Karen M. Hoguet - Chief Financial Officer

Deborah L. Weinswig - Citigroup Inc, Research Division Lizabeth Dunn - Macquarie Research Steven J. Kernkraut - Berman Capital Management LP Dana Lauren Telsey - Telsey Advisory Group LLC Paul Lejuez - Nomura Securities Co. Ltd., Research Division Charles X. Grom - Deutsche Bank AG, Research Division Michelle L. Clark - Morgan Stanley, Research Division Adrianne Shapira - Goldman Sachs Group Inc., Research Division Matthew R. Boss - JP Morgan Chase & Co, Research Division Paul Swinand - Morningstar Inc., Research Division David J. Glick - The Buckingham Research Group Incorporated Jeffrey S. Stein - Northcoast Research Joan Payson - Barclays Capital, Research Division Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division

Good morning, and welcome to Macy's Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to your host, Karen Hoguet. Please go ahead. Karen M. Hoguet: Great. Thank you. Good morning. I'm Karen Hoguet, CFO of Macy's, Inc. And on behalf of our company, I'd like to welcome you to our conference call scheduled to discuss our fourth quarter earnings. Any transcription or other reproduction of the statements made in this call without our consent is prohibited. A replay of the call will be available on our website, www.macysinc.com, beginning approximately 2 hours after the call concludes. Please refer to the Investor Relations section of our website for discussion and reconciliations of any non-GAAP financial measures discussed this morning. Keep in mind that all forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to differ materially from the expectations and assumptions mentioned today due to a variety of factors that affect the company, including the risks specified in the company's most recently filed Form 10-K and Form 10-Q. 2011 was another record year for Macy's, Inc. We are very proud of our team and the momentum we have built up. Our sales grew approximately 5% in comp stores for the second year in a row while increasing the profitability of the company. This results from the combination of great strategies and terrific execution, which has helped us to gain market share. Our EBITDA rate as a percent of sales increased 80 basis points in 2011, on top of last year's 100-basis-point increase. And we have strategies to increase it further to the 14% to 15% targeted level while continuing to invest in driving top line sales. We also increased our return on invested capital by 230 basis points in 2011, almost reaching 20%. And our return to investment grade ratings in all agencies speaks to the strength of our balance sheet, our performance, and the sustainability of our strategy. It is great to be entering the new year with so much positive energy throughout our organization. I will outline the key aspects of our fourth quarter and the full year 2011 performance and then discuss some of our key assumptions for 2012. Sales in the fourth quarter were $8,724,000,000, up 5.5% over last year. And on a comp store basis, our sales in the quarter grew 5.2%. Sales in the fourth quarter exceeded our expectations, reflecting a very strong holiday performance. Our sales performance continued to be balanced. We were pleased with our performance at Macy's, as well as at Bloomingdale's, online and in stores. In fact, all regions across the country produced sales growth this year for both the quarter and the full year. All year long, our southern regions across the country performed best, and that continued in the fourth quarter. And the northeast also had strong sales growth in the fourth quarter. By family of business, we saw strength during the quarter in so many categories, including cosmetics and fragrances, shoes, handbags, watches, men's, textiles, housewares and furniture. And the areas with the most notable weakness in the quarter were the cold weather merchandise areas, junior's and traditional casual women's apparel. Average unit retail in the quarter was up 9%, while transactions were up approximately 1%, and units per transaction down approximately 4%. For the second half of the year, our average unit retail was up approximately 7%, which is at the high end of the 5% to 7% that we had anticipated. All in all, we did a great job anticipating and planning for the merchandise cost increases that we had experienced. Gross margin in the fourth quarter was 41%, down 30 basis points from last year. Merchandise margins were flat in the quarter, while we were negatively impacted by the free shipping as expected. Inventory at year end was up 7.5% over a year ago. This is a little higher than the 6% to 7% we had expected due to the decision to keep cold weather merchandise in the stores longer than usual so it would be available for the customer when the weather has historically turned coldest. While you might not know it on the East Coast, winter isn't over yet. And by the end of the first quarter, this merchandise will be gone, and our cost store inventory will be again below expected sales growth. Also, remember the year-end inventory continued to be impacted by the higher in-transit discussed each quarter in 2011. We've now year-rounded on the change, so it will no longer be a factor as we enter 2012. In the fourth quarter, SG&A in dollars was $2,314,000,000, or 3% over last year. As a percent of sales, it was 26.6%, down 60 basis points from a year ago. This is better than expected due to various year-end adjustments and lower depreciation relating to the timing of capital expenditures. Credit profitability in the quarter increased by $59 million over a year ago, which is within the range of what we had expected at the beginning of the quarter. We clearly continue to benefit from the stronger portfolio performance. At the end of the quarter, we sold 4 store leases to Lord & Taylor that they had been subleasing from us since the 2006 divestiture. We booked a $54 million gain on this sale. Also, in the quarter, we booked $29 million in costs, primarily associated with the announced store closings, of which $22 million was noncash asset impairment charges. The net of these 2 items is the $25 million of income that you see on the P&L. Interest expense in the quarter was $108 million as expected. The tax rate was 36.6% in the fourth quarter. You'll recall that last year, in the fourth quarter, our tax rate was 35% so the year-over-year comparison in fourth quarter earnings is negatively impacted by the higher tax rate. Average diluted share count in the quarter was 427.3 million shares. During the quarter, we bought back approximately 8.2 million shares. So since we resumed our stock buyback program during the third quarter, we have bought back a total of 16.4 million shares for approximately $500 million at an average price of $30.57. EPS in the fourth quarter on a diluted basis, excluding store closing costs and the gain on the sale to Lord & Taylor, was $1.70, well above both expectations and last year. Our cash flow was also very strong throughout the year in 2011. During the year, operating activities generated $2.1 billion of cash as compared to $1.5 billion last year. Our pension contribution this year was $375 million versus $825 million a year ago. And CapEx was $764 million this year, below the budgeted $800 million dollars, due to the timing of the cash outlay. Cash flow before financing activities was $1.476 billion, up $435 million over a year ago. In the financing section of the cash flow, you will note the $800 million of debt that we issued in January. Given market conditions, we accessed the market in advance of the approximately $790 million of debt maturing during the first half of 2012, $617 million in March and $173 million in July. At the end of the year, we had $2.8 billion of cash on our balance sheet, or $2 billion excluding the debt issuance which we used to pay down debt. This compares to $1.46 billion at the end of last year. Our return on invested capital in 2011 was 19.7%, up the 230 basis points over last year that I referred to earlier. And our credit ratios, excluding the impact of the January debt issuance, were well within our targets, with debt to EBITDA at 2.6 relative to our target levels of 2.4 to 2.7 and our EBITDA to interest of 7.1 relative to the range in our target of 6.4 to 6.6. Maintaining credit ratios at least in the target range is very important to us, and you can check our website to the specific calculations. Let's now move on to 2012. As stated earlier, we expect the momentum to continue. For planning purposes, we are assuming a comp store increase of approximately 3.5% on a 52-week basis. Remember, our retail calendar includes an extra week in January in 2012. So for the full year, our total sales including this extra week are expected to be up approximately 1 point over our comp store sales increase. Now obviously, in the fourth quarter, given that extra week, we're expecting a much bigger gap, in fact 3.5 points higher total store growth in comp. However, in the first 3 quarters of the year, total sales growth is expected to be slightly below our comp store growth due to the locations that we closed at the end of 2011. We are planning to open 2 new stores in 2012, both in fact next month. One in Milwaukee and one in Salt Lake City. We are also opening 5 new Bloomingdale's outlets during 2012, bringing the total number to 12. We are assuming a flattish growth margin rate for the year, although we could have continued pressure from free shipping given the sales growth expected in the omnichannel business. And by the way, this may not be the case in every quarter, but over the course of the year, we do expect the gross margin rate to be flattish. On the SG&A front, we expect to be able to continue to improve our expense rate as a percent of sales. We expect our income from the credit portfolio to increase approximately $15 million to $20 million during 2012, but we are expecting big variances when we look at the comparison to last year and each quarter. As we start this year, we're expecting a year of strong credit portfolio performance and, therefore, the earnings will be more evenly distributed through the year. This is obviously very different from 2011 when the good news ended up being much more back-end loaded, particularly in the third quarter of 2011. For the year, we're expecting retirement expense, pension plus SERP, to increase by approximately $65 million, while depreciation is expected to decline approximately $25 million for the year. For interest expense, we're assuming approximately $435 million to $444 million -- I'm sorry, $440 million for the year. And we're assuming an effective tax rate of 36.95% for 2012, although it will vary by quarter. And our CapEx budget for 2012 is $850 million. In terms of uses of cash, we are now planning to contribute $150 million to the pension plan during the year, and we will pay off the $1.1 billion of debt at maturity. Remember that we, in essence, pre-funded the March and July maturities with the issuance in January, and we have an additional $298 million of debt maturing in January of 2013. With our excess cash, we expect to buy back stock on a regular basis throughout the year, depending on market conditions. We have approximately $1.3 billion of authorization remaining. So net-net, we are assuming earnings per share on a diluted basis of $3.25 to $3.30 for 2012. This represents an increase of 13% to 15% over 2011's diluted EPS, excluding store closing costs and the gain on the sale to Lord & Taylor. This does not include any store closing-related costs that we could incur in 2012. The real headline from today's announcement is the significant back-to-back-to-back improvement in our results over the past 3 years. When we first announced our new strategic direction in 2008 and 2009, we talked about the opportunity we saw to accelerate sales growth and improve overall financial performance. And that is exactly what happened in 2009, 2010, and again in 2011, as our organization has executed superbly and captured market share from our competitors. But as you have heard us say many times, we're not even close to being done. We have in place a whole new set of activities beginning this spring to continue to refine our localization approach within My Macy's and empower our organization to meet the specific needs of customers by location. We are also forging ahead with experiments and innovations within our omnichannel strategy to serve customer needs in-store, online and via mobile. Not only is this driving sales, but it is also beginning to help us improve the management and velocity of our inventory. In MAGIC Selling, we are strengthening the coaching process among sales managers and associates on the selling floor so our customer engagement is consistent and leads to more items in her shopping bag. And you will be hearing more about our initiatives to engage millennial customers in more comprehensive and powerful ways as we sharpen our focus on what is now America's largest and most diverse generation. We feel very good about our prospects in 2012 to strengthen our business at both Macy's and at Bloomingdale's. We also feel very good about the groundwork we are laying now for continued growth beyond 2012. The results we are generating are very real, and the momentum in our business has our organization ready to take the company to the next level of success. And so now, what questions can I answer?

[Operator Instructions] And we'll go first to Deborah Weinswig with Citi. Deborah L. Weinswig - Citigroup Inc, Research Division: In terms of store to door right now, how many stores are on that program? What's the pace at which they'll be ramping? And what's the opportunity available? Karen M. Hoguet: 23 stores were available this fall for us to be able to ship from a different store to the customer directly. And in 2012, that number, by the fall season, should reach approximately 290. Obviously, big success this fall, and we think it's going to be a big opportunity for continued growth. Deborah L. Weinswig - Citigroup Inc, Research Division: And then in-store, obviously, MAGIC Selling training has been a huge success. Can you talk about online customer service? Karen M. Hoguet: Yes. Actually, to the fourth quarter this year, that was a very big priority. But frankly, we have been disappointed with some of the service issues the year before. And we think we did a much better job, the customer service scores improved significantly. And so we'll continue to work both in making the site easier to navigate and also make sure that we have the customer service backed up when there are questions or issues that come up. Deborah L. Weinswig - Citigroup Inc, Research Division: Okay. And then last question, it sounds like the holiday season overall exceeded your plan. What were the key drivers? Karen M. Hoguet: Well, it always starts with the sales line. And when you can achieve sales growth over 5%, that's always obviously a great thing. We invested in certain ways to achieve that sales growth in the selling floor and some of the support functions in our stores, in marketing and obviously, also, the investment in store fulfillment. And it clearly all paid off in terms of the sales that we got.

We'll go next to Liz Dunn with Macquarie Capital. Lizabeth Dunn - Macquarie Research: I guess in terms of getting to the 14% to 15% EBITDA margin, can you talk about -- I'm assuming most of that will come from leverage on continued strong sales. And then in terms of your 3.5% comp growth for 2012, can you talk about how price will play into that? Karen M. Hoguet: Yes. I mean, in terms of how we're going to get to the 14% to 15%, you're right, a lot of that will be leveraged from sales growth. We also are working to reduce expense where we can in areas that obviously won't impact the sales that we're generating. Also, we see opportunities for gross margin rate as we go forward, both from markdown optimization that we've been working on and also as we are able to improve the inventory turn through our omnichannel strategy, that should help gross margin rate over time as well. Not in 2012 necessarily, but as we go farther out. So we feel good about that. Lizabeth Dunn - Macquarie Research: Okay, great. And then looking at the direct-to-consumer business, I think you said about $2 billion is what you're looking for, for 2012 or is that just over $2 billion? Because it looks like, with the growth that you had for 2011, that would suggest a little bit of a slowdown in the growth rate. Can you help us think about how that... Karen M. Hoguet: Yes. No, we do expect it to be more than $2 billion. And hopefully, it will continue to grow at the pace that it is. Obviously, it's a pretty high rate to continue, but we do expect it to be more than the $2 billion.

And we'll go next to Steve Kernkraut with Berman Capital. Steven J. Kernkraut - Berman Capital Management LP: I guess I had just one question, just on the e-commerce business as well. The way -- what impact does the growth of e-commerce business have on the overall inventory, where the inventory is up 7.5%? You would think it would be able to grow less because so much of that online inventory is centralized in your distribution centers. Karen M. Hoguet: Yes. I mean, the inventory turns for the online business are significantly higher than the store. And one of the things that we're doing as we enable the 290 stores to ship to the customer directly will be the ability to supplement online sales using store inventory, which, based on our tests, we think will be a big contributor to sales in 2012 and beyond. So we... Steven J. Kernkraut - Berman Capital Management LP: Yes. I mean, I would think as time goes on, that your sales should be able to grow at a much faster rate than your inventory. Karen M. Hoguet: That's the expectation, Steve. It will be having -- utilizing our inventory better, whether it be in the warehouses or in stores.

And we'll go next to Dana Telsey with Telsey Advisory Group. Dana Lauren Telsey - Telsey Advisory Group LLC: As we think about omnichannel and CapEx, what CapEx initiative is involved in omnichannel? And what do you see that achieving the operating margin or EBIT margin goals going forward? Does it happen faster, in 2 years, what's your sense? Karen M. Hoguet: Well, I think we will be investing in technology and omnichannel for a long time to come. There's different pieces to it. There's a small piece that relates to the store fulfillment. There's a bigger piece that relates to building incremental warehousing space. As you know, we're opening our next big mega center in West Virginia this year. So that's a big chunk. And there's a lot being spent in terms of software development to improve the site itself. But we will be continuing to invest in that, plus store technology as we go forward.

And we'll take our next question from Paul Lejuez with Nomura. Paul Lejuez - Nomura Securities Co. Ltd., Research Division: Karen, can you maybe share with us what your specific assumptions are for how e-com factors into that 3.5% comp guidance? And then just wondering if you can maybe talk about whether you have any new specific initiatives on the e-com side of the business that will act as a tailwind this year. Karen M. Hoguet: We don't break out that as part of our planning to disclose -- sorry, I can't give you that number. And in terms of improvement in e-commerce, a lot of it will have to do with the merchandising on the site and getting greater alignment with the stores. So I think that will be a big chunk of it. And obviously, continuing to try to make the site easier to navigate. Paul Lejuez - Nomura Securities Co. Ltd., Research Division: Will you be increasing the merchandise available online, stuff that you wouldn't necessarily have in your stores? Karen M. Hoguet: We do some of that. But more of what we're trying to do is actually increase the alignment with the stores.

And we'll go next to Charles Grom with Deutsche Bank. Charles X. Grom - Deutsche Bank AG, Research Division: Just on -- go back to Steve's question earlier on site to store to door and the comp. Do you expect that 3.5% comp to be consistent throughout the year? Or do you expect it to be back-end weighted? Because I'd imagine, if Nordstrom's any bit of a playbook for us, you would expect a pretty big comp lift as you get to 290 stores towards the end of the year. Karen M. Hoguet: At this point, I would say it's relatively even through the year by quarter in terms of the expectation. But there's always hope that as we get to 290 stores, it does what we think it could do. And obviously, that would help comps as we go through the year. Charles X. Grom - Deutsche Bank AG, Research Division: Okay. Fair enough. And then you've always talked about this 14% to 15% EBITDA target for longer-term goals. But it appeared to me that there's a lot of opportunity, and you kind of alluded to it on the gross profit margin line with inventory productivity, as well as sales efficiency as you get more of your business online to maybe exceed that. I mean, have you guys thought about that as your -- as part of your long-term planning? Karen M. Hoguet: Yes, I thought about it, Steve. I don't see that we'll exceed it. I mean, there's always that possibility. But remember, we're also trying to invest for growth, so you've got to balance it all. So I think, getting to 14%, I can see pretty easily. Getting to 15%, frankly, will be more challenging. And if I were you, I would not count on getting above the 15%. Again, not that it won't happen, but it'll be a ways out is my guess. Charles X. Grom - Deutsche Bank AG, Research Division: Okay. And then just one quick question here. The past couple of quarters, you've bought back I think 16 million shares, and I know that there's some level of buybacks in your guidance. Just wondering if you could give us a little bit of sense for what you guys are thinking as part of the $3.25 to $3.30 EPS for you. Karen M. Hoguet: We're not making out exactly what we've assumed in terms of the buyback. But you should get a sense of what we've been doing. And the idea, it's just part of the story. We're going to take our excess cash and buy back stock.

We'll take our next question from Michelle Clark with Morgan Stanley. Michelle L. Clark - Morgan Stanley, Research Division: Karen, you mentioned the 53rd week impact. Can you just detail for us what you're expecting in terms of the EPS lift in the fourth quarter? Karen M. Hoguet: No. Actually, Michelle, we really aren't breaking it out. It's sort of a complicated calculation. Obviously, adds a lot to sales, and it's a very profitable week as you might imagine. But we are not giving specific guidance as to the EPS impact. Michelle L. Clark - Morgan Stanley, Research Division: Okay, great. And then your comp outlook for 2012 of 3.5%, I'm guessing that, that assumes no pick up from any disruption related to J. C. Penney? Karen M. Hoguet: Well, we'll have to see how that plays out. Our best assumption right now is the 3.5%, and we'll see. Michelle L. Clark - Morgan Stanley, Research Division: Okay. And then lastly, Karen, I was wondering or hoping that you could update us on price optimization, when we should expect to see that impact your gross margin and top line results. Karen M. Hoguet: Yes. My guess is we'll continue to experiment this year. It's proven to be a little more complicated than we originally thought. But initial tests are looking good. So my guess is we're probably talking about back half of '13.

We'll go next to Adrianne Shapira with Goldman Sachs. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: Karen, just specifically on some of the merchandise weakness. Obviously very strong performance on many categories, but we can understand the cold weather items. Just maybe if you could share some specific initiatives to kind of help turn junior's and that traditional casual women's business around. Karen M. Hoguet: Yes. I mean, I think on the casual women's traditional business, I think that's been a business that's been weak throughout the industry. It's not just a Macy's issue. And we have retooled some of the private brands that are in that area. And interestingly, initial selling on that is looking very strong. So we have some hope that in 2012, that business will continue. In the case of junior's, it's a very competitive marketplace. As I alluded a few minutes ago, we've spent a lot of time this year evaluating our strategies for the millennial customer, which include sort of 2 categories: the younger millennial, which is the junior customer; and also the older millennial, where today, frankly, we see a lot of white space and opportunity for us. And I think as we move on, we'll see improvement in that business as well. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: Okay, great. And then just a question on the fourth quarter margins. I mean, obviously, impressive flat margin -- merchandise margins given the holiday season, but if you connect the fact that inventory, a little bit heavier at quarter end, and your comment that maybe not every quarter we should see flat margins, could we see some pressure in the first quarter based on some overhang coming out of the fourth? Karen M. Hoguet: There's really no overhang coming out of the fourth. As you might imagine, we take the markdowns when they're needed. That doesn't mean there won't be pressure in the first quarter by the way, but it's for different reasons. Adrianne Shapira - Goldman Sachs Group Inc., Research Division: And the different reasons? Karen M. Hoguet: Well, no, I mean, it just has to do with the promotional nature of the first quarter. But again, we've talked about flattish margins, but we did not come out of the quarter with significant overhang.

We'll go next to Matthew Boss, JPMorgan. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Karen, can you elaborate on My Macy's? And looking forward, additional layers of opportunity here, I think you've talked to the My Macy's initiative now in the fourth or fifth inning. So just looking for any color on the second half game plan here. Karen M. Hoguet: Yes. I mean, the key thing as you think about My Macy's, 3 things are happening. One is the people in jobs have been there longer, and so they're getting better and better at not only understanding the opportunities in their markets, but also communicating with the central merchants to make them happen. So I think the more time in job the district people have had, the better the 2-way communication is happening. The second thing is that we continue to find new opportunities as we study markets in a more refined way, whether it be differences in the tourist customer in different markets, whether it be new strategies. For example, the need for cold summer assortments in places like the Pacific Northwest or Southern living strategies sort of across Atlanta and the Southeast. So the second point is that we're continuing to find new opportunities strategically as we look at market-by-market. And then the third point I would make is that we took a lot of time this summer and went back and surveyed all the store managers like we had done back in '06, which was the beginning of My Macy's, to try to understand how we could improve it further. And we have -- I think it's roughly 13 initiatives that our teams are busily working on to even make it work better. So a combination of those 3 factors, Matt, makes me feel really good that there's still a lot more to come from My Macy's. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Wow, that's great. And then on the product side, you mentioned a little bit around private label. But can you speak to current and some upcoming initiatives which in the stores that we should keep our eyes on? I guess, particularly the Charter Club relaunch and any other category-specific noteworthy changes to just keep our eyes open for. Karen M. Hoguet: Yes. No, I think there's a lot that's gone on in the women's apparel area, the Charter Club redo, or refresh is probably a better word. The Bar III launch has been terrific in the impulse arena. And we've recently launched a new active line, Ideology, which just looks spectacular, and we think will be an important part not only in the millennial strategy but also for older women as well.

And we'll take our next question from Paul Swinand with Morningstar. Paul Swinand - Morningstar Inc., Research Division: On the SG&A and the credit portfolio tailwind, I think you gave some numbers in the prepared remarks. Looking at 2012, is there assumption that it will sort of flattish? Or do you think that, that portfolio can keep getting better, even below pre-recession levels? Karen M. Hoguet: Is your question, credit? Paul Swinand - Morningstar Inc., Research Division: Yes. Karen M. Hoguet: I'm sorry. Yes, we had said that we expect there to be continued improvement in the credit profitability for us of $15 million to $20 million for the year. Paul Swinand - Morningstar Inc., Research Division: I'm sorry. Okay. And then on the inventory store to door, I know you said that, that should improve turns because it's a centralized inventory. But if the sale that you're missing that's in the store and not in the centralized inventory, is that just a size? Or is that something that you didn't have in the centralized inventory? Because you did say you were going to make the inventory more like each other. Karen M. Hoguet: Well, I think the key thing is as you think about shipping merchandise from stores, the logic that will be built into the system as of this summer, which is consistent with the rollouts of the 290 stores, is that there will be a logic build-in that will pull the inventory from the store least likely to sell the goods. So it's frankly a markdown that would have happened had we not sold it as opposed to a lost sale. It's really quite cool if it works properly. And there'll also be a faster build-in for distance to customer. But the compelling part of the logic, the key driving factor, will be where the goods are selling through the slowest to pull it from those stores. Paul Swinand - Morningstar Inc., Research Division: Got it. Okay, understood. And then sorry to beat this horse a little more, but on the credit side, realizing you gave the number, the $20 million, but are you assuming that you go to better charge-offs and delinquency ratios than you had? And is that something that can keep going? Karen M. Hoguet: Well, the price portfolio continues to improve, but the major adjustments that happened in 2011 is done. But we don't expect it to deteriorate from where we are.

We'll go next to David Glick with Buckingham Research Group. David J. Glick - The Buckingham Research Group Incorporated: A couple questions. I was wondering if you could give us an update on the renovation plans for Herald Square and the time frame that, that will occur, and whether any disruption in sales are expected this year. And then secondly, we talked about some of the challenging areas from a merchandising front. But clearly, the drivers have been in the accessories, men's and part of the home area. Are you counting on those areas to outperform once again in 2012? Karen M. Hoguet: Yes. I mean, let me answer the second question first and I'll go back to Herald Square. Obviously, we're expecting the businesses that have been doing well to continue to do well. And our hope is that we could also layer in a stronger of the casual traditional women's apparel as well. So in part, we think the momentum will continue to build as a result. In terms of Herald Square, there's really nothing more to report. We continue to expect to spend about $400 million over the next 4 years. And yes, we're factoring in some disruptions, although we frankly don't think it's going to be tremendous. But we continue to be extraordinarily excited about what we're going to be able to create here. David J. Glick - The Buckingham Research Group Incorporated: Are you seeing any changes in tourist traffic in the last 2 or 3 months? Karen M. Hoguet: I don't believe so, David.

We'll go next to Jeff Stein with Northcoast Research. Jeffrey S. Stein - Northcoast Research: Why don't you -- if you could tell us what the private label and branded exclusive penetration was for the latest fiscal year? Karen M. Hoguet: Yes. I don't have it in front of me, Jeff, but I think it's still around the 20% for the private label and north of 40% for the limited distribution. Jeffrey S. Stein - Northcoast Research: Okay. And how about -- back to your capital spending budget for a moment. What percent of your budget will be IT-related this year compared to prior year? Karen M. Hoguet: I don't know that offhand, but my suspicion is it's fairly similar to prior years. We've been investing for a long time in omnichannel, as well as improving our core systems. Jeffrey S. Stein - Northcoast Research: Got it. And I know, in each of the last 2 years, and this relates to SG&A, you've invested in the MAGIC Selling. Is it going to be similar in terms of the dollars you're going to spend to that effort in 2012? And then maybe you could address the issue of marketing spend year-on-year. Karen M. Hoguet: Yes. I believe that we will continue to invest in the MAGIC Selling at a comparable ratio -- amount that we've spent in recent years. And in terms of marketing, we're planning a flattish rate. So dollars will go up, rate will not.

And we'll go next to Bob Drbul of Barclays Capital. Joan Payson - Barclays Capital, Research Division: It's Joan Payson standing in for Bob today. And just 2 questions, in terms of next year on that 3.5% comp. If possible, could you provide some sort of additional color on the AUR assumptions there? Karen M. Hoguet: Yes. I mean, we expect the AUR to continue to increase, particularly in the first half of the year. A specific amount, I can't really tell. It's hard to forecast. Joan Payson - Barclays Capital, Research Division: Okay. And then in terms of the Bloomingdale's outlets, just looking at how those have been performing and sort of what you're targeting for store number penetration in the long term. Karen M. Hoguet: Yes, we're still developing how many we can add, so it's hard to answer. At the end of this year, we expect to have 12, and it will grow from there. How many we ultimately have, I just don't know at this point.

[Operator Instructions] We'll go next to Lorraine Hutchinson with Bank of America. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: As you begin to plan your inventory for the back half, just knowing that you're coming up against a 7% increase in AUR, how are you thinking about unit velocity and growth versus pricing as you come up against that very difficult comparison? Karen M. Hoguet: Yes. I mean, obviously, we're spending a lot of time -- last year, we spent a lot of time thinking about the unit plans, given the price increases that we experienced for the first time in recent history. Now we're spending as much time thinking about what do you do the second year. So it's being thought through category-by-category, much like we did last year. And hopefully, our planning will pay off as well this coming fall as it did this year. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: And then as far as your credit penetration, does the guidance that you gave for credit income assume an increase in that? And what are your strategies around growing that this year? Karen M. Hoguet: It actually doesn't. It actually assumes a slight decline, which is what we've been experiencing. In 2012, our penetration of credit was roughly 47.3%, down about 50 basis points from the year before. Part of that, we think, relates to the challenges with the new account approval that relates to a lot of the regulations coming out of Washington. I think also, as our market share is growing, we've got a lot more customers in our store who don't yet have a Macy's card. We hope to change that. But to some degree, it also relates to the new account approval process. It also appears as if some of our customers are deleveraging and using debit cards more than their Macy's credit card. And then obviously, the strength in the tourist business that we've been seeing, where customers tend not -- especially the international tourists -- tend not to have our credit cards, impacts us in some of the big tourist locations like Herald Square, Union Square, Florida, et cetera. But we -- so we are assuming it to be down slightly next year.

And it appears we have no further questions in the queue at this time. Karen M. Hoguet: Great. Well, thank you all very much. And if you have other questions as the day goes on, just let us know.

Again, that does conclude today's presentation. We thank you for your participation.