John A. Maurer - Vice President, Treasurer And Head Of Investor Relations Lauren B. Peters - Chief Financial Officer, Executive Vice President and Member of Retirement Plan Committee Kenneth C. Hicks - Chairman, Chief Executive Officer, President, Chairman of Executive Committee and Member of Retirement Plan Committee

Paul Trussell - Deutsche Bank AG, Research Division Omar Saad - ISI Group Inc., Research Division Eric B. Tracy - Janney Montgomery Scott LLC, Research Division Robert F. Ohmes - BofA Merrill Lynch, Research Division Stephen Glagola - Barclays Capital, Research Division Sam Poser - Sterne Agee & Leach Inc., Research Division Michael Binetti - UBS Investment Bank, Research Division John Zolidis - The Buckingham Research Group Incorporated Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division Camilo R. Lyon - Canaccord Genuity, Research Division Bernard Sosnick - Gilford Securities Inc., Research Division

Good morning, ladies and gentlemen, and welcome to the Third Quarter 2012 Earnings Release Conference Call. [Operator Instructions] Later we will conduct a question-and-answer session. This conference call may contain forward-looking statements that reflect management's current views of future events and financial performance. These forward-looking statements are based on many assumptions and factors, including the effects of currency fluctuations, customer preferences, economic and market conditions worldwide and other risk and uncertainties described in the company's press release and SEC filings. We refer you to Foot Locker, Inc.'s most recently filed Form 10-K or Form 10-Q for a complete description of these factors. Any changes in such assumptions or factors could produce significantly different results, and actual results may differ materially from those contained in the forward-looking statements. If you have not received yesterday's release, it is available on the Internet at www.prnewswire.com or www.footlocker-inc.com. Please note that this conference is being recorded. I will now turn the call over to John Maurer, Vice President, Treasurer and Investor Relations. Mr. Maurer, you may begin. John A. Maurer: Thank you, and good morning, everyone. We're happy that you could join us this morning to discuss Foot Locker, Inc.'s results for the third quarter of 2012. Earlier this morning, we reported that Foot Locker had record earnings of $106 million or $0.69 per share, a 60% increase over the $0.43 per share that we earned in Q3 last year. As noted in the release, these GAAP results benefited from a $9 million tax adjustment. Without this benefit, which added $0.06 to the results, non-GAAP earnings were $0.63 per share, an increase of 47% over last year. This very strong profit result, another record for our company, brings year-to-date earnings on a GAAP basis to $293 million or $1.90 per share, a 50% increase over the same 39-week period last year. I'm joined this morning by our Executive Vice President and Chief Financial Officer, Lauren Peters, who will begin with a summary of our third quarter and year-to-date financial results. She will also update our outlook for the rest of the year. Ken Hicks, Foot Locker, Inc.'s Chairman and CEO, will then review our progress on several of the key initiatives that the management team outlined in our long-range plan earlier this year. Ken and Lauren will hit the highlights for all of our banners and all regions of our global operations, and we'll leave time for your questions afterwards. I'll turn it over to you now, Lauren. Lauren B. Peters: Thank you, John, and good morning to you all. We truly appreciate your interest in Foot Locker. After reporting comp sales gains for the first 2 quarters that were very strong but which fell just shy of 10%, we were very pleased to report this morning that we not only sustained top line momentum in the third quarter, we are able to call out a double-digit quarterly comp store sales gain. Our 10.2% comp store sales gain in Q3 brings our year-to-date gain to a very strong 9.9%. We continue to execute well in terms of translating those top line gains into record bottom line results. The non-GAAP earnings of $0.63 per share that John mentioned was the highest level of Q3 earnings in our history as an athletic company. Our year-to-date EBIT margin flow-through, in other words, the increase in year-to-date EBIT divided by the year-to-date increase in sales, is almost 40%, indicative of solid expense management even as we invest in programs to drive traffic and increase productivity and as we tapped many exciting new ideas for our stores and Internet sites. To focus on the top line first. Our domestic stores collectively comped up in the low-double digits in the quarter. The only division with a comp store loss was Lady Foot Locker, which Ken will touch on during his remarks. The best performer was once again Kids Foot Locker, with a gain topping 20%. Champs Sports, domestic Foot Locker and Footaction all had double-digit comp gains for the quarter. The gain at Champs was especially impressive coming on top of a similar double-digit gain last year for a 2-year stacked gain of approximately 30%. Foot Locker Europe finished with an essentially flat comp for the period. As we noted on our last call, Foot Locker Europe started the quarter on a positive note in August and sustained that low-single digit gain performance through much of September. However, after the customer had kept their appointment with us during the important back-to-school selling period, October softened somewhat, giving us a flat comp sales performance for the quarter. Ken will also touch on our European initiatives a bit later in the call. Our other international divisions performed well, with Foot Locker Canada posting a high-single digit gain, and Foot Locker Asia/Pacific coming in with a mid-single digit increase. Sales in our Direct-to-Customer businesses were up 18.3% overall, with our athletic banner Dot-Coms up almost 50% in the aggregate. Included in the overall gain was a high-single digit comp decline at CCS.com, which continues to redefine its place in the very promotional skate category. Excluding CCS, the 2-year stacked comp results of our digital business continued to exceed 40%. Our comp performance was very consistent across footwear, apparel and accessories, each within a percent or 2 of the overall 10.2% comp. Within footwear, the kids' category was strongest, posting a gain in the high teens across all of our divisions. Women's footwear was up slightly as gains across most divisions more than offset the decline at Lady Foot Locker. Within men's footwear, the basketball category continues to show great momentum, with a gain of more than 20%. Our customers were drawn to the key player shoes, such as LeBron, Kobe and Rose. The Jordan Brand, including Jordan Classics, is exceptionally strong with all of the Retro shoes selling through very well. Basketball is also becoming increasingly relevant in Europe, where the growth comes not from our key player shoes but in Jordan and a variety of classic basketball silhouettes such as the Blazer and Adi Hardcourt. Running was slightly positive overall, with gains in our U.S. stores and online sites, partially offset by weakness in Europe, where some customers are migrating out of running and training styles into the court styles I just mentioned. The Nike Free is clearly the running shoe of choice for many of our customers. But technical running shoes from the likes of ASICS and Mizuno are doing well, as are other Nike running models such as the Flex and Dual Fusion. As I mentioned, apparel was up low-double digits, with a solid gain in the teens in the U.S., slightly offset by a small comp decline in European apparel sales. Branded apparel continues to outperform private label. And the back-to-school uniforms certainly seem to include at least one verbiage T-shirt very likely produced by our Team Edition facility. Within accessories, our gain was led by high-performance socks from Nike, Adidas and Jordan. Hats were also doing really well, as our customers are literally looking for us to provide them with a complete head-to-toe hookup. By month, we posted low-double digit comps in the key back-to-school months of August and September and a high-single digit comp gain in October. If you look at it on a 2-year stacked basis, our comp pattern was steady throughout the quarter in the high teens. Our gross margin rate rose to a solid 33.1% in the third quarter, an increase of 60 basis points compared to last year. The margin story is similar to last quarter in that the gain was a combination of occupancy leverage, from which we picked up 100 basis points, partially offset by a 30-basis point reduction in merchandise margin and another 10-basis point decline due to lower shipping revenue from our Direct-to-Customers sales. In our U.S. stores and online sites, we were successful in offsetting the reduced initial markup percentages from our vendors, which we have described on previous calls, by lowering our markdown rate. As a result, our merchandise margins outside of Europe held steady year-over-year. The 30-basis point decline in merchandise margin primarily stemmed from Europe, where we continue to take additional markdowns in order to keep our inventory position current and on trend. That said, our European business remains productive and profitable, and we believe we are taking share in several markets. In fact, our profits in Europe during the quarter were higher than a year ago, even after backing out the $7 million adjustment we took last year related to European vacation accrual. Mentioning that adjustment from last year brings me to SG&A, which improved by 210 basis points in the third quarter to a rate of 20.9% compared to 23% last year. Even excluding the European adjustment of a year ago, SG&A still improved by a very strong 160 basis points. SG&A leverage starts with maximizing the productivity store wage expense. But we continue to invest in tools and technology to drive improvement. First, we've installed a program to help us manage our payroll hours and make sure the right associates are on the sales floor at the right time. Second, we have rolled out a tool to improve the efficiency of the associate hiring process. And third, we continue to expand traffic counters to more doors, which allows us to measure conversion and implement programs to propel sales per payroll hour even higher. Looking at our year-to-date SG&A performance. We have produced a sales gain of $348 million, with an SG&A expense increase of only $12 million. We achieved this tremendous leverage, while making incremental investments in powerful marketing programs, a great example of which is the Foot Locker Approved campaign that we launched this summer, which clearly helped drive increased traffic and sales in our stores during back-to-school. Our depreciation expense was $30 million for the period, up $3 million from last year, reflecting the increased level of capital investments we're making in the business. Meanwhile, interest expense was flat at $1 million. Our GAAP tax rate for the third quarter came in at 31.7% due to the settlement of a foreign tax audit, which allowed us to reduce tax reserves established in prior periods. Releasing those reserves reduced our tax expense by $9 million or $0.06 per share. On a non-GAAP basis, excluding that benefit, our effective tax rate was 37.5%, in line with our expectations. A GAAP to non-GAAP reconciliation reflecting this tax adjustment was included in this morning's press release. The bottom line net income total of $106 million in Q3 is the highest level of earnings of any third quarter in our history as an athletic company and more than 60% higher, $40 million higher to be precise, than last year. On a year-to-date basis, our GAAP earnings in 2012 are up almost 50%, $96 million higher than a year ago, which was our previous best-ever year. Turning to the balance sheet. Our inventory increased 3% compared to last year. Given a total sales increase of more than 9%, it is clear that our turns are improving and our inventory is fresh. We feel well positioned in all of our markets for the holiday selling season. Our cash position continued to strengthen as we ended the quarter with $853 million of cash and short-term investments. We spent approximately $30 million in the quarter to repurchase 841,000 shares. We've already repurchased almost 3 million shares this year under our $400 million share repurchase program at a cost of about $94 million. We are also on track to spend approximately $170 million in capital this year, as we continue to invest in high-return potential projects to drive future business performance. In a few minutes, Ken will talk about some of the initiatives we are testing that can justify additional capital dollars in the coming years. We're still developing our 2013 capital program. But for right now, suffice it to say, as we did on the last call, that the potential exists to significantly increase our capital spending over the next few years. On the real estate front, we have closed 72 stores and opened 70 year-to-date, bringing our store count to 3,367 at the end of October. Many of the new stores are in Europe, which helped propel our profits there that I noted earlier. We have a handful of new stores still to open this year and as mentioned on the call in August, we are on track to close slightly more than 100 stores for the full year as we continue to aggressively tackle the least-productive stores in our fleet in order to improve our financial returns and overall productivity. Before I turn the call over to Ken, let me turn to the rest of the year. First, as everyone knows, the quarter got off to a challenging start with some truly severe weather events. But despite that, our comp sales through yesterday are actually up mid-single digits. But let me pause here, Ken, since I know you'd like to comment on Sandy. Kenneth C. Hicks: Yes. Thanks, Lauren. First of all, I want to express my deepest sympathies to everyone who suffered losses and hardships due to Hurricane Sandy. Fortunately, all of our associates are safe, but many did experience significant, even devastating damage to homes and property and some remain dislocated. Through our charitable entity, the Foot Locker Foundation, we have created a fund to support our associates most directly impacted by the storm. And we've made donations to the American Red Cross, and our operating divisions have also donated shoes to local charities. I was extremely impressed by the dedication of so many of our associates who, as soon as the storm passed, went to extraordinary lengths to get to their stores, distribution centers or offices to keep the business running, if not quite at top speed, then as close to it as possible. I want to thank all of them. It was a tremendous effort. Lauren B. Peters: Indeed, it was extraordinary. At the peak, we had about 200 stores closed for several days, but we got all but a handful of the stores open very quickly. Given the size of our global footprint, we do not expect the storm to have a material impact on our fourth quarter results. And as I said, month-to-date, comps are up mid-single digits with most of the sales trends I mentioned for the third quarter still in place. Specifically, Europe's comps are running down somewhat and Lady Foot Locker is also negative. The rest of the key banners have good positive momentum. We are planning comps for the fourth quarter to be up toward the upper end of mid-single digits. Please remember that the fourth quarter this year contains an extra 14th week. This extra week takes us into the beginning of February, one of our biggest months of the year. This shift does not in itself impact comps. However, our current forecast is that the week could add about $0.10 per share to our reported earnings. Gross margin is expected to be up 50-or-so basis points on a comparable 13-week basis, in line with recent quarters. The same margin dynamics, namely lower IMU, offset by lower markdowns with pressure from the mix between U.S. and international sales are expected to continue in the fourth quarter. The extra week, which contains no occupancy expense, will, of course, provide significant incremental leverage to the overall margin rate that we report. Similarly, we intend to continue to leverage our SG&A expense on a comparable 13-week basis, and the extra week will lower the rate about 40 basis points even further. Our tax rate in the fourth quarter is expected to be more in line with our new normal run rate of between 37% and 38%. The greater contribution of earnings coming from the U.S., where the tax rate is higher than our average international tax rate is pushing the blended rate up from the trend of the last few years, which was around 37%. Finally, currency movements created profit headwinds of about $0.01 per share in the third quarter. This equals the impact we saw in the second quarter and brings the year-to-date impact of exchange rate changes on our reported earnings to a minus $0.03. Having given you all of the financial details, I'd like to turn the call back over to Ken, so he can paint the bigger picture, as well as address several of the key initiatives we have underway. Kenneth C. Hicks: Thanks, Lauren, and good morning. I'd like to add my thanks to everyone for your participation on today's call. Let me first spend a few minutes developing some of the themes that Lauren touched on. For example, she noted the potential for an expanded capital expenditure program in the next couple of years. As you've heard us say, we're actively developing and testing new prototype stores for virtually all of our banners. The banner that is furthest along in that process is Champs Sports. And so far, the results of that banner's test stores have been quite good. We want to see how they perform during the holiday season before making a final rollout decision. But we're optimistic an accelerated remodel program for that banner will produce significant returns for the business. Moving to Foot Locker in the U.S. That banner has a couple of prototype stores in operation, one in Smith Haven Mall on Long Island and the other at Willowbrook Mall in New Jersey. We are still in the early days for those stores, and we're learning from them. The initial reads are definitely encouraging, and we plan to put in place several more test stores this quarter and more in the first quarter. We've also been testing Kids Foot Locker stores. We've put in place pop-up Kids stores in malls with strong children's business within the regular Foot Locker to test whether the malls can support both banners profitably. The results have been encouraging. We're also testing a new design of Kids Foot Locker and trying out Kids Foot Locker stores in Europe, where we think the banner will translate well. Turning to our women's business. This is still a work in progress. As Lauren mentioned, Lady Foot Locker posted negative comps for the quarter. Although disappointing, it wasn't a huge surprise because we're really moving that business to reach a different customer. And I've certainly been around long enough to know the old retail cliché that when you fire a customer, they know right away. But when you hire them, it can take a while for the new customer to find you. We are really repositioning Lady Foot Locker to cater to that active woman in her 20s and 30s with a premium assortment of stylish, great-fitting, high-performance athletic apparel, shoes and accessories. The 14 rescanned Lady Foot Lockers feature all the premium athletic brands, such as Nike, ASICS, Adidas, Under Armour, New Balance and Reebok, that fit the active woman's on-the-go lifestyle. The new banner that we just announced, SIX:02, is targeting that same customer, taking a strong position on fitness and performance that is even more pronounced than the rescanned Lady Foot Lockers. We will support the broad product assortment in SIX:02 with well-trained, highly knowledgeable store associates and an exciting new store environment. The 3 SIX:02 stores are almost 4,000 square feet, larger than our average Lady Foot Locker. These test stores will be open for Black Friday. One is in the Stamford Town Center in Connecticut, one is in the Willowbrook Mall in New Jersey and the other is in North Star Mall in San Antonio, Texas. It is far too early to tell whether the repositioning moves we're making in the women's business will produce the returns necessary to justify a major rollout. But we know we had to make the move because the productivity of the Lady Foot Locker business over the last several years has not compared favorably to our male banners. It will take some time for the customer to find us and see the compelling product stories we believe we have for her in both Lady Foot Locker and SIX:02. However, every day, we're learning more about how to deliver the shopping experience and merchandise assortment that she wants. And we have a talented, highly motivated and dedicated team here that keeps making strategic adjustments to the formula. And I'm confident we're headed in the right direction. Let me turn now to Europe. As Lauren mentioned, we posted a flat comp there. Under the challenging economic circumstances faced by most of our customers there, we aren't disappointed at that result. At the same time, we continue to implement initiatives to strengthen the business even more. For example, with traffic in Europe relatively weak, we are heightening the focus of our store associates on customer conversion. Another example is our push to take advantage of the recent fashion trend shift in Europe towards basketball. As a category, basketball is still not nearly as important in Europe as it is in the U.S. And as Lauren mentioned, the gains are somewhat concentrated in certain classic styles such as the Nike Blazer and the Adi Space Diver. Performance players' shoes are not yet as large a factor in Europe as they are in the U.S., although the Jordan Brand is growing nicely in several key European markets. In any case, we know a little about basketball business here at Foot Locker, so we're excited about the shift. The European prototype store concept that we introduced last year, the Locker Room, is still being tweaked, with the U.K. stores not yet producing the returns required to justify a major rollout. However, we remain cautiously optimistic that the banner will find more success once we open some stores on the continent, where the promotional environment is not quite so intense. Overall, the Foot Locker team in Europe is doing a good job navigating through the macro environment, keeping inventory fresh and relevant and maintaining a highly profitable business. I don't want to forget to mention the very strong performance of our Direct-to-Customer business. The consistently high top line growth we're seeing there, accompanied as it is by strong profitability, is a reflection of the terrific team we have in Wausau that drives the Footlocker.com and Eastbay business. We continue to invest in our sites both in terms of providing entertaining, engaging content featuring authentic lead athletes and in terms of developing and optimizing the sites for all sorts of devices, from smartphones to tablets to old-fashioned PCs, like John sometimes still uses. We certainly see the digital business as having the potential to deliver the highest top line growth over the next several years, and we intend to invest in the business to maximize its potential. Lauren mentioned the big picture. And while it is tempting to look back on our 11 consecutive quarters of meaningful sales and profit growth, a record of which we are certainly very proud, around here, we're always looking forward. We remain confident in the near-term prospects for our business. However, the economic picture in the U.S. is far from rosy -- or of particular concern to me is the likely payroll tax increase slated to kick in at the beginning of the year. Anything that takes money out of the pockets of our customers creates a more challenging business environment. I certainly expect that our political leaders won't lead us over the fiscal cliff, but we'll have to manage through whatever economic circumstances we find ourselves in. We've produced solid results for the last few years in less-than-ideal economic times, and we are fortunate that our key vendors, Nike, Adidas, Converse, Jordan, ASICS, New Balance, Mizuno, Reebok and Under Armour, continue to develop innovative product and great ideas as fast as ever. Our customers remain excited by the stories we're telling and the product assortments they find in our stores and on our digital sites. Before we get to your questions, I do want to pause again, and on behalf of the executive committee, personally thank the entire team at Foot Locker, who delivered another stellar quarter and who, as I said, went to extraordinary lengths to keep our business moving forward after taking Sandy's best shot. Fortunately, the much bigger selling period in the quarter is ahead of us. Our plans are in place. And now it's time for us to execute and bring home another record year, not just for our shareholders but for our customers and our associates as well. Thank you. We'll be happy to open to questions now.

[Operator Instructions] And our first question comes from Paul Trussell with Deutsche Bank. Paul Trussell - Deutsche Bank AG, Research Division: Just to start off, can you just give a little bit more color, Ken, on what you've seen initially through the Lady Foot Locker remodels? And if you can just give a little bit more color on SIX:02 and how it will differentiate from the remodeled Lady Foot Locker stores? Kenneth C. Hicks: The Lady Foot Locker stores, much more apparel presentation and apparel-driven, more performance-oriented, not as much on the classics and fashion shoes. And we've got 14 of them up, and they are performing better than the overall chain. But we're still learning, and we've got to make sure we keep them in stock on the apparel, that we've got the right presentation of the performance, that we tell the customers what's there and the staff. So while they're performing better than the chain, some are performing much better and some are performing just at the chain. So we're looking for more consistency as we have in our other remodels. With regard to SIX:02, SIX:02 is really taking that and putting it on steroids. It's a much stronger performance environment, very apparel-driven, be more than 50% apparel in terms of presentation. And it'll be a much friendlier environment. It's a bigger store, so we'll have more space to tell stories and communicate to that customer the full assortment of what we have. Paul Trussell - Deutsche Bank AG, Research Division: Okay. And it was good to hear that merchandise margins were held flat in the U.S. But if you can just give us some color on expectations going forward, and especially talk about Europe. Will we start to see some relief there from a merchandise margin standpoint now that inventories are clean? Lauren B. Peters: Yes. Well, as we said, the expectation is that the dynamics we saw in the third quarter will continue into certainly, the fourth quarter, and we'll see about next year as we get closer. But that dynamic is that we have lower IMU that we are managing to offset at least domestically with lower markdowns. But in Europe, we have wanted to keep the inventory fresh and have had to take some additional markdowns to do that. So we would hope that begins to mitigate. And certainly, as we see some strength in basketball, which is the beginnings for us, maybe that will help us there. But the dynamic of shipping revenue, that -- I don't see that abating. The customer loves free shipping. Paul Trussell - Deutsche Bank AG, Research Division: Great. And just lastly, could you speak about the trends in footwear versus apparel margins this quarter? Lauren B. Peters: Well, I can tell you that we narrowed the gap, but we are still not declaring victory with apparel margins ahead of footwear margins. Kenneth C. Hicks: It's about as close as you can get, but I want to see it for a while before we say we're there. Lauren B. Peters: Yes.

And our next question comes from Omar Saad from ISI Group. Omar Saad - ISI Group Inc., Research Division: Ken, I would love to hear a little bit more of your view on the -- your personal view on the macro consumer environment. Heading into the holiday, heading into 2013, there's such a lot of reasons you're talking, whether it's natural disasters or the fiscal cliff, you have some tax changes, Europe crisis, which is ongoing. You guys don't seem to be really missing a step. And I wonder if you're seeing your consumer show an underlying strength that may be kind of overcoming all these things going on out there. I wonder if you've got any personal views on that, or you're seeing variations across regions, across consumer demographic. Kenneth C. Hicks: Well, we are not exempt from the rest of the world, although the customer appears to be willing to spend the discretionary money they have on our products. And part of that is we've got -- it's something that they love and makes them feel good. And part of that is there's a lot of new and exciting things out there. We do see, particularly in Europe, the more challenged countries are more challenging. Greece and Spain are more challenging. Germany, France happen to be stronger countries because their economic environment is strong. If I knew how it would play out, I probably wouldn't be on this call. But I'm assuming that we will work through this, we have through the years, and that -- or I should say the governments and the economies will work through this. There will be some pain, and we will suffer some of that. But I'm also assuming that because of actions we've taken and how we plan and work and the product that we have that we will fare better than others. Omar Saad - ISI Group Inc., Research Division: Fair to say, I mean, as you talk about kind of increasing the capital commitments over the next 2 years, which is pretty exciting. And I don't know if it's clear, whether it's more centered around remodels versus square footage growth. But you have to have a certain level of confidence or comfort with kind of the ongoing economic environment, given your willingness to really kind of ratchet up the capital spend. Kenneth C. Hicks: Yes. And as you look at our capital and the investment, there are really 4 major things that we're focusing on. One is digital, which we look at as an opportunity for sales growth and to drive traffic. Another is that shopping experience, to make us more productive, to drive higher sales, which is one of the reasons, quite frankly, we've closed more stores. And we will continue to close unproductive stores. Improving our overall productivity to improve our profitability, with systems like what we've done with our time management system but also warehouse management system and a better allocation system, and in Europe, where we can increase share and position ourselves for the future. Because as you look at the business, you got the near-term, intermediate-term and longer-term. And near-term, we feel good about where we are with the product, the promotions we have and the customer reaction to that. We feel very good about that. Intermediate-term, we are making sure that we set ourselves up with the renewals that we're doing, the remodels, the product mix, growth in our children's business and apparel and making sure that we have a strong position there. And longer-term with by looking at what we're doing in digital, by making sure that we're positioned properly in Europe when it comes back, by being a player in team sports, and with the new formats that we're testing and looking at. So that we are positioned strongly in the near-term, we make sure that we're going to keep that going in the intermediate, and we will be an important player in the longer-term.

Our next question comes from Eric Tracy from Janney Capital Markets. Eric B. Tracy - Janney Montgomery Scott LLC, Research Division: I guess, Ken, clearly on everyone's mind, beyond just the macro uncertainty, is, I guess, the state of this "athletic footwear" cycle. Maybe you can just speak to again the visibility that you all have in terms of the product pipeline, not only through holiday but into spring next year, kind of what gives you confidence from a vendor perspective of what's out there, be it in basketball or running, that again sort of helps sustain this momentum that we've seen in the last couple of years. Kenneth C. Hicks: Sure, Eric. There's 2 things. So one is we keep talking about the cycle. And there's 2 things going on. One area is an athletic footwear trend, and it's actually an athletic trend. More people are wearing sneakers now than a year ago. Next year, more people will be wearing them, and that benefits us. There's also because of what's happening with health and wellness, more people are being more active. So the athletic apparel will also become more important. So there's that trend. There is definitely right now a cycle of elements that accentuate that trend, things like color, technology, fashion, just what people are doing, the fact that the elite athletes are all doing well. Those accentuate that trend. And what we see is that it will -- there's a lot of great product ahead of us. We see great new launches. We see terrific -- based upon the key athletes, we haven't taken the full benefit of some of those. Obviously, you've got people like Jordan and LeBron. Now that he's really reached that elite level, he's going to become more important. Kobe continues to be an important factor. But you've got the push of people like Rose and Kevin Durant that are going to add to the elite athlete. You also have the importance of color, and what we're seeing in color. And so you have all of the key players, and then players like ASICS and Mizuno that are really driving color. You have new players like Under Armour coming out with great new shoes, like the Spine. And they're pushing very hard, and they're pushing hard in apparel. Reebok is working very hard to make sure that they are -- continue to maintain their relevance. Adidas is going to be a stronger player, not just in basketball and the classics but in running. So all of those things, we can see out into the -- from the near to the intermediate future look good. Lauren B. Peters: And the customer responds to that newness. Kenneth C. Hicks: Yes. They like the newness, they like the look. And so from what we see, and that's why I say the near-term, the intermediate-term, those are things that we have some visibility to, we feel good about. And we continue to position ourselves for the longer-term. Eric B. Tracy - Janney Montgomery Scott LLC, Research Division: Okay, fair enough. I appreciate that. And then just as it relates to the apparel business, I understand that, that continues to improve from a profitability perspective. But maybe just stepping back, where you feel like the assortment merchandising is -- again, I hate to use the phrase sort of what inning we're in. But how you feel like reassorting that mix focused more on branded, focused more on performance product as you look across the fleet? Kenneth C. Hicks: Well, I would say we're in the fourth chukker. They play 6 chukkers in polo. And we have built a much stronger position with branded, but there's still things that we know we can build and expand upon both in terms of the fashion elements and the performance elements. Where we have had the biggest challenge because we had a big private label business that was commodity, and as we back off on that and go into some performance elements, like our women's Actra business, that takes some time to build up. And so you've got the negative, but you don't have the full positive yet. And as we learn and develop new elements within each of the banners and they feel comfortable, as Footaction, we make sure we have the fashion elements of that. In terms of Champs, we just went through -- going through the shift in the NFL from Reebok to Nike. That will take time to continue to grow and develop. But that's going to be a tremendous plus for both of our companies. So there's things going on. We're nowhere near this being played out, but we've made a lot of progress. And we've seen it both in terms of sales, it's been up in the 20% range every quarter, and in terms of the improved profitability performance.

And our next question comes from Robbie Ohmes from Bank of America. Robert F. Ohmes - BofA Merrill Lynch, Research Division: A couple of follow-up questions. The first is on kids', just the amazing momentum there. Maybe a little more comment on is that all style takedowns, adult takedowns driving that? And how sustainable is that unbelievable comp trend and why? And then the second question would just be on running. Maybe a little more on what you see there. Could there be things in that pipeline you're speaking of that could get your running business to reaccelerate again? And maybe weave into that the Flyknit and the Nike+? I think some analysts have put some big numbers out there on how big the Flyknit could be and I haven't heard anybody saying much about that. Kenneth C. Hicks: Okay, sure. On kids', I do think it's sustainable. There's not a lot of places now for better kids' shoes. And we are the place to go to get better kids' shoes because you've got kids and other people with kids. All they want to wear is sneakers, which is great because they'll grow up just wanting to wear sneakers, too. So we are positioned well there with our chains. But it is the growth of takedowns and shoes that look -- that are more adult-like, both things -- the elite athlete shoes, LeBrons and Kobes and Jordans. But also things like the Free are good shoes. And so we're seeing that. We're also seeing a resurgence in kids' of the classics. The All Star or the Samoas are doing a great job in kids' because they're just looking for a good shoe that, that the child can wear that's got some color, has a good look to it. And so it's a mix of both new and exciting takedowns and the classics. But it's more, I think, that people are just paying attention to it, both the vendor, the retailer and the parents. With regard to running, I think running is going to continue to improve. And as that improves, we will continue to do better because we're not as penetrated, but we're getting a lot better at it. Now there are some exciting new things, the Flyknit, the reason I don't think anybody has talked much about it is there are not a lot of them out there. But as the quantity grows and we're getting more in our stores, and we'll have many more in our stores next spring, we think that, that's going to be a big shoe. It's a terrific shoe and a great idea. We're improving our performance in some of the classics in terms of running, making sure like the Pegasus, that we have a stronger position with that, as well as the Lightweights. We're building our position with people like ASICS and Mizuno. They are doing a terrific job with their product and as well as Brooks, and we're building our position there. And then there are new people getting into the business in a stronger way, like Under Armour and Adi. And I think you put that together, the specialist, Nike, strengthening their position significantly, and some new players. And I'm very optimistic and bullish on running. Robert F. Ohmes - BofA Merrill Lynch, Research Division: Just last question, Ken. The Nike+ shoe, how did that launch go versus your expectations? And is that expected to do well this holiday? And what do you see in that for next year? Kenneth C. Hicks: I think the Nike+ is -- it did fine. But it's going to take a while for the customer to fully understand all the features and benefits. I see the Nike+ kind of like the Free. It took the Free about 4 or 5 years to become an overnight success. And same thing is going to happen there, that people -- I'm wearing a Nike+ band right now, keeping track of my fuel points. More people are going to care about that and look to track their mileage to compete against themselves or others. And that's what the Nike+ and the miCoach both do.

And our next question comes from Stephen Glagola from Barclays Capital. Stephen Glagola - Barclays Capital, Research Division: Just one question on the pricing side of it. Heading into holiday and as you look to spring here, where are we in terms of seeing some of the price increases from some of your vendors work their way through the supply chain? Kenneth C. Hicks: I would say we've had some and we continue to have some. They've moderated significantly. So they're working their way through. And as cost go up or cost go down, we're seeing the adjustments on pricing. But we're working with the vendors to make sure it doesn't impact the sales. Stephen Glagola - Barclays Capital, Research Division: Okay, great. And then I guess, just looking at Black Friday here coming up, any initiatives that we should look out for in the stores? Kenneth C. Hicks: We have a tremendous, tremendous lineup -- it's actually the whole week. And we have a press release coming out about noon, and I don't want to preempt that. But it will be some exciting things all during the week with launches from Jordan and Nike and Adidas. And we've got Rose and Foamposites and Jordan Retros and new LeBrons. So it's a big, big week.

And our next question comes from Sam Poser from Sterne Agee. Sam Poser - Sterne Agee & Leach Inc., Research Division: A couple of questions. Number one, in Europe, are you benefiting from -- like what happened in the U.S., when the economy got really bad, and you saw a lot of little guys close. Are you picking up extra business because just basically the power that you have, the size of your business, the financial setup and everything? Kenneth C. Hicks: Yes. We are picking up share. We are seeing some of the small guys close. We entered, for example, Czechoslovakia, we bought half a dozen stores -- or I said Czech, that shows you how old I am, the Czech Republic. And so there, we're seeing the benefit, if you will, of the tough times. Sam Poser - Sterne Agee & Leach Inc., Research Division: And then you sort of said -- I've like 2 more questions. You said it in general, but the e-commerce by banner, you commented how the banners were up 50%. Can you give us a little more detail there? And then lastly, can you talk about how many stores you plan to open in the fourth quarter? You talked about the closings for the full year, and then how you're thinking about stores opening or closing for 2013. Kenneth C. Hicks: Well, the e-commerce by banner, actually, they're pretty consistent. Our largest one is Footlocker.com. But the growth is pretty consistent, if you will, that it's significant. With regard to -- and I'll let Lauren talk about the specifics for this quarter. But next year, we have not finalized the plans. But our focus is going to be on opening the right number of stores, still looking at Europe is where we're the most underdeveloped. But really, closing and openings is going to be focused on productivity, what's going to give us the biggest sales and profit growth. Lauren B. Peters: And for the fourth quarter, openings about 10 to a dozen. Closures, we've got about 25 still to go.

And our next question comes from Michael Binetti from UBS. Michael Binetti - UBS Investment Bank, Research Division: So Ken, you've got a lot of growth drivers out there. And we can hear the confidence from you on some of these things, like the new Champs shops, the new Champs reimages. Other things like the reimages at Lady Foot Locker, CCS or the Locker Room sound like they haven't turned the corner yet. Can you just talk a little bit about how you look at those initiatives and how you make decisions on a go-forward basis as to whether to keep pushing ahead versus pulling up anchor? Kenneth C. Hicks: Well, we look at the performance and the numbers, and then see if they're headed in the right direction or wrong direction, and then do the economic analysis. This is why we prototype, test, and then roll out or we don't roll out. I think the Lady Foot Locker -- we're seeing the benefit of the Lady Foot Locker. It's just we want to see more, so we're going to continue to tweak and develop that. Locker Room, it's an unusual situation. You've got to put it up against -- we opened it the way we did because of the Olympics. But now we've got to get a better test and check the Europe because, believe it or not, the U.K. is not all of Europe or indicative of all of Europe. And then CCS is something that we continue to evaluate. We had some good success in the first half. We continue to make adjustments. And it's been -- the challenge we have there is the industry's having a tougher time. The whole skate-surf business is having a tough time. But we will evaluate that and make the call at the appropriate time. Michael Binetti - UBS Investment Bank, Research Division: Okay. And then if I could just ask on gross margins. How should we think about gross margins looking ahead a little bit, maybe beyond just the near-term here and in 2013? And do you think 2013 is a merchandise margin-positive year? Obviously, the brands have taken some price increases on you and maybe you haven't taken as much but -- or maybe you're just on a different schedule. But do you think 2013 becomes a positive merchandise margin year? Lauren B. Peters: Thank you, Mike, for asking that because I didn't really answer that one. Paul asked the question about the margins. We still remain optimistic about merchandise margins from the things that remain in our control, like the allocation system that we're investing in. We did a test with that this year, and we're pleased with the test results, so we're going to go forward with that system investment here in 2013. And certainly, as we allocate the products better, the first time around, you get more full-priced selling, which will support better merchandise margins. So we still think that there's opportunity on merchandise margins. The tree may -- the fruit may be higher up in the tree, but it's still there to harvest. Michael Binetti - UBS Investment Bank, Research Division: Okay. If I could sneak in one last question. Ken, your comment about technology as a footwear cycle driver earlier was interesting. If you look at the data, there's been some strong trends in the lower-priced running SKUs, and that's probably helped by the popularity of Free. And maybe some customers are -- that are just fashion customers are buying basketball or buying running last year. But I mean, couldn't you make the case that the pressure you're seeing at maybe some of the high end of running could be indicative of a slowing of the cycle if you're not able -- if the brands aren't able to push the customer towards the high price points there as they roll out new technologies again? Kenneth C. Hicks: I don't think so based upon what we're seeing with what's happening with Mizuno, Brooks and ASICS. So I think that -- and we have underplayed the technical running from Nike and things like the Pegasus. And so there's an opportunity for us to step up there. So there is a customer who's just in it for looks, but there's also the technical customer. And so the good news is we offer both because we've got Free and we've got Dual Fusion, we've got Lunar. So we're able to give the customer what they want.

And our next question comes from John Zolidis from The Buckingham. John Zolidis - The Buckingham Research Group Incorporated: Question on the plans to significantly increase potentially capital expenditures next year. Could you just let us know when you're evaluating the deployment of capital, what criteria you're looking for in terms of the return? And then how would you compare that return to share repurchase, for example? If you can buy back your stock at less than 6x EBITDA, you would get a nice return for your shareholders; how you contrast that with the investment that you're considering in the business? Lauren B. Peters: Yes. Okay. So all of our projects that we invest in, be it new stores, remodels, et cetera, we hold to hurdle rates of 13% IRR and 11% ROIC. As we look to the results of these initiatives that we're testing, and we're looking for returns, at least that -- or should be actually quite a bit more. Kenneth C. Hicks: But we just conducted a review with the board of the projects of the last couple of years, and they were -- they are significantly more. Lauren B. Peters: So we ran a number of different scenarios that consider these tests playing out a different way and that will drive different levels of capital investment and different timing. We need to get through the holiday selling season to see how those tests perform. And then we will evaluate where we head with which of those capital scenarios with our board in January. So when we come back at first quarter, we'll be able to give you much more insight into that. John Zolidis - The Buckingham Research Group Incorporated: Okay. That's very helpful. Just one follow-up. So after you go through this process on the store remodels, the new formats, et cetera, then the free cash flow that you might still expect to generate, would that be more likely to be applied to additional share repurchase? Lauren B. Peters: Well, we certainly have room still to go on the program that's been authorized, right? We've got a $400 million share repurchase program. We only spent $94 million of it so far. So if returning money to our shareholders both in share repurchase and dividend remains a priority, our first priority is investing in the business to get after our long-term objective.

And our next question comes from Chris Svezia from Susquehanna Financial. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: So I just -- I have a question regarding comps to date. I mean, as tragic as the events were, I guess, mid-single digit is very commendable in terms of the performance. But is it fair to say that if you look at areas outside what was affected or maybe post the events, sort of what's been going on, is it fair to say that the comp performance is stronger than that? Or can you add any color in and around that, if you exclude those areas in markets that were impacted, just sort of what we're thinking about there? Kenneth C. Hicks: Well, it's safe to say that the areas that didn't have stores closed for a period of time did better than those that did. But yes, I mean, areas outside are better. One of the things though to keep in mind, we have demonstrated that during the real key selling periods, we perform stronger, the February, back-to-school, holiday because we've become more of a place people want to go. It's not that we don't perform well during the other times, we just perform better. I think for the holidays, we will perform better. So I feel optimistic, I'm not concerned about being up -- not that being up mid-single digits is bad, but I think that, that's an indicator that the business is still strong even with all of the noise around the election, the fiscal cliff, the storm, Europe. I'm looking at reports that are coming out, most people would feel pretty good if they had mid-single digits. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: Yes, very fair. True. Switching gears, Lauren, for you for 1 second. When you look at -- can you just walk though again the SG&A and gross margin thought process for the fourth quarter? I caught most of it. But can you just walk through that one more time for me? Lauren B. Peters: Yes. So again, this is what we're planning, upper and mid-single digits on comps, 50 basis points on gross margin. And then the leverage that we get on SG&A in the fourth quarter would be consistent with what we saw last year, probably a little bit better than that. Fourth quarter SG&A has a challenge in that the malls are open longer hours and we've got to staff to that, even though not many people like to get up and shop at 2 in the morning. That does put a little bit of a damper on the leverage on SG&A in the fourth quarter. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: Okay. But you mentioned something about 40 basis points SG&A. Lauren B. Peters: Yes. So that's really when you start to look at the effect of that extra week, which will give us a lift in gross margin because there is no occupancy associated with that week, and you get the benefit. And we think it's worth another 40 basis points in SG&A from fixed [ph] within that. But just think about the 53rd week as about $0.10 from where we are. Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division: Got it. Okay. And then lastly, just on the labor scheduling and the systems there, just, I guess, you're very early in that process. Just kind of anything that you've learned from it, anything where you see the bigger opportunities from that? If you can maybe walk through your thoughts there, it'd be helpful. Lauren B. Peters: Yes. Well, it is early days for us in that it went in towards the end of the second quarter. But it really gives us the ability to see how individuals perform by hour of the day and match that up with the traffic patterns so that we've got the staffing right. So we're learning from that and making improvements in the scheduling process. And remember, you've got to train 3,367 store managers on how to get the best out of it. Kenneth C. Hicks: Yes. It not only does it allow us to make sure that we're staffed with the people -- the proper number of people at the right time, it also makes sure that you have your best people at the right time. So it ensures that you have productivity, better productivity. So it's not only an expense saver, it's a sales benefit, too.

And our next question comes from Camilo Lyon with Canaccord Genuity. Camilo R. Lyon - Canaccord Genuity, Research Division: So Ken, my question relates to the price increases that -- really the understory you guys have been benefiting from this year, pretty significant tailwinds to comp growth this year. However, those increases are expected to decelerate. Can you just talk about what leverage you have at your disposal to make up for that deceleration? Kenneth C. Hicks: Well, we are still, even with the higher prices, our units are up and our traffic is up. Mall traffic, I think, depending on who you hear because I quit counting, is flat to down a bit. Our traffic is actually up. Our units are up and our AUR is up. So we've got all of those levers working. And as one -- as price mitigates to some degree, we think that, that will help us with continued unit growth. As we improve in apparel, that will help us with unit growth. So you look at things like apparel, you look at things like accessories, socks and hats that Lauren talked about, and the development of our kids', women's business. And we think that we've got a lot of different levers, or continued increase in growth in running. So I feel pretty good about that. And sales are a function of traffic times conversion, times UPTs, times average price. And we are working with the product to drive the traffic. We've got a number of programs there to drive conversion. We are working with better product, so they hook up. So not just, okay, $5 for 20 T-shirts, it's making sure buy a $16 pair of socks or a $35 hat to go with those. And AUR is just a part of that. Camilo R. Lyon - Canaccord Genuity, Research Division: That's a great explanation. I just wanted to have one clarification. What would you say is the biggest opportunity amongst the elements that you mentioned, units, traffic, conversion? Is conversion the biggest one, given the systems that you're implementing? Kenneth C. Hicks: Yes, I think conversion, and that's something that I will tell you our stores organization is working very, very hard on. And the challenge is -- and it's why we put traffic counters in. 1/10 or 2/10 may not seem like a lot, but it's a huge, huge volume increase. And so we are working hard, and it's everybody working. It's the people in the stores. It's making sure we have the right product. It's making sure that we're in stock in the right sizes. Everybody plays a role in increasing conversion, and we've really built that up. Camilo R. Lyon - Canaccord Genuity, Research Division: Great. And then just my last question is with apparel. I think this was touched upon in previous questions, but I wanted to hone in on where do you think the ultimate opportunity is on a margin perspective. Lauren B. Peters: Well, we continue to say that when you really get apparel right, it should be a couple hundred basis points higher than footwear. That's the long-term view. Camilo R. Lyon - Canaccord Genuity, Research Division: And the path to getting there, I guess, what can help accelerate that trajectory? Kenneth C. Hicks: Well, one of the big things is getting the right apparel. I think we're better at that. Second part is developing a more robust private label business. We are working on that to go with the strong branded business. And the third is better allocation of product. And we're working right now to develop and put in place a better allocation system so that you have the right product in the right store at the right time at the right size at the right price. And we are working on all 3 of those things, and they will all help the apparel business. It's been growing rapidly. It's been improving the profitability. It's just the shoe business keeps doing well, too.

And our next question comes from Bernard Sosnick from Gilford Securities. Bernard Sosnick - Gilford Securities Inc., Research Division: Ken, you've spoken in the past about coordinating colors of footwear with apparel and hats, and you're alluding to that. Are you saying that this is a visible trend? Kenneth C. Hicks: Oh, yes. When we have a launch, we'll make a T-shirt that will go with it and it'll be sold out. Or we have a -- in fact, we've got right now in Footaction, there's a Adidas jog suit that's in kind of OD, and there's a series of shoes, 3 or 4 different shoes that go with it, Forrester and Samoas and the All Stars. And they will sell out. People are buying the whole outfit. I was in a store not too long ago, and actually a guy was buying one from himself and a woman was buying one for her husband, and they were matching up everything. So that happens, but what happens more is the kid comes in, buys a pair of Rose socks or Nike Elite Socks, really, we've got 36 colors, or buys -- again, walking down the street, a kid's walking by, he's got on a Colorado Rockies hat in the middle of New York City. I asked him. I said, "What team is that hat for?" And he says, "I don't know, but it matches my shoes." Bernard Sosnick - Gilford Securities Inc., Research Division: The other question I have is you're very explicit about your enthusiasm regarding the intermediate-term outlook for the product coming onto the market. Does that intermediate-term outlook that you expressed include back-to-school next year? Kenneth C. Hicks: We haven't seen all of that product yet. In fact, some of our guys are just now working with the vendors. So I can't speak to that. But I will tell you that the competitive nature of our vendors is such that I believe they're going to continue to make sure that they have the best product there. Bernard Sosnick - Gilford Securities Inc., Research Division: I agree with you on that. Let me ask you one other thing. Are you seeing anything out there that suggests that brown shoes might be picking up? Kenneth C. Hicks: No. I'm not sure the brown shoe business is a business that, at least in the United States, I would want to be in. Europe, a little bit different situation in some of the countries. But in the States, all you have to do is look out on the street and see what people are wearing. And it's moved from -- it's not just kids now. There are a lot of adults that are wearing sneakers beyond those that work at Foot Locker. Kenneth C. Hicks: The team has done a great job, and really appreciate all they've done. And I want to thank everybody for participation on the call and staying a little bit late, but we wanted to get everybody's questions. John A. Maurer: And that's all we have time for right now. But we look forward to having you join us on the next call, which will cover the fourth quarter and our full year results. And that call is tentatively scheduled for the morning of March 8. For now, happy Thanksgiving, and goodbye.