Peter Nordstrom - Executive Vice President, Director and President of Merchandising Michael Koppel - Chief Financial Officer and Executive Vice President James Nordstrom - Executive Vice President and President of Nordstrom Direct Robert Campbell - Vice President of Investor Relations and Treasurer Blake Nordstrom - Principal Executive Officer, President and Director Erik Nordstrom - Executive Vice President, Director and President of Stores

Dorothy Lakner - Caris & Company Barbara Wyckoff - Credit Agricole Securities (USA) Inc. Paul Swinand - Morningstar Inc. Michelle Clark - Morgan Stanley Richard Jaffe - Stifel, Nicolaus & Co., Inc. Robert Drbul - Barclays Capital Adrianne Shapira - Goldman Sachs Group Inc. Kenneth Stumphauzer - Sterne Agee & Leach Inc. Deborah Weinswig - Citigroup Inc Erika Maschmeyer - Robert W. Baird & Co. Incorporated Jennifer Black - Jennifer Black & Associates Neely Tamminga - Piper Jaffray Companies David Glick - Buckingham Research Group, Inc. Lorraine Hutchinson - BofA Merrill Lynch Edward Yruma - KeyBanc Capital Markets Inc.

Hello and welcome to the Nordstrom 2011 Second Quarter Conference Call. At the request of Nordstrom, today's conference call is being recorded. [Operator Instructions] And I would now introduce Rob Campbell, Treasurer and Vice President of Investor Relations for Nordstrom. You may begin, sir.

Good afternoon, everyone, and thank you for joining us. Today's earnings call will last approximately 45 minutes and will include about 30 minutes for your questions. As a reminder, all forward-looking statements on this call are subject to risks and uncertainties that could cause the company's actual results to differ materially from the expectations and assumptions discussed due to a variety of factors that affect the company, including the risks specified in the company's most recently filed forms 10-K and 10-Q. Participating in today's call are Blake Nordstrom, President of Nordstrom Inc.; and Mike Koppel, Executive Vice President and Chief Financial Officer, who will discuss the company's second quarter 2011 performance and outlook for 2011. Joining us for the Q&A are Pete Nordstrom, President of Merchandising; Erik Nordstrom, President of Stores; and Jamie Nordstrom, President of Direct. And now, I will turn the call over to Blake

Thank you, Rob. We appreciate the opportunity to share with you our performance for the second quarter. We had good results across the board. It was a strong quarter for the company and continues the consistent gains we've had now for almost 2 years. Additionally, we're encouraged by the many opportunities in front of us to grow the business and better serve the customer. Our Anniversary Sale was a significant factor in both our July and second quarter results. We're pleased to report that this year's event was the best yet in the history of our company. The Anniversary Sale remains unique because of our ability to do something no one else in our industry does: offer the customer preseason savings on new merchandise. After the event, everything goes back to regular price. Over the years, Anniversary has gained quite a following. Our customers love it because they know they can get fresh, new merchandise at considerable savings. Though last year, the Anniversary Sale was successful, we were able to take some terrific feedback from our customers and salespeople to enhance this year's sale. One area we focused on that we believe our customers were particularly receptive to was the Early Access event that benefits Fashion Rewards customers. Our Fashion Rewards program is a key component of our loyalty strategy, and this year's Early Access reinforced the value of being a Fashion Rewards customer and encouraged many others to join as well. Our results for the Anniversary Sale and the quarter reflect our customers' demand for newness. Anniversary really sets the stage for the second half of the year, and our team has continually improved upon our ability to execute such a huge event. We're in a good inventory position coming out of the Anniversary Sale. Because of our solid planning and consistent track record of staying disciplined, we're able to flow in fresh, new merchandise and achieve record high inventory turns. For 7 years now, we have strived to be a more seamless multichannel retailer for our customers. An example of this was our ability to integrate our entire inventory so that more of our merchandise is available to our customers wherever and whenever they want it. These multichannel efforts have given us a strong foundation to build on as technology becomes an increasingly important enabler of the service experience we offer our customers. We recognize the shopping landscape continues to change rapidly. More and more, customers value speed and convenience, and these factors increasingly define our service proposition. I mentioned during last quarter's call that we were excited about deploying approximately 6,000 mobile point-of-sale devices for our people to utilize during the Anniversary Sale. We're learning a great deal from this technology and its ability to improve the customer service experience. As we learn more, we're in a good position to accelerate the utilization of these devices and add more if needed. There are numerous technology initiatives that, like these devices, contribute to our ability to communicate and serve our customers on their terms. One recent example is the enhanced mobile website we launched in June to make it more convenient for customers to shop with us. Ultimately, we want to be where our customers want us to be, and we see some real and tangible opportunities to accelerate our online growth, improve service and attract and retain more customers. Direct is our fastest-growing part of the business, which is reflective of how customers increasingly want to shop. Additionally, a significant amount of future growth will come from online. Our strong capital position allows us to make the necessary investments to stay relevant with our customers. We are already seeing results from these efforts and believe they will be beneficial down the road as well. Over the coming months, we'll be adding more features and functionality to better meet our customer's expectations online. We're excited about how our e-commerce efforts can contribute to the total business and help improve the overall customer experience. To wrap up, we believe we're in a strong position for the future. We're mindful of the economic challenges facing all of us. However, we know from previous experiences that our customers remain receptive, and we're able to evolve with them and provide a compelling reason to buy something new. We found more areas to invest in growing our business and will continue to focus on becoming their retailer of choice, both online and in-store. Now I'd like to turn things over to Mike.

Thanks, Blake. First, I want to reiterate Blake's comments on the strength of our performance. This marks the seventh straight quarter of positive same-store sales. During the second quarter, we held 3 of our 5 annual sales event, consisting of the Men's and Women's Half-Yearly sales and the Anniversary Sale. These second quarter events are significant in balancing our sales and profitability between the first and second halves of the year, as opposed to the more common retail cadence that is heavily weighted toward the fourth quarter holiday season. With continued improvement in our discipline and capabilities regarding inventory management, there has been a reduction in clearance inventory. As a result, the Half-Yearly sales, which are clearance events, continue to drive traffic into the stores but have become a less meaningful part of our overall performance. Our Anniversary Sale, on the other hand, is an opportunity for us to offer new merchandise at reduced prices. This year's event outperformed our internal expectations as the customer continues to respond to newness in fashion. Our ongoing efforts to focus on the customer are evident in the current financial results and leave us encouraged about the opportunities that lie ahead. For the second quarter, our earnings per diluted share were $0.80 and earnings before interest and income taxes or EBIT totaled $320 million. This is an increase of 21% in diluted earnings per share and an increase of 18% in EBIT compared with the same period in 2010. This year's second quarter earnings were reduced by $0.05 per diluted share due to last quarter's HauteLook acquisition. Same-store sales in the second quarter were up 7.3%. Nordstrom same-store sales, which included results from our full-line and Direct businesses, were up 7.9% with the South and Midwest as our top-performing regions. Shoes, Cosmetics and Designer were our top-performing merchandise categories. Our Direct business outperformed both internal expectations and total company performance. Nordstrom Rack same-store sales were up 4.8% in the second quarter, with a total sales gain of 23%. Second quarter gross profit as a percentage of net sales increased approximately 135 basis points to 36.6%. The majority of the improvement was driven by gross margin as we continued to see strong regular price selling. This was the case during our Anniversary Sale but also was true during the Half-Yearly clearance sales in which regular price sales outpaced clearance sales. Continued progress improving inventory productivity enables us to maintain a fresh flow of new merchandise, which is resonating with our customers. As a result, our total sales per square foot improved 8% on an inventory per square foot increase of 5%. Overall, our inventory turn improved 55 basis points to 5.5x over the same period last year. During the quarter, we did not see a material impact to gross margin due to product cost inflation. Retail SG&A increased $95 million compared to last year's second quarter. This increase, in part, reflects $27 million of HauteLook operating expenses and related purchase accounting charges. The remainder of the retail SG&A increase was primarily due to variable expenses associated with higher sales and fulfillment volume, new stores and timing differences and expenses related to better-than-planned performance. Additionally, there was increased technology spend associated with our focus on improving the customer experience, such as the mobile POS devices that we recently placed in our full-line stores. We are excited about our credit performance during the quarter. As Blake stated, we experienced significant growth to our Fashion Rewards program during our Anniversary Sale this year. We're encouraged by this as it shows the strength of our rewards program in establishing and deepening relationships with our customers. Overall, this supports the importance of our brand's loyalty program and adding value to both the customer experience and company performance. We also experienced continued improvements in our credit metrics, with our second quarter delinquency rate of 2.7%, representing an improvement of 75 basis points over last year. Our write-off rate was 7.2% for the quarter, down 182 basis points from last year. Our payment rate increased 356 basis points over last year, reflecting continued improvement in credit quality, although lower finance charge revenue. As a result of these improving trends, we reduced our reserve for bad debt by $10 million to $125 million, which is 5.6% of ending credit card receivables compared to 7.8% of credit card receivables last year. The performance of our overall business has put us in a position of financial strength. We ended the quarter with $1.1 billion in cash, with an adjusted debt to EBITDAR of 2x, which continues to outperform the peer average and is well within the range of investment grade. In the second quarter, we repurchased 6.5 million shares at an average price of approximately $45 for a total of $296 million. We have $688 million remaining under our current authorization, which expires at the end of January 2013. As Blake mentioned, we expect significant growth in our online channel. We have an opportunity to build on our solid multichannel foundation to improve the customer experience both in our stores and online. A few months ago, we launched an enhanced mobile website to make it easier to shop with us. We also are working to increase our online presence through Nordstrom.com and HauteLook. These are examples of the kinds of things we will continue to invest in to improve our website capabilities and online customer experience. At the end of the fourth quarter, I shared with you our 5-year capital expenditure plan of $2.2 billion. 15% of this plan is allocated to technology investments. Unlike investments in store expansion, investments to improve e-commerce tend to impact the P&L quicker than store projects because of the larger portion expensed versus capitalized. Additionally, the majority of these projects have a shorter life cycle. As a result, as you've seen in recent quarters, our traditional flow-through metric will not be as predictable as it may have been historically, although it remains a valuable measure internally as we monitor our performance and continue to maintain operating discipline. The fundamentals of our business model, including the importance of the customer experience, top line growth, operating discipline and return on invested capital or ROIC, are unchanged. In the future, we expect continued top line growth while maintaining our operating discipline and producing ROIC in the mid-teens range. Within that framework, I will discuss our updated outlook for fiscal year 2011, factoring in our second quarter performance and our thoughts on the remainder of the year. We expect to achieve 2011 earnings per share of between $2.95 and $3.10. Full year same-store sales guidance is between 4% to 6%, which incorporates our strong performance in the first half of the year but reflects moderation in the third and fourth quarters as we compared to the improving trends we experienced in the latter halves of both 2009 and 2010. In addition, our outlook includes a $0.06 benefit from the second quarter share repurchases. Lastly, included is the $0.20 EPS impact of the HauteLook transaction, which is unchanged from last quarter. Our updated SG&A outlook reflects the growth in our business with higher sales translating into higher variable expense. We also included $20 million to $30 million in additional technology and marketing expenses, again, to improve the online and in-store experience, positioning us to capture incremental volume and share. In conclusion, our second quarter performance is a result of our success in driving sales, managing inventory and expense and delivering meaningful improvements in profitably. We are well positioned to make measurable progress and take advantage of the numerous growth opportunities in front of us. With that, I'll turn the call over to Rob.

Thank you, Mike. Before taking the first question, we want to ask that each person limit himself or herself to 2 questions: one, being a follow-up, in order to give as many persons as possible an opportunity to ask a question. If you have additional questions, we'll ask that you return to the queue. With that, we'll take the first question.

[Operator Instructions] And our first question today is from Deborah Weinswig from Citi. Deborah Weinswig - Citigroup Inc: Mike, if you look out with your updated guidance for same-store sales and also in terms of your gross margin outlook, can you just update us in terms of as you look out for the rest of the year? Any real changes in terms of the business? And how should we think about just the gross margins as they progress throughout the year?

In terms of our expectations going forward, we're consistent with where we were last quarter, and that is, the remaining of the year is based on the plans that we established going into 2011. It's clear to us after 2 solid years in the back half of the year in '09 and '10 that we were coming up against some higher comps, and we felt that it was prudent to plan our inventory and expenses at a lower level than the trends would indicate in the first half of the year. So there's nothing inconsistent about that approach. In terms of margin the back half of the year, as has also been our approach is, we're a little bit reticent to overcommit to margins. We tend to get margin benefit when our sales accelerate, and so as a result, what you see there is what we believe is the appropriate margin plan based on the sales that we planned for the back half. Deborah Weinswig - Citigroup Inc: Okay. And then outside of the rollout of the handheld devices, the 5,000 or 6,000 handheld devices, was there anything else that was done differently for the Anniversary Sale this year that led to the great performance?

Deborah, this is Erik. Yes, we had a number of smaller changes, but probably the biggest was around Early Access. So that's the program for our rewards customers to pre-shop the sale event. We, in short, cleaned it up a bit. Made it easier to understand. It's the first time it was eligible for all Nordstrom cardholders. And as I think Blake mentioned earlier, that drove a big increase in the amount of accounts that we have more than we expected. And the main goal of doing that was to create a better customer experience and make them more understandable for the customer and convenient to shop. And qualitatively, we got terrific feedback on that.

Our next question is from Edward Yruma from KeyBanc Capital Markets. Edward Yruma - KeyBanc Capital Markets Inc.: Can you talk a little bit more about higher unit costs in the back half? And then particularly, as you look out to 2012 with maybe some of the early buys that you're making, what is your confidence in your ability to take price? And then kind of as you look forward, do you think that you'll be able to get better pricing as raw material prices come in?

This is Pete. Pricing, that's an interesting subject for us. So far, our average regular price sales are up a little bit, but that's mostly due to mix and it's not really due, so much, to inflation. I think a lot of what we've been hearing hasn't really happened, at least for us yet, in terms of cost of goods flowing through to the customer. So what to see, what shakes out with that, I think the fact that we've got a fair amount of breadth to our offering allows us to flex, and essentially, we will chase the customer demand. Interestingly for us, particularly in the second quarter and Mike mentioned it, the Designer part of our business and all different classifications is really good. So when we talk about mix, that's a growing part of our business. And so that has affected average price. But on the whole, it's pretty steady right now. We're cost about it -- I think, in terms of how those costs will manifest itself in our business, I think a lot of it will happen potentially with our own products and what we call our MPG division, which is roughly 12% of what we sell. So we'll have to make some decisions if prices go up there to see what we want to do. Edward Yruma - KeyBanc Capital Markets Inc.: Great. And do you actually see higher prices within the MPG product for the back half?

Nothing material at this point.

Our next question is from Lorraine Hutchinson from Bank of America. Lorraine Hutchinson - BofA Merrill Lynch: You've had a nice recovery in comps at Rack. Just hoping if you could expand a little bit on what's changed or what you're seeing from that customer.

Blake, could you take that please.

Sure. Lorraine, this is Blake. We've talked about the Rack for some time, and I think I want to underscore what a fluid model that is. It is very productive in terms of sales per square foot, and our inventory's very fluid, returned quickly. So there's been a number of initiatives, and there really hasn't been one that stands out that's been driving it. But we're really pleased that the team's been able to really try to address the customers' ongoing desire for a great brand and fashion at great value. And for the last now 3, 4 months, the Rack's demonstrated getting back to some consistent comp store increases. So we went about 12 to 15 months, but we were flat or slightly down. And we're pleased that it's turning around the quarter a little bit, and it gives us a little more confidence going forward that they'll continue with this trend. Lorraine Hutchinson - BofA Merrill Lynch: And then any comment on store openings for next year and perhaps a long-term target?

For the Rack? Lorraine Hutchinson - BofA Merrill Lynch: Yes.

Okay, I believe this year, it's 17. And Mike, I don't know if we have announced next year's. Is it roughly 13 for next year?

Yes, I think over the next several years, we'll probably have more than 15 stores a year on average.

But I think we have announced next year around 13, and for the foreseeable future, that seems appropriate. And what we've shared with all of you is that our lead times on these stores are much different than our full-line stores. They are 12 to 18 months out. And so it's a pretty dynamic thing that we review pretty regularly. But for right now, it's performing well, and the customer's really receptive to it. So we're continuing at this point.

Our next question is from Michelle Clark from Morgan Stanley. Michelle Clark - Morgan Stanley: Obviously, there have been concerns here about the higher-end consumer slowing as the market is sold off over the past several weeks. Any commentary on slowdown, maybe in the full-line stores? And any geographical commentary that you can share with us?

No. Michelle, this is Mike. To date, no, there's nothing of any -- specific that we can comment on there. Michelle Clark - Morgan Stanley: Okay, great. And then my second question, Mike, was on the credit card business. Obviously, nice improvement in credit trends over the past year. Any updated thoughts on selling versus retaining the business?

Well, I think based on how we've been performing there and the continued loyalty program that we're building, we're very wedded to owning that business. We have no current plans to do anything other than retain it.

Our next question is from Jennifer Black from Jennifer Black & Associates. Jennifer Black - Jennifer Black & Associates: It's pretty clear that the baby boomer woman's lifestyle has changed. And I know you're enjoying success in several departments like t.b.d. and Collectors and BEC [ph] and Active. And I want to know how you're addressing the other women's departments as far as adapting to the changes in her lifestyle. That's my first question.

Jennifer, this is Pete. I think probably the major factor there is most customers, almost regardless of age, view themselves as modern. And I think that's different than before where if you look 25 years ago, I think something that a 25-year-old might have worn wouldn't be something a 55-year-old would wear. So there's been some compression in terms of style, and adoption curve is much quicker. So for us to be able to allocate more modern styling across the breadth of what we do is important. Obviously, there's fit dynamics that come into play, and price is a factor as well. So it's just there's an ongoing evolution, I think there, just based on the way the customers have been reacting. If you listen to them closely, they clearly want to view themselves as being modern, and I think we have responsibility to deliver that style for them. Jennifer Black - Jennifer Black & Associates: So that's something that you're really focused on in departments, like Point of View, Narrative, all of those departments. Is that correct?

Yes, and really across women's. If you look at our entire women's offer, its book ended by Juniors, which is BP and then the whole designer part. Those parts of the businesses are really healthy and well defined. It's everything else kind of the middle and it applies what we've just been talking about pretty much across the board there, just making sure that we're laser focused on what the customer expects for us -- from us and how we can stay relevant in their lives.

Our next question is from Neely Tamminga from Piper Jaffray. Neely Tamminga - Piper Jaffray Companies: So okay, Anniversary Sale, let's unpack that a little bit if we can. Clearly, it looks like you guys had some stronger full price selling, fuller price selling this year versus last year behind the gross margin. But wondering if you could just aggregate a little bit, Mike, in terms of how much of this is also pickup from maybe over shipping last year because of the different change in the methodology of how people went home with their product. That would be one thing. And then, Pete, for you, on a product perspective, clearly, Anniversary Sale is better than expected to your internal plan. That means you saw some pickup maybe from a product category perspective or is that just broad-based transactions, i.e., are we going to see some great new trends coming out of denim, outerwear, footwear, et cetera that can give us some hope in boding well for fall and holiday?

Well, Neely, why don't I start? In terms of the question I think you're talking about fulfillment and fulfilling from different locations. Certainly, I think this year, it helped us from more of a back-office productivity and being more efficient. From a margin standpoint, it really wasn't a major impact. The major contributor to improved margins is the fact that we just continue to sell more at regular price. Pete you want to?

Yes. In terms of the trends from Anniversary, one of the things that's happened over the years is that we tend to do a better job of concentrating on newness literally than specifically fall look. The idea the customer's going to buy something and stick it in their closet for 2.5, 3 months. While, some customers do that, it's not as many do as used to, so we don't have quite as much intelligence based on the sale about what's going to happen in fall as, maybe we would have 10, 15 years ago when there was much more of a precursor about fall. What I can tell you though with regards to that is specifically, if you look at our Shoe division, which had really excellent results, they made a really big bet on boots and that paid off. And I think that's going to bode well for what you're going to see in fall and winter for us. And that's some good, early read for us that we think we're on the right track. I would say probably similarly with apparel and outerwear, we had some good success there too.

Our next question is from Paul Swinand from Morningstar. Paul Swinand - Morningstar Inc.: I just wanted to ask about the online business. I know you've offered some details about the things you're doing. I'm sure you're doing more advertising, more weight of advertising. But if you could just talk about how the business has changed and where you see it going. Is it more of a customer behavior change? Is it more of the tactics that you're taking? Could you offer a little more color?

Yes. Sure, Paul, this is Jamie. I think as Mike mentioned, there's a lot of things that we've been working on over the last couple of years to improve our online results. We mentioned last quarter that the improved mobile website that we rolled out, I think, there's a lot of things that are pretty clear drivers of online success that we're seeing out there. Personalization's a big subject, that a lot of people are working on. And we've got some opportunities to improve how we're personalizing a customer's online experience that we're working on, as well as selection. The concept of what kind of a selection drives success online versus in-store are different. And I think we've learned a lot over the last couple of years about how we might be able to have a selection that's a little more specific to our online store that serves customers a little better. So those are a couple of examples of some things we're working on. And you'll likely see those kind of things evolve over the next several quarters. Paul Swinand - Morningstar Inc.: Okay. And given that answer, would it be fair to assume then that you're driving the comp more of selling to existing customers? Or are you actually attracting a greater percentage of the sales being due to new customers coming through the online channel?

Well, I think it's both. Clearly, the online channel is a really strong customer acquisition channel for us. I think we said that 1/3 of all new Nordstrom customers come through our website. And we think that over time, as the online channel becomes a larger portion of overall sales, it will become an even more important customer acquisition channel. So clearly, we've put a lot of focus on that and whether it's through different forms of online marketing or we're just really expanding our online presence. We hope to acquire a lot of customers through that channel.

Our next question is from Bob Drbul from Barclays Capital. Robert Drbul - Barclays Capital: I guess the first question is could you talk a little bit about California and the trends you're seeing in California? And my second question is just around the SG&A plans for the back half of the year. Just maybe address your ability to flex spending, if sales do slow, especially the investments in technology or that sort of aspect.

Bob, this is Erik. For California, overall for the state, we continue to see some gains there, but it does lag our company average. What's changed recently, we've seen fairly decent improved trends out of Northern California and San Diego. L.A. and O.C. continued to lag a bit versus our company average.

And Bob, this is Mike. In terms of the SG&A, just to give a little bit of context, roughly half of the increase in SG&A we've experienced so far this year is directly related to our growth and our performance. And so that being said, if for some reason our growth and performance slow down the back half, the SG&A would respond accordingly. So the flexibility I think that we demonstrated back in '08 and '09 still exists today.

Our next question is from Barbara Wyckoff from CLSA. Barbara Wyckoff - Credit Agricole Securities (USA) Inc.: Could you talk about the Anniversary Sale, the length of the sale, the flow through the event? And it seems as if this year you had a big surge upfront and how do you keep the sizzle going to the end of the sale when many of the bestsellers are sold out? And then just as a follow-up, I'd really love some feedback on HauteLook because we hadn't really -- you haven't really talked about that.

Okay, Barbara, I'll take the Anniversary question. Certainly with the early access that does shift some activity to even before the sale officially starts. But in that first weekend is still our heaviest traffic days of our whole year. And actually, the last weekend of the sale is the next busiest couple of days of the sale. So we get a strong surge on those last couple of days. It's actually helped us, I think, serve our customers better. We spread out some activity, and customers have more choice on how they want to get product. A lot of customers want to come in on a busy day and have that energy in the store. A lot of customers want to avoid that. And so by spreading out how the customer -- and being able to deliver how the customer wants to shop with us during Anniversary, it frees up our best salespeople to take care of their customers that do come in the store. So we think the length is still really good. We certainly don't have any plans to shorten the event.

Barbara, this is Mike. Regarding HauteLook, to date, the business continues to operate better than as planned. We collectively vote the management of HauteLook, as well as our teams here at Nordstrom continue to work together to find ways that we can leverage each other to improve our performance and acquire new customers. So to date, we continue to be very happy, and we'll continue to provide updates each quarter.

Our next question is from Dorothy Lakner from Caris & Company. Dorothy Lakner - Caris & Company: Just wanted to follow up on Anniversary and in particular the rewards program. And I wondered if you could share with us just maybe quantitatively what the magnitude it was of the increase in new customers that you saw. And then secondly, you got those mobile devices into stores. Just wondering if there are plans or not to increase the number as you move into the holiday season.

Dorothy, this is Mike. In terms of putting some context to the success, we opened well over 100,000 new accounts on a base of roughly 2.5 million active accounts. So it was really terrific for us in terms of engaging new customers into our loyalty program. And we saw a significant improvement in volume and average spend per customer, as well as total volume in the rewards program. So not only was it a success during that period, but we also have a lot of new customers out there who now have Nordstrom notes that will likely be coming in and doing some more shopping with us. So that's a positive. Oh, I'm sorry. And the second part on the mobile, yes, when we first went out with the mobile part of our plan was to learn what we felt, long term, was the right mix between mobile and our traditional registers, and I think we still have a little bit of journey ahead of us to figure that out. But it's very possible that we would have more devices as time goes on.

Our next question is from Richard Jaffe from Stifel, Nicolaus. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: A follow-on question with the Online business. Could you talk about the business by category? Where the strengths are developing and where you see greater opportunity? And then taking that to HauteLook and talking about the, I guess, the opportunity as you guys see it as that business evolves and what direction you see it going in?

Rick, this is Jamie. In terms of online business by category, it's really near our overall business in our stores for some time now. And that's kind of a result of what our strategy has been. Pete mentioned that boots are really strong right now. Well, they're strong online, too. So that's something that has been there for some time. I think as I mentioned earlier, we've got an opportunity to at least online, we kind of expand beyond traditionally just what's been our core store offer. Not necessarily in the different categories but within the categories where we already participate, there's potential for expanded selection there that we're working on. Your second question about HauteLook, we've got, as I -- I think we've talked about before, we got a number of things that are in the works to both help HauteLook grow. We believe that there's a lot of runway in front of HauteLook, and we can provide some things in terms of scale and infrastructure that can open some doors for them. But also, as Mike mentioned, they're a team of entrepreneurs that we really want to learn from and are learning a ton from them. And they're having meaningful impacts on our business today. So we hope to continue that. And as Mike mentioned, we're pretty happy and thrilled, frankly, with our collaboration with them so far. And we're really encouraged about the potential for the future.

Our next question is from Erika Maschmeyer from Robert W. Baird. Erika Maschmeyer - Robert W. Baird & Co. Incorporated: You've -- you kind of partially addressed this with Jennifer's question, but I wanted to just see if you could dig in a little bit more on your efforts in the women's business. Thoughts and things that you're testing around merchandising and marketing and kind of where you're honing in on your biggest opportunities.

This is Pete. Well, I think, aside from what I mentioned in terms of style adoption and making sure we're relevant to our customers what they are looking for, there's opportunities for us to improve the shopping experience and make it more intuitive and easy for them. That's an ongoing thing. We've invested actually quite a bit of money in visual over the last year with mannequins and just different visual elements that hopefully make it easier for the customer to navigate our women's department. So we're definitely working on that. So there is an environmental part that would also include department adjacency and just kind of the natural flow and rhythm of how our women's floors work. But it's an ongoing battle for us. The women's business, maybe not dissimilarly from California as an analogy, well, it's done all right. It's lagged the average for us, and so we're applying a lot of energy right now on that subject, and we hope to have some things that we can talk about here in coming quarters about what we're working on to improve that business. Erika Maschmeyer - Robert W. Baird & Co. Incorporated: Okay. And then just a kind of quick follow-up on that. Are you working with your existing vendors or looking at new vendors to create new product for the Missus category, the traditional that just maybe doesn't exist right now?

Yes, we definitely are working with vendor partners to do that, but some of that responsibility may also fall to us in our internal MPG programs. We've got a really capable group there, and if you look at where we typically compete in those categories, it's with verticals. And I think some of the evolution, what's happened over the years with the different powerhouse brands in women's is that they've evolved and moved on and created voids and opportunities really for us to fill. So I think it's a combination of doing some of that ourselves within MPG and working with vendor partners to fill that.

Our next question is from Adrianne Shapira from Goldman Sachs. Adrianne Shapira - Goldman Sachs Group Inc.: Actually, I had a follow-on to Bob's earlier question about SG&A. Mike, maybe help us think about -- we appreciate that you've got a variable cost structure that creates a tremendous amount of flexibility, but the $20 million to $30 million on the marketing and online spend. Could you give us a sense of the pace of investment that you would be committed to if, in fact, sales were to slow a little bit?

Well, I think, in terms of investment for the things we're doing to continue to build and grow our business, at this point, we're committed to that, and likely, we will continue to move forward on that. I mean these are things that are going to build our business for the future, and if there is a short-term blip, we certainly don't want to jeopardize those commitments. So I would be surprised if those things got slowed down considerably. Adrianne Shapira - Goldman Sachs Group Inc.: Okay. And then on the inventory side, you've done a great job, in terms of, as you said, sales per square foot, up 8%, inventory, up only 5%. As you think about continued share gains and top line, help us think about how you're planning inventory levels.

Well, we've made a commitment to ourselves internally that we would have improvements in our inventory turns every year. And we've been managing our inventories in, I would say, a fairly dynamic way, and that's based on how we view sales and our actual sales performance. And so the outcome of that would be the inventory levels. But I think you should expect from us continuous improvement. We delivered a 6% improvement in turn this quarter. So that still is an important focus for us.

Our next question is from Ken Stumphauzer from Sterne Agee. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: First, Mike, as far as the purchase accounting goes, how much of the $13 million from HauteLook -- how much of the $13 million drag-on EBIT from HauteLook was related to purchased accounting?

The majority of it was. The business itself, from an operating standpoint, is roughly breakeven. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: Okay. And then just secondly, if you could talk about gross margin performance, it was obviously a meaningful acceleration from the past couple of quarters both on a year-over-year basis, as well as on a multiyear basis. I'm just curious to know if you can maybe give us a little more color or granularity as to what caused that, if you could potentially see a scenario where that could continue if comps kind of stayed up in the ranges they're at right now.

Well, a big contribution to that this quarter was the fact, I think both Blake and I mentioned it in our comments, that our clearance events, the actual clearance activity is becoming a smaller proportion of the total sales, and we're doing more regular price and, in a quarter where we have a large proponent of clearance, that had a measurable impact on margin. And so I think to expect that kind of improvement each quarter is probably unrealistic.

Our next question is from David Glick from Buckingham Research Group. David Glick - Buckingham Research Group, Inc.: Just a follow-up on the product cost environment. As you start to work on spring of '12, wondering doesn't sound like you've seen significant price increases for fall. But I'm just wondering if you're seeing any moderation as you work on your early spring deliveries. And then, housekeeping item, Mike, if you could quantify the HauteLook sales for the quarter, that'd be helpful.

Okay. This is Pete. Yes, I think in terms of price we really have nothing to report there in terms of any kind of noticeable change. The fluid situation will respond accordingly, but I think current course and speed is about what we're expecting. David Glick - Buckingham Research Group, Inc.: And, Mike, on the HauteLook contribution?

Yes, David, on those sales, we haven't disclosed those as of yet.

Thank you for joining us today for our second quarter earnings call. As a reminder, a webcast replay of this call will be available for one year on the Investor Relations section of Nordstrom.com under Webcasts. Thanks for your interest in Nordstrom. Bye.

Thank you and this does conclude today's conference call. Thank you for participating. You may now disconnect.