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

Robert S. Drbul - Barclays Capital, Research Division Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division Daniel T. Binder - Jefferies & Company, Inc., Research Division Kimberly C. Greenberger - Morgan Stanley, Research Division Matthew R. Boss - JP Morgan Chase & Co, Research Division Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division Deborah L. Weinswig - Citigroup Inc, Research Division Paul Swinand - Morningstar Inc., Research Division Paul Lejuez - Wells Fargo Securities, LLC, Research Division Michael Binetti - UBS Investment Bank, Research Division Alex J. Fuhrman - Piper Jaffray Companies, Research Division David J. Glick - The Buckingham Research Group Incorporated Dana Lauren Telsey - Telsey Advisory Group LLC Patrick McKeever - MKM Partners LLC, Research Division Paul Trussell - Deutsche Bank AG, Research Division

Good morning. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kohl's First Quarter 2013 Earnings Release Conference. [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 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 IA 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. Also, please note that replays of this recording will not be updated. So if you are listening after May 16, it is possible that the information discussed is no longer current. Thank you. I would now like to hand the call over to Mr. Wes McDonald, Senior Executive Vice President and Chief Financial Officer. Please go ahead, sir. Wesley S. McDonald: Thanks a lot. With me today is Kevin Mansell, Chairman, CEO and President of Kohl's Corporation. Total sales for the quarter decreased 1% to $4.2 billion. Comp store sales decreased 1.9%. The decrease in comp sales reflects a 2.4% increase in units per transaction, which was offset by a 1.1% decline in average unit retail and a 3.2% decrease in number of transactions. Kevin will talk more about our sales in a moment. Our gross margin rate for the quarter was 36.4%, approximately 50 basis points higher than the first quarter of last year and significantly better than our guidance of flat to up 20 basis points. We continue to believe that our value equation is right, and we expect improvement in our gross margin throughout 2013 as a result of lower costs and better inventory management. SG&A decreased 1% for the quarter, better than our expectations, above 2.5% to 3.5%. SG&A as a percent of sales deleveraged approximately 10 basis points for the quarter. Store payroll continue to be managed very well despite our volatility in sales during the quarter. Our store controllable line achieved significant leverage in remodel-related costs, as all 30 2013 remodels will occur in the fall. Overall, store expenses deleveraged through the inability to leverage our fixed costs with the lower-than-planned sales. Advertising expenses leveraged for the quarter. We expect to invest more money in advertising in the second quarter after seeing some of the results of our advertising test in the first quarter. Our credit operations continue to provide leverage as revenue increases more than offset increases in marketing and servicing costs. Distribution centers and information technology did not leverage due to growth and infrastructure investment in our e-commerce business. We continue to improve our efficiency in e-commerce fulfillment, and they achieved significant leverage as a percent of e-commerce sales. Depreciation expense increased 6% over the first quarter of 2012 to $214 million. The increases is primarily due to technology investments across the company. Net interest expense was $83 million this quarter, up $1 million compared to the prior year quarter. The increase is primarily due to the September 2012 debt issuance. Our income tax rate was 37% for the quarter. This is approximately 150 basis points higher than last year's first quarter, which included the impact of favorable state audit settlements. Net income decreased 4% to $147 million, and EPS increased 5% to $0.66 per diluted share. For your modeling purposes, gross square footage at the end of the quarter was 101.07 million, and selling square footage was 83.536 million. During the quarter, we opened 9 new stores and also reopened our Caesar's Bay store in New York, which had been closed since Superstorm Sandy last November. Moving on to the balance sheet -- we ended the quarter with 1,155 stores. Our plans are to open 3 new stores and remodel 30 stores this fall. Moving on to the balance sheet. We ended the quarter with $518 million of cash and cash equivalents. Capital expenditures were $135 million for the first 3 months of 2013, $42 million lower than the first 3 months of 2012. The decrease reflects multiple changes in our capital expenditures, including fewer remodels and new stores, partially offset by higher IT spending. Our April inventory balance was $4 billion, a 15% increase over April 2012. And our brick-and-mortar stores' inventory dollars are up 10% per store over last year. Kevin will talk more about inventory in a few minutes. AP as a percent of inventory decreased from 46.6 at quarter-end 2012 to 36.7 this year. Weighted average diluted shares were $223 million for the quarter. And on May 15, 2013, our board declared a quarterly cash dividend of $0.35 per share, which is payable June 26, 2013 to shareholders of record at the close of business on June 12, 2013. I'll now turn it over to Kevin, who will provide additional insights on our results.

Thanks, Wes. Let me start with sales. As Wes mentioned, comp sales were down 1.9% for the quarter. Though we don't provide details by month, when spring finally arrived in April, we saw significant comp improvements in our weather-sensitive markets, including the Midwest, Mid-Atlantic and Northeast. For the quarter, the West was the strongest region and was the only region which reported higher comp stores. The Midwest, Northeast, Southeast and South Central regions all reported mid-single-digit comp decreases. E-commerce sales increased 31% for the quarter and contributed approximately 210 basis points to our comp. The seasonal apparel was down 8% for the quarter and negatively affected sales by approximately 320 basis points. Moving on to a line of business perspective. All lines of business reported modest sales decline, as higher sales in basics and other non-seasonal merchandise were more than offset by lower sales in seasonal merchandise categories. Home, accessories and footwear were the strongest categories, performing better than the company. Within home, electrics and luggage were very strong. Within accessories, strength was in bath and beauty, watches and sterling silver jewelry. And athletic shoes were the strongest footwear category. Women's was consistent with the company average. Notable performers again included the active and fitness category. Intimates and sleepwear and special sizes outperformed the company average. Men's reported notable strength in the tailored and dress category. And finally, children's reported the largest sales decreases. Results were generally consistent across all kids' apparel categories. From a brand perspective, private, exclusive and national brands performed very similarly in the quarter. Private and exclusive brand penetration grew 30 basis points versus last year for the quarter in total. Our newest brands such as Jennifer Lopez, Marc Anthony and Rock and Republic continue to achieve solid double-digit growth increases. And several of our largest brands, such as NIKE and Chaps, also reported strong sales. From an inventory standpoint, as expected, our inventory levels are up low double digits on a per-store basis over the first quarter 2012 levels. As you may recall, our inventory levels were uncharacteristically low, as we were chasing inventory in many categories through most of the spring season last year. We would expect to end the second quarter up low- to mid-single digits per store versus last year. Most of that investment would be in key back-to-school areas like children's and young men's, as well as areas that were short [ph] of seasonal products, such as men's sportswear. In marketing, we've been able to read some of the marketing tests we did last fall and in the first quarter. Many of those tests have proven successful, and we are increasing our marketing spend modestly over last year in the second quarter as a result in order to drive sales. We continue to be very pleased with the early results of our loyalty program, which we launched in approximately 100 stores last fall. We expanded the test to the state of Texas earlier this month and are planning to expand it to other markets in the third quarter. We've listened to our customers in the pilot stores and have made some notable improvements to the program. Included were changes in threshold levels, redemption timeframes and in-store communication. At this point, we're seeing both existing Kohl's Charge customers and bank card customers embrace the program. We've not seen our credit card penetration dip in these markets, and loyalty is increasing the likelihood of the bank card customer applying for a Kohl's Charge Card. We're also pleased with the financial results in terms of frequency and spending so far. The program continues to provide us with significant insights into how our customer shops and how we're better able to influence our shopping behavior. We plan to use these learnings to further improve the program before a rollout to the entire chain. In the area of information technology, during the quarter, we made significant additional technology investments. They were to support our online business, to provide ongoing operational efficiencies in our stores and corporate locations and to provide the omni-channel shopping experience that our customers desire. We are on track to replace our e-commerce platform in the second quarter. This upgrade will be virtually invisible to our customer but is foundational to our omni-channel roadmap. We also expect to have the necessary infrastructure in place to expand our ability to fulfill online orders from stores. We expect to expand shift from stores to 200 stores by this holiday 2013. We will also expand our RFID pilot to additional stores and departments later this year. This project improves our on-shelf availability and reduces replenishment costs. Mobile POS is a key benefit of our POS re-platform project. We will pilot mobile POS in the third quarter. And finally, our global inventory visibility project will improve our ability to track in-store inventory and is the first of several steps necessary to offering in-store pickup for online orders. Each of these investments either has been or will be adequately tested before it's rolled out to ensure it meets our ROI goals and does not negatively impact the customer experience. In closing, from a strictly financial results perspective, first quarter results were better than expected. We're pleased with the management of both our gross margin and our expenses. Our customers continue to give us very high marks on our customer service, noting the improvement in our inventory levels in all of our survey results. The West region is starting to get momentum on the sales line after we improved our store operations there over the last few years. The region has now led the company in sales for the last 2 quarters. However, we're not satisfied with our progress on the top line across the company. Our e-commerce business has remained strong, and we'll continue to invest in its growth for the long term. And as I mentioned earlier, we've had some success with the marketing tests we've been running, and I do believe you will see that in our future top line results. There's also a lot of pent-up demand for spring merchandise out there. We'll be in a much better inventory position in the second quarter than we were last year, and we think it will allow us to take advantage of some pent-up seasonal demand. And finally, our organizational changes are having additional 3 months to take effect. As a reminder, our 3 broad strategies for 2013 were: to own savings; to focus on mom, our most important customer; and to increase our confidence in Kohl's from all aspects. On the savings strategy, we believe strongly that savings isn't just about the lowest price. It's about price, quality, style and the experience the customer gets at Kohl's. All-in savings includes focusing our marketing message to consistently position Kohl's as the savings leader. It includes ensuring that our prices are competitive first but then even better with our value-added offers. It includes building increased style and quality into the products that she buys. We made a decision to expand our loyalty program to broaden the customer base with access to value-added offers, and we believe, long term, it could be a very powerful tool to broaden our reach. Our second strategy, increasing her confidence in Kohl's, is about providing the assurance that Kohl's will always come through for her and that she knows we are the store for her, having what she wants and when she wants it, whether it's in store or online. With our increase in inventory levels, we have seen improvement in our in-stock levels on replenished goods. As we enter the fall season, we would expect to improve on that further as we focus the increasing depth of customer choice while reducing the number of choices. In 2012, our offerings became too broad, and our assortments lacked focus. Most importantly, our organizational changes should have their full impact as we enter the back-to-school season. The third key strategy is focusing on mom. Though moms are our most loyal and highest spending customers, we believe we have significant opportunity to capture a larger share of her wallet. We continue to do a significant amount of customer research, both quantitatively and qualitatively, to learn how we can serve her best. In summary, our #1 goal is to drive sales. In order to do that, we have to continue to improve the quality of our merchandise and offer items at a great value. I'm pleased with the progress we've made in our marketing. We need to continue to progress in order to drive increases in transactions per store. Driving traffic will allow us to gain market share consistently from competitors. With that, I'll it turn back to Wes to provide our second quarter guidance. Wesley S. McDonald: Thanks, Kevin. For the second quarter, our guidance is as follows: total sales increase of 1% to 3%; comparable sales increase of flat to 2%; gross margin rate increase of 10 to 20 basis points; SG&A expenses increasing 2.5% to 3.5%; depreciation expense of $228 million; interest expense of $83 million; and a tax rate of 37.5%. This results in earnings per diluted share of $1 to $1.08 for the second fiscal quarter. With that, we'll be happy to take your questions.

[Operator Instructions] Your first question comes from the line of Bob Drbul with Barclays. Robert S. Drbul - Barclays Capital, Research Division: I have 2 questions. The first one is, when you look at the inventory levels, is there a different way to look at it on a sort of calendar comparable basis? Did the calendar have a significant impact on your reported levels? Wesley S. McDonald: Not for this quarter, really. It was relatively same. I think what did have an impact was the receipt level. Obviously, with seasonal merchandise not selling very well in the beginning of the quarter, we were able to cut some receipts in April. The accounts payable dropped about $150 million. About $100 million of that was due to just receipt reduction in April. Robert S. Drbul - Barclays Capital, Research Division: Okay. And then the second question is, when you look at the sales performance this quarter, just the weather impact in the first quarter, how much of that do you expect to get back in the second quarter? And can you quantify any estimate around how much it did hit yourselves this quarter, especially when you look at some of the competitive data that's out there?

I think, Bob, as far as the first quarter goes, probably the clearest way to quantify it is the way we did in our summary, which is to say that seasonal categories, which are the classifications that normally come to mind when you think about spring and summer selling, t-shirts, tanks, shorts, sandals, were down 8% comps. So they had a significant negative drag on our total business. We've included in our assumptions for the second quarter basically our base assumptions for the year, which is a flat to 2% comp. I do think that there's probably a lot of pent-up demand, and we saw some of that breaking news in April, as we mentioned. The trend change in April was pretty dramatic. So we'd like to be optimistic and say we could get a lot of that back, but our base case comp assumptions just include our full annual comp assumptions of flat to 2%. Wesley S. McDonald: Yes, I think Kevin mentioned that on the call. But if we were to run flat and seasonal, the comps for the quarter would've been 320 basis points better.

Your next question comes from line of Lorraine Hutchinson with Bank of America. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: You didn't comment on your prior full year guidance of $4.15 to $4.45. Does that still stand? Wesley S. McDonald: Well, if we don't comment, it means it didn't change. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: Okay. And then just thinking about the second half, what categories do you see the most comp opportunity from having better inventory position and having some of these new merchants in place?

Well, I mean, I think that, first of all, generally, the basic classifications have great opportunity to grow. And actually, in spite of the weak demand in the first quarter, which meant weaker traffic drove that, basic categories actually performed pretty well. So I think that's encouraging. Our in-stock service levels are up significantly over last year. That remains an opportunity for us going in the fall and holiday because we didn't do a good job on basic categories. And then we've had a pretty broad wholesale organizational change. So I don't know that I would call out any particular category. I think our opportunity in the store in total is pretty wide, to be honest with you, Lorraine. So I would expect that all of our key 6 businesses could contribute to sales growth in the back half. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: Great. And then can you quantify the impact that the better credit had on SG&A? Wesley S. McDonald: $10 million.

Your next question comes from the line of Erika Maschmeyer with Robert W. Baird. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: You're up against or you used comparison in Q2, and you're obviously giving comp guidance that's in line with your full year guidance. I mean, so should we think of it more on the high end of that range? Or it sounded like you were pretty optimistic on the opportunity for pent-up demand. I mean, just is there any other shift in advertising or marketing or promotions or anything else that would be a headwind for the comp in Q2?

No, I mean, there aren't any specific headwinds in the second quarter. I think we're optimistic that we'll get some pent-up demand because we are positioned to take advantage of it. And as you said, last year, our performance was driven by a lack of in-stock in those categories. So we do think it's an opportunity for sure. But no, there's no specific other headwinds. I think we did mention that we are investing a little more in marketing. That's due to the results of the tests that we did in the fourth quarter and the first quarter. Those were primarily around loyalty, of course, but they were also around application of expansion in broadcast, both event television and radio, and also changes in our direct mail strategy. So I'm hopeful that those also could have a positive impact. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: On the advertising front, so you found an encouraging ROI from expanding the broadcast in the quarter. Is that fair to say?

Yes. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Okay. So then should we think of that as probably continuing through the holidays. And I guess, any other early thoughts that you might have on the competitive environment for the holidays and how you plan on increasing your share of mind share with the consumer?

No, I mean, I don't think we're prepared to talk about back-to-school or holiday at this point. We're really focused on taking advantage of the opportunity in front of us in the second quarter. But one of the things we work diligently at is to formulate many, many tests and pilots in marketing because we do know that that's an area that has not leveraged effectively for us and needs to perform better from a productivity standpoint. So I would expect that to continue. We're going to continue to be testing, piloting and then applying those learnings to our broad company-wide effort.

Your next question comes from the line of Dan Binder with Jefferies & Company. Daniel T. Binder - Jefferies & Company, Inc., Research Division: A couple of questions. First, on expenses. I guess, relative to your expectations in Q1, was it just simply better layer management that allowed you to keep the expense growth down? And in longer term, just curious, based on the cost-cutting initiatives that you've taken and pursuing for the last year or so, I'm curious where we are in that, in recognizing them. Wesley S. McDonald: Well, we've put $80 million in our plan so far, either fall last year or for 2013. I'd say our SG&A performance, quite honestly, every area in the company, other than store fixed expense, beat their plans. So my guidance to you guys earlier in the quarter is based on what our plan is and the comparison outlines just really our result. So the plan -- but every team in the company really did a great job of managing expenses across the board. Daniel T. Binder - Jefferies & Company, Inc., Research Division: And then just on the inventory front, I know you guys were under inventory this time last year. So when we look at the increase at around 15%. I guess, how much of that is sort of catch-up to getting to where you should be versus just being heavy because of a soft Q1? And is the mix of the excess inventory primarily seasonal?

No, I mean, the total inventory ending for the quarter is, frankly, exactly where we thought it would be. And that includes being, as you said, light in our revenue expectations. So we made adjustments during the quarter to make sure we manage that effectively. I -- from my perspective, and I think Wes and I both feel strongly that the basic in-stock commitment we made we're living up to, and that's going to benefit us. But on a year-over-year comparison, we're up quite a bit as a result. And then on the seasonal classifications, those are reclassifications that we were way under inventoried and going into the second quarter last year, so it is definitely a correction to last year. Wesley S. McDonald: Yes, I mean, as I look at the buckets of inventory, our seasonal inventory is up a little bit more than -- per average store, it's not material. We're actually up a little bit more in things like denim and non-denim long bottoms. Daniel T. Binder - Jefferies & Company, Inc., Research Division: And then just one final one on credit. I think you were doing some work with Capital One to mine the data better then give you an opportunity to go a little bit further down on the FICO score spectrum in terms of what you approve and don't approve. Any updates on that? Wesley S. McDonald: Well, I put a new scorecard in last October, and that's been running since then. So I guess what I would tell you, it's -- we've been able to maintain our approval rate either a little bit above last year or at last year. One of the things that just came out from Washington is they're going to come up with some rules that's going to make us -- allow us to grant credit to stay-at-home spouses, which is obviously a big part of who shops our store. And we're anxiously awaiting those rules to come out so we can change some of our criteria on our scorecard to allow us to approve more people.

Your next question comes from the line of Kimberly Greenberger with Morgan Stanley. Kimberly C. Greenberger - Morgan Stanley, Research Division: I was wondering, how should we think about inventory management in the back of the year? And as you were going through the first quarter with sales that were running below plan, did you have any opportunities to cancel or cut back on any second quarter deliveries in order to try to respond to that situation? Wesley S. McDonald: Yes, I already sort of answered that. I mean, I said $100 million of the AP drop was due to cut in receipts in April, and we'd obviously adjust the receipts in the second quarter as well. We said the inventories at the end of the second quarter will be low to high -- or excuse me, low- to mid-single digits on a per-store basis. And then as we go into the fall, obviously, especially at the end of the year, when we are very heavy in inventory, I will expect us to be a lot lighter than. We haven't broken out the merchant plans yet by quarter. We're getting ready to do that, but I would expect both quarters to be down, with the fourth quarter being down more significantly.

Your next question comes from the line of Matthew Boss with JPMorgan. Matthew R. Boss - JP Morgan Chase & Co, Research Division: You doubled your target for door-to-store rollout to 200 stores by the end of the year. Can you speak to some of the learnings from the pilot test thus far?

Yes, I mean, as you can imagine, the test has been very positive. I mean, we -- generally, what we've seen is that the costs to shift customers from our test stores, which we're anticipating to be able to do from 200 stores in the Fall/Holiday, are similar to the costs from our e-fulfillment center. But the customer service levels are dramatically improved because the store location, compared to the customers' residences, is very, very close. So essentially, we're getting much higher service levels for the customer for the same cost to the company. Wesley S. McDonald: Yes. And the shipping cost is a little better, which is another thing. And I guess the last thing is we don't want to build another e-fulfillment center. We've maximized our transportation savings with 4. The only reason to build a fifth one is for capacity. And we have 1,155 stores. We'd like to use the store as the excess capacity for peak season and also, as Kevin mentioned, would increase the speed of shipping to the customer. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: Great. And then with your comments on April improvement in the release, have you seen these more robust trends continuing May to date? And also, could you speak to the expected progression of monthly sales in 2Q?

Well, we're not giving monthly anymore, so that we won't speak to. The only thing I would say about -- because we obviously can't comment on trends in the quarter, but the only thing about May that is, obviously, there's a benefit early in the month because of the calendar shift. Mother's Day sort of appears a little bit earlier in the month. But that's probably true for all retailers.

Your next question comes from the line of Nathan Rich with Citigroup. Deborah L. Weinswig - Citigroup Inc, Research Division: It's Deb Weinswig. So in terms of looking at the quarter, Kevin, you've said that your first quarter results were better than expected. What were the key drivers behind that?

Well, I mean, they were, to be honest with you, with the very notable exception, which I'll be clear to admit, our top line, which was still disappointing, but I really do feel that was driven strictly by seasonal weather issues. With the exception of that, I think we were almost happy with every other single performance. Inventory management was well done. We ended the quarter with the inventory we expected to, even though we didn't get the topline revenue we expected. Merchandise margins exceeded our expectations, and they were wide spread across the company. And as Wes said, I think almost every single area contributed to our expense results. And the only area that didn't -- of note that didn't really leverage was store payroll but -- the store expense [ph], I'm sorry, because of the sales results. So I think one of the things that makes Wes and I both feel so great about the quarter is that it was very broad, and that's important. Deborah L. Weinswig - Citigroup Inc, Research Division: And then you laid a lot of tech investments that have happened, but it sounds like there's a lot that's coming. How would you kind of prioritize in terms of 2013 and also 2014 what you think will be the most important in terms of driving the business?

In terms of which area though, Deb? Wesley S. McDonald: IT. Deborah L. Weinswig - Citigroup Inc, Research Division: Your IT investments.

I think it's -- it would be almost impossible to be specific about a specific year's impact. Some of these things are taking hold this year. But as you know, it takes time to sort of gain traction and gain momentum. A good example to me is the re-platform, right, where we invested a lot in the re-platform, and there's expectations that, with that more robust ability to be more personal in our communication and deliver better service levels. Combined with our ship-from-store capacity, it will give us long-term growth. But to be able to quantify how much of that growth can be at the back half of the year this year versus next year gets really difficult. And I think the kind of the same is true for most of the other items. I think, generally, there's positives for the Fall/Holiday, but I think the bigger positives are quite coming in 2014. Wesley S. McDonald: Yes, I mean, there's a lot of systems that we're working on that are foundational in the merchandising area in partnership with Oracle to basically rewrite almost -- or replace almost every PO item-type system that will allow a lot more flexibility in terms of analyzing the business. But Kevin is right, the e-com platform is definitely going to help us this year, but it's going to hopefully help us in the next years and the following year to come. It was expensive, so hopefully we have a multiple-year payback on that.

Your next question comes from the line of Paul Swinand with Morningstar Investment Research. Paul Swinand - Morningstar Inc., Research Division: Just a question on your comments that you have narrower and more focused assortments. In your prepared remarks, you've mentioned that. Do you believe that's influencing gross margin and even inventory turns? Or is it still sort of in the transition phase?

I mean, I don't know that it's had a significant impact right now. I think we see it as a really important driver of 3 things. One is top line results because we think of a more focused assortment presented on the floor just gives us a better platform to present to customers, but definitely an impact on both inventory turn and the resulting merchandise margins because we know that we got unfocused and over-assorted, and that cost us a lot with the customer. And it cost us an awful lot in terms of margin over the course of last year. So I think we see it affecting all 3 things. You'll see more of it in the fall. I've been sitting through the fall planning meetings, and we've really made it a big focus to look in every division, choices versus last year, and then depth versus last year. So it's something the team has really embraced across all merchandise areas, and that's when I think you should see it. Paul Swinand - Morningstar Inc., Research Division: What do you think led you to get unfocused? Was it just testing to try to see what would work in a tough sales environment? Or...

Well, I mean, without rehashing sort of old news, but I think one of the things we recognized last year is that we needed to improve the quality of our decision-making on our merchandise assortments broadly across the company. And that led us to strengthen our merchandise team, almost every single area of planning, buying and product development. And as you know, it's not as if we don't have good system capabilities to make these decisions, but ultimately, it's about leadership. And we've, as you know, made significant amounts of leadership changes at the end of last year, and we're thinking that that's going to have a positive impact as we go into fall and holiday.

Your next question comes from the line of Paul Lejuez with Wells Fargo. Paul Lejuez - Wells Fargo Securities, LLC, Research Division: Just a couple of questions. On the near-term stuff, you mentioned some weakness in the weather-sensitive categories in the first quarter. But you also saw strength in some of the non-weather-sensitive like home, accessories and footwear. So I'm just wondering if maybe you saw a dollar shift out of the weather-sensitive stuff and into non-weather-sensitive, and if you could see, kind of a giveback in the second quarter when the weather turns. And then also, I'm just wondering if you could share the comp metrics that you gave. I guess, those always include e-com. I'm wondering if you could share what they were at the store level.

On the looking forward versus looking backwards, where the business came from, I mean, basic categories performed better than non-basic categories, but I don't see the results of those being dramatically inflated by the lack of selling in the seasonal merchandise. Generally, when seasonal merchandise is a little soft, basic categories are a little stronger. That's been consistent forever, and I am sure that will be consistent going forward. But no, I don't really see that as a headwind at all for basic categories in the second quarter, particularly considering, as we talked about, the tremendous effort and investment we've made in inventory in basic categories to be in stock in the second quarter. Paul Lejuez - Wells Fargo Securities, LLC, Research Division: But when you say basic, you're not talking about home, accessories and footwear, though, are you?

Certain classifications and assuming most to home is basic. I mean, the vast majority of home is basic. And footwear categories, it's sort of a -- it depends. In the area of athletic footwear, we find that there's a lot less seasonality in the business. In the area of casual footwear, of course, with categories like sandals being really important and really heavily seasonal businesses. And then the other things that we kind of throw in the basics are the basic categories like underwear and dress shirts and ties, denims, categories that you would normally assume. Wesley S. McDonald: And for your other question, I mean, e-com was up 30% -- a little over 30% and was 210 basis points on the comp. It obviously had better traffic than the stores. I'm not interested in really breaking that up that much. Given the fact that it's less than 10% of the business, the metric differences aren't material. Paul Lejuez - Wells Fargo Securities, LLC, Research Division: Got you. And then just maybe longer term, as you look at the strength in e-com and I guess maybe weaker store traffic, does it make you rethink what the right number of stores are just in terms of your overall footprint over the long term? Because it does seem like e-com sales are potentially coming out of the stores, and I'm just wondering if you rethink the number of stores that you should have longer term. Wesley S. McDonald: Well, I think they're coming out of everybody's e-com business. We're not alone in that. Well, I think we're just a little more honest about it than other people. If you look at our sales per square foot with e-com, it's basically been flat for the last 5 years. So as far as reducing the number of stores, we look at everything on an incremental cash flow basis. If it doesn't provide incremental cash flow, we'll close it. And there's a handful of stores, but I'm not thinking we need to close a large amount of stores at this point. You're talking about a handful.

I mean, the most significant impact of online on our strategy on the stores, to be honest with you, is to make the stores smaller and to take advantage of the online. And I think it would be very difficult for Wes and I to look way out in the future and decide whether or not the total number of stores Kohl's could ever have is going to be dramatically influenced or not. But certainly in the short term, we're opening fewer stores.

Your last question comes from the line of Michael Binetti with UBS. Michael Binetti - UBS Investment Bank, Research Division: Just I guess if you can help me just break down the gross margin year-over-year changes in the quarter a little bit, you said -- I think you said gross margins exceeded your expectations. So maybe you could help us think about how much of the year-over-year change was due to seasonal markdowns, how much was related to cost benefits and maybe just some of the components there?

Yes, I mean, we don't get into the detail of where the margin came from, from which area. I think the most I could provide color on that is to say that the margin improvement was widespread, and it was across the company. And it was both brick-and-mortar and online. So it's pretty consistent, I would say. Wesley S. McDonald: Yes, and we gave you guys -- obviously, we have higher expectations internally than we give you externally. and I would tell you the merchants made their plans. They haven't made that in a while, so I'm very happy about that. And we can continue to do that. I think we'll have good margin performance throughout the balance of the year. Michael Binetti - UBS Investment Bank, Research Division: Okay. And if we could talk about the components of the comparison or the comp sales maybe in the second quarter. Frankly, you obviously lapped your biggest AUR hurdle from last year in the second quarter. So if I try to look at some of the -- your guidance going from 0 to 2%, and then if I want to look at the positive comps, is it safe to say that baked into that assumption is that from the transaction sluggishness in the first quarter was pushed into May and probably still see a negative AUR in the second quarter? Wesley S. McDonald: Yes, I mean I think if I was trying to prognosticate, I would say the transactions need to be positive for us to -- flat to positive for us to run a positive comp. AUR is probably going to be down, and UPT will probably be up. And as we move through the back half, especially in the fourth quarter, I would expect AUR to be up, given our margin performance last year, and units to be down. Michael Binetti - UBS Investment Bank, Research Division: Okay. And then one last question. Obviously, we don't have a lot of details yet on the changing strategy of J.C. Penney, but it seems intuitive that those guys can look to drive traffic with heavier promotions and that they would more likely to do that in categories like the basics that you talked about today, where they can mark the product down with less gross margin damage. Have you seen any early reads if they've, I guess, started dipping their toe back into heavier coupons here in recent weeks that we could think about?

Not really, and to be totally honest with you, I just don't think we're in a position to talk about that, anyway.

Your next question comes from the line of Alex Fuhrman with Piper Jaffray. Alex J. Fuhrman - Piper Jaffray Companies, Research Division: I would love to talk a little bit more about the e-commerce fulfillment strategy, and I think in prior quarters, you've given a little bit more color about the actual impact to gross margin from shipping and handling. And it sounds like, from your prepared commentary, that you're sort of talking about some fulfillment efficiencies. I mean, with that, could you actually see an improvement year-over-year in your net shipping margin? And then kind of looking forward to the balance of the year, obviously, e-commerce as a percentage of sales is going to be a lot higher. I mean, is there an opportunity to stem the margin erosion from shipping and handling, just given the improvement in the net shipping margin even as your e-commerce business grows? And then if we could just clarify quickly, Wes, I think you said that the cost of fulfilling an order from one of your stores is about the same as it is from your DC. Is that just the marginal cost of one order? In other words, is it still cheaper to do from the store when you factor in the depreciation associated with having to build out another DC? Wesley S. McDonald: Well, I think if you'd factor in the adding of an incremental DC, then yes, the store would be cheaper. In terms of your earlier question, the shipping cost has improved dramatically year-over-year. It's still -- and because of the cost as a drain on the margin, you'll get more details in the Q, but it hurt our overall margin rate this quarter by 10 basis points. Much less than it has in the past.

Your next question comes from the line of David Glick with Buckingham. David J. Glick - The Buckingham Research Group Incorporated: Kevin, just a question on your national brand strategy. It sounded like in Q1, the performance was similar to private and exclusive. And then you talked a quarter ago about putting more emphasis on those brands in marketing. Just wondering if you could update us on your thoughts to sort that business, as well as some potential opportunities in the center core area where you're underdeveloped and possibly have the sales opportunity in accessories?

Well, in national brands and the private, exclusive brands essentially ran almost the same performance for the quarter, which was the second quarter in a row where national brands performed at or better than the overall stores. So from a trend standpoint, to be honest, that's a pretty big change in the trend. I think, as we talked about at the beginning of the year, we're really focused on making sure that our most important national brands are getting their due in inventory investment, premier floorspace, visual and more prominent marketing. Much of that is sort of emerging in the second and the third quarter. I think that we believe that that'll be particularly noticeable by the time we get to fall. So I'm optimistic that we'll see even more traction as we go into the third quarter with national brands. On the center core business, it's definitely a business we're focused on. We -- the business that outperformed the store, though it wasn't exciting in terms of its results because, as we said, all 6 areas of business were, in fact, slightly negative. But I do believe that with some of the testings and remodels that we're doing, there's a lot of good things to come in that world. So I would expect that world to perform better as we look through the rest of the year. David J. Glick - The Buckingham Research Group Incorporated: Are there any brand opportunities that you can talk about at this point, Kevin? Or...

No. Yes, it would be premature to talk about any details.

Your next 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 your credit card sales growth versus the non-credit card sales growth? And then as you had mentioned mobile, is the mobile pilot still on track for the third quarter and has anything changed? Wesley S. McDonald: In terms of credit versus non-credit for the quarter, credit was up low-single digits, and non-credit was down mid-single digits, so a little disappointing from that perspective given the performance in the fourth quarter. But I expect some of the things we're doing with loyalty, as well as some other advertising changes in the second quarter, I think, will get the non-credit customer back onboard. They also have a reason to buy because now they can buy shorts because it will be warmer than it was in the first quarter. So I think we'll make some progress there. And the mobile initiative is really tied to the re-platform, so assuming that the re-platform goes in, you'll see some of those initiatives happen in the fall.

Your next question comes from the line of Patrick McKeever with MKM Partners. Patrick McKeever - MKM Partners LLC, Research Division: Just wondering if you could maybe give us a little more -- or a little color on the DesigNation initiative, how that's doing, how the Derek Lam merchandise is doing right now. Is that -- has that been less weather-sensitive than the rest of the store, if that merchandise is selling better in-store or online, that sort of thing, and what's the plan there going forward?

DesigNation, as you know, this is our second launch with the designer. We had Narciso Rodriguez in the Fall/Holiday and Derek Lam just a few weeks ago. I think the consistency that we see is that there's a lot of excitement with consumers around it. That's a positive thing for word of mouth and for keeping consumers engaged. So that's definitely fulfilling our expectation there. Second, it's very, very strong online. Maybe that's not a surprise to you, but both the first launch and this more recent launch have both performed exceptionally well online, where we got a lot of consumer engagement. The actual performance of each of the brands has driven -- been driven a lot, of course, by, also, overall traffic. So I think we probably didn't do quite as well in April with our Derek Lam expectation but -- as we had originally planned in our brick-and-mortar. But unfortunately, as you know, we had lower traffic than we expected as well. So I don't know the exact number, Patrick. I don't know that we made the plans, but we came pretty close, I think.

Your final question comes from the line of Paul Trussell with Deutsche Bank. Paul Trussell - Deutsche Bank AG, Research Division: Just to follow back up on gross margins, could you just speak about the contribution of the lower sourcing costs, as well as what was the impact of markdowns during this period, if any? And also just on inventory, do the move from being up 10% per store to low- to mid-single digits, is that just a function of the comparisons or just -- if you can just help us get more comfortable with that? Wesley S. McDonald: Well, the drop is a function of the comparisons. We really didn't have any seasonal inventory in May and June, and we delivered polos the Thursday before Father's Day. So we were chasing most of the quarter. And as far as the components go, I think it was pretty much balanced. We had less clearance markdowns than we thought and a little bit better markup with the lower costs. So to get more granular than that, there's a lot of moving pieces, and I'm just happy we beat our guidance. Paul Trussell - Deutsche Bank AG, Research Division: Okay. And operating income was down again this quarter year-over-year, and share repurchases is helping the bottom line quite a bit. Just as we look at your cash balance, which is half of what it was a year ago, I know you noted the AP is down, but in order to get to that $1 billion in buyback for the year, should we expect for you to add debt in the third quarter as you did a year ago? Wesley S. McDonald: No, we won't add any debt, and the cash flow will get better towards the end of the year as the inventory comes down. Thanks, everybody. Appreciate your time.

Thank you. This concludes today's conference call. You may now disconnect.