Karen M. Hoguet - Chief Financial Officer

Charles X. Grom - Deutsche Bank AG, Research Division Paul Swinand - Morningstar Inc., Research Division Jeffrey S. Stein - Northcoast Research Deborah L. Weinswig - Citigroup Inc, Research Division Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division Bernard Sosnick - Gilford Securities Inc., Research Division Matthew R. Boss - JP Morgan Chase & Co, Research Division Michael Binetti - UBS Investment Bank, Research Division Lizabeth Dunn - Macquarie Research Kimberly C. Greenberger - Morgan Stanley, Research Division Dana Lauren Telsey - Telsey Advisory Group LLC Joan Payson - Barclays Capital, Research Division David J. Glick - The Buckingham Research Group Incorporated Paul Lejuez - Nomura Securities Co. Ltd., Research Division

Good morning, and welcome to the Macy’s, Inc. Third Quarter Earnings Release Conference Call. As a reminder, today's call is being recorded. I would now like to turn the conference over to your host, Ms. Karen Hoguet. Please go ahead. Karen M. Hoguet: Good morning, and welcome. I'm Karen Hoguet, CFO of the company. 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. Before beginning my commentary, I want to take just a moment to express our sympathy, empathy and gratitude to so many people whose lives were impacted by Hurricane Sandy. Our sincere sympathy goes to the families of the 100-plus people who died as a result of the storm and the countless others who were injured. Our hearts also go out to the millions of people who suffered significant property damage, including those who lost homes, cars and many of their possessions, not to mention electricity, telephone and cell service as well as access to transportation. I know that a number of people on this call were among them. And lastly, thanks to the Macy's and Bloomingdale's teams in the Northeast and Mid-Atlantic regions who have shown such incredible resiliency in preparing our facilities for the storm, helping to get them up and running so quickly after the storm and for taking good care of our customers in the process, all while dealing with the disruptions in their own personal lives. Our associates did a phenomenal job getting our stores reopened. Our logistics team has been able to get merchandise delivered to our stores and to our customers with little delay. And our New York-based teams overcame numerous obstacles to get their jobs done. I have to express particular thanks to the finance organization that worked together in new ways to make sure that we could get the quarter closed on schedule. That said, let's move on to the business at hand. The third quarter was another good one for the company. Not only did our sales performance continue strong, but we were also able to significantly exceed our earnings expectations and beat last year's $0.32 per share by 12.5%. As you know, we had expected a down quarter, so we are very pleased with these results. As you will recall, we had spoken in each of our conference calls this year about the challenges of year-rounding on last year's $108 million increase in credit income and the 24% tax rate in the third quarter. But we were able to more than offset these with a combination of better-than-expected sales, gross margin rate and SG&A. I'll discuss each of these factors, as well as our cash flow, and then I'll talk about our key planning assumptions for the fourth quarter. Sales in the third quarter were $6,075,000,000, up 3.8% over last year or 3.7% on a comp basis. We continued to see strength during the quarter in Center Core, men's and home categories with some encouraging trends in parts of women's apparel. Amongst the strongest performers were watches, handbags, fragrances, women's suits, men's shoes, men's tailored clothing, home textiles, luggage, mattresses and furniture. The weaker performers included juniors, tabletop and housewares. Within women's apparel, we saw trend improvement in the classic parts of our assortment. The cold weather categories experienced great sell-throughs in the quarter when the weather was cold, but we didn't see enough of that weather during the quarter. Geographically, the business trends were very similar across our Macy's regions, with the exception of our Houston-based South-Central region, which had a particularly strong quarter. Our macys.com business continued to be very strong. We are getting more and more traction from our omnichannel initiatives, which are enabling us to utilize inventory in our direct-to-customer warehouses and in 292 store locations to satisfy customer demand, both online and also in stores. I have to say that it is getting harder and harder to define Internet versus store sales, given all the ways customers are now researching products, as well as shopping and purchasing. But what is so great about our performance is that we're doing better than anticipated, both in store and online. Each channel is driving sales in its own channel, as well as helping to drive sales in the other channel. Bloomingdale's performance in the third quarter was consistent with their recent trend. As with Macy's, Center Core, men's and parts of home showed the most strength. The women's apparel area was the toughest for Bloomingdale's. During the quarter, bloomingdales.com continued its very strong performance, and the outlet stores during the third quarter produced sales that were better than expected. During the third quarter, our average unit retail, or AUR, was up approximately 4.5%. As anticipated, it is moderating from the larger increases earlier in the year. And we expect that to continue to happen in the fourth quarter, but it is still quite healthy. Remember that AUR increases do not equate necessarily to price increases. AUR increases can result from mix changes, such as the mix between regular price and clearance selling, jackets versus tops and higher price points versus lower. In the third quarter, our transaction count was up as well, and our unit per transaction continued to fall below last year. The gross margin rate in the quarter was 39.6%, up 20 basis points over last year. We were very pleased that we were able to more than offset the higher costs associated with free shipping with a higher merchandise margin. We ended the quarter with inventory up 0.7% and flat to last year on a comp basis. This is lower than what you might have expected given our fourth quarter sales assumption. We planned inventory this way purposely because we wanted to enter the fourth quarter with lower stock levels than in the past so that we would be able to flow in more newness for the holiday season. SG&A in the quarter was $2,078,000,000, up 3% over last year. And as a percent to sales, SG&A was 20 basis points below last year. SG&A relative to last year benefited from $13 million in lower depreciation and amortization, but was negatively impacted by $23 million in lower credit income, $17 million in higher retirement expense and the continued investments in our omnichannel strategies. Relative to what we had expected, the biggest improvement, but not the only improvement in SG&A, was in credit income. Our credit penetration in the third quarter increased 20 basis points over last year, which is a positive change in trend from the spring season when our penetration was down 80 basis points. Losses continue to reflect improvement as well, and our delinquency is also in good shape. Operating income was $325 million in the quarter, up 12% over last year's $291 million. As a percent to sales, operating income was 5.4%, up 40 basis points over last year. Interest expense was $103 million in the quarter versus $108 million last year, and tax expense was $77 million as compared to $44 million last year. The tax rate this year was 35% as compared to the 24% last year. This can be attributed to several normal course state tax settlements that happened to fall into the third quarter of last year. Net income in the quarter was $145 million; and earnings per share on a diluted basis was $0.36, up 12.5% over last year. Share count on a diluted basis was 407.9 million shares, down 5.5% as a result of our buyback program. Through the third quarter, we have bought back 26.3 million shares, utilizing $991 million in cash. We have $361 million remaining in our current authorization. Our year-to-date cash flow is strong as well, and we ended the quarter with $1.3 billion of cash on our balance sheet. During the first 3 quarters of this year, we generated cash from operating activities less investing activities of $274 million, which is $119 million higher than last year. We've utilized this cash, as well as cash on the balance sheet, for a combination of our stock buyback, debt reduction and the increased dividend payout. This balanced approach is what you can expect from us, and our credit ratios were very strong at the end of the quarter and improved versus a year ago. So all in all, it was another great quarter for Macy's, and we are well positioned for the fourth quarter. Were it not for Hurricane Sandy, we would be even more optimistic about the fourth quarter than what you're hearing today. There are 4 key factors that are contributing to our confidence. One, our gift strategy is reaching a whole new level. Our merchants and our planners have learned from the experiences over the past 2 years and have been able to work with our vendor partners to make our offerings better than ever. Exclusivity and fashion content have been increased across all categories. Localizing the assortments as a result of our My Macy's strategy has also enabled us to strengthen our gift offering. We believe that our marketing, both brand and promotional, is very powerful this year; and we're utilizing social media more than ever before to communicate our message. And our stores team is executing our gift strategy with greater precision. Our floors look terrific, and our associates are better engaging with customers due to the ongoing MAGIC Selling training and coaching. The second key factor is our omnichannel strategy, which as I mentioned a few minutes ago, is gaining traction. We currently have 292 Macy's stores in place to handle fulfillment of orders compared with only 23 stores at this time a year ago. And our dot-com and store organizations are far better aligned than in prior years on key merchandise and marketing initiatives, which will clearly help drive our business. The third factor relates to cold weather goods. And although the weather forecast remains to be seen, we believe we have a large cold weather opportunity. And as I mentioned earlier, the business has been encouraging when the weather has been cold, which bodes well for those categories for the fourth quarter. And the last factor, but not the least, relates to the calendar. This year's calendar is the most favorable fourth quarter we can have, with 32 days between Thanksgiving and Christmas, 2 more than a year ago. However, as I just mentioned, given the impact of Hurricane Sandy, this optimism, at least for November, is somewhat muted. We do anticipate that our November sales will be negatively impacted by the storm. But we still believe that the 4.2% comp increase for the quarter is achievable, and that 4.2% for the fourth quarter will result in a 4% comp increase for the fall season. As we think about the storm's impact, it's greater than just the lost sales from the closing of stores. Customers in the most directly impacted areas of Long Island and New Jersey have other priorities right now. Transportation issues are making it challenging for customers who do want to shop to get to the stores. And to some degree, the receipt of merchandise was interrupted. We are spending unplanned dollars to make sure that our stores recover and are staffed, so that we can both help customers and also get the new merchandise to the selling floors as fast as we can. Additionally, in an attempt to help customers in the impacted areas, both Macy's and Bloomingdale's will be extending the duration of promotional events just this week, and Macy's is adding a recovery coupon for customers who've experienced damage to their homes. We hope that these efforts will help us recover some of the lost sales. All of our best thinking has been incorporated into our guidance for the fourth quarter. With the strong third quarter, we are comfortable increasing our earnings guidance by $0.05 to $3.35 to $3.40 for the year, which translates to roughly $1.94 to $1.99 for the fourth quarter. This compares to $1.70 last year. That $1.70 excludes $54 million of income related to the sale of store leases to Lord & Taylor last year, partially offset by $29 million in store closing costs. The net of these 2 items is $25 million or $0.04 a share. The guidance for the fourth quarter of this year assumes no costs associated with store closings because these decisions haven't yet been made. Here are a few additional details to help you as you're thinking about and modeling the quarter. First, while we are expecting a comp store increase of roughly 4.2% in the fourth quarter, this increase is planned very differently by month, with November expected to have a much lower sales increase than the other 2 months of the quarter. This is due primarily to the calendar but also to the impact of the hurricane. Also remember that this quarter has an extra week in January this year. So the spread between total sales growth and comp growth, which assumes the same number of weeks year-over-year in the comp guidance, the gap between total and comp will be a lot higher. We are expecting total sales in the quarter to be up approximately 7.2% or 3 points more than the comp guidance. Number two, we believe there will continue to be pressure on gross margin as a result of the free delivery. And so we are maintaining our guidance for flattish to down slightly gross margin rate for the fall season or the combination of the third and fourth quarters. Three, SG&A in the fourth quarter will continue to benefit from the strong credit results. We are estimating credit income for the fourth quarter to be approximately $25 million to $30 million higher than last year. This benefit versus last year will be offset in part by the higher retirement expense and also will be offset by the continued investment in our omnichannel strategy, and of course, when you're looking at dollars, the impact of the 53rd week this year. Four, included in this guidance for the quarter is interest expense of approximately $112 million. Assuming we complete the debt tender that we launched last week, there will be additional interest expense associated with the premium pay. Its size will depend on the amount of bonds which are tendered. For example, if $500 million of the maturities for which we have tendered are redeemed, the pretax cost would be approximately $100 million. Remember, though, that future quarters will benefit by the lower interest expense as a result of this tender refinancing, and we will have locked in favorable interest rates while extending our maturities. Assuming the tender and the subsequent debt issue are completed, we will be more specific as to the impact. Five, the tax rate in the fourth quarter is expected to be approximately 37%, bringing the year's effective rate to approximately 37%, consistent with our guidance all year. Six, we still anticipate making a $150 million pension contribution in January, and our capital expenditures are still expected to be $950 million roughly this year. We are very proud of our team for the results that we have delivered since our My Macy's, One Macy's transformation. Our performance has been consistently strong in absolute terms and relative to our peer group. I note that this third quarter was our 11th consecutive quarter of increased sales and earnings at Macy’s, Inc. This speaks volumes about a, the strength of our strategies and vision; b, the rigor and determination in our execution on the front line; and c, our ability to continually improve the business, adding growth on top of growth. We have no intention of deviating from this path of growth. Hurricane Sandy was a terrible disaster and has affected our business in the short term. We are sensitive to the interruption it has caused to our customers and to our associates. But we, along with our communities, are bouncing back and look forward to a very good fourth quarter. Also, before taking questions, I want to make sure you saw in our release that beginning in fiscal 2013, we will no longer be reporting monthly sales. I have mixed feelings about this because it will make conversations with our investors much more challenging mid-quarter. But with so few companies reporting, it doesn't make sense to continue. We will work hard to continue the dialogue with you, but the discussions will have to be more about strategy and longer-term direction rather than current business trends. And now, I'll open the call for your questions.

[Operator Instructions] And we'll now take our first question from Charles Grom with Deutsche Bank. Charles X. Grom - Deutsche Bank AG, Research Division: Just on Sandy, when you look back at some of these prior mega-storms that have hit different parts of the country, did they tend to postpone sales altogether? Or does the consumer curtail purchases altogether, and kind of what your expectation for the next couple of months here? Karen M. Hoguet: It's a complicated question. We think some of it is lost, most is postponed and in some cases, unfortunately, it creates new demand for goods, given destruction. It's a question of the timing. One thing different about this hurricane than Andrew or Katrina, it's frankly more like Wilma, which was a lesser impact but closer to the holidays. So we're trying to look at that and how the business rebounded. But frankly, this is hitting a far more dense -- densely populated area. So we're just sort of looking day by day and seeing what happens. Charles X. Grom - Deutsche Bank AG, Research Division: Okay. That makes sense. I'm living through it myself. So just separately on the Internet strength relative to your comp guidance in the fourth quarter, it looks like it continues to grow. Are you assuming that, that trend will continue and that your fourth quarter comp guidance assumes about half of that is going to come from online? Karen M. Hoguet: We don't split the guidance that way. But our dot-com business is doing very well and getting incremental growth, now that it's able to pool inventory to satisfy demand from these 292 stores. Charles X. Grom - Deutsche Bank AG, Research Division: Okay, fair enough. And then... Karen M. Hoguet: That's the strategy for the Internet. Charles X. Grom - Deutsche Bank AG, Research Division: Right. And then can you just remind us that the basket size delta between brick and mortar and online, and also how the merchandise margins look between both? Karen M. Hoguet: You know what, it's -- in terms of the average order or the average transaction, it is higher online, but I don't have the specific numbers in front of me. And in terms of margin, it is higher online as it has been. So that's obviously good for the business as well.

And we'll now go to Paul Swinand with Morningstar. Paul Swinand - Morningstar Inc., Research Division: First question, just talking about the online business. Are you noticing any acceleration of buying where customers are closer to stores? Or is more of the growth coming from people that are outside of store areas, maybe discovering or rediscovering the brand? Karen M. Hoguet: In the case of Bloomingdale's, where we have fewer stores, our best online customers do live near the stores. So there has been some growth in other markets, but it's really more coming from the markets where we currently have stores. In the case of Macy's, because we have so many stores, it's much harder to tell. Paul Swinand - Morningstar Inc., Research Division: Okay. Any regional comments... Karen M. Hoguet: As online customers are going to be the ones that are also nearby a store. Paul Swinand - Morningstar Inc., Research Division: Okay. Any regional comments on driving the online? Is it more city-based or urban-based where people have better Internet connections or... Karen M. Hoguet: I have not looked at that, so I don't know. Paul Swinand - Morningstar Inc., Research Division: All right. And then I wanted to ask about one of your prepared remarks. You said that you're going to be flowing more inventory in the fourth quarter. And I was wondering, why -- it seems like I've been hearing retailers say that for years and years. Is there a reason that you flowed less last year, and now you're lapping a different flow strategy than last year? Karen M. Hoguet: Well, we've consciously try to bring more goods into the stores to help us transition to the spring and have more newness as Christmas approaches and for our post-Christmas strategy. So it is a conscious change from what we've done in the past. Paul Swinand - Morningstar Inc., Research Division: Is there anything structural or anything technology or anything in the way you -- in your strategy that has enabled you to do this better this year? Or is it just a switch in what you want to do? Karen M. Hoguet: Frankly, it's a decision that if we were taking input from sort of our My Macy's team, a lot of it came back that we didn't have enough newness as we went through the quarter, particularly in December and for the fifth week of December, which as everyone knows, has become very important.

And we'll now go to Jeff Stein with Northcoast Research. Jeffrey S. Stein - Northcoast Research: Karen, curious, what percent of your online sales are now being generated from mobile devices? And has that changed appreciably as we've kind of moved through the year? Karen M. Hoguet: Well, I don't know the specific percentage, but yes, it's growing significantly. And also, we're actually looking at mobile devices split between tablets and smartphones. So we're seeing a lot of growth in the tablets more so than smartphones, but we're seeing lots of shopping on smartphones. So we actually are divide -- as we think about channels, it's more than just 2. You've got to really think about the offering on the smartphone, the tablet, as well as the desktop or laptop device. Jeffrey S. Stein - Northcoast Research: Right. And Karen, can you talk a little bit about the SG&A in the fourth quarter? I'm kind of curious, you gave us a little bit of guidance on the top line. I'm wondering what kind of SG&A dollar growth should we expect given the extra week? Karen M. Hoguet: We're really not giving specific guidelines for that, but we do expect there to be leverage in the SG&A as a percent of sales.

And we'll now go to Deborah Weinswig with Citi. Deborah L. Weinswig - Citigroup Inc, Research Division: And in addition to brand launches, any changes to the store experience or marketing as part of the Millennial strategy? Karen M. Hoguet: I think the big focus right now has been product. And as I've said, so many of those new brands won't be launched until spring. So you really will not see the dramatic change there until next Christmas. We're also testing quite a bit of new technology in about 23 stores, not specifically for Christmas, but just in general, to see what works best in the Millennial shopping environment. Deborah L. Weinswig - Citigroup Inc, Research Division: Okay. And then how has the store labor model changed in the 292 stores that are being used for online fulfillment? Karen M. Hoguet: Well, we're obviously adding hours so that we have people doing the fulfillment business. But I'm not sure what you mean beyond that. Deborah L. Weinswig - Citigroup Inc, Research Division: Just in terms of is there -- are there more people on the floor? Do -- the customers that are there feel like they're getting a better kind of customer service experience? I'm just wondering if there are kind of other additional benefits as well. Karen M. Hoguet: No, actually, we're using non-selling people to do the fulfillment, so that they're more specialized and can get out and pick the goods. Deborah L. Weinswig - Citigroup Inc, Research Division: Okay, great. And then last question, in terms of -- I know you recently announced the launch of the Finish Line shops. How should we think about this in the broader context of merchandising? Karen M. Hoguet: Well, I think the key thing is Finish Line is a strategy similar to what we did with Sunglass Hut, which has been an enormous success. Sometimes, there are categories of goods where we perhaps can't get the most wanted vendors or product from those vendors. And also there's a specialized selling model that works well with these lease departments. So where we see white space and see a category where we don't think we can get the best assortments, we think it's a great model. And again, we've been really successful on the Sunglass type front.

And we'll now take our next question from Lorraine Hutchinson with Bank of America Merrill Lynch. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: Karen, just wanted to ask about the gross margin longer term. There's a lot of puts and takes going on right now with free shipping, but should be some longer-term benefits of in-store fulfillment and you've seen some higher merchandise margins. So just how should we think about that in 2013 and beyond? Do you see more opportunity for gross margin expansion? Karen M. Hoguet: Well, I think 2013 will be early to see what I'm about to explain. But my hope is that in 2014 and beyond, we will have figured out how to optimize the inventory across our channels and be far more productive and improve turnover. And as you know, improved inventory turnover leads to higher gross margins. So that would be my hope. And again, then, we would be able to offset what I think will be continually higher free shipping costs. But those strategies to optimize the inventory will probably take until '14 to get underway.

And we'll now go to Bernard Sosnick with Gilford Securities. Bernard Sosnick - Gilford Securities Inc., Research Division: Karen, you said there were 23 test stores with regard to the Millennial. Could you describe a little bit what your objectives are there? Karen M. Hoguet: Well, we're trying to see if there's ways of using technology, whether it be through mobile devices or visual mannequins, digital mannequins and things like that, that can help us better service that customer. Bernard Sosnick - Gilford Securities Inc., Research Division: Okay. And one other thing with the omnichannel strategy, how are you dovetailing that with your learnings from dunnhumby? Karen M. Hoguet: Well, it's all the same customer data, so it all goes into the -- we're looking at a Macy's customer across channels.

And we'll now go to Matt Boss with JPMorgan. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Karen, with omnichannel going live this quarter, can you -- I mean clearly, it sounds like a pretty positive response thus far. How should we think about holiday opportunity from an assortment perspective? I know you're testing some new items online. And then in 2013, anything new from the initiative that we should think about? Karen M. Hoguet: I'm not sure what you mean by omnichannel going online this quarter. That is not new. It's just we're expanding the number of fulfillment stores. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Right, the 292 stores going live. And then I think you're testing some items online that were previously just in store for the holiday? Karen M. Hoguet: Correct. What we're trying to do is figure out what's the best way of offering merchandise to customers and satisfying demand. So I hope that we find that when we put store-only items onto the Internet, we're able to sell them, obviously, a lot more profitably than if we also carried that inventory in the stores. So we'll see. Matthew R. Boss - JP Morgan Chase & Co, Research Division: Got it. And then on the women's front, you've seen a recent improvement in the category, noting classic and traditional particularly. What do you attribute some of this improvement to? And any initiatives you have in place that you're excited about for 4Q and next year? Karen M. Hoguet: Well, I think a lot of it has to do with product design, putting newness in. I think often, people think of traditional or classic as not being new. And I know as we looked at our own private brands starting with Charter Club, all of the feminine apparel, we really made an effort, as you know, to retool the lines and offer that classic traditional customer more newness, and it's really paying off; true for the market brands as well.

We'll now go to Michael Binetti with UBS. Michael Binetti - UBS Investment Bank, Research Division: So if I can just try to piece together a couple of comments you made on gross margins so I understand the guidance. Is there -- it sounds like there's an incremental headwind to think about in the fourth quarter from the e-commerce side, and that's maybe why we're thinking negative in the quarter. Is that maybe a change in the free shipping threshold or something to look ahead to? Karen M. Hoguet: No, there's no change. Michael Binetti - UBS Investment Bank, Research Division: Okay. And then as you -- you mentioned earlier just a quick comment about having some challenges with getting product to the stores after the -- and we've heard other places where there've been some problems in the supply chain of getting product to stores around the hurricane-affected areas. Can we assume that based on your confidence in November and in the fourth quarter that you're seeing that already start to improve over the last week as the storm starts to wane a little bit? Karen M. Hoguet: Absolutely. And I'm sure there will be some specific item or vendor where we're struggling to get the goods in and won't. But overall, we think we're in great shape after just 1 week of recovery. Michael Binetti - UBS Investment Bank, Research Division: Okay. And then finally, if I could just ask you about the Millennial strategy a little bit. You guys announced a strategy a few months ago. I think you had a couple of early successes in the monthly reporting that you were commenting on. And then October was a little bit more choppy and that perhaps could have been because of the weather. But maybe just an update on how you're feeling about the early phase of that strategy? Karen M. Hoguet: Well, let me be clear. The Millennial strategy we're working on, we never expected to get benefits until midyear next year. So we got better results in the junior category, in specifics, for a couple of months. But that really frankly wasn't due to the strategy. So the new strategy really will be more in place for next year. Michael Binetti - UBS Investment Bank, Research Division: Okay. And any early learnings you could tell us about? Karen M. Hoguet: I think the key thing is as we expected, product is key. And I think as we get the assortments right, we will see a great lift in that business.

And we'll now go to Liz Dunn with Macquarie Capital. Lizabeth Dunn - Macquarie Research: Just a few questions. First, in terms of Sandy, the disruption you mentioned in terms of getting product in, is that more -- is that just into the city of Manhattan? Or can you just provide some additional color on... Karen M. Hoguet: No. Well, our facilities have been open almost the whole time. But some of the vendors had difficulty with their facilities, getting the goods to us to get to our stores. So it's been frankly more an issue of making sure the vendor could ship it to us. We've done a really good job. Our logistics team's been phenomenal at working with our vendors to help whatever we can to get the goods to us and then to our stores. Lizabeth Dunn - Macquarie Research: Okay. In terms of the Millennial strategy, I'm sorry, I know we've all been asking about it. But as I'm looking at your holiday announcement, it seems as though you've got a lot of products that are maybe targeted towards that customer. Is that the right way to think of it? Like it's a longer-term initiative but you're cognizant of the fact that last year, you've got a Millennial customer in the store when you opened at midnight. And so you're offering them free headphones with a $75 purchase and that kind of tailoring your door busters, for lack of a better word, to that customer? Karen M. Hoguet: Yes, I would say tailoring more so. Lizabeth Dunn - Macquarie Research: More so than you had in the past. Okay. And then my final question, the changes to Herald Square so far look fantastic. Are there any things in what you've seen so far that could be potentially rolled out in obviously smaller scale to more stores? And is there more of a willingness from vendors to invest capital than maybe has been the case over the last couple of years for shopping [indiscernible]? Karen M. Hoguet: I think it's too early to really judge. A lot of the technology we're using on the shoe floor, we actually have already rolled out. So for that, that's the case. But I think we've got a lot more to learn, but we'll see. Currently, the early results are very encouraging.

And we'll now go to Kimberly Greenberger with Morgan Stanley. Kimberly C. Greenberger - Morgan Stanley, Research Division: I'm wondering if you can just talk about SG&A for a second. Was there any sort of shift in expenditures between 3Q and 4Q? I'm just trying to look at the differential and the growth rate between the 2 and understand why there's -- without the -- without -- excluding the impact of the extra week why there's such a bigger -- a big differential in the growth rate between those 2 quarters. Karen M. Hoguet: There was a little bit of timing shift, particularly in the marketing area, but not enormous. Kimberly C. Greenberger - Morgan Stanley, Research Division: Is there anything else, Karen, that would be bigger in 4Q than 3Q that maybe I'm not considering? Karen M. Hoguet: Not that I've thought of, but I'll go back and look and see if I can be helpful.

And we'll go to Dana Telsey with Telsey Advisory Group. Dana Lauren Telsey - Telsey Advisory Group LLC: Karen, can you talk a little bit about the remodeled 34th Street. The shoe area looks terrific. The new in-store boutiques look great. What are you learning from it? And how do you think about the rest of the chain CapEx? Any implications of what any shops could look like in other stores, any enhancements? Karen M. Hoguet: Well I guess I think it's too early to conclude anything about other stores. Obviously, we're thrilled with the early results of what we've got here. And as the Luxe shops start opening between now and Christmas, we'll have a better handle on that. But we are very optimistic that not only will the store do great things and help the whole image of Macy's, that we will in fact learn things that we can apply to our other certainly flagship stores across the country. Dana Lauren Telsey - Telsey Advisory Group LLC: And with credit income going up a little bit, are you seeing new customers? Are you seeing Big Ticket items on the crediting penetration moving higher? Karen M. Hoguet: Well, it's a couple of things. One is our Big Ticket business is doing very well, as I've been saying all along. So that helps to some degree. But we're also been able to open new accounts in the third quarter above last year, which is the first time all year. So I think it's greater usage from our customers, it's more new accounts, as well as the furniture business and mattresses being strong.

[Operator Instructions] And we'll now go to Joan Payson with Barclays. Joan Payson - Barclays Capital, Research Division: You mentioned earlier that the Bloomingdale's outlets have been outperforming recently. And was just wondering what you attribute that to, and if there's any sort of change in your plans or acceleration of building those out at this point? Karen M. Hoguet: No, I think we've been working hard to try to get that formula right, and the third quarter worked well. So hopefully, we're just getting better at running that business. Joan Payson - Barclays Capital, Research Division: Okay. And then in terms of tourist traffic, which you spoke about a bit last quarter, how has that been trending this quarter? And are there any segments of the tourist customer base which are stronger? Or how does it vary between Bloomingdale's and Macy's at this time? Karen M. Hoguet: No, the tourist business is still positively contributing to our comps, but a lot less so than it was earlier in the year.

And we'll now go to David Glick with Buckingham Research Group. David J. Glick - The Buckingham Research Group Incorporated: A clarification and a question in the guidance for Q4, you said that November to expect a lower sales increase relative to the Q4 trend. That implies that you think you can bounce back and put up at least a slightly positive comp. And then secondly, the Center Core businesses were very strong in Q3. And just wondering what you're seeing in the confidence level that you think that momentum, which has been obviously going on for a few years, whether that can continue through Q4 and into next year, in areas like shoes, handbags, jewelry, cosmetics? Karen M. Hoguet: Certainly expect it to. I mean the business has been very great for a long time, but showing no evidence of slowing up. And I'm not sure I understand your November question. What I said was that November sales would be the way we planned it, even before the hurricane, was that the November sales growth would be less than that in December and January. David J. Glick - The Buckingham Research Group Incorporated: Okay. The operative word being growth in November. Karen M. Hoguet: Yes.

And we'll now go to Paul Lejuez with Nomura. Paul Lejuez - Nomura Securities Co. Ltd., Research Division: Paul Lejuez. Karen, just wondering if the Sandy impact that you've seen is really restricted to the Northeast and the affected states? Or if you've seen maybe some C&N [ph] effect throughout the country? Karen M. Hoguet: Well, you had 2 things going on. You had the C&N [ph] effect with the storm but you also had the election. So you know what, I don't know is the real answer. Paul Lejuez - Nomura Securities Co. Ltd., Research Division: Okay. And then just thinking next year just from a marketing perspective, do you have anything planned as you think about JCPenney starting to get a little bit deeper into the home category come first quarter, second quarter? Is there anything that you guys are preparing for just -- from a competitive dynamic? Karen M. Hoguet: No, honestly, we've stuck to our strategies because they're working. So I don't see any reason to change that at this point. It's working well for now.

Ms. Hoguet, it appears there are no further questions in our queue. I'll be glad to turn the call back to you. Karen M. Hoguet: Okay. Well, thank you all for your interest. And if you have further questions, feel free to call us. Take care.

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation.