Wesley S. McDonald - Chief Financial Officer, Principal Accounting Officer and Senior Executive Vice President Kevin Mansell - Chairman, Chief Executive Officer, President and Member of Executive Committee

Dana Lauren Telsey - Telsey Advisory Group LLC Paul Lejuez - Nomura Securities Co. Ltd., Research Division Matthew R. Boss - JP Morgan Chase & Co, 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 Daniel T. Binder - Jefferies & Company, Inc., Research Division David J. Glick - Buckingham Research Group, Inc. Lizabeth Dunn - Macquarie Research Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division Michelle L. Clark - Morgan Stanley, Research Division Robert S. Drbul - Barclays Capital, Research Division Deborah L. Weinswig - Citigroup Inc, Research Division Adrianne Shapira - Goldman Sachs Group Inc., Research Division

Good morning. My name is a Brandy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kohl's Quarter 3 2011 Earnings Conference Call. [Operator Instructions] Certain statements made on this call, including projected financial results, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Kohl's intends forward-looking terminologies such as believe, expect, may, will, should, anticipate, plans or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause Kohl's actual results to differ materially from those projected in forward-looking statements. Such risks and uncertainties include, but are not limited to, those that are described in Item 1A in Kohl's most recent annual report on Form 10-K/A, as you may see, we supplemented from time to time in Kohl's other filings with the SEC, all of which are expressly incorporated herein by reference. Also, please note that replays of this call will be available for 30 days, but this recording will not be updated. So if you're listening after November 10, it is possible that the information discussed is no longer current. Thank you. I will now turn the conference over to Wes McDonald, Senior Executive Vice President and Chief Financial Officer. Mr. McDonald, please go ahead. [Technical Difficulty]

Ladies and gentlemen, please stand by. We are experiencing technical issues. [Technical Difficulty]

Sir, you are now reconnected to the conference call. Wesley S. McDonald: Okay, sorry about that technical difficulty there. I'll start again with financial performance. Wholesales for the quarter increased 3.8% to $4.4 billion. Comparable store sales for the quarter increased 2.1%. Average transaction value increased 5.2% and reflects a 9.5% increase in average unit retail and a 4.3% decrease in units per transaction. Number of transaction per store decreased 3.1%. Year-to-date sales have increased 3.5% to $12.8 billion, and comparable store sales have increased 1.7%. Average unit retail increased 6.2%, and units per transaction decreased 3.9%, resulting in an average transaction value increase of 2.3%. Number of transactions per store decreased 0.6%. Kevin will provide more color on our sales by region and line of business in a few minutes. Our credit share was 57% for the quarter and is 55% for the year, an increase of approximately 430 basis points over the third quarter of 2010 and approximately 540 basis points over the first 9 months of 2010. Our gross margin rate for the quarter was 38.6%, 10 basis points higher than the third quarter of last year and at the high end of our expectations. Year-to-date, our gross margin rate increased almost 20 basis points to 39.1%. Our fourth quarter expectations are consistent with our previous expectations for the third quarter, down 10 basis points to up 10 basis points over last year. SG&A increased 1.1% for the quarter, below our expectations of a 1.5% to 3% increase. More importantly, SG&A as a percent of sales leveraged 66 basis points for the quarter. The most significant leverage came for our credit and store organizations. Advertising did not leverage due to planned incremental spending to drive customer traffic and support the Jennifer Lopez and Marc Anthony launches. We would expect SG&A expenses to increase 5% to 6% for the fourth quarter due in part to increased advertising spend to drive holiday traffic. Depreciation expense was $202 million in the third quarter this year and $207 million in the fourth -- excuse me, in the third quarter of last year. Depreciation is expected to be approximately $202 million in the fourth quarter. Operating income increased 16% for the quarter to $415 million. Operating income, as a percent of sales, was 9.5%, 103 basis points higher than the third quarter of 2010. Year-to-date, operating income increased 10% or $122 million to $1.4 billion. Net interest expense was $75 million this quarter, down $4 million compared to the prior year quarter. The decrease is primarily due to debt repayment in March of this year. Interest expense is expected to be $82 million in the fourth quarter. Our income tax rate was 37.8% for the quarter compared to 36.5% in the prior year quarter. The increase was partially due to lower trust and municipal income in 2011. Additionally, we favorably resolved some state tax audits last year, which lowered the 2010 effective tax rate. We expect our tax rate to be approximately 37.75% in the fourth quarter and 37.4% for the fiscal 2011 period. Net income increased 20% to $211 million, and diluted earnings per share increased 40% to $0.80 over the third quarter of last year. Year-to-date, net income increased 14% to $711 million or $2.56 per diluted share, a 26% increase over last year. Moving on to the balance sheet and some model metrics. Per square footage, we ended the quarter with 1,127 stores, 38 more than at the end of third quarter of 2010. Gross square footage at quarter end was 98 million square feet, 3 million higher than October 2010, and selling square footage increased 2 million to 82 million. Moving on to cash. We ended the quarter with $760 million of cash and cash equivalents, a decrease of 1.7 billion from the prior year quarter end. The reduction in cash is primarily due to share repurchases. We have repurchased approximately 3 billion of stocks since the third quarter of 2010. The cash equivalents are in money market funds, CDs and commercial paper. We ended the quarter with $4.1 billion of inventory, a 2% increase over the prior year quarter. Inventory per store is down 1%. Kevin will talk more about inventory management in a few minutes. Capital expenditures were $755 million for the first 9 months of 2011, approximately $80 million higher than the prior year due to new stores, increased number of remodels, the opening of our third e-commerce fulfillment center and exercise of a purchase option in our Texas call center lease. Accounts payable, as a percent of inventory, was 50.4% versus 52.7% last year. The decrease is primarily due to vendor payment initiatives and lower inventory turn. From a capital structure perspective, we repurchased 15 million shares during the third quarter and have repurchased approximately 57 million shares since reactivating the buyback program in the fourth quarter of last year. All of these purchases were made pursuant to 10b5-1 plans. Weighted average diluted shares were 265 million for the quarter. For your modeling purposes, I would use 253 million diluted shares for the fourth quarter and 272 million shares for the year. This assumes $300 million in share repurchases in the fourth quarter at an average price of $53 per share. Additionally, if you'd like to update your models with restated numbers for the fourth quarter of 2010, you can now back into the numbers from the restated filings in today's results. For your benefit, last year in the fourth quarter, we stated SG&A was $173 million, depreciation and amortization was $189 million, net interest expense was $71 million, and net income was $494 million. Diluted earnings per share were $1.66. Sales and margin were not impacted by the restatement. Earlier this week, our board approved a quarterly dividend of $0.25 per share. The dividend is payable on December 28 to shareholders of record at the close of business on December 7. In October, we issued $650 million of long-term debt with an effective rate of 4.07%, which is approximately 250 basis points lower than our other existing debt. We currently plan to use the proceeds for share repurchases and general corporate purposes. And with that, I'll turn it over to Kevin.

Thanks, Wes. As Wes mentioned, comparable store sales increased 2.1% in the third quarter. After a challenging August, we were pleased to report sales in both September and October at the high end of our guidance. From a line of business perspective, children's reported the highest comp sales for the quarter on strength in both boys and girls. Men's also outperformed the company average and was led by dress shirts and basics. Home, accessories and women's were generally consistent with the company average for the quarter. Notable strong performance performers were small electrics in home, watches and fashion jewelry in accessories and active and updated sportswear in women's. Footwear was the only line of business to report a decline in comp sales for the quarter as high double-digit increases in women's shoes were more than offset by declines in athletic shoes. We launched the Jennifer Lopez and Marc Anthony brands in mid-September. The brands launched in all stores and online concurrently and across multiple departments, making it the largest launch in our history in breadth of content. It also met our very aggressive sales goals and exceeded the size of any previous brand launch by a substantial degree in sales. Both brands are performing very well, and we're excited by the newness that they bring into the holiday season. Our private and exclusive brands continue to increase in penetration as they were approximately 51% of our sales in the third quarter, up approximately 270 basis points. In our private brand portfolio, Apt. 9, So and Urban Pipeline all reported double-digit increases as the FILA SPORT, Food Network, Lauren Conrad, Mudd and Simply Vera Vera Wang in our exclusive national brand portfolio. From a regional perspective, the Southeast reported the strongest comps. The Midwest and South Central regions were consistent with the company average. The Northeast and Mid-Atlantic regions slightly underperformed the company average but were positive. The West was the only region to report a decline in comparable store sales. Our e-commerce sales year-to-date have surpassed $0.5 billion and remain on target to reach our goal of $1 billion. During the quarter, we opened our third EFC, a 1 million square-foot facility in Maryland. We are planning a fourth EFC in Texas, which we expect to open in the summer of 2012. Looking at inventory management. We continue to be very pleased with our results. As Wes mentioned, gross margin as a percent of sales increased 10 basis points for the quarter. Growth in our private and exclusive brands continues to be a key driver of the gross margin improvement. These brands now account for over 50% of our sales. As recently as 2004, private and exclusive brands were only 25% of total sales. Clearly, our customers recognize and appreciate the value and style that these Only-at-Kohl's Brands offer. As we've been saying for several months, apparel costs have increased approximately 10% to 15% for the fall season, but we've been successful in navigating through that change. The impact of apparel cost changes resulted in an increase of 9.5% in average unit retail, more modest unit per transaction decline and a resulting increase of 5.2% in average transaction value. This was better than our planned 1:1 levels of elasticity. Looking at inventory levels, merchandise content and receipt flows. We're very pleased in our inventory management results and are very comfortable in our plans going into the holiday season. Total inventory per store is down 8% in units and 1% in dollars. Clearance units per store are up slightly but account for less than 3.5% of our total units on hand. We would expect our inventory dollars per store at the end of the fourth quarter to be up low single digits on a per store basis. From a marketing standpoint, last week, we announced an integrated marketing campaign designed to maximize the brand sales through the holiday season. The marketing will continue to emphasize our unprecedented value, our industry-leading, hassle-free return policy and no exclusion sales and our unbeatable savings opportunities like Kohl's Cash, Power Hours and Early Birds, Kohl's Charge benefits and of course our Only-at-Kohl's Brands. Our holiday marketing campaign will also include a number of new features. Our Love to Give, Happy to Save campaign focuses on planning, shopping and sharing in the excitement of the holiday season. For the first time in our history, our stores nationwide will open at 12:00 a.m. on Black Friday and will be opened for 24 continuous hours. Kohls.com includes new navigation features to showcase things like what's new, bestsellers and customers top rated. We've invested in additional digital media marketing to help us reach more targeted audiences while at the same time, we've increased our broadcast investment for broad reach as well. From a store perspective, we opened 31 new stores this quarter, bringing our current store count to 1,127. Approximately 75% of the new stores that we opened in 2011 were small stores, stores with less than 64,000 square feet of retail space. We also completed the remodel of our 100th store during the quarter. Not only do these remodels result in a fresh and pleasant shopping experience for our customers, they also result in higher customer satisfaction scores and payroll productivity improvements. We've added marketing to attract customers to remodeled stores and are now targeting a mid-single-digit list in sales following our remodels. We are currently experiencing low single-digit lists, but much of our incremental marketing from remodels is ahead of us in the fourth quarter. We do expect to remodel another 100 stores in 2012, but the slightly reduced new store openings. We now expect to open approximately 30 stores in 2012, 8 in the spring season and 22 in the fall season. 90% of these stores will be small stores. In closing, we weren't happy with our sales performance in the third quarter in total, but we definitely like the improvement that came in September and October. We're pleased to have achieved our earnings goals, as all areas of the company contributed to the success. We have strengthened our marketing for the fourth quarter, adding approximately $30 million to our spending and have the benefit of the biggest brand launches in our company's history, which we believe will allow us to continue to improve our sales performance in the fourth quarter. We continue to be excited about our e-commerce performance as we remain on track to achieve $1 billion in e-commerce sales in 2011. In order to achieve that goal, our third e-commerce fulfillment center in Maryland is online to support the holiday peak season. We're also very happy with our performance in Texas this quarter as we added that state to our marketing intensification initiatives. We have much more to do to achieve our goals in these high -- hot and mild markets, but we continue to move forward positively. Our increased penetration of private and exclusive brands, along with very strong inventory management, continue to benefit us on our gross margin rate and we see no change in that going forward. Our inventory remains in great shape. Inventory levels are in better position than our plans. In addition, our merchants and planners reacted to demand in seasonal sales. We have very appropriate levels of inventory in those categories entering the fourth quarter. We continue to make progress in the SG&A line. After being a significant headwind in 2010, our credit business provided significant leverage in both the current quarter and on a year-to-date basis as our bad debt expense continues to drop towards prerecession levels, and late fee income was restored to more normalized levels. Leverage in the store payroll expenses continues to be driven by sustainable productivity improvements such as the rollout of electronic signs now in 250 stores. Finally, I think you can see that our capital structure continues to provide a great deal of flexibility. We believe that our stock is certainly undervalued at its current level, and we are more aggressive about share repurchase by an approximately $750 million of stock during the quarter versus our planned $500 million. We would expect to buy back at least $300 million worth of stock in the fourth quarter. We're committed to being good stewards of capital, and we'll continue to prioritize profitable growth and reinvestment in our stores while returning any excess cash to our shareholders. I think this is evident as you see our earnings per share increase of 40% over last year and a $207 million of cash dividends that were paid so far this year. With that, let me turn it over to Wes to provide our earnings guidance for the fourth quarter. Wesley S. McDonald: Thanks, Kevin. For the fourth quarter, we'd expect total sales to increase 4% to 6%, and comparable store sales to increase 2% to 4%. We expect November to be toward the low end of our comp guidance, December to be toward the high end of the guidance and January to be near the middle. Gross margin, as a percent of sales, is expected to be between down 10 and plus 10 on a basis point level versus last year. As I said earlier, SG&A expenses are expected to increase between 5% and 6%, and including estimated share repurchases of $300 million, we expect earnings per diluted share to be $1.93 to $2.04 for the fourth quarter. And as a result of our third quarter performance and our fourth quarter assumptions, we are raising our fiscal 2011 guidance from $4.34 to $4.49 per diluted share to $4.41 to $4.52 per diluted share. And with that, we'd be happy to take your questions at this time.

[Operator Instructions] And your first question comes from the line of Adrianne Shapira with Goldman Sachs. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: Kevin, just a few questions. You spoke about the recent improvement in sales trends. I'm just wondering a few months ago, we had talked about the lack of loyalty among noncredit customers. What are you seeing in terms of where the sales improvement is coming from? Is it greater share from your loyal credit card customers or the less loyal customers are coming back?

Well, share on credit rose during the quarter as it has been all year. So certainly, our credit card customers have responded really favorably to the new initiatives. I think we see that mostly in credit card customers who are less frequent shoppers shopping a little more over the period of the quarter. But credit definitely led the performance for the quarter. Wesley S. McDonald: Yes, we did -- having said that, we did see improvement in the noncredit card customers versus how they did in the first 2 quarters. It's still negative, but it's trending in the right direction. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: Great. And then just talking about the comp statement, Wes, that was helpful to kind of walk us through the monthly performance. November being at the low end, is that a function of a-year-ago comparison or maybe shed some light in terms what sort of trends you are seeing out there currently?

I think -- this is Kevin. I think just generally, historically on a trend basis, we've seen the holiday business come later and later each year, and we saw it also at back-to-school. We saw it again this year at back-to-school where a big piece of back-to-school shopping occurred in September instead of in August. So I think, from the perspective of when the business has come -- is going to come, we just kind of expect it to be a little later. So it isn't so much about the year-over-year comparison. There is... Wesley S. McDonald: Yes, you also get an extra selling day between Thanksgiving and Christmas in December, which tends to be worth at least a point in comp. So pretty comfortable with the prediction that December is going to be the best month of the quarter. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: Great. And then just on -- maybe, Kevin, just give us your insight in terms of the landscape out there. Obviously, we always know its competitive heading into the holiday season, but there's a fair amount of management shift that some of your peers, rumblings of EBLP [ph] pricing out there. What are you seeing out there? How does this compare to past seasons, and how do you plan to respond?

I mean, I think generally, just like last year, we look at our customer, and she continues to be pressured by many of the things that you're well aware of in her life. And so how she spends her money, she's very thoughtful about and value's really, really important to her. So as a result, we just think providing her better value and communicating that is really important. That's why we made the decision to invest more into marketing in the fourth quarter, so we can take a real leadership position from a savings perspective for the holiday. I think from a competitive perspective, I don't know if there's anything new to talk about there. I'm really happy, Adrianne, in our inventory levels. I think that's really important because coming into the holiday season, we wanted to be really well managed in inventory. So coming in with less dollars of inventory per store I think is in a really good place for us to be because it allows us to flow freshness into our assortments in November and December, and that definitely was a very big objective of ours.

Your next question comes from the line of Lorraine Hutchinson with Bank of America. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: Just wanted to see if you could address the SG&A growth rate in the fourth quarter a little bit further. I know you added $30 million of incremental marketing, but what are the other incremental costs to drive that rate higher than what we've seen over the past couple of quarters?

Well, I think if you back out the $30 million from the advertising it's more like 2.5% to 3.5%, which if you remember back in February, we kind of guided for the year at 3% to 4.5%, so we're basically doing better than that or projecting doing better than that absent the advertising in the fourth quarter. We always are conservative. We hope to do better. Also if you also recall, the third quarter of last year, we had a onetime very large headwind in credit of about $50 million with late fee reductions as we changed some things to comply with the legislation. So third quarter is always planned to be the lowest improvement of the year, and you saw that in our actual results. So I don't think there's anything else other than advertising that's really higher than our trend has been. And perhaps we'll have some upside in credit if that remains to be seen. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: Can you quantify the benefit that you've gotten from credit so far this year and expectations that, that could continue?

Well, we got at least the $50 million back from last year because that was, as I mentioned, a onetime thing and we got some benefits from continued late fee -- excuse me, continued bad debt expense improvement. We haven't really quantified that. I suspect from a bad debt perspective, it will continue. The effect from credit in the fourth quarter won't be as great as it was in the third quarter, but it also wasn't as great in the spring season either. So the third quarter, I think, is kind of a high mark of our contribution from credit given the year-over-year comparisons. I suspect bad debt going into 2012 will continue to improve but at a much lower rate.

Your next question comes from the line of Deborah Weinswig with Citigroup. Deborah L. Weinswig - Citigroup Inc, Research Division: Wes, you now have 2 quarters in a row where expenses came in better than expected. Can you talk about some of the primary drivers behind that? Wesley S. McDonald: Well, as I mentioned this quarter for sure credit was a large driver and has been in the spring. I think the other major driver has been store payroll expenses based on our phenomenal job of managing to our sales results, which have been a little bit more volatile, honestly, than they normally are, which is pretty volatile as it is and have been basically leveraging at a flat comp. So I'm very encouraged by that. I think we'll be able to continue to do that, especially as we roll our electronic sign the remainder of the year and into next year. The distribution centers have also done a good job. They're leveraged for the quarter and for the year even as our E-Commerce business grows, which is a much higher cost. Advertising, as we mentioned, we've kind of invested more, especially in the fall and hope to see that and improve sales results. We're not counting on that as we give you guys the guidance. We have some room to do a little bit better on corporate but we're investing in some key areas and e-commerce and product development, which we think is important for the longer term. So I think going forward, it's going to be mainly stores and credit and DC that provides the benefit. Deborah L. Weinswig - Citigroup Inc, Research Division: And in terms of -- if we look at the progression of sales throughout the quarter, maybe one way to ask the question, has the halo effect from J. Lo and Marc Anthony have been greater than expected maybe in September and October?

I think, generally, probably no. We had high expectations, so I guess a little bit depends on where you're coming from. But we did have high expectations that we'd drive more traffic. I think also, as you remember, Deb, we had increased our marketing investment beginning very late in September around the launch, of course, and then more so in October so I think that definitely was a tailwind. That was something that propelled more visits as well. So like any other time, it's typically a combination of factors that changes things, and I think it's a combination of newness along with an incremental investment and marketing to drive more traffic that get us a little better results. Deborah L. Weinswig - Citigroup Inc, Research Division: Okay. And then last question, you talked about your store plans for 2012. As we look at the 30 stores, are those going to be more fill-in locations and will those be ground-up or takeovers?

They're pretty much all fill-in locations. We don't have any really new markets. It depend on how you define fill in. Some of them in a metro area, but probably in the x urb [ph] in terms of takeovers versus ground-up, I don't have the exact number in front of me but I think roughly 1/3 are takeovers.

It's definitely higher. There are more takeovers next year than we have in our current portfolio, that's for sure.

Your next question comes from the line of Bob Drbul with Barclays Capital. Robert S. Drbul - Barclays Capital, Research Division: Wes, I just have a couple questions. On the gross margin for the quarter, on the e-commerce growth, has the free shipping had a major impact or drag on your gross margin? And what are the assumptions in the fourth quarter with the big volume you expect? Wesley S. McDonald: Yes, I think short answer is yes. We've increased -- if you look at merchandise margins year-over-year before you take into the cost of shipping, we've done a nice job of increasing that as we've increased our penetration of apparel. I think some of you guys know that our home business is a bigger part of e-commerce than it is in brick and mortar, roughly of 1/3 of our E-Commerce business versus under 20% of our total business. But free shipping is definitely a drag. It's been a drag all year. It will be a drag in the fourth quarter. But that's not any different than last year, quite obviously. In the fourth quarter, pretty much between Thanksgiving and free ship -- and Christmas, it's free shipping everyday for us and most of our competitors. And so that won't be any different year-over-year. Robert S. Drbul - Barclays Capital, Research Division: Got it. And then, Kevin, I think in your comments, you talked about the footwear business and I think the women's business has been generating double-digit comps. Within the J. Lo line, the platform wedge, mid-cap boots and the over-the-knee boots seem to report doing pretty well. Are you having any trouble keeping them in stock?

Bob, do you want a job on merchandising and footwear? Because I'm impressed with your intuition when it comes to product. I don't think so. I think generally women's footwear had a really good trend all year, and they've just been trend right on product. And for us, it's very fortunate that we are because we have had a face to drag from last year as you remember in the toning business and the athletic shoes. And while that pretty much goes away post the fourth quarter and it's certainly less important in the fourth quarter, the positive improvement in our women's casual and dress businesses has been a great offset to that. So that seems doing a really good job on product. Wesley S. McDonald: I think boots, overall, are up 30% for the quarter, so it's definitely a boot year so far. Robert S. Drbul - Barclays Capital, Research Division: Got it. And when you look at the AUR expectations, do you think that, that sort of peaked in terms of the 9.5% for the quarter? Or how should we think about that within the fourth quarter?

I'm thinking AUR in the fourth quarter is going to be up similar kind of levels, whether it's exactly 9.5%, I don't know about that, but high single digits I would expect because the cost of our product that we'll be selling essentially are up in that kind of 10% to 15% range, and so we're expecting average unit retail to be up probably high single digit. And we've done better than our expected elasticity. Units are not down 1 for 1 so that's a very good thing. But I would expect units to be down in the fourth quarter as well, just not as much as retail is up.

Your next question comes from the line of Michelle Clark with Morgan Stanley. Michelle L. Clark - Morgan Stanley, Research Division: I had a question for you on your fourth quarter comp store sales outlook, appreciate the fact that you hit the guidance below in the guidance in the third quarter but you're going up against a much more difficult compare here in the fourth quarter. So what are you seeing that gives you confidence in the acceleration in the 2-year comp trend?

What I mean, I think, as we kind of touched on, Michelle, it’s typically when we see improvements in that trend there, a result of actions that we've taken to motivate consumers. And so more newness in our assortments, I think, gives us some confidence that we're getting more visits and we'll continue to get more visits. Definitely, marketing investment was a big part of our strategy beginning in October and right through December. We just recognized that with the weaker sales trend in the first half of the year and then, of course, as you all know, August continued to be weak. We needed to make a change in terms of how much we invested in marketing to drive traffic. And so the comp -- I would say those, there are lots of other things in terms of the way we mix out and trends that we have but we really look at high level. 2 big things I'd say, more newness in our assortment and a more aggressive spend on marketing, which is both broad, around broadcast but also very defined in digital. And so a combination of those 2 things, I think, we're hopeful will drive continued good success. Wesley S. McDonald: I'll add the third, good things come in threes, so e-comm was a much bigger part of the business in the fourth quarter. It helped the comp 100 basis points in the third quarter and year-to-date, it's 120. It's closer to 200 basis points in the fourth quarter, and we feel real confident in our ability to hit that plan. Michelle L. Clark - Morgan Stanley, Research Division: Okay, that's fair. That's very helpful. And then, Wes, how do we think about 2012 in your leverage point on SG&A, if we factor in credit slowing as a tailwind? What comp you need to leverage SG&A in 2012? Wesley S. McDonald: Well, long term, we've always said that our goal is to leverage to comp and that really won't change for next year. How we get there is undetermined because we haven't really given 2012 guidance. We're planning an Analyst Day in March, so we'll try to share multiple year guidance, so we'll put a lot more thought here in the next 90 days about a longer-term outlook. But for your modeling purposes, that's what I would use because that's what we're targeting to achieve.

Your next question comes from the line of Charles Grom with Deutsche Bank. Charles X. Grom - Deutsche Bank AG, Research Division: Just historically when you spent the incremental marketing spend, is there a good ad to spend or an ad-to-sales ratio that you guys typically see on that $30 million?

I mean, this is a real generalization but generally, when we incrementally add to marketing, we don't get the same productivity rate that we would report in our overall marketing. So for the year, we're 4.5% of sales in our marketing spend, and then we make a decision to add incremental marketing. We don't expect it to return at that rate. It's going to come at a slower rate just because these are -- now you're starting to talk about kind of the extra things that don't produce at the same rate of sales. But they're important if you're going to continue to move forward. So we don't have expectations it would leverage at the same rate of our regular investment. Charles X. Grom - Deutsche Bank AG, Research Division: Okay. Just on the elasticity front with a little bit less demand structure that you probably would have imagined. How do you think IMUs look in 2012, particularly in the back half because we start to see some of these costs drop? What do you think your AUR will look like relative to the cost that you're going to need to procure those items?

It's just too early, I would say, Chuck. We're not trying to dodge the question I think it's just too early for us to comment on that. Our mark up is in great shape. As we talked about, I try to really reinforce this with investors, our inventory is in great shape. Coming into the quarter with less inventory dollars per store is a great place to be going into what will probably be a competitive promotional holiday. So from that perspective, I also expect to enter the spring season in great shape, which gives you the ability to navigate more effectively. But it's just too early to think about fall yet. I think we might be better prepared in the fourth quarter call to talk about that. Charles X. Grom - Deutsche Bank AG, Research Division: Okay, fair enough. Last question, just I think the bar case in the stock is that you can't take the sales per square foot up and narrow the gap between the cold and the mild and warm markets today. I'm just wondering if you could quantify for us how under indexed those markets are and what are you doing beyond like the new product launches to narrow that gap?

I mean, rough number they're around 10% less. That's no single one in the home markets that is actually 10% less. Some are better than that, but some are worse than that. But 10% is probably a good number to use. I mean, always, the tactics involve, refining the marketing, tailoring the marketing based on the way media is consumed in each of those markets. But more and more, I would say we're focused around product and refining the product offering, introducing more and more newness into our assortments. We're going to be very aggressive about that next year. We're going to start off the spring season with a huge launch with our Rock & Republic partnership with VF, and I would expect to hear us tell you about more new brand launches for the fall season next year as well. Wesley S. McDonald: This is just a modeling thing, but we don't include e-commerce sales in our sales per square foot calculation. I don't know about some of the other guys, but that growth is sort of off to the side from a sales per square foot. So you might want to look at combining them. Charles X. Grom - Deutsche Bank AG, Research Division: Fair enough. And then just as a follow-up there. How they got opportunities with Capital One now versus Chase to target certain customers in a different way? Wesley S. McDonald: Well, I think we had a good relationship with Chase, and it was profitable for both of us. I think we're starting off very well with Cap One as well. We're in the process of developing a new scorecard, which should provide some opportunity for us next year that won't get installed until next year when we switch. We're switching over to a new system in the first quarter with First Data, and after we do that, we'll put in a new scorecard. But we've made some changes to improve the approval rate a couple of hundred basis points, which has really helped us in areas like Texas, as we've included them in the market intensification program that Kevin mentioned earlier. That's been helpful try to get more credit card customers down there as that's an area where we're under penetrated from a credit perspective.

Your next question comes from the line of Dan Binder with Jefferies and Company. Daniel T. Binder - Jefferies & Company, Inc., Research Division: Dan Binder, just following up on your comment about the approval rates. As they go up, is it due to Capital One's acceptance of a slightly lower FICO score customer? And if that is the case, it would seem that bad debt expense could be going up in the future at some point. I don't know if it's 6 months or 9 months, is that fair or no? Wesley S. McDonald: No, I mean I think we're looking at a variety of different things and trying to approve. A lot of reason we can't approve people is because their credit history is very thin, so we're looking at different ways to approve them. We're looking at utility payments, apartment rent payments, things like that. We may take it a small dip a little bit lower in the FICO scores, but we don't use FICO score, we use Vantage scores. But it's not material. It's a very small part of the population. I would just say look at our track record, our profitability and credit has been very good even through the recession. It was one of the reasons that people were so interested in our portfolio. We wouldn't put it out for bid. We're not going to make decisions that are going to get us short-term sales just to have to write them off in 180 days later. Daniel T. Binder - Jefferies & Company, Inc., Research Division: The credit penetration is pretty high. I think you said 57% earlier in the call. Directionally, where do you think that can sort of go to? Wesley S. McDonald: Well, we have markets that are over 60% I won't say that we'll get all the way everybody over 60%, but we also have a lot of markets in the 40s so do I think the total share will be over 60%? I find that unlikely. But I definitely think we can continue to improve it and out year is probably at a slower rate than what we've done so far. Daniel T. Binder - Jefferies & Company, Inc., Research Division: How do the credit customer comp this quarter? Wesley S. McDonald: Like Kevin said earlier, it was very strong. I think we got more visits from more of the infrequent customers. But the noncredit card customer improved as well. I mean, they both have to improve, to be honest, for us to get better comps. It can't be driven by just one or the other.

Your next question comes from the line of Erika Maschmeyer with Robert W. Baird. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Could you talk about just the drag that sharper pricing was for you versus your plan for this quarter? And then on the pricing front, I know you said before that if you just raise prices on newness and fashion items and harder on some of the opening price points but probably are there any trends by categories where you've seen greater success?

I wouldn't refer to pricing as a drag. I think the results, and to be honest with you, the results that we got from an average unit retail perspective were pretty much right on the target that we have set and sort of expected when we implemented the new cost and reflected those in our retail and then incrementally added to our advertising as well. So I think we're pretty on target from that perspective. I think pricing is kind of where we expect it to be. Certainly, you're a 100% right when you say that pricing has been much less of an important factor in the success of things that are new or more on target. And I think the perfect example of that is the Jennifer Lopez and the Marc Anthony brand, both of which brand add significantly higher average unit retails than the categories in which they operated. And even the price zones in which they sit, which were our best price zones. So that tells you that customers look past a little bit higher price because of the excitement around the newness and on-target fashion. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: And then can you talk a bit about the drivers and strength for children's and men's. It seems that accelerated from last quarter?

Well, men's has been pretty good all year to be honest with you. Marc Anthony was definitely positive for the men's business as well. Jennifer Lopez brand probably gets a lot more attention than the Marc Anthony brand does. And naturally Jennifer Lopez brands could be bigger because the women's business at Kohl's is significantly bigger. It's almost 50% bigger than the men's business. But in terms of impact in the business, Marc Anthony brand had just as big an impact on the business as Jennifer Lopez did in women's. And really what happened in both of those businesses I would say, as we launch the new brand, the brand that surrounded them, which always we want to watch carefully because you don't want to get new sales for the new brand and then lose sales with the old brand, that really didn't happen in either of men's or women's worlds. The brands around them were very successful in the quarter, and a great and best example of that is the Vera Wang brand, and women's continue to produce a double-digit increase in the third quarter right in the heart of the launch around Jennifer Lopez. So from that standpoint, I think we feel pretty good. But men's has been strong, I think, last time [ph] all year. Wesley S. McDonald: Yes, men's have been better than the company and kids -- I mean kids had a really great quarter. Obviously, some of that was driven by favorable weather. It's more of a need-base business but I think the merchants in that area have done a good job managing through the cost increases. That's obviously one of the most price-sensitive customers we have. And for them to lead the company for the quarter with a mid-single-digit comp, they've done a nice job.

Your next question comes from the line of Paul Lejuez with Nomura. Paul Lejuez - Nomura Securities Co. Ltd., Research Division: Paul Lejuez. Just on that last comment, Kevin, what would it be the UPTs look like on the transactions that included a J. Lo or Marc Anthony item? And then second, just wanted to go back to expand on the question that was asked earlier on the cost environment. I'm just wondering what you're seeing now in terms of your costing, and when do you think that you'll see decreases on a year-over-year basis running through your P&L.

On the first part of your question, the basket, units 2 new brands in them, I don't have that in front of me. I know for sure that the average value of the basket was higher, but I can't tell you whether that was also higher on units. It clearly was higher in average transaction value, and clearly, the 2 brands produced the highest average unit retail in the worlds in which they sit. We can try to get you the other thing, Paul, and get back to you on it. On costs going forward, I think currently, our assumptions are that for the spring season, we're going to still see increases in spring 2012 over spring 2011 but much more modest, more in the low to mid-single digits range. By the time we get to summer, those could actually be flat to low. And then as I kind of said earlier, I'm a little hesitant to say anything firm around fall, but I think it's not a question that we would see flat to modestly down in some cases for the fall season. But it's just a little early to say. But the trends are clearly going in that direction.

Your next question comes from the line of Liz Dunn with Macquarie. Lizabeth Dunn - Macquarie Research: Just a couple of short ones. I was wondering just a little bit more information on the decision to open just 30 stores next year. Is that about the development environment or kind of what's behind that? And then if you could refresh me on what has been your experience if competitors close stores? How much pickup do you get if that were to happen? And then on gross margin, maybe I'll start there and then I'll follow-up with my gross margin question.

I mean the 30 new stores is pretty much what we've been indicating to investors for a while now. You should plan on approximately 30 new stores. It seems like the right level. I know you've heard us talk a lot about how happy we are with the success of the small stores in terms of their productivity, their operating margin, their return on invested capital. So I think Wes indicated 90% of stores for next year are small stores. It just seems like the right level and their deals that are proportionally higher in takeover, which isn't a surprise either. We're thinking that there's going to be more takeovers because there is more flexibility with the smaller prototype to fit into boxes that are empty than with the bigger prototypes. So I think 30 is kind of what we expected, and I wouldn't read anything into it any more than that. Wesley S. McDonald: Yes, in terms of competitors closing, I mean, it depends on a lot of factors whether most of the competitors I think that are closing are in the malls these days so it depends on how close our stores is to the mall. Mervyns went out of business that was probably the biggest share we picked up and that was depending on how close the store was to their location, somewhere between 20% and 25% of their sales, at least from the way we estimated it. If a GAP store closes, it would be a heck of a lot smaller than that. So from a hypothetical perspective.

I mean, generally, if you think about it as those stores who overlapped the most in terms of customer demographic and like kinds of merchandise assortment, that's where we'll get the biggest lift, and we'll get the least lift where store close to have a very different demographic target or a very different merchandise mix. Lizabeth Dunn - Macquarie Research: Okay. And then in terms of gross margins, if it's still sort of philosophically make sense that going forward, you won't really push for gross margin gains but you'll sort of use some of leverage that you have that are driving gross margins higher to sort of give that back to the customer and drive shares, is that still where you are philosophically?

Well, it's certainly for sure a fact for the fourth quarter that's how we thought through our fourth quarter guidance. We haven't given guidance for next year beyond, but I think philosophically I think we know that the benefits of better inventory management which we're enjoying and the improvement in our exclusive product brand portfolio, which enhances our merchandise margin rate, those positives should be used to drive more traffic. And so I think it's probably good to assume that going forward, we're not really planning much in the way of margin improvement, but we'll use that to drive more traffic. Lizabeth Dunn - Macquarie Research: Okay. And then just one final one. I know a couple years ago, we sort of talked about $250 per foot in sales per square foot productivity. Is there any kind of update around that as a goal?

Well, again, we haven't beyond the fourth quarter guidance, one of -- let me back out for a second, Liz. One of the things that Wes mentioned in the call is that we are planning in March an Analyst Day for the first time in several years. And the purpose of that is to kind of set the stage for the next few years and give you more insight into our thinking. Certainly, we're doing all the things we can to get productivity in our brick-and-mortar stores back to the level they were at prerecession. So the focus hasn't changed. That's for sure. In terms of an absolute number, I think we'll talk about those kinds of things probably at that March meeting.

Your next question comes from the line of Matthew Boss with JPMorgan. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Can you talk about trends in the home category during the quarter? Any changes you've seen within the category? Anything that's outperforming or any new lag that's worth noting?

No. I mean, I think, first of all, home has lead the company, and led it again. For the year, I think we're up. Wesley S. McDonald: Home for the company for the year, it was pretty much with the company for the quarter I think trending. Small electric is obviously been very good. Everybody likes coffee. And I think bedding has also been a very strong category. That category has been a little bit weaker than in the home-decor area, the knickknack types of stuff that you don't necessarily need. It's more discretionary, the stuff that you -- is more on a replacement cycle is stronger.

I mean the other thing that's similar and home to the rest of the store but has definitely been a big positive for home is the partnership with Food Network. Our Food Network business is up dramatically on a year-over-year basis from what it was a year ago. And of course, that's in a lot of different categories beyond small electrics and tabletops and others. But I think the impact of the proprietary brand relationship we have with them has been really positive in the home area. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Great. On the gross margins just to kind of follow up on some of the questions that have been asked, the drivers looking forward, inventory like you said has been in great shape heading out of the quarter. From a technology standpoint, any initiatives and further room to go there? And then from a longer-term perspective, where could private and exclusive brands go as a percentage of the mix do you think?

Well, I think the drivers in margin improvement, which, of course, you don't always see in total because as I said earlier, we do use some of those to drive more traffic. They're still the same. We're very, very focused on inventory management. Probably the biggest initiative we have they're in the next 2 years is around assortment planning. We've talked in length about the need to improve how we tailor our merchandise more appropriately by market, so that's on target to the customer that lives in that market. And a lot of that has to do with having the right tools for our merchants and planners to use so that job becomes easier for them. And so we are planning to roll out a new assortment planning tool in the next 2 years with our technology partner SaaS [ph]. We do expect that, that would have a positive impact in our ability to tailor more effectively. Size optimization has just really kind of come into being, so we do expect and hope that that's going to have a positive, not just on margin rate, but also on sales as we more effectively tailor our sizes by market and by store because as you know, those are very, very different as well. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Okay. Final question. From a competitive standpoint, Ross Stores recently announced their first move into the Midwest to 12 stores in Illinois. How do you guys compete with Ross and some of the off-mall shared value centers, is there any concern? And are you seeing anything else from a competitive standpoint worth noting?

I mean, I think Ross is a large retail player in our categories in the West Coast now. They're growing. When you look at share gains broadly, Matt, the winners in the last 5 years have been very consistent. They're in the apparel world. They're kind of Kohl's and the off-price stores. And I'd say we don't see any change in that. Those are the stores who are growing. We're opening 30 stores next year as well across the country, I think, in many different regions. But we definitely compete against Ross. We compete against off-price stores like TJX and they're part of the landscape, and we have to consider them in our merchandising strategy.

Your next question comes from the line of David Glick with Buckingham Research. David J. Glick - Buckingham Research Group, Inc.: I just want to follow up a little bit on digital marketing. Kevin, I was wondering if you can give us some color on is there a philosophical change there to step that up? Do you feel like you've perhaps been behind your peers and catching up? And on the flip side, do you see this as one of the key comp drivers, both online and in-store?

I don't know that I would say we're particularly behind competitors in terms of either the level or the effectiveness of our digital marketing campaign. It's just as we thought through decisions that we were going to need to make for the future. We want to kind of stay ahead of the curve on that. And I think generally, David, I would say that emerging media types like digital marketing are harder to get the same productivity levels from a sales results standpoint than more traditional methods that we have. So we recognize that spending money in categories like digital is very, very important for the future, but we can't expect the same -- get the same A-S that we would get in, let's say, more direct mail or more print but it's the future, and so we want to be better positioned for the future. So we made the decision to invest more -- it also does a better job targeting, so we definitely are going to leverage that. One of the reasons we also invested in broadcast is because that does give us a really wide reach. And that does reach a lot of people. It's certainly not as refined as digital can be, but it's important to do both. David J. Glick - Buckingham Research Group, Inc.: And just to follow on the E-Commerce business hitting an important milestone this year. How quickly can you get to multiples of that? I don't recall if you defined a specific targeted timeframe that maybe in Investor Day conversation, but I was just curious if you can give us some idea of how much more you need to build out that organization from a merchant and technology perspective, and how much more beef you need to -- how much more you need to beef up in that organization?

I mean, I think the short answer is that will definitely be probably a large piece of our Analyst Day come March today I think we do owe everyone what our vision is in terms of the growth rate of that business over the next few years and the investment that, that business will require. I would say infrastructure-wise, that's already been reflected in our thinking to a great degree. We just opened up our third EFC. We're opening up our fourth next year. That's already built into our capital assumptions. The area that I think we'll get a lot of investment, and which we're planning for and we'll share the details with you, will be the e-commerce organization corporately. And that's everything from marketing to planning to buying to product development to IT. That is going to be an area in which we're really going to invest in. The best analogy I will give to you, David, is if you look back a few years and you thought about where Kohl's was from a product development perspective and the decisions we've been made to invest in product development in places like New York and the return and results we got from that, that's how we're thinking about digital is that we're going to make a big investment, and we expect to get a big return in the next few years for it.

The next question comes from the line of Richard Jaffe with Stifel, Nicolaus. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: Just a bookkeeping question. How many stores or what percent of your stores are in warm weather regions?

It's over half now. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: And you had commented about the sourcing opportunity really in the second half. Should we assume that would translate into margin improvement or do you anticipate trimming retails as pricing gets better for you guys or some combination?

What I think, again, and I'm not trying to dodge it, I think we just don't have -- we're not fully informed enough yet about where pricing is going to land to be able to comment directly. I expect we'll definitely be in a position to do so in February. I think it's important to note when you think about what happened to cost in this fall season, I think people, investors were suspect that we would be able to continue to maintain and improve our merchandise margins in the face of higher costs. That's how we did, and we're able to do it. So we're just kind of thinking about it whether costs are going up or costs are going down. It's just our job to manage through that, get the customer the best result, but effectively manage it so that we come out whole at the end.

Your final question comes from the line of Dana Telsey with Telsey Advisory Group. Dana Lauren Telsey - Telsey Advisory Group LLC: Can you talk a little bit about as you think about products for 2012, you have J. Lo, Marc Anthony, Rock & Republic's coming up, how do you think of the brand and product initiatives and what percent of the business exclusives, private and how it impact margins?

Yes. I mean, generally, we're expecting to be able to announce more newness for next year for the fall season, back-to-school and fall season I would say. And I think our results just kind of have reconfirmed what we already knew, which is very important for us to introduce newness and create new ideas to generate excitement and generate traffic. Generally, as long as we execute well, our exclusive brand portfolios produce higher merchandise margin rates than the store in total. So that's a tailwind as long as the product is on target. Wesley S. McDonald: Thanks, everybody.

This does conclude today's conference call. You may now disconnect.