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

Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division Jessica Schoen - Barclays Capital, Research Division Deborah L. Weinswig - Citigroup Inc, Research Division Daniel T. Binder - Jefferies & Company, Inc., Research Division Adrianne Shapira - Goldman Sachs Group Inc., Research Division Charles X. Grom - Deutsche Bank AG, Research Division Paul Swinand - Morningstar Inc., Research Division Lizabeth Dunn - Macquarie Research Kimberly C. Greenberger - Morgan Stanley, Research Division Michael Binetti - UBS Investment Bank, Research Division

Good morning. My name is Matthew, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Kohl's Q2 2012 Earnings Release Conference Call. [Operator Instructions] Certain statements 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 terminology, such as believes, expects, may, will, should, anticipates, 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 such 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 and as may be supplemented from time to time in Kohl's other filings with the SEC, all of which are expressly incorporated herein by reference. I would now like to turn the call over to Wes McDonald, Senior Executive Vice President and Chief Financial Officer. Please go ahead. Wesley S. McDonald: Thank you. With me today is Kevin Mansell, Chairman, CEO and President. I'm going to take some time to go over the income statement and balance sheet, and then I'll turn it over to Kevin to walk through some more specifics on our results related to merchandising, marketing and expense management, and then I'll close up with guidance for the third quarter. Total sales for the quarter decreased 1% to $4.2 billion. Comp store sales decreased 2.7%. The comp decrease was driven by transactions per store, which were 4.5% lower than the second quarter last year. Average transaction value increased 1.8% on a 6.2% increase in average unit retail and a 4.4% decrease in units per transaction. Year-to-date, sales increased 0.4% to $8.4 billion, and comparable store sales decreased 1.3%. The year-to-date comp decline was also driven by transactions per store, which declined 3.1%. Average unit retail increased 5.5%, while units per transaction decreased 3.7%, resulting in a 1.8% increase in average transaction value. Kohl's Charge sales penetration increased 160 basis points to approximately 57% of total sales for the quarter. Year-to-date, credit share is 56%, an increase of approximately 215 basis points over the first half of 2011. Kevin will provide more color on our sales in a few minutes. Moving on to gross margin. Our gross margin rate for the quarter was 39%, approximately 160 basis points lower than the second quarter of last year but significantly better than our expectations of a 200 to 250 basis point decrease. SG&A decreased 1.6% for the quarter, well below our expectations of flat to up 1.5%. SG&A as a percent of sales leveraged approximately 15 basis points for the quarter and 30 basis points year-to-date. Kevin will provide more color on expense management as well. Depreciation expense was $210 million in the second quarter this year and $190 million in the second quarter of last year. The increase is primarily due to new stores, remodels and IT investments. As a percentage of sales, depreciation was 5%, approximately 50 basis points higher than last year for the quarter and 30 basis points higher year-to-date. Net interest expense was $80 million this quarter and $162 million year-to-date. The $8 million increase over Q2 2011 and the $14 million increase over the first 6 months of 2011 were primarily due to the $650 million of long-term debt issued October 2011. Our income tax rate was 36.3% for the quarter, significantly lower than our original expectation of 38%. The decrease was primarily due to favorable settlement of state tax audits, which contributed $0.02 to our diluted earnings per share. Net income was $240 million for the current year quarter and $299 million for the second quarter of 2011. Diluted earnings per share for the quarter this year was $1, and year-to-date diluted earnings per share for the year-to-date period was $1.63. Moving on to some metrics for your models. Square footage, 90,848 this year versus 96,380 last year, up about 2.6%. Selling square footage, 82,522 versus last year's 85,097, up 2.4%. We ended the quarter with $600 million of cash and cash equivalents. Moving on to CapEx. CapEx expenditures for the first 6 months of the year are $429 million, $50 million lower than the first half of last year. The change reflects multiple changes in our capital expenditures, including fewer remodels and fall new stores, partially offset by higher IT spending. As a reminder, we are planning to open 12 new stores this fall compared to 31 last fall, and spending on our E-Commerce facilities was relatively flat year-over-year. Moving on to inventory. Our inventory balance at the end of July was 3.5 billion, a 13% increase over July 2011; our inventory dollars per store on a cost basis is up 9%; and our units per store are up 6%. AP as a percent of inventory was 43.8%, slightly higher than last year's 43.5%. From a capital structure perspective, we repurchased 6 million shares of our common stock during the quarter and 12 million shares thus far this year. We have repurchased approximately 77 million shares since reactivating the buyback program in the fourth quarter of 2010. All of these purchases were made pursuant to 10b5-1 plans. Weighted average diluted shares were 239 million for the quarter and 242 million for the year-to-date period. Earlier this week, our board approved the quarterly dividend of $0.32 per share. The dividend is payable September 26 to shareholders of record at the close of business on September 5. I'll now turn it over to Kevin to provide additional insights on our results.

Thanks, Wes. Let me start by adding some color to our sales results. As Wes mentioned, comparable store sales decreased 2.7% in the quarter. From the line of business perspective, Men's was slightly positive for the quarter on strength in casual sportswear and pants and tailored and dress clothing. Footwear and Accessories outperformed the company average. Within those categories, athletic shoes reported a positive comp as we've anniversary-ed prior year declines in the toning category. Women's shoes also outperformed the company average. In Accessories, both sterling silver jewelry and bath and beauty reported comps of approximately 10%. Handbags and small other Accessories were also positive for the quarter, continuing their recent favorable trend. Women's, Home and Children's each reported mid-single-digit declines. In Women's, updated sportswear was the strongest category with a low double-digit increase. Intimate and sleepwear also outperformed the company. And as we expected, the Junior business continued to be challenging. Better performance in Home included bedding and sheets, bath and towels and other domestics. Children's apparel improved throughout the quarter, as back-to-school inventory arrived in the stores and inventory levels normalized. Active and fitness apparel, which span multiple lines of business, consistently outperformed other areas of the company with a low single-digit comp for the quarter. Key contributors were NIKE and adidas, as well as our own proprietary FILA SPORT and Tech Gear brands. From a regional perspective, all regions were negative with no significant variation between the regions. E-Commerce sales increased 39% over the second quarter of 2011 to $237 million. Year-to-date, E-Commerce sales were $488 million. The effect on the comp for the quarter and year was approximately 170 basis points. From a brand perspective, 55% of our second quarter sales were private and exclusive only at Kohl's brands, an increase of approximately 200 basis points over the second quarter last year. Substantially all the penetration increase was the result of our new exclusive brands: Jennifer Lopez, Marc Anthony and Rock and Republic. We saw notable sales improvements in many of our entry level price point brands in July, as inventory levels normalized. Our private brands reported a combined comp increase of 3% in July, more similar to our first quarter results in these brands, after reporting declines earlier in the quarter. Our exclusive brands comped up low double digits for the quarter. Strong performers included Lauren Conrad, FILA SPORT, Food Network and Simply Vera Vera Wang. During the quarter, we launched the Princess Vera Wang line. This new Junior line was designed with Vera Wang and features apparel, jewelry, handbags and shoes that range in price from $16 to $98. And finally, in June, we announced a partnership with Narciso Rodriguez, who will be the first designer for our new limited edition collection concept called DesigNation. This collection will feature fashions based on international inspiration from different premier designers across the world. The collection will feature Missy apparel, including outerwear, dresses, skirts, pants and shirts. The retail prices will range from $30 to $150 and be available beginning in early November. On the gross margin front, as Wes mentioned, our gross margin rate for the quarter was approximately 160 basis points lower than the second quarter of 2011. Though we're certainly never happy with gross margin declines, we're pleased that the decline was lower than both our second quarter guidance and the first quarter decline. We entered the fall season with an improved understanding of how our customer responds to our pricing, fresh inventory and normalized inventory levels. We are also seeing mid-single-digit apparel cost decreases for the fall season. Our expectation by the end of the year is that unit and cost increases per store will be similar, as we gain benefit from the lower cost fall receipts. On the SG&A line, our teams once again outperformed our expectations. Our credit operations contributed the most significant SG&A leverage. Portfolio growth and improved performance are now the key drivers, however, as we annualized our new relationship with Capital One in April. Our stores organization continues to drive payroll efficiencies, and reductions in the number of remodels also generated cost savings. We also reported leverage in our corporate operations. As expected, marketing costs did not leverage as we spent incremental dollars to support brand launches, including this quarter's Princess Vera Wang launch and to reemphasize the many great ways to save at Kohl's. Distribution centers also did not leverage as we continue to develop the infrastructure for our growing E-Commerce business. In February, we laid out 4 priorities for fiscal 2012. We've had 6 months to focus on these priorities and would like to take this opportunity to update you on our status. Our first and most important priority was to reposition our business to allow us to improve our sales trend as we transitioned into the fall and in the holiday period. In order to do so, we identified the need to act on several fronts: stronger pricing, improved inventory levels in in-stock and an improvement in the style and the quality of our merchandise content. We have made progress in all 3 opportunities. On the pricing front, we lowered our merchandise margin plans to allow our merchants to take a more leadership position and price points in all of our key businesses. This is especially important for us in order to expand the appeal of Kohl's value to a broader customer base. Our customers have responded favorably to the lower prices, particularly in opening price points. On the inventory front, our inventories are now where we believe they need to be in most categories. And as that happened, in the last 4 to 6 weeks, our business has improved. As Wes mentioned a few minutes ago, inventory units per store are approximately 6% higher than last year and generally consistent with the second quarter 2010 levels. The style and timeliness of our merchandise content has also improved. We've made significant changes to our merchandise organization and continue to do so to support that effort. We do believe we are now well positioned both in terms of units and fashion content with significant depth in key items, especially in key back-to-school areas. Though we're encouraged by recent sales results, we acknowledge the challenges that are still in front of us as we enter the back-to-school season and prepare for the critical holiday season. We recognize the gaining sales momentum as a gradual process and remain very determined and focused on meeting this goal. Our second priority going into fiscal 2012 was to drive leverage around SG&A. As I mentioned just a moment ago, our teams again delivered solid expense results in the second quarter. Our operational process changes and technology-driven productivity changes are generating sustainable expense savings. But we will not become complacent. We will actively pursue opportunities to generate additional savings in the future to allow us to operate most efficiently and pass the greatest value onto our customer. Increasing our online success was our third priority. Year-to-date, E-Commerce sales have increased 41%, in line with the 40% goal that we laid out at the beginning of the year. We’ve continued to invest around all the aspects of this business, including technology improvements, more efficient fulfillment capabilities and a larger and more experienced organization. And our final priority was to reallocate our capital expense spending within our overall capital allocation plans. We have significantly reduced our new store openings and remodel program, but we have significantly increased our technology investments. These technology investments support not only our online business but also provide ongoing operational efficiencies in our stores and our corporate location. And beyond these capital expense plans, our remaining capital allocation strategies remain intact around our share buyback and dividend strategy. I'm generally pleased with our progress to date and the disciplined focus of our Kohl's associates. Clearly, we have additional work to do. And as confident as I am that we'll remain focused and obtain each of our goals, we also know it's important to remain realistic in our expectations for the fall season. With that, I'll turn it back to Wes to provide our third quarter earnings guidance. Wesley S. McDonald: Thanks, Kevin. Our third quarter earnings guidance is as follows: total sales increase of 1% to 3%; comparable sales increase of flat to 2%; we expect August and October to be at the high end of the range and September to be at the low end of the range; we're forecasting a gross margin rate decline of 60 to 80 basis points; we would expect our SG&A expenses to fall in a range of up 1% to down 1%; depreciation expense of $216 million; interest expense of $82 million; tax rate of 38%; share count average for the quarter of 234 million diluted shares; and then 236 million shares for the year. This assumes $300 million in share repurchases in the third quarter at an average price of $50 per share. Including these estimated share repurchases, we expect earnings per diluted share of $0.83 to $0.89 for the third quarter. Reflecting our current results in our third quarter projections, our fiscal 2012 guidance has been updated to $4.50 to $4.65 per diluted share from our original guidance of $4.75 per diluted share. And with that, we'll be happy to take your questions.

[Operator Instructions] Your first question comes from the line of Lorraine Hutchinson with Bank of America. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: It sounds like you have the units in place to drive possibly some upside to the comp in the back half. So I was just curious as to how you're planning for the full fall and holiday season and then what you're expecting in terms of pricing and costing.

Well, I think, generally, we're thinking that the fourth quarter will be stronger than the third quarter. That's kind of built into our assumptions. And the baseline for that is our comps last year, historically, were pretty strong in the third quarter and pretty weak in the fourth quarter. That's probably the main driver. In addition, we think we have strategies in place to particularly drive the fourth quarter business. We have been experiencing pretty consistent cost decreases on product, and that's also built into our assumptions from a pricing perspective and from a merchandise margin perspective, and that's a pretty big change from the trend in the spring season. And as you said, from a unit perspective, for the first time, we have units that are more similar per store to our 2-year-ago level of unit inventory. So I think all those things are the reason we feel like we're positioned to start to get a little better business trend. Wesley S. McDonald: Yes, I mean, our goal going into the fall was to get our inventory unit levels back to where we were in the fall of 2010. Last year, as it's been well-documented and we've said many times, we cut units back too far. And so, I think looking at it, as we were back in 2010 is a better indicator of how we're positioning our inventory. And I would expect our cost to be either at or lower than our unit growth by the end of the season. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: And then what was the reason for the better-than-expected gross margin performance in the second quarter? Wesley S. McDonald: Just got improvement in the July sales. Our revised guidance after June sales was predicated on a flat comp for July. We did a little bit better than that, and the merchants were able to deliver a little better than they thought, and that's, hopefully, a good pattern that we can continue to see throughout the year.

Your next question comes from the line of Erika Maschmeyer with Robert Baird. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: On the Juniors side, I've noticed you've got some more colored skinny denim in there. Could you talk about the impact that the new GMM has had so far, kind of the changes that she has been making, and then just update us on your merchant search overall?

Sure. Colored denim certainly has been a focus. The new merchant leadership in Juniors, identified that early on as something that we wanted to take a strong position in. And I think in both Juniors and in Big Girls, we're experiencing really positive results. And in both cases, we have pretty significantly strong inventories. We've also changed the merchandise presentation in our stores in both those cases to try to emphasize that to a greater degree. Other changes in the merchandise organization continue to occur. We're not finished, as I mentioned on the call. We're looking to continue to strengthen it, continue to add quality and talent. We've made a lot of progress already, and we filled a significant number of new positions in the company that helped to drive the change in our content, but we're not completely done, Erika. I would say we probably won't be completely done until later in the fall season. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Okay, great. And then I know you don't have a crystal ball, but based on what you've seen so far, could you talk about your expectations for the holiday environment, the consumer competition, what you’re seeing in terms of inventory plans for your competition? Wesley S. McDonald: Well, I think, from our perspective, we feel like we're a little bit unique since our fourth quarter last year, we struggled a lot, especially in November. I think, as I read your guys' questions that you're sending me via e-mail, I think one of the things we're being more conservative on for the back half than we originally thought in February is our gross margin expectations. I think -- we think it's going to be -- every Christmas is competitive, and this will be no different. But our expectation, I think, going into fourth quarter, given we were down in margin last year, we might have more opportunity to make that up this year, and we've taken a more conservative position in our early plans for the fourth quarter on gross margin. So that's kind of my best shot at the crystal ball.

Your next question comes from the line of Bob Drbul with Barclays Capital. Jessica Schoen - Barclays Capital, Research Division: This is Jessica Schoen on for Bob. I was wondering if you could update us on the sales productivity test. You had mentioned an expanded Home selection, and I see specific markets. Wesley S. McDonald: I think it's still early. We have kind of talked to you guys about really talking about it in January. Main reason is Home is a big part of the business in the fourth quarter, so our expectation would be that's when we're going to get our biggest lift. I think we made a lot of progress. We've learned some things about what's working and what's not. If we choose to roll it out, I think one of the things we're going to do differently -- just for ease of use, we went after space and kids and shoes because they were the areas adjacent to Home, made it quick and easy, and my favorite thing, it was cheap to do. But if we do it going forward as part of our remodel program, we'll end up taking a little bit of space from everybody, and that wouldn’t provide as big a drop in sales in some of the areas that we're seeing. But too early to really share a lot of specifics. We'll talk about it in February at the end of the fourth quarter. Jessica Schoen - Barclays Capital, Research Division: Okay, great. And then just a follow-up on understanding the gross margin differential from your guidance. It sounds like more leverage. Is there -- has there been any difference in merchandise margin, though? And as you think to the back half and the reversal of the input costs, how your -- what your expectations are there? Wesley S. McDonald: Well, our gross margins are merchandise margins. We don't have buying occupancy in there. So I mean, to be totally honest, I gave myself a lot of room. We were surprised in the first quarter from our margin. We don't usually miss our margin guidance, and we kind of pride ourselves in being accurate on that, so I wanted to make sure we had plenty of room to make it if sales didn’t come out the way we thought. It came out of a little bit better, and so we did a little bit better. We're still looking for relative improvement going into the third quarter. We were down 160 basis points in the second. We're saying we're going to be down 60 to 80 in the third. So that's improving, and that's really a function of getting that lower cost in there. We are providing ourselves a little room in terms of reacting to competition, should the fourth quarter be more competitive than we anticipated.

Your next question comes from the line of Deborah Weinswig with Citi. Deborah L. Weinswig - Citigroup Inc, Research Division: Can you talk about how your credit card penetration came in for the quarter and how your non-credit card customers are shopping you versus your credit card customers? Wesley S. McDonald: Well, I think our credit card customer has been the one that's been most consistent with us, as we've struggled to get our units back to where we want to be. I guess, though, the thing I'm excited about is our non-credit card customer in July improved quite a bit. We've talked about the formula for us to run at 2 to 4 comp as the credit card customer kind of mid to high single-digit positive, and the non-credit card customer negative low single-digits to flat. That's pretty much how July worked out. We're hoping we can continue that trend going into the fall. From a marketing perspective, we put a lot more emphasis on broader-reaching vehicles for fall, specifically in digital, as well as broadcast in terms of penetration of rating points. Last year, we added a lot of TV late in the game and paid a premium for it. This year, we plan to invest a lot more in broadcast, so we got more rating points for basically the same dollars. And those few things we think will continue help our non-credit card penetration. But obviously, the key for fall, we have to improve our transactions per store. We feel like we've got the units in the right place now, and now we have to drive the traffic in, especially on the non-credit side to drive the kind of comps we believe we can achieve. Deborah L. Weinswig - Citigroup Inc, Research Division: Okay. And then on the SG&A in the second quarter -- in your guidance was [indiscernible] flat, up 1.5%. You obviously significantly did better than that. What would you say were the key drivers there? Wesley S. McDonald: I'd say, the -- we'd mention credit on an absolute basis, that's certainly the case. That's the case every quarter. On a relative basis versus last year, that really helped us a little bit, an $8 million benefit. We did a great job with store payroll. We actually got just as much leverage out of store payroll on a significantly lower comp than expected, so the team did a great job there. Also, we got some favorability in terms of controllable expenses with fewer remodels. We didn't have as much write-offs and then also managed things like electricity and repair and maintenance fairly well. And then on corporate expenses, we're accruing to a lower level bonus at this point, and that provided some leverage as well. Deborah L. Weinswig - Citigroup Inc, Research Division: Okay. And then last question, how are remodeled stores performing? Wesley S. McDonald: I'm sorry, Debbie. I didn't get the question. Deborah L. Weinswig - Citigroup Inc, Research Division: How are remodeled stores performing? Wesley S. McDonald: Similar to how they have been. Continue to experience low single-digit lifts, and it’s one big reason we're running the sales for a productivity test with an increased presence in Home. We're not displeased with the remodels, but it’s basically acted the same as it has for the last 4 or 5 years.

Your next question comes from the line of Dan Binder with Jefferies. Daniel T. Binder - Jefferies & Company, Inc., Research Division: It's Dan Binder. I've got a couple of questions. First, outside of the Juniors area, where would you say the biggest content change is for the back half? Then secondly, you cited traffic, the challenges there, and now that you’ve got the units, do you plan on increasing your marketing spend year-over-year for the back half?

On the content side, I think the biggest probably change from the last 3 quarters is not unique to one particular area, Dan. It's the improvements in the depth and the level of our private brand ownership, and that's been a significant headwind for us. It was particularly noticeable in the second quarter. And so I think that's not around one unique area. It's sort of across the store. Disproportionately, I would say areas like Women's apparel, Men's casual sportswear and, of course, Kids see that because the penetration of those private brands in those areas is so high and such a large part of the business. So it's probably not unique to one area, but it is really important change. From a marketing perspective, we've -- Wes kind of mentioned that we've assumed that we're going to have to continue to spend and invest in marketing. One thing which was a real headwind for us last year was that much of the marketing investment we made later in the fall and holiday was reactive, and it was chasing business because our sales didn't materialize. So as we went into this fall and holiday, we've been in a better position to preplan those expenditures. Wes mentioned one particular area, which has gotten significantly increased marketing investment, and that's the digital area. And that's across a wide spectrum, but it's really important, and it's definitely getting us really good results. So I think the biggest change in the marketing side is really a plan that we feel more confident about based on the experience we've had in the last 2 or 3 quarters.

Your next question comes from the line of Adrianne Shapira with Goldman Sachs. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: Kevin, just wanted to understand, as you outlined the 4 priorities for the year, it sounds like you're making progress on all fronts. I just wanted to be clear: The lower guidance for the year is a function of what? I mean, what has changed in those 4 priorities to prompt you to lower guidance? Wesley S. McDonald: I think the biggest change from our expectation in February is our gross margin expectations for the back half. I think we've always planned, from a sales perspective, fourth quarter to be better than third quarter. Ideally, if we would have had a little bit of better second quarter, we’d probably have been a little more aggressive in terms of our comp expectations for third quarter, but flat 2% is a big improvement of down 2.7%. So we're thinking it's going to improve. It's going to take a while to get the traffic back, as people realize we're much better in stock, and we'll continue to focus a little bit more intently on the non-credit card customer. But margin is the biggest change from where we were thinking in February.

I mean, this is Kevin, Adrianne. Wes is definitely right on the numbers. I think as we looked at what happened in our business, we recognized that particularly around our opening price point, but also throughout the store, one of the biggest challenges we have is to appeal and make Kohl's value be more apparent to a much larger customer base. And we've been so successful with our loyal customer base and bringing in a certain number of less loyal customers to that really high user base or credit card base. But we have to appeal to more. And I think one of the ways we know that we have to do that is just to offer a better value equation, and that means, in some cases, lower pricing. And as we've increased the amount of our private brand inventory to prep ourselves to get better sales, that has implications as well. So the change is definitely on the margin line, but I think underneath that, it's really about strategically saying how do we reach more customers and be appealing to more customers. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: That's helpful, Kevin. And is that a function of changes that you're seeing on the competitive front? Is it just getting that much more aggressive out there? Or is it a function of what you saw in the first half to your point that the customer’s just looking for greater value than perhaps you've offered or like -- the messaging hasn't been as clear to the customer? Or is it more a response to the competition?

No, it's not a response to the competition. I think it's more a function of what we've seen happen in our business over the last 3 to 4 quarters and just recognizing that where we've provided more clarity around our value, and some areas are more important than others, we're talking a lot about opening price point, but that's a good example, we get much better response. And we know if we get better response, we're clearly going to be more appealing to more customers, and that's really probably the key part of our improved top line sales. So it's really not about a competitive issue. It's really more about looking at our own metrics and our own customer reaction. Wesley S. McDonald: Some of it is a little bit mix related. I mean, Kids, obviously, suffered last year a lot, given our drops in units. We think that they're going to be well positioned to have a good fall season and, certainly, a good fourth quarter. And that slightly lower margin business for us. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: Okay. And then, Kevin, you've talked about newness, freshness and maybe give us an update on brand introductions, what you're seeing, perhaps not so much in the back half, but 2013. And then how does that split with -- again, as you've historically looked to kind of move into perhaps better and best, given the customer seems a lot more focused on the opening price point, is that where you're looking to add to the assortment? How should we be thinking about new brand introductions? And where should they be coming?

Well, new brand introductions are continuing to be important in our thinking. We have a lot that's new this year, obviously. We have yet to annualize either Jennifer Lopez or Marc Anthony. We introduced Rock and Republic. We just introduced the Junior brand, Princess Vera Wang, and we're introducing the first of what we hope to be very many DesigNation designers with Narciso Rodriguez. So newness is very important. I think you're making a good point, which is that while we've focused a lot of our newness around better and best and maybe even particularly best because we were under-penetrated there, we do recognize the fact that the customer is pressured. And so it's very, very important to be powerful in good, which is mostly our private brands, and better, which is a combination of some of our private brands and some of our national brands. So without talking about it specifically, we definitely recognize that fact. So as we look forward to next year and beyond, there's a lot more focus around those kinds of price points as an important element to drive our business.

Your next question comes from the line of Charles Grom with Deutsche Bank. Charles X. Grom - Deutsche Bank AG, Research Division: Sales in national brands have lagged, obviously, the impressive numbers in exclusive and better numbers in private. I'm just wondering why you think the national categories lagged so much. And what steps are you taking to improve the category? And to Adrianne's question, are there any new brands that you may be targeting on a national brand front?

Well, national brands definitely lagged the total company. To be honest about it, national brands and our opening price point brands ran pretty close to the same negative comp. And it was just the double-digit increase in exclusive brands that lifted the comps. So they didn't -- I wouldn't say national brands performed uniquely differently than our opening price point private brands. Clearly, there are some really important national brands that are critical to our success. And we had some great success, even in the second quarter, with some of those. We called out active sportswear as a key one. Both NIKE and adidas were very strong, and I guess that makes us, I think, a little optimistic about back-to-school opportunity with both of those brands as well. Denim business is really important, so while we've introduced a lot of proprietary brands in denim, contemporary brands like Rock and Republic and new denim offerings with other existing proprietary brands, the Levi's business is really critical, and so we've put a lot of effort behind that brand as well. We're continuing to focus on brands. So I wouldn't want to give you any impression that all of our attention is around our own exclusive brands as we move into 2013 and 2014. It's really important for us to have a strong position with these national brands, and we’re continuing to look for new opportunities as well. Wesley S. McDonald: I think one of the things that you guys sometimes get too caught up in is a lot of the space we created when we introduced new exclusive brands come from what I would call tertiary national brands that really have lost their relevance with the customers. So if you look at our top 50 brands, they tend to comp much better than the brands that I would classify in the other bucket because a lot of those brands have lost space or actually don't even exist in our store any longer. Charles X. Grom - Deutsche Bank AG, Research Division: Okay, fair enough. And then, I know it's just a couple of weeks in, but we did have pass-through this past week and this morning. Given the expectations for August to be at the high-end, how the past couple of weeks have been?

Well, first of all, it's like way too early to be talking about August sales. We -- of course, you know we don't talk about sales in the month anyway. My sense is that based on all the research we've seen, Chuck, both the secondary research but also our own proprietary research, that back-to-school will continue to be very late, and it'll come late in the season, and it has been more and more bridging August and September. When we give these indicators on how we think the business is going to come, that's kind of all they are. I would say we're not very good at that. We're primarily giving you those based on our last year sales, so we look at it and say, we had a very cold September and sales in September were particularly good, so that probably is going to be the weakest month... Wesley S. McDonald: Then we launched J. Lo and Marc Anthony with $20 million behind it.

Yes. And by default, that makes August and October a little weaker. So there's no great science behind that to be totally honest with you. I mean, we're optimistic. We're sounding optimistic probably because our later June sales and our July sales were better than the sales we had all year. And our inventory levels are up, and they're not out of line because they're basically at the same level that we were at 2 years ago, so there's really no big difference. But we're better in stock, and that's particularly selling these back-to-school areas. So we're optimistic, but I also think we're fundamentally recognized. Weather is an important factor and the lateness of back-to-school is an important factor, and you're not going really know how that all works out till you get to August and September combined. Charles X. Grom - Deutsche Bank AG, Research Division: Okay, great. That's fair enough. And then for Wes, just on the leverage front. How willing are you to leverage up the balance here? Your adjusted EBITDA looks like it'll be on target for a little bit under 2 at the end of the year. I'm just wondering what your thresholds are. Wesley S. McDonald: I mean, I think it's something we're going to take a look at. It's certainly a favorable market. If we were to do anything, it would be in this quarter. We wouldn't want to do anything in the fourth quarter. I'm not looking to lever up dramatically, but I think there is some room to do some modest leverage on a consistent basis.

Your next question comes from the line of Paul Swinand with Morningstar. Paul Swinand - Morningstar Inc., Research Division: Just wanted to keep on the SG&A and gross margin and talk about the sustainability there. I'm thinking about -- on the SG&A line, is some of the leverage in the store coming from the technology investments you've made there? And is the cycle of that -- where are you in the cycle of this, the investment versus reaping the benefits? And I guess, in the same scenario, you’re talking about technology spend for online, and where are you in the cycle versus reaping the benefits? Wesley S. McDonald: Well, I think on the store side of things, we're about halfway through our eSign rollout, which has been a pretty big benefit in terms of reducing the payroll required for setting our ads. We expect to be through the balance of chains by the end of the fourth quarter. So I would say we get some benefit next year, and then we'll have anniversary-ed it all really when we get into 2014. Regarding... Paul Swinand - Morningstar Inc., Research Division: Is there an additional driver because you mentioned in-store payroll is driving the SG&A? Is that the 90% of it or is it half? Wesley S. McDonald: We don't try to get to that kind of level of detail. I would say it's a part of it certainly in the stores that have it. We've done a much better job of operating our stores in the mild and hot markets to improve sales productivity as we've right-sized the inventory levels in those stores, and we're not actually having to take as many markdowns. We're seeing a lot less drop in the gross margin in, for example, in California than the rest of the chains as we've gotten inventory levels appropriately sized. It's really just the guys are doing a great job managing the business.

I mean, the other thing is, Paul, that some technology investment, while it isn't specifically targeted to the store environment, it indirectly impacts the store expense structure a lot. And the most -- the best example I can give you on that is we have not done a great job from a balances inventory perspective across the store portfolio. As Wes just mentioned, mild and hot stores have not generated the same level of merchandise margin because we carry too high an inventory for the sales they do, and our sizing optimization program has not worked as efficiently as we'd like to see. Our assortment planning strategies, which are a lot about tailoring merchandise assortments more effectively, have not been as successful as we'd like to see. Those things all impact the most important thing, which is inventory level, and that's a key component of what stores spend payroll on, which is handling and dealing with merchandise inventory. The other thing that's not technology-related and only indirectly is, as we've gone through our remodel process, we've quickly come to the realization that the move of customer service to the front of the store is a really efficient move from a payroll productivity standpoint. So it's not all about technology, and it's not all about technology that you would naturally automatically think about as in the store. Paul Swinand - Morningstar Inc., Research Division: Okay, great. Some interesting stuff there. And then real quick on the gross margin. I know you guys have been particularly good at offering special discounts, Friends and Family, Kohl's Cash, various rolling or multi discounts. Has that been increasing penetration? And is that in fact impacting the gross margin? And if so, do you still see that as a positive? Or is it something you need to start to dial back at some point?

Well, the -- what you would term special promotions, which we would call our monthly credit, most loyal customer promotion and our pick-a-day promotions which run at various times through the course of the rest of the year, the number of those, the frequency of those, I think, is static year-over-year. I don't think there's basically any change. We tweak the percentage savings that we offer those customers across the country along the store lines based on regional needs that we see or across the year based on particular months of the year. I don't really have the answer on that percent as it changed, but it's not a meaningful part of why our margin has eroded. Our margin plans were lowered because we made a very strong commitment to better pricing. That's really why our margin plans are down. Paul Swinand - Morningstar Inc., Research Division: And pricing, you mean initial pricing to start with?

Across the board. I mean, initial pricing in the spring season is very different than initial pricing in the fall season because the cost acquisition that we have is very, very different. We've gone from an environment where in spring 2012, we were paying much higher prices than spring 2011, to an environment in fall, deliveries in June and July for fall selling, where we were paying much lower prices than fall 2011. So I'm talking about net merchandise margin. Paul Swinand - Morningstar Inc., Research Division: Understood, understood. So by the end of 4Q, do you feel like the units and the dollar inventories will start to be even? Wesley S. McDonald: That's what we said. Paul, I'm cutting you off because we've got to get to some other guys in the queue.

Your next question comes from the line of Liz Dunn with Macquarie. Lizabeth Dunn - Macquarie Research: I have a question on E-Commerce. We spoke about it a little bit during the quarter, but just in terms of the profitability, do you think that longer-term, you could achieve the sort of profitability in your E-Commerce business that you achieve in the stores? And also, as a related question, how much of a drag on the stores business are E-Commerce returns? Wesley S. McDonald: Well, the last question is probably the easier one to answer. We think, obviously, 95% of the E-Commerce returns happen at the store. There's also a lot of activity with buying something when they return something because, usually, it's an issue with size or fit or something like that, so we don't think that penalizes the store at all. That's our point of view on that. In terms of longer-term, I think E-Commerce operating margin will probably remain slightly below the store. We have a lot of investment planned over the next 3 years for E-Commerce. We're going to re-platform in the spring of next year. That requires a lot of capital. Home is always going to be, I think, a little bit bigger part of the online business. But from a return on investment perspective, my expectations will be in a couple of years to be significantly better than brick-and-mortar stores, even with the lower operating margin, given the fact that our investment will start to tail off. We’re -- we built 4 EFCs. I don't have any plans to add another EFC in the next 3 years, so that's a lot of growth we can accomplish with very little fixed cost investment.

I think also, this is Kevin, we -- Wes probably has a better handle and is more confident on the comment on return to invested capital because we have a pretty good understanding of that as it relates to our online business. On the operating income line, to be honest, we've doubled the size of our E-Commerce business in 2 years, literally doubled it. So I think, to some extent, we're using our best thinking, and it may be conservative and it may not be. We just don't know. I think Wes is giving you his best look into the future, which is it'll probably continue to run a little lower on the operating margin line but be better on the return on investment line. Lizabeth Dunn - Macquarie Research: But -- so Kevin, are you saying that, that could be -- that could prove conservative?

No, I have no idea. I mean, the truth is, literally, the growth in that business has been so staggering and so fast that we're just learning. Wesley S. McDonald: And it's changed. I mean, who knows what's going to happen with free shipping 3 years out?

Your next question comes from the line of Kimberly Greenberger with Morgan Stanley. Kimberly C. Greenberger - Morgan Stanley, Research Division: I was wondering if you could talk a little bit about the strategies behind improvement -- improving the Women's business, the Home business and the Kids business. Wes, I think you said that Kids had really suffered because of a lack of units in that business. Sounds like it's improving now that you've got a better in-stock position. Is there anything else in Kids that you think is required there to accelerate that business? And just the strategies in the other categories?

Sure. I mean, I think one -- certainly, the key thing in Kids we're focused on is making sure that, that area has sufficient depth of inventory to support its very high level of opening price point penetration, and I think we feel like we are there on that front. In some areas, like Girls, we've made a lot of merchandise changes as well. The merchandise leadership that runs our Junior business also runs our Girls business now. That's new. And some -- so some of the influences from Juniors drift down into Girls, and we think that's going to be a good thing. On the Home side, to be honest with you, the results in Home over the course of a period of years, and Wes can correct me on this if I'm wrong, but I think it's been actually pretty good, and Home has outperformed the company consistently. The weakness in Home has been very recent. And so we're focused on that, improving that. One area that we're really targeting is our Home décor business because that's been a drag. And then in the Women's business, there have been a lot of changes from an organizational perspective and a lot of changes from a content perspective. If you think about the last, essentially, 9 months, 2 of the biggest brands that we've had in Women's have been introduced: Jennifer Lopez and Rock and Republic, both on -- one on each side of the floor. And so there's been a tremendous amount of change there as well. We just have to -- we know we have to continue to work on content in Women’s.

And your last question comes from the line of Michael Binetti with UBS. Michael Binetti - UBS Investment Bank, Research Division: I think there's been a lot of questions on the details in the quarter. Maybe just a longer-term question. As you guys think longer term about some of the structural changes going on in the industry, you guys always done a good job with customers like -- groups like moms, in particular, and some of your competitors have talked about focusing on psychology of younger customers and the next generation. Seems like younger moms are bigger online shoppers, those kinds of things. How are you guys looking ahead at the next-generation shoppers and how you may need to change your go-to-market strategy?

Well, we can -- I mean, I think we obviously know we can always do better on that issue. We have, frankly, I think, probably a younger demographic. Young moms generally are a larger part of our business than many of our competitors’, and that's -- you can see in our sales the penetration of our business that is Children's and penetration of our business that is Juniors is significantly higher than all of our department store competition. So I think that clearly says to you, they have a lot of young moms in the store. It's a really important part of the business model, and we're not going to give that up at all. So we're focused a lot on improving that. You can tell, just from the merchandise organization changes we're making that certain pieces of those business are getting a lot more attention. Juniors is a really good example of that. From a customer preference, do I want to go to the store versus do I want to go online, more people across the age spectrum are going online. Certainly younger families are more apt to be higher online shoppers at Kohl's. But I think we're doing a pretty good job of that. As I said, we've doubled our business online in the last 2 years, so I think that's pretty significant. We're still behind, so we know we've got a lot longer pathway ahead of us. But I think we're making the right decisions in terms of where the investments go so that they follow what the customer preference has shown to be. Michael Binetti - UBS Investment Bank, Research Division: Let me ask you one last longer-term question on the topic. So it sounds like -- it seems like if we roll off these cyclical input cost structures that were largely caused by spikes in things like cotton last year, we're probably less in a scenario where the decade-long benefits of deflation for manufacturing in Asia are over with. You guys made a big business out of delivering better value every year for your customer. And as these long-term inflationary trends in sourcing seem like they're poised to change, will that change the way you guys approach your value strategy with the consumer at all?

No. I mean, our values are really an important part of why customers choose Kohl's. And all you got to do is look at the last 6 to 9 months to recognize that when our value got a little out of whack, our sales got a little lot of whack at the same time. So values are really, really an important element. And as prices have moved back to more historical levels, I think that's in our favor, but it's more important about just making sure that we have the right mix of goods across our price spectrum, enough opening price points to appeal to a customer that is value-conscious and delivering that message to a broader audience, and that's why we’re spending a lot of time talking about how we communicate in our marketing to a broader audience rather than a more narrow credit card audience. Thank you. Wesley S. McDonald: Thanks, everybody.

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