Co, Research Division: My question relates to the side-by-side stores. How many stores ultimately do you see you could get to the side-by-side format? Michael D. Casey: We're taking it a step at a time. We've got some portion of about a dozen of them open right now, and we're not in a sweat to open up stores that don't provide good returns to our shareholders. So we're pleased with the early progress, the response that the consumers were having to the stores. I'd encourage all to go out and see these stores. We're happy to give you the locations. And -- but we've been out in the stores, and we've spoken with the store associates, with the consumers and we're seeing a good response. Typically, the response that you hear when the consumer comes into the Carter's store is they say, "Geez, we didn't know OshKosh even had stores." Because most of the stores we have for OshKosh are in outlet center locations and only about 5% of young children's apparel is bought in outlet centers. So the whole objective is to bring the brand closer to the consumer in a beautiful format, attach it to Carter's. Carter's has natural traffic to its stores and enables us to offer them an assortment for the older child. So Carter's has a beautiful product offering for very young children. OshKosh product offering skews to the older child. So the side-by-side store initiative enables us to support what the original investment rationale was for OshKosh to acquire a wonderful, complementary brand to Carter's. And now we're making that product offering more convenient for the consumer. So we'll do 24 this year. And as I said, if we're happy with that performance, our guess is that we would do some portion of 24 stores next year and then we'll walk it up for them. What the ultimate potential is? Too early to say. We'll see how they perform, and we'll keep you posted on our progress. But we're very pleased with the store economics, much more profitable store format than we had been seeing with prior models. Carla Casella - JP Morgan Chase & Co, Research Division: And then is it -- are you having good opportunities on the real estate side? Or is the real estate market getting any tighter in terms of finding good locations? Michael D. Casey: Yes. Good question. There's plenty of real estate. It's actually become a significant point of interest with the property owners. They see it as a traffic driver to the centers. They see it as something that's unique, it's different. The consumer can come into one store and easily cross over to the other store and then have one convenient checkout. So they think it's a traffic driver for the centers, and we're seeing a lot of interest from the property owners. Carla Casella - JP Morgan Chase & Co, Research Division: Okay. What percentage of your stores now are mall versus strip versus outlet? Michael D. Casey: I think -- probably best to think we have outlet stores, and the lion's share of our stores are outlet stores. Of the 170 stores we have, probably some portion of maybe 25 to 30 are outside the outlet. So think of it as outlet stores versus brand stores. We have -- we probably have a half a dozen stores in malls, but there's not a significant difference between that format from the typical brand stores we'll open up in strip centers. Carla Casella - JP Morgan Chase & Co, Research Division: Okay. And then I just have one question on the promotional environment in department stores. And with JCPenney returning to promotions, can you just comment on what you're seeing there? Brian J. Lynch: I would say the retail environment continues to be highly promotional. Many of the retailers, particularly in the specialty markets, are offering strong deals that work through their inventory based on those macro factors we said before, warmer fall, traffic declines during the situation in Washington. Q3, we were comparable with the exception of, I'd say, Carter's late September. We did take some additional steps to make sure that we were going to Q4 cleaner than the past. Consumer spending is always a point of risk, and I think consumers' confidence was clearly impacted during the shutdown. If you look at shopper traffic, the traffic has improved recently. But overall, the promotional activity, I think, is going to be at least as impactful as last year given what folks have gone through. We do feel good about our plans for the balance of the year and we're moving forward.

And we go next to Steve Marotta with CL King & Associates. Steven Louis Marotta - CL King & Associates, Inc., Research Division: Regarding the slippage in on-time deliveries in Q3 and that spilling a bit into Q4, can you quantify the differential there? Can you quantify the improvement in Q4 and also comment on preventative measures for the first half of next year and beyond? And a quick follow-up to that is interest expense expectations in the fourth quarter. Richard F. Westenberger: Sure. On the last question, Steve, interest expense is probably going to be something around $6.5 million. So we have the additional financing that's driving that. On airfreight, we had previously called out that we expect to spend $4 million to $5 million on airfreight in the third quarter. We came in at the lower end of that range for the third quarter, but I'd say our performance from the factories continues to be less than what we would like it to be. We've seen a trend towards some improvement, so likely to still have some additional airfreight expense that comes through the fourth quarter. There's been a lot of very good work on the part of the supply chain to work with our vendors, work with our factories in Asia. Our head of sourcing just returned from a fairly comprehensive summit meeting with those folks, and it's all about how can we take complexity out of our business. We do have a very complex business model with the channels and the wholesale business and retail, growing direct-to-consumer business, all that factors into how we efficiently get product from the factories back over here to the U.S. And there certainly have been some issues with some of the newer factories that we've added in terms of their ability to keep up with our demand. So it's a comprehensive effort, continues to be underway and we're on top of it. Steven Louis Marotta - CL King & Associates, Inc., Research Division: Would you expect that headwind to slip into next year as well? Richard F. Westenberger: Well, we're certainly hoping for improved performance going into end of 2014.

And with a follow-up question, we return to Taposh Bari with Goldman Sachs. Taposh Bari - Goldman Sachs Group Inc., Research Division: Just had a couple kind of housekeeping items. So first is, as we anniversary, I guess, Hurricane Sandy in November, if you could just give us some context or if you could just address what your comparisons look like through the rest of the quarter given that you're implying an acceleration? Two is, I thought I heard a lot of -- obviously, a lot of commentary around inflation, but I thought I heard, Mike, you say that price and costs are going to be up 4%. So wouldn't those neutralize each other? If you can just correct that. Michael D. Casey: I would say cost in the fourth quarter, we expect it -- unit cost in the fourth quarter are projected to be up more than the average prices. Taposh Bari - Goldman Sachs Group Inc., Research Division: Okay. And then the last question, so I guess the Sandy question, and the other question I have is just kind of philosophically. The composition of your operating margin has changed meaningfully over the past couple of years. The past, I'd say, 2 years, is really driven by cotton deflation and somewhat, I'd say, masked by a period of over investments. So as the cotton tailwinds go away, help us understand how you're approaching operating margin. I'm not looking for a guide for '14, I'm just trying to get a better handle on how you're just approaching that line item. Michael D. Casey: Brian, why don't you comment on Sandy and I'll... Brian J. Lynch: In terms of Sandy, last year, we talked about that was worth about 1 point of comp loss last year. I would say we're hoping for no big storms this year. So that would be helpful. Michael D. Casey: They're rare around Halloween. Brian J. Lynch: Exactly. But our comps last year, in Q4, we were down 6 in OshKosh, we were up 5 in Carter's, but we think that Sandy was worth about a point. Michael D. Casey: With respect to cotton inflation, cotton, I would say, has stabilized. Cotton prices are still higher than last year, but we feel as though at $0.80 a pound, the cotton market is fairly stable. I shared with you that earlier this year, we met with our largest suppliers and they told us not to expect much impact based on what they saw at the time, to see much inflationary pressure because of cotton. The price -- the farmers are planting plenty of it and there would be adequate supply. The focus is on rising labor cost. So you've read plenty of the articles in terms of demand for higher wages, living wages. And our view is we actually think those things are good because it'll provide a more stable workforce and more people will come back after Chinese New Year and you won't see as much turnover and there'll be more consistency in execution. But it does put some pressure on product cost. So it's largely driven by labor, we're keeping an eye on it. We feel as though, to Richards point, we feel as though we have plenty of good margin driving initiatives. We're focused on great product and the best margins on product that's selling well. We've got direct sourcing capabilities, and the analysis that we have seen would suggest that, that has been a net benefit to us relative to sourcing everything through agents. We'll start to see more of a benefit, we believe, from the new multichannel distribution center that will go fully online, full automation, sometime middle part of next year. We'll get the full benefit of that, we hope, in 2015. We're seeing progress with OshKosh profitability, which is weighed on our earnings in recent years. So there's no shortages of ways to improve our margin structure. We're committed to margin expansion. This year, we're on track to have a 12% operating margin. We're working hard to make sure that we can make improvement on that. We just don't know enough about what the fall costs will be. Fall '14, the second half of our year, is the more significant portion of our year. We've got -- we just finished developing the line. We've got the teams in Asia now starting to negotiate prices. So we'll see how that comes back. Just don't have enough visibility on the second half. But we're hopeful that, on a net basis, we have enough initiatives to offset the rising input costs.

And with that, ladies and gentlemen, we have no further questions in our queue. Therefore, Mr. Casey, I will turn the conference back over to you for any closing remarks. Michael D. Casey: Okay. Well, thank you all very much for joining us this morning. We appreciate your thoughtful questions. We hope this call has been helpful to you, and we look forward to updating you again on our progress in February. Goodbye.

And again, ladies and gentlemen, this will conclude today's conference. Thank you for your participation.