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

Paul Lejuez - Nomura Securities Co. Ltd., Research Division Matthew R. Boss - JP Morgan Chase & Co, Research Division Barbara Wyckoff - Credit Agricole Securities (USA) Inc., Research Division Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division Charles X. Grom - Deutsche Bank AG, Research Division Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division Lizabeth Dunn - Macquarie Research Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division Jane Thorn Leeson - KeyBanc Capital Markets Inc., Research Division Michelle L. Clark - Morgan Stanley, Research Division Dorothy S. Lakner - Caris & Company, Inc., Research Division Robert S. Drbul - Barclays Capital, Research Division Adrianne Shapira - Goldman Sachs Group Inc., Research Division Neely J.N. Tamminga - Piper Jaffray Companies, Research Division Deborah L. Weinswig - Citigroup Inc, Research Division

Hello, and welcome to the Nordstrom 2011 Third 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 third quarter 2011 performance and outlook for the remainder of fiscal 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. Blake W. Nordstrom: Thanks, Rob, and good afternoon, everyone. On behalf of our team, I'd like to take this opportunity to share a few thoughts about the quarter and talk with you about how we're growing our business with our continued focus on the customer. Our third quarter results were a continuation of our teams' solid performance over the first half of 2011, reflecting strength across all of our channels. This marked the eighth straight quarter of positive same-store sales with our online increase significantly outperforming the other businesses. We're in a position of strength, given the consistent execution in our core business, established multichannel foundation, the new capabilities we're able to offer the customer, and our strong balance sheet and cash position. We're encouraged by the wide ranging opportunities ahead of us as we continue to invest in improving the customer experience. Third quarter was reflective of how our customers continue to respond to newness across all categories. Our Shoe and Accessory businesses have been terrific for some time now and were once again amongst our best performing categories for the quarter. Our Men's business is showing strong momentum. Finally, Designer was particularly strong last quarter across all categories. One of our unique differentiators in the marketplace is our breadth of merchandise, which we know our customers value. Designer is an important part of that equation. While a relatively small portion of our overall business, we're very pleased with the progress we've made in growing this business since making it a strategic focus 7 years ago. Our full-line stores are performing well and have consistently delivered solid same-store sale gains. We're pleased with the results we're seeing in the Rack, which had a total sales increase of 23.6% along with a same-store sales gain of 6.8% for the quarter. This is now 4 consecutive quarters of same-store sales increases at the Rack. Last quarter, we wrapped up our 2011 full-line store openings with 2 successful openings in Nashville and St. Louis. Nashville is a new market for us and it is especially gratifying to receive such a tremendous welcome from customers there. Over the past 11 months, we've opened 20 Racks, and every opening, we've had a good customer response. About 3 years ago, we significantly accelerated our growth plans for the Rack to increase market share and gain new customers. We're encouraged by the results from our Rack growth and look forward to further expanding our Rack store presence to better serve customers. For some time now, we've shared with you how online remains the fastest-growing part of our business, and we believe this will be a key driver of future growth as well. We are now at a juncture where we can build upon our position of strength in our stores by adding better capabilities and making more investments in e-commerce and technology to enhance the customer experience. We're excited about these investments because we believe they will help us take advantage of more opportunities to improve service, drive sales increases and achieve profitable growth. Over the past several quarters, we've been working on a number of initiatives to increase speed and convenience. Our hope is to become more responsive to how our customers want to shop with us, whether it's free shop -- excuse me, free shipping and free returns online, mobile POS devices in our stores, the upcoming rollout of our Nordstrom app, online search, or improvements to our online and mobile websites. All of these are indicative of the types of efforts that will continue as we seek to elevate our level of service and drive e-commerce growth. We believe our ability to offer a compelling shopping experience in all channels is what the customer values, and we're optimistic about our prospects to achieve sustainable and profitable growth over the long run. With that, I'd like to turn the call over to Mike.

Thanks, Blake. The progress demonstrated in our third quarter performance was broad-based across all channels and multiple merchandise categories. As Blake mentioned, it's the combination of consistent execution, greater use of technology as an enabler of service, strong financial position and meaningful opportunities in existing stores, new stores and online that provide us with a sound platform for growth. For the third quarter, our earnings per diluted share were $0.59 and earnings before interest and income taxes, or EBIT, totaled $240 million. This was an increase of 11.3% in diluted earnings per share and an increase of 8.2% in EBIT compared with the same period in 2010. Total sales increased 14.2%, while same-store sales in the third quarter were up 7.9%. Nordstrom same-store sales, which include results from our full-line and Direct businesses, were up 8.5% with the South and Midwest as our top-performing regions. Handbags, Dresses and Designer across all segments were our top-performing merchandise categories. Sales in our Direct business have increased well above 20% year-to-date and grew by more than 30% in the third quarter. Nordstrom Rack total sales grew nearly 24% in the third quarter with same-store sales up roughly 7%. Our market share in this channel is growing through both increased productivity in existing stores and expanding our presence in current and new markets. Third quarter gross profit, as a percentage of net sales, increased approximately 40 basis points to 36.6%. The improvement was driven by leveraging buying and occupancy costs, as merchandise margin was approximately flat to last year. During the quarter, we did not see a material impact to gross profit due to product cost inflation. Our customers' response to the launch of free shipping and free returns online was encouraging, resulting in a meaningful increase in Nordstrom Direct sales. While the absence of shipping revenue reduced our gross profit percentage by an estimated 15 basis points, overall, the strategy was accretive to earnings. Our increase in total sales per square foot of 10.4% was matched by a similar increase in inventory per square foot, reflecting a seasonal build up in full-line store inventory, coupled with a widening selection in our online merchandise offering to better serve our online customers. Overall, our inventory turn improved 77 basis points to 5.23x as compared to the same period last year. We continue to target increased inventory turn, which includes a benefit to merchandise margin. As a reminder, in 2010, we achieved our recent historical high in merchandise margin. We also are continuing with the accelerated expansion of Nordstrom Racks, which yield slightly higher EBIT margins, but lower merchandise margins than the company average. As a result, we expect the majority of any near-term gross profit improvement to come from leveraging buying and occupancy costs. Retail SG&A increased $101 million compared to last year's third quarter. The increase in part was due to growth in both comp and new stores. It also reflected various initiatives to grow the e-commerce business, including $21 million of HauteLook-related expense and improvements in the shopping experience across all channels. That said, I'd like to emphasize that the core business, in other words our operating model exclusive of these type of initiatives, in the third quarter, continued to deliver our historical level of incremental profit on above-planned sales. Our full-line and Rack stores combined consistent the majority of our business and will continue in the future. With that foundation, we've shared that we anticipate our fastest-growing business in coming years will be e-commerce. Our company's increased focus in this area not only will affect the mix of our capital investments over time, but also how those investments will flow through our P&L. For example, our technology and e-commerce investments typically include a higher proportion of expense relative to store investments and include assets with shorter useful lives. As a result, project costs will be reflected in our SG&A more rapidly than before. Additionally, we are supplementing our e-commerce effort with resources that bring demonstrated experience and expertise in online retail. These factors do not change our overarching goals of mid- to high-single digit total sales growth and mid-teens ROIC. In fact, they enable them, reflecting in part our belief that the e-commerce investments will result in sustainable online sales growth of between 20% to 30%. What's important to keep in mind is that our growth involves -- it will change the way in which these goals will be achieved. Now I'll turn our performance to Credit. Our Fashion Rewards program featured a triple rewards events in September for our Nordstrom cardholders that drove significant incremental sales compared to the same event in the prior year. As you know, our Credit business is important to us as it enables us to attract, retain and deepen relationships with our customers. Credit's key metrics, delinquency, write-off and payment rates continue to show favorable trends, though at a moderating pace relative to preceding quarters. Given that our delinquency rate has started to flatten and is projected to remain at roughly current levels though the end of 2011 and with lingering caution concerning the macroeconomic environment, our reserve for bad debt is unchanged from last quarter at $125 million. As always, we will continue to monitor these metrics and evaluate our reserve levels accordingly. The overall performance of our business has put us in a position of financial strength. We ended the quarter with $1.5 billion in cash and with adjusted debt to EBITDA of 2.3x, which continues to outperform the peer average and is well within the range of investment grade. During the quarter, we completed an unsecured 10-year $500 million debt transaction at a fixed interest rate of 4%. In responding to an opportune borrowing window, we gained additional long-term liquidity at an attractive rate. We do have $500 million in securitized notes that mature in April 2012, and our recent financing gives us increased flexibility in addressing this maturity. In the third quarter, we repurchased 4.8 million shares at an average price of $45.89 for a total of $220 million. We have 468 million remaining under our current authorization, which expires at the end of January 2013. Within that framework, I will discuss our updated outlook for fiscal year 2011, factoring in our year-to-date performance. We expect to achieve 2011 EPS of between $3.05 and $3.10. Full year same-store sales guidance is approximately 6%, which incorporates our strong year-to-date performance, but reflects moderation in the fourth quarter as we compare it to the improving trends we experienced in the fourth quarter of both 2009 and 2010. Our revised SG&A guidance primarily reflects increased variable expense associated with higher sales and an additional $15 million, largely from marketing initiatives across several channels and for service enhancements online. As we approach the fourth quarter and strategically focus on future opportunities, we remain confident in our ability to execute across all channels, while purposefully investing in the technology and capabilities necessary for sustained profitable growth. 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 and, if necessary, one 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] Our first question is from Deborah Weinswig with Citigroup. Deborah L. Weinswig - Citigroup Inc, Research Division: Mike, in terms of the expenses to improve the shopping experience, are these more onetime in nature? Or how should we think about SG&A retail going forward?

Some of these do relate to a ramp-up in some of our capabilities and in some technology investments that we're making. We expect that over time that those will level out and that the consummate benefits that we get from that will start to ramp up. But at this time, I would consider those a combination of some upfront investment along with some ongoing costs. Deborah L. Weinswig - Citigroup Inc, Research Division: Okay. And then I think during the second quarter earnings call, you talked about seeing an increase in terms of the number of Fashion Rewards customers and that they joined you during the Anniversary Sale. Did you also see that customer return to you during the third quarter?

Yes. Yes, we did see a very healthy redemption rate of the notes that were earned during the Anniversary Sale. And our triple rewards event in September was extremely successful. So the answer is yes, we continue to see the growth there.

Our next question is from Dorothy Lakner from Caris & Company. Dorothy S. Lakner - Caris & Company, Inc., Research Division: Just wanted to talk about the online business and get a little more color there. Free shipping, I think you said definitely gave you a pretty big uptick in the business. So I wonder if you could just speak to that and talk about the growth in that business you see going forward and how it relates to your store business. James F. Nordstrom: Sure, Dorothy. This is Jamie. We launched free shipping and free returns roughly the first of September, and the reasons we did that is because we have big ambitions for the growth of our online business. And we believe that the majority of the growth of our categories over the next 10 years will be online as opposed to in-store. And so we feel we need to be investing in the customer experience and be more competitive and be more relevant to customers online, so that we can serve them better as they continue to choose, to shop more and more online. And we feel that it comes down to delivering better service, and that can mean shipping things faster, having a better online experience, having a broader selection. And so we're doing all those things right now. And our online business is outpacing the rest of our business, and we expect that to continue. Dorothy S. Lakner - Caris & Company, Inc., Research Division: But overall, I mean, obviously you forego the revenue and shipping, but you are anticipating that the benefit to the EBIT will continue going forward. James F. Nordstrom: Absolutely. We not only anticipate it; we're seeing that.

Our next question is from Neely Tamminga from Piper Jaffray. Neely J.N. Tamminga - Piper Jaffray Companies, Research Division: So Mike, 2 questions, on HauteLook, just a reminder as to what's embedded now that you've kind of updated this guidance outlook. What's embedded in terms of the revenues and profitability of HauteLook? And I'll go ahead and throw out my second question. It's about Fashion Rewards. So have you seen an increasing cadence or velocity of the loyal customer shopping in and around the points days? And am I right in thinking you guys have done an incremental 10 points day for holiday this year?

In terms of HauteLook, what's embedded in our overall expectations, we've got the sales, which is roughly $150 million to $160 million, roughly a 50% to 60% increase over prior year levels in sales. And in terms of earnings, it's roughly $0.16, $0.17 of -- on a per share basis that's built into those numbers. Regarding Fashion Rewards, yes, we continue to see increased activity. In terms of the cadence of events, which I think goes to your last question, that event that we have in holiday we did have last year. That's something we've done year-over-year, but we have added personal event into that, which is helping the velocity, and it's getting more customers involved. And it's giving customers the flexibility that they've been asking for.

Our next question is from Lorraine Hutchinson from Bank of America. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: Just a follow-up on HauteLook. It looks like you took the revenue guidance down a little bit this quarter. Any update on the performance there versus your initial expectations?

No. The initial guidance had us growing like about 60% to 70%, and this has us about 50% to 60%, so still a very, very healthy growth. I think just as we get closer to the fourth quarter, there's a little bit more visibility there. But we continue to be very excited about HauteLook. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: And then are you still planning to run that as a separate business outside of your core Nordstrom business?

Yes, we are.

Our next question is from Michelle Clark from Morgan Stanley. Michelle L. Clark - Morgan Stanley, Research Division: The first question, Mike, is on your full year comp outlook. If you back into what's implied for the fourth quarter, you're looking at about a positive 3 comp for 4Q. And while I appreciate being conservative as we head in here into the fourth quarter, that would imply significant deceleration on a 2-year basis. Is there anything that you're seeing in the environment that would suggest that slowdown?

No. Michelle, the basic premise for that is I think you're looking at a 2-year basis including '11 and '10. But if you look at the 2-year basis of 2009 and 2010, the fourth quarter, we're up against some pretty significant comps. I think the combination of '09 and '10 is about 14%, 15%. So when we planned the fourth quarter, we definitely looked at that as a little bit more of a headwind against us. And as you know, we like to ensure that we have our inventories properly lined up with expectations. And that's pretty much what we've been saying all year, so that hasn't changed. Michelle L. Clark - Morgan Stanley, Research Division: And that leads me to my next question, Mike, on inventory. The inventory on a per-square-foot basis looked high coming out of the quarter, and I was just hoping you could reconcile for us why that is given the strong sales that you saw in the third quarter. And then I know that you guys had mentioned October was weaker given out-of-clearance inventory was light.

Yes. Well, the inventory increase per square foot matched the sales increase per square foot coming out of the third quarter. And there was 2 things that drove the increase in inventory. One was the buildup of seasonal purchases, particularly in the full-line stores. And we expect, as we go through the quarter, that, that will be dealt with accordingly. And the other piece was an increase in our selection in the online. And as Jamie's comments earlier mentioned, one of the things we're doing to improve the service experience there is have a better selection. And so part of that reflects the increased investment there, and we're confident that, that's consistent with the sales pace we're seeing.

Our next question is from Paul Lejuez with Nomura. Paul Lejuez - Nomura Securities Co. Ltd., Research Division: Two questions. First on the Credit business. It seems that this is the first quarter that marketing expenses were down. They were down about $5 million. Just wondering what was happening on that line item versus prior quarters. And then second, it's hard for us to get the exact new store productivity numbers just because of the timing of the stores. So can you maybe talk about what you're seeing on the new space productivity of Rack. It looks like maybe it slowed a bit, so just want to get your thoughts there.

Sure. Let me just get a little clarity. I'm not quite sure I follow the question on the Credit marketing. Paul, could you... Paul Lejuez - Nomura Securities Co. Ltd., Research Division: Sure. So there was a -- I mean, marketing expenses were down $5 million, I believe, year-over-year. Or maybe it was -- sorry, maybe it was a bigger number than that. One second -- why don't you answer the other one first, and then I'll come back to you with the exact number.

Maybe while we're figuring that out, Blake, do you want to talk about the Rack? Blake W. Nordstrom: Sure. On the Rack productivity, number one, we've said all along that our Racks is a highly productive model, well in excess of $500 per foot, which is, from what we can gather informationally, is over double of our peer group. The new stores have all exceeded our expectations but are slightly below that average because on year 1 and in some cases year 2, they haven't hit maturity. But we haven't, in aggregate and even individually, had new store openings that haven't met our expectations for productivity. It's a statistic or a number we watch very closely. And to date, it's continuing to improve with the Rack. Paul Lejuez - Nomura Securities Co. Ltd., Research Division: Got you. And the original question, it was actually $7 million if I look at the line within SG&A on the Credit side of the business went from. . .

Yes. I see what your question is. Paul Lejuez - Nomura Securities Co. Ltd., Research Division: It's the first time it's gone down this year, so I was just wondering what happened versus prior quarters. So it went from $33 million to $26 million, right?

Yes. Well, I think more of that has to do with some general operational investments that we made last year rather than any material change in what we're doing with the Credit business this year.

Our next question is from Barbara Wyckoff from CLSA. Barbara Wyckoff - Credit Agricole Securities (USA) Inc., Research Division: What percentage of the total business does Orange County and LA comprise? And could you just kind of remind us where California totally is now of your total business? And then could you give me some thoughts on the region? What is going on there? Do you have too many stores? What's the competitive environment in the region? And then if you could just comment, as a second question, on Treasure & Bond. Erik B. Nordstrom: This is Erik. I'll take the L.A./O.C. So I think you're generally asking what's going on and do we have too many stores. No, we don't have too many stores there. We opened 2 stores in the last 2 years, and we've relocated a store at Three Oaks [ph] into a better building. And those are all performing very well. L.A./O.C., though secretive, kind of hit disproportionately with the housing crisis and unemployment. So our business is light there. It's starting to get a little better. As far as what percentage is to our total, we really don't take break that out, so I'll pass on that one. But if you step back and not look at year-over-year, L.A./O.C. continues to be one of our most productive regions. I think it's our second highest on a sales-per-square-foot basis. So there's still a lot of business that we do down there. Certainly, nothing that would suggest we have too many stores. And it is starting to get better there and we're actually pretty encouraged, looking forward. Peter E. Nordstrom: And this is Pete. I'll address the Treasure & Bond question. It's still early days for us there, but it's going well. We're learning a lot. We've really positioned that store so that it could be completely independent of everything that happens here at Nordstrom. So there's -- as you might imagine, it's a -- there's a lot of challenges with just running a one-off store that's out there kind of on its own. But it's all been very positive learnings for us, and we're happy with how we've begun. And we think we have a chance to build on that and have success. I think in particular we've been happy with all the real positive editorial comments we've gotten online and magazines and what have you. And it just continues to grow the interest in the store.

Our next question is from Charles Grom from Deutsche Bank. Charles X. Grom - Deutsche Bank AG, Research Division: Just on the impact from free shipping, 15 basis points. It was around for about 2/3 of the quarter. So should we expect an uptick in that for the fourth quarter? And how do we think about that in 2012 before you cycle it next fall?

Yes. Well, I think, frankly, I think we're still learning there. We'll have to see if there's any more acceleration in volume because part of the impact is not just the loss of revenue but the acceleration in the demand. So I think it's a little early to tell, Charles, exactly what that number is going to be, but we'll share that when we learn at the end of the fourth quarter. Charles X. Grom - Deutsche Bank AG, Research Division: Okay. And then just a follow-up on the -- you spoke, Mike, about the incremental $15 million of marketing spend in the new SG&A forecast for the year. Is that in addition to the $25 million to $30 million that you outlined on the 2Q call in August? Or is that included in the $25 million to $30 million?

It's in addition.

Our next question is from Jennifer Black from Jennifer Black & Associates.

I have 2 questions. My first question is, can you talk about the new Women's format? How is it doing in St. Louis and in Nashville? Both of them look fantastic. Peter E. Nordstrom: Yes, this is Pete. I would say that in both those cases, it's performed well. We had a chance for the benefit of all current information to rightsize our allocation to the Women's departments. And the fact that particularly in Nashville, we're new to that customer base, there's been no real big preconceived idea about how it's supposed to be laid out. So we get a much purer look at the intuitive benefits of that kind of layout, and I think that, that's worked out really well. In St. Louis, where we already have a store, it's worked out well there, too. So we continue to add those experiences to the other pilot stores that we're working on. Hopefully, we'll be in a position -- by the end of the year, we'll be able to draw some conclusions from that and that'll enable us to create a more comprehensive go-forward strategy in Women's.

Great. Okay, and my second question has -- if you could give a little more detail on the Rack, are there any changes in strategies for this holiday season? And how is the online Rack business doing? And do you do CRM for the Rack? Blake W. Nordstrom: Jennifer, this is Blake. On the Rack -- and you know Geevy Thomas well who leads that area. He's got a lot of energy and ideas, and there's a number of initiatives that the team has been working on for some time now, and we're really encouraged that it's starting to be reflected in the comps. It's been consistent from a new store point of view. From a marketing point of view, one of the beauties of the Rack is that we can use it as a test. And so there's been a lot of things from a pilot point of view, with social networking and what have you, to improve our communications with our customers, both our existing customers and to attract new customers. So there's just a number of initiatives there. But it's all in the platform of, kind of, the basic tenets of trying to improve the customer experience within that model for that customer. And that's things like having the floor filled in and sized and making sure that the checkout experience -- and that's an area we've been testing some things too with handhelds. It's efficient and meets our customers' expectations. But it really is all grounded in product and having the best product, the best brand and the best values. And one of the benefits from opening more stores is that we've got more scale, and our merchandising team is continuing to make good inroads with our key vendor partners to ensure that hopefully, we're getting the first call on this merchandise. And because of our size, we're able to take the full quantity that they have. And so that for now has really encouraged us, and we'll continue on these initiatives through the fourth quarter to test and try things.

Our next question is from Erika Maschmeyer from Robert W. Baird. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: I've got a couple of follow-ups. Could you talk a little bit about the change in customer behavior that you've seen with free shipping? Are you seeing basket sizes change or decrease, the number of trans -- online transactions increase? James F. Nordstrom: Erica, this is Jamie. We had a lot of assumptions going in before we launched it about what we expected to see happen with conversion rates and average order size, units per order, all those things. What I could tell you is that all of those metrics have performed better than we expected, and so we're overall very pleased with not only the increased demand that we're getting, but the way that the customers are shopping is also ahead of where we thought we'd be. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Great. And then can you talk and give a little bit more details on the marketing initiatives, the incremental $15 million that you're spending, kind of what are they, the timing of them?

Yes, Erica, this is Mike. Primarily, the largest of it is additional search we're doing online. We have found search online to be very, very productive. We measure it very frequently, and we have found -- and as of this point, our investments haven't indicated that there's not a marginal benefit to continue to grow that. So we continue to invest more in there, and it's pushing more people to our website and purchasing more from our categories. And then there's some also other initiatives we have going on in both the full-line and Rack stores that we'll be testing in the fourth quarter. And hopefully, those will pan out.

Our next question is from Adrianne Shapira from Goldman Sachs. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: Mike, you talked about on the expense side, if we could kind of drill down a little bit there, it sounds like a combination of upfront and ongoing spends. But if we're going to fast-forward, help us think about what's the appropriate run rate in terms of expense spending and what sort of comp we should think about to lever expenses.

I think as an ongoing run rate, we'll give some more visibility in February when we talk about 2012 as to what that looks like. But I think the important -- there's 2 important messages I want to leave. One is that we believe we're in a period where we do need to try things and we do need to accelerate the speed with which we're trying some things. And so is there a pure window that's going to tell us when that's going to stop? It's tough to tell right now. But clearly, we've got the resources and the curiosity to continue to move forward on that. The second thing I would say is that as we're investing capital in technology, the lives of those assets and the expense associated with those investments is much larger than with the store. In the old core, the stores used to -- the amount of expense that would be -- that would fall into that current year was much lower than the amount of the expense that's going to fall under these technology investments. So I think from that perspective, we're going to see that for a little bit. And then I would also say that our performance for the quarter, and we highlighted it in the comments, is that our core execution was consistent with what we've said. It was within the flow-through that we expect. And now we're not reporting that separately, but I think internally, the way we're running the business, we continue to monitor that, and we continue to perform appropriately. So hopefully, these investments we make, which we're confident in, will play out over time, and you'll appreciate these efforts that we're making right now. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: Well, it looks like it's driving considerable top line, so it seems like it's working already. But my question then is on the inventory front. It seems as if your comments about expanding the selection online, is that a -- should we then think you're more comfortable running with more inventory if that channel should see continued outsized growth? James F. Nordstrom: This is Jamie. One of the things we're trying to do with expanded selection is be more of an authority and be more relevant to customers with the given category or brands. For example, we've got a large shoe business in our stores, and we're the dominant retailer of a lot of the big brands that are well known, whereas online, we have a much smaller selection than a lot of our competitors out there. And we feel to be not only competitive today but in the future, we need to carry a broader assortment. And that's what the customer is looking for. I think the customer has been telling us over and over again that they want to see a broader selection in the stuff that they're looking for. And so that's what this is about. That's what we're doing, and it's not a onetime thing. I think it's going to evolve probably over the next couple years.

Adrianne, I would just add one more thing. While the inventory may increase, I think you'll continue to see turns increase. And so we're investing to grow that top line, but we still strongly believe in the kind of opportunities that increased turns present to us.

Our next question is from Bob Drbul from Barclays Capital. Robert S. Drbul - Barclays Capital, Research Division: Two questions that I have. The first one is, I guess when you look at your consumer, especially the full-line shopper, can you give us your opinions in terms of where you think that customer is today from the health of the customer, and sort of the expectation into rest of this year and into next year? The second question that I have is, when you look at the categories that have been your leaders from the third quarter, do you think those will be the same strong categories for the fourth quarter? And I guess any thoughts around the Shoe business or the Boot business into the holiday season.

Blake, do you want to take the consumer question? Blake W. Nordstrom: Sure. I think we've been consistent in our communication with you that for some time now, we've seen the customer really respond favorably to newness. And so whether that's brands or color or fashion, innovation, and then there's a quality-value relationship as well. And I think we really also see loud and clear the last 2 to 3 years in this kind of downturn in the economy. And now that it's bumping along here, that could play out even more so. So the comment earlier about, from Mike, how important turn is, it's just really critical that we keep our inventories fresh and that we're close to the customer and we have good flow, and turn is one way to measure that. So from the customers' point of view, what are we seeing? I think we're -- we feel very fortunate about our breadth and the niche and the customers that we serve. There are customers out there that are challenged with employment and housing, other issues in this economy. But for the most part, we have a relatively affluent customer that if we do our job with our services and our products, the customer is responding favorably. And so that's what we're focused on, and we're not economists, but our trends this year give us encouragement if we can stay on that path. So I'll turn the, maybe, the merchandise part over to Pete. Peter E. Nordstrom: Yes, our plans for the fourth quarter are consistent with our trends that you are aware of based on what we've reported over the last few quarters. And the good news is there's -- our Shoe business is very strong, continues to be strong. And you actually asked about Boots specifically, and it's pretty remarkable, actually, the amount of business we're doing as a percentage of the total Shoe business in Boots specifically. And so we made a bet on that going into the season. And from what we can tell right now, that was the right way to go. And so we're pretty encouraged about how we think it's going to end up for us there. Beauty business has been good and so has Men's. And what's nice about that in terms of them having an improved trajectory is they -- and same with the Accessory division as well. They tend to do a disproportionate amount of business in the fourth quarter because of gift-giving. So I think we feel like we're in a really good position to be able to take advantage of all the increased traffic that happens for this time of year.

Our next question is from Liz Dunn from Macquarie. Lizabeth Dunn - Macquarie Research: I guess, following the conversation earlier about sort of the stacked comp, the 3-year trend doesn't really get tough until -- or the 2-year trend, I guess, whatever way you want to look at it, doesn't really get tough until December. So how should we think about the November versus December trend given the fact that you do have an extra day in December versus the fact that the comps get more difficult in December?

Liz, as you know, we don't give any kind of monthly forecast on comps, but we do see an accelerating, more difficult trend coming up in front of us, and I think we'll see the results behave somewhat similar to that. But we'll know soon enough. Lizabeth Dunn - Macquarie Research: Okay. And then if you look at the sort of profitability of a sale online versus store, so in the store you've got the commission, and now online you've got the free shipping. Can you help us sort of understand the puts and takes there?

Yes. Well, I think I will answer that question from just a little bit higher level, and that is from a return on capital perspective. As you know, that's how we tend to look at our overall ability to create value. And clearly, the online channel, because of its lower fixed asset investment relative to a store base, tends to have a higher return on capital. The P&L behaves a little differently than the stores, but the capital base tends to be measurably lower. So we see some higher returns there. And even with all the line item, kind of, pressures that are going on, whether it's free shipping or other forms of competition, I think, overall, that model tends to have a higher return.

Our next question is from Edward Yruma from KeyBanc Capital Markets. Jane Thorn Leeson - KeyBanc Capital Markets Inc., Research Division: This is Jane in for Ed. Most of my questions have been answered. I just had one more. If you could just elaborate on your product flow for holiday. I think that you said you had changed it a little bit, maybe increase for holiday and for next year versus prior year. Peter E. Nordstrom: I'm not exactly sure what you're asking. This is Pete. I would say that the rhythms of how we receive merchandise and what we think we can sell is consistent to how we've always executed the fourth quarter. There's nothing new or different going on there. So I'm not entirely sure what you're asking. Jane Thorn Leeson - KeyBanc Capital Markets Inc., Research Division: That's what I was...

Jane, are you referring to the fact -- I'm sorry. Jane Thorn Leeson - KeyBanc Capital Markets Inc., Research Division: Sorry, go ahead.

I said, were you referring to the fact where inventories were at the end of October? Jane Thorn Leeson - KeyBanc Capital Markets Inc., Research Division: Yes.

Yes. It's really not materially that different than what it was last year. Jane Thorn Leeson - KeyBanc Capital Markets Inc., Research Division: Okay. And then in terms of the comp, the consistency of the comp drivers, how was traffic versus conversion? Particularly, at Rack and at the Nordstrom full-line?

Yes, Jane, we normally don't break out those portions of the equation. But suffice it to say with our overall volumes, we're happy with the amount of traffic that's coming through our doors.

Our next question is from Richard Jaffe from Stifel, Nicolaus. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: So just a follow-on to the HauteLook efforts, and if you can give us some perspective on how you see that fitting both as an independent business and as an integrated part of Nordstrom. You said you're going to keep it as a freestanding business in Los Angeles, but obviously, there's some intelligence that I think both of you could probably share. So any additional color on that business and outlook for its contribution would be really helpful.

Sure. Richard, this is Mike. There's 2 areas right now, I think, that we're focusing a lot of attention in terms of our ability to work together. One is on the product side. Both companies share relationships with some very important brands, and we continue to find ways to improve our ability to work together and to get the best product we can across all our channels. And the second is some marketing initiatives. We've actually tried some things with the Rack and find ways to use HauteLook's large member list to push folks to the Rack and to attract more customers. So those are 2 ways right now that we're working together. In terms of a forward-looking on the performance of that business, we're not talking about that right now. I mean, certainly, in February, when we talk about 2012, we'll give a little bit more color on those subjects.

And our final question is from Matthew Boss from JPMC. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Can you walk us through your localization initiative that you've spoken to? Specifically what it entails, the time frame for the rollout, and when we could see some initial benefits? Peter E. Nordstrom: This is Pete. It's an ongoing deal. This is really a big year -- 2012 will be big year of implementation for us. So it's probably more about that than it is about literally seeing the benefits of it. But I think -- it's clear to us that there should be some near-term benefits as soon as we get some things implemented. So we're still kind of right in the middle of the implementation phase, so I think it's premature to predict the benefits right now. Matthew R. Boss - JP Morgan Chase & Co, Research Division: And what exactly does it entail? I mean, in some ways, I almost think of it as a smaller scale My Macy's program. But my understanding is that it's clustering of stores, and then the next piece is actually localizing the assortments at the store level. I think there's also some in the buying and planning organization, too. Could you just elaborate on it a little bit?

Matthew, this is Mike. In terms of what we're doing, we're using a lot of the information that we've been able to gather over a lot of years with our SKU-based systems in order to more finally sort and allocate our product at a store level. We have had local buying for -- local buying and local attention in the stores for a long time, and it's done very well for us. And I think now we have an opportunity to take it to the next level with a lot of the information we have available to us. And we've designed a lot of the practices and way we're going to do that. And to Pete's point, next year is when we start to roll it out into the integrated systems and tools. And so sometime in the next 12 to 18 months, we should have a better feel as to where we are.

This is Rob. Thank you for joining us today for our third 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. Thank you for your interest in Nordstrom. Goodbye.

Thank you. And this concludes today's conference. You may disconnect at this time.