Jane Singer - Vice President of Investor Relations Jane T. Elfers - Chief Executive Officer, President and Director Michael Scarpa - Chief Operating Officer, Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Dorothy S. Lakner - Topeka Capital Markets Inc., Research Division Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division Marni Shapiro - The Retail Tracker Betty Y. Chen - Wedbush Securities Inc., Research Division Janet Kloppenburg Thomas A. Filandro - Susquehanna Financial Group, LLLP, Research Division Adrienne Tennant - Janney Montgomery Scott LLC, Research Division Lee J. Giordano - Imperial Capital, LLC, Research Division Brian J. Tunick - JP Morgan Chase & Co, Research Division Taposh Bari - Goldman Sachs Group Inc., Research Division Stephanie S. Wissink - Piper Jaffray Companies, Research Division Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division John Zolidis - The Buckingham Research Group Incorporated Jay Sole - Morgan Stanley, Research Division Dana Lauren Telsey - Telsey Advisory Group LLC John D. Morris - BMO Capital Markets U.S.

Good day, everyone, and welcome to The Children's Place First Quarter 2013 Conference. [Operator Instructions] Please note, this call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Ms. Jane Singer. Please go ahead.

Thank you, Zach. Thank you for joining us this morning. With me here today are Jane Elfers, President and Chief Executive Officer; and Mike Scarpa, Chief Operating Officer and Chief Financial Officer. We issued a press release this morning, announcing first quarter 2013 financial results. A copy of the release can be found on our investor website. Before we begin, I would like to remind participants that any forward-looking remarks made today are subject to the Safe Harbor statements found in this morning's press release as well as in our SEC filings. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially. The company undertakes no obligation to publicly release any revision to these forward-looking statements to reflect events or circumstances after the date hereof. After the prepared remarks, we will open the call to questions. [Operator Instructions] Thank you. And now I will turn the call over to Jane Elfers for her opening remarks. Jane T. Elfers: Thank you, Jane, and good morning, everyone. We exceeded our guidance for the quarter due to a combination of significantly improved sales and merchandise margins in the month of April and tight expense management throughout the quarter. The results by channel for the quarter were: E-commerce, sales increased double digits, up 13% for the quarter. All divisions comped positive and key categories increased double digits with the notable exceptions of shorts, tanks and swimwear. Even the web wasn't immune to the record cold. Outlet, performance was in line. We ended the quarter with an approximately flat comp, which was significantly stronger than our performance in full-priced stores. We attribute this result to 2 factors: One, strong customer acceptance of our made-for-outlet product. For example, our made-for-outlet assortment in dresses this year was stronger than last year and delivered significantly better results. In addition, we also delivered a full assortment of accessories and shoes, which we didn't have last year. We now have over 80% of our assortment in made-for-outlet product and it is clearly resonating with our customer. Two, a more diverse store base, with less reliance on the cold weather states during the first quarter. Due to our geographic diversity in outlets, we were able to perform better in the key volume short and swim categories. U.S. Place. U.S. Place performance was tough through the end of March and significantly improved in April. For the quarter, the Northeast and Midwest were the most difficult, and the South and Southwest the best performing regions. All divisions underperformed and product category performance was clearly split. We experienced double-digit decreases in the key volume classifications of shorts, tank tops, sports, swimwear and sandals, and double-digit increases in the smaller volumes spring categories of denim, jeggings and jackets. Clearly, the weather was a driving factor behind mom's purchasing decisions in Q1. Canada. Traffic in transactions experienced significant declines in Canada during Q1, with 2 main drivers of performance. First, the weather during the quarter was significantly colder and stormier than last year, and all regions negatively comped. Sales increased significantly in April when the weather turned much warmer across the country. And secondly, as you may recall, Canada had a very difficult margin performance in Q1 last year due to a heavy inventory position in spring product. We significantly pulled back the spring buy for Q1 this year. And while we suffered on the top line, we had a 260-basis-point improvement in merch margin for the quarter. Starting with summer product, which we delivered in March, receipts are in line with last year's buys. Now I'd like to update you on our senior leadership team and our geographic expansion plan. The senior leadership team. A top priority has been getting the right leadership team in place and the significant time investment is paying off. Mike Scarpa has made a significant contribution since joining us last year. His operational focus, coupled with the culture of tight expense management, is producing results every day. Greg Poole, our Senior Vice President of Sourcing, is making good progress on vendor consolidation and country migration. Greg is spending the summer in Asia, working directly with our overseas team to focus on our longer-term strategy for sourcing. Natalie Levy, EVP Merchandising and Design, has led the effort to significantly improve our assortments and we are well positioned for back-to-school and holiday. Our Baby business is just starting to turn the corner and we anticipate sequential improvement for the balance of the year in both our baby and newborn divisions. Kevin Low, our Senior Vice President of Stores, has made significant strides on standard presentation and associate engagement this past year, and it shows in the quality of our field team. And Jason McAndrew, our Senior Vice President of Planning and Allocation, has been instrumental since his arrival last year in leading our transformation effort as it relates to our future business systems. Jason has a very strong team. And together, they have significantly improved the quality of the buys, as well as the quality of the allocation while working within the constraints of our current system's infrastructure. Geographic expansion. E-commerce continues to deliver outside growth. We are launching our new e-commerce platform during Q2, which we anticipate will have a meaningful impact on conversion and provide mom with a much easier shopping experience. On the international front, we opened 4 new stores in the Middle East during the quarter, bringing our total to 20, and we are on track to have 40 stores in the Middle East by the end of this year. Bruce Marshall, our Senior Vice President of International, is in talks to expand to additional markets, potentially as soon as the fourth quarter of this year. In summary, weather negatively impacted us through the first 9 weeks of the quarter. And when it turned more seasonable, we finished strong. We were comping down negative 10% after 9 weeks. And with the arrival of more seasonable weather, we were able to end the quarter at negative 5.5%. We are raising our guidance for the full year to reflect these improved results and our entire team remains focused on driving our growth initiatives to deliver long-term shareholder value. Going forward, there are some significant timing shifts due to the 53rd week last year, which will impact our sales and inventory by quarter. I'll turn the call over to Mike, who will provide more clarity in his remarks. Mike?

Thank you, Jane, and good morning, everyone. I'm going to start with an overview of the first quarter results, then I'll move on to an update of the key operational initiatives we are undertaking in fiscal 2013 and will conclude with our guidance. As Jane mentioned, sales strengthened considerably as the weather improved in April, which enabled us to achieve better-than-expected sales in the quarter. Overall, net sales declined 3.5% to $423 million, and comparable retail sales declined 5.5%. The negative comp was driven by a 2.7% decline in transactions and a 2.9% decline in average transaction value. Comparable store sales declined 6.9% in the U.S. and 15.1% in Canada. E-commerce comp sales increased 13%. Gross margin rate declined 210 basis points to 38.6% for the quarter, which was better than our initial guidance as sales and margin came in stronger than forecasted. A flat merchandise margin during the quarter was offset by higher supply chain costs as we continue to invest in our sourcing capabilities and by deleveraged fixed expenses on the negative comp. SG&A was well managed in the quarter, with a decline in dollar spend year-over-year, primarily due to more effectively managing store expenses. The rate deleveraged 70 basis points to 28% of sales on the negative comp. Adjusted depreciation and amortization expense in the first quarter was 3.9% of sales, compared to 3.7% last year. Adjusted operating income was $28.4 million or 6.7% of sales. Earnings and adjusted earnings were $0.83 per diluted share, compared with $1 in the first quarter of 2012 on a GAAP basis and $1.14 on an adjusted basis. Moving on to the balance sheet. Our cash and short-term investments at the end of the first quarter were $201 million, compared to $205 million last year. In the past 12 months, the company has generated $175 million in operating cash flow while investing $90 million in CapEx and repurchasing $94 million in stock. The company repurchased 512,000 shares for a total of approximately $24 million during the first quarter. Consistent with our guidance, balance sheet inventory at the end of the quarter increased 14% in dollars and 11% per square foot. Overall, inventory was up $31 million with in-transit and early fall receipts increasing $36 million, partially offset by $5 million with spring and prior-season inventory. Higher in-transit inventory and early receipt of fall product is due to a shift of floor set timing year-over-year as a result of the 53rd week last year. During the quarter, we opened 20 stores and closed 4. We operated 1,111 stores at the end of the quarter, with a total of 5.3 million square feet. This represents a 3% increase in square footage compared to last year. Going forward, I believe there is a tremendous opportunity to improve our operations and strengthen our financial performance by continuing to focus on managing company-wide expenses; increasing hurdles for return on invested capital, which will impact our store expansion decisions; making progress on systems implementation; and developing alternative channels of distribution. Company-wide expense management. We are happy with the progress we made in Q1, and we continue to believe we can achieve our goal of reducing the absolute level of SG&A spend versus last year despite the full year impact of new stores in 2012 and the incremental SG&A associated with the planned openings in 2013. Improving operational efficiencies and reducing costs is an imperative, and we are making it a priority in our culture. We are making good progress on plans to increase our four-wall contribution in store productivity through fleet optimization. As I mentioned on our year-end call, we are undertaking a thorough market-by-market store portfolio review. We will be in a position to communicate more about our portfolio review and plans for optimizing store openings and closings on our second quarter call. However, as part of this review, we executed early lease kickout options at 10 stores in the first quarter, and we'll close those stores as part of the fleet optimization initiative. Systems implementations. With successful completion of SAP financial system behind us, we are focused on implementing a core merchandising system, which we expect to be operational in the next 12 months. Developing alternative channels of distribution. As Jane mentioned, we are in talks to expand into additional international markets. We expect both the international and wholesale businesses to become a meaningful contributor to operating margin over time. Combined with continued strong growth in our e-commerce channel, improved four-wall contribution from North American stores and strong expense management, we believe the company can significantly improve operating margins over the next few years. Now I'd like to move to guidance. As a result of our stronger-than-expected first quarter performance, we are raising our guidance for fiscal 2013. We are now projecting earnings per diluted share to be in the range of $3.05 to $3.20, assuming flat to slightly negative comparable retail sales for the year. We expect to deleverage gross margin modestly by 10 to 40 basis points, better than our previous guidance as Q1 came in better than we expected. While we still expect SG&A dollar spending will decline slightly for the year, we are now projecting SG&A to be flat as a percentage of sales. There are some significant changes in sales and inventory by quarter this year as a result of the calendar shifts attributable to the 53rd week in 2012. Let's start with the second quarter. A shift in tax-free events from the first week of August last year to the last week of July this year will benefit Q2 net sales by approximately $12 million. We expect flat comparable retail sales, compared to a 4% adjusted comp in the second quarter of 2012. We expect an adjusted loss per share between $0.50 and $0.55. Gross margin is expected to leverage by 60 to 100 basis points, driven by a stronger merchandise margin. As a result of the back-to-school sales shift, we expect to leverage SG&A by 20 to 40 basis points. However, total SG&A expenditures will increase by approximately 5% in the quarter, in part due to a shift of some back-to-school expenses from third quarter into second quarter. We expect inventory to be up mid-20s at the end of the second quarter. Inventory will be up approximately $65 million to $70 million at the end of Q2, with in-transit inventory and early holiday receipts accounting for the entire increase. As you model the third and fourth quarters, there are also some calendar shifts to keep in mind. Q3 net sales growth will be negatively impacted by the tax-free sales shift into Q2 this year. And Q4 has 13 weeks compared to 14 weeks last year, which will make net sales comparison more challenging in the fourth quarter. Just a reminder, week 53 last year represented $22 million in sales. In terms of inventory levels for the back half, while we don't provide inventory guidance beyond the end of the next quarter, you should expect more normalized inventory comparisons as we end the year. Finally, I want to say we remain committed to using our strong balance sheet and cash generated by operations to invest in our business to support long-term profitable growth and to consistently return cash to our shareholders. At the end of the quarter, we had $56 million available under our current share repurchase authorization. At this point, we'll open the call to your questions.

[Operator Instructions] And we'll go first to Dorothy Lakner with Topeka Capital Markets. Dorothy S. Lakner - Topeka Capital Markets Inc., Research Division: I wondered if, one, Jane, you could speak to Girls' and Boys' performance in the quarter. Girls has been obviously such a bright spot for you. And then just -- if you could give us a little bit of color on how you've worked to improve the Baby and the Newborn business? And then secondly, just if Mike could update us on planning and allocation. And what we should expect going forward there? Jane T. Elfers: Sure. Well, Dorothy, as we said in the opening remarks, in Place, all divisions comped negatively and underperformed for Q1 due to, certainly, the weather impact through the first 9 weeks of the quarter. Having said that, the lagger in Q1 was Baby Girl. The Big Girl business and the Big Boy business were better overall but, as I said, still negative. From a -- turning the corner, your Baby question, we started to see, in April when we delivered our summer to deliveries, we started to see a nice improvement in the Baby business, particularly the Baby Girl business, which has been the biggest struggle for us. And we are continuing to see that through May. I think the merchandising difference versus last year's April and May deliveries, it's much more mix and match. It's much more knit driven than woven driven. And I think that some of the colors and some of the art are a lot of a lot better than we had last year. So the merchants see that continuing now. I think me and Natalie believe that we've really turned the corner there and that we should see that Baby business and the Newborn business continue to improve sequentially through the balance of the year. As far as -- I know you asked about planning and allocation as well. Jason and his team have made some pretty significant improvements on our ownership since last year by size and by classification. And when you look at just the pure inventory content that's on the floor right now and that we're delivering for back-to-school, we're in a much better place than we were a year ago as it relates to the ownership of key categories and key basics heading into back-to-school. And with respect to allocation, they developed tools, even though working within the system constraints we currently have that really much more accurately placed inventory by store grade and by store attribute. So they really have made a significant difference in the past year, and we're really looking forward to seeing that come to life through the balance of the second quarter and into back-to-school.

And we'll take our next question from Lorraine Hutchinson with Bank of America. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: As you approach the fall season, can you talk about some of the lessons learned from the dressy assortment and how you're changing things this year to try to capitalize on that pre-holiday opportunity? Jane T. Elfers: Yes. That's a great question, thank you. On back-to-school, I think what the biggest lesson that we learned last year from back-to-school, we had a terrific August and even within that very strong August, we had a lot of issues on out of stocks. That August is really built around 4 key classifications. You have uniform, you have backpacks, you have graphic tees and you have denim. And then in the Girls side, over the last year or so, jeggings have really come on as a competitor to denim, so you could really maybe add in a fourth classification. We did well with those classifications last year during back-to-school, but we had some significant out of stocks and some significant misses in sizes last year. And that kind of goes back to what I was talking about with Jason and his team. They have really worked very hard since last year to put us in a good position into those basics. Going into September last year, we set up holiday in mid-September. And I think the hindsight from that was that it was too much of the floor set and too much of the floor space. And what we really should have done is, we should have stayed in the back-to-school mode much longer into the month of September than we did. So this year, when you look at the floor sets post-Labor Day, you'll still see holiday products coming in because picture taking and the early holidays, the customer need is there. But from a level in the month of September and a floor placement in the month of September, it won't take up the square footage that it did last year, and you'll see us continue through the month of September to really play up back-to-school.

And we'll go next to Marni Shapiro with The Retail Tracker. Marni Shapiro - The Retail Tracker: Could you just talk a little bit about the gross margin line because it seems like you guys are making some nice progress here? And I was wondering if you could break it down a little bit because you have 3 things happening at the same time. You have sourcing, some improved full-priced selling and you have the outlet business. If you could just put a little color around the 3 buckets in the gross margin or if there's more.

Sure. Obviously, we're making good progress in terms of our sourcing initiatives around country migration and vendor consolidation. So we're seeing a nice reduction in terms of our overall AUCs, which were down mid-single digits in the quarter. So that, obviously, contributed to the overall gross margin and merchandise margin. When we look at initiatives around the Outlet business, we have closed the gap on what was 1,000 basis points a few years back to 400 at the end of last year. And we think we'll get to parity by 2014, with hopefully half of that differential of 400 close this year in terms of margin expansion. What hurt us overall in the first quarter, though, was the fact that we had comped negatively. We -- obviously, we had some fixed costs into our gross margins. And as we negative comped in the quarter, it did -- that was solely the reason for our gross margin decline. As we move forward, and obviously we expect to have better comps in the Q2 to Q4, obviously, we'll be in a better position to leverage those costs and help drive some gross margin percentage. Marni Shapiro - The Retail Tracker: Are you guys able to sort of separate out, though, the full-priced selling? Are you seeing improved full-priced selling in Big Girls? And is that continuing and across the board? I know there've been some spots that have been a little bit tougher, but in general on the fashion side especially?

I think we've seen a great response to our summer product. Obviously, we were a little disappointed in spring, really weather related But as the weather warmed up, we saw increases in customer acceptance of our goods. And we expect with normalized weather patterns, we'll continue to see that.

And we'll take our next question from Betty Chen with Wedbush Securities. Betty Y. Chen - Wedbush Securities Inc., Research Division: I was wondering if you can talk a little bit about the additional distribution you mentioned earlier. I guess, how far along are we in terms of the additional markets coming out by the end of this year? What types of market are you considering? And should it be a similar business model as the Middle East? And then regarding wholesale, I think the test at Sam's Club did very well last year. And what is the additional point you can give us regarding maybe a more comprehensive push into the wholesale channel?

Okay. I'll start with wholesale first. We're still in the process of developing our overall strategy for wholesale. As I mentioned on our year-end call, we had just brought in an executive to head up the wholesale area for us. We continue to shift to Sam's Club and continue to get great response in terms of products. We think it's a big opportunity for us, and we see operating margins in that segment of the business to be accretive to the overall operating margins of the company. And we look at it as a key initiative for the company as we move forward to help us drive operating margins. From an international perspective, as Jane mentioned, we opened 4 stores in the first quarter. Our goal is to have 40 stores in the Middle East by the end of the year. And we feel comfortable with that. We're currently in negotiations in 3 different markets, which I will not name until those negotiations are complete. But we do see geographical expansion as we move through the fourth quarter of this year.

And we'll take our next question from Janet Kloppenburg with JJK Research.

A couple of questions. I think you said your AUC benefit was about mid-single digits in the first quarter, Michael. And I was wondering what we should expect in the second quarter and beyond this year. And, Jane, I was wondering if you could talk a little bit about Canada and factory. What kind of sales trends you saw there at the end of the quarter and if we should be thinking that -- or why we shouldn't be thinking that those segments couldn't generate positive comps for the remainder of the year? Jane T. Elfers: Sure. Well in Outlet, as we said, we had approximately flat comp for the quarter, so we were excited to see that. I think a lot of that has to do with the made-for-outlet products that was in the chain that was not in last year. If you remember, when we turned the corner for the first time in Outlet last year was the month of July. So the beginning of the second quarter was a little bit more difficult. And then we turned and had a really strong July and then into the third and fourth quarter. So we're looking to continue to have a solid performance in Outlet through the second quarter. And then I think this has some of the same things that we have applied to Place as far as ownership in key items and key basics. I think that plays through to the third quarter and back-to-school for Outlet as well. When you look at Canada, I think it was really 2 issues in Canada. They had extremely cold and extremely snowy winter throughout the entire country. And they also were up against that heat wave last year in the month of March. So they did not have any regions in Canada that were better than really any other region. For instance, in the United States, our South and our Southwest were much stronger than our Northeast and our Midwest. They didn't have that. They really had tough performance across all their provinces, so that hurt them. And then also last year, we had a difficult margin performance in Q1, so we had to hold back the spring products, which started to deliver in December, which is really the December through February deliveries. We had pulled that back pretty significantly, which did hurt us somewhat on the top line during the quarter. But I think we saw that merch margin improvement, and that's really what we were looking for to kind of stabilize the merch margins up there. I think when the weather got warm in the middle of April through the beginning of May, the Canadian business got a lot better. So we're looking for it to certainly not repeat the performance of Q1. But there also are some other things going up on -- in Canada from a competitive point of view. There a lot of other people going up to Canada, not just Target but a lot of specialty stores have come up into Canada. And then, of course, you have the big Target openings which started during the quarter. So I think we just need to keep a close eye on the competitive landscape up in Canada and continue to stick with our strategy but be aware.

And then from a AUC perspective, we were down mid-single digits in the first quarter and expect to be down in the mid to high range in the second quarter as we finish the anniversary-ing of the comp increases. We would expect the back half of the year to be in the low- to mid-single digit reduction overall in AUC.

And we'll take our next question from Tom Filandro with Susquehanna. Thomas A. Filandro - Susquehanna Financial Group, LLLP, Research Division: So a couple of quick questions. Mike, can you tell us like, what is the profile of those 10 stores that were closed, at least kickout? And can you let us know how many stores are up for renewal over the near term? And then I have a question about if you could give us a sense of what the implied EPS impact is during the second quarter related to that 1 week shift, as well as the 53rd week, which you identified as $20 million -- $22 million in sales. What was the rough EPS impact? And then my final question is, could you just tell us what -- remind us again what your cash comfort level is, please?

Sure. So the -- let's start with the stores first. We made the decision to exercise kickouts on approximately 10 stores in the first quarter, which will close throughout the year. As we looked at those stores, they had underperforming four walls. Productivity was under the average of the fleet. And also, when we looked at the size of those stores, it didn't make sense to continue with them. They were oversized and, obviously, provided some headaches in terms of inventory allocation. So it's a process we go through in terms of looking at a market-by-market approach. We've put into place some hurdle rates around what we want to achieve as a minimum for a four-wall contribution. We look at productivity levels and, obviously, what we would do from a cash perspective if we were to go out and remodel or downsize. From an EPS perspective, week 53 was approximately $22 million in sales and generated a little over $1 million in operating income, so basically had a $0.02 to $0.03 impact in the fourth quarter. As we look at the $12 million coming in, we think that it probably has a $0.02 to $0.03 EPS impact overall. As far as cash goes, we continue to generate strong cash. We've averaged $175 million in the past 12 months, and it really put that back into the business in terms of CapEx and share buyback. We ended the quarter with excess of $200 million. We'll burn through some cash in the second quarter as we normally do due to seasonal cash flows probably to the tune of about $50 million or $55 million. As you know, we have approximately 2/3 of our cash at the current time permanently reinvested overseas. So we may see to the point in the second and probably in the third quarter, we'll go on our line a little bit but we're not concerned about that. We have leveraged that, we can pull it if we see business tailing off in terms of what we can do from a CapEx perspective or an expense perspective. But we're very comfortable with our cash position and comfortable going on the line.

And we'll take our next question from Adrienne Tennant with the Janney Capital Markets. Adrienne Tennant - Janney Montgomery Scott LLC, Research Division: Jane, can you talk about the promotional environment in the Kids sector. Are you seeing any signs that there could be release perhaps as we go into the summer month as inventory across the sector is maybe a little bit cleaner? If you're going to talk a little bit about that. And then just following up on, Mike, on the 53rd week. I'm just curious if the $12 million's about $0.02 and the $22 million's about $0.02 to $0.03. Is that because you actually did have to accrue rod in the fourth quarter? I'm just wondering what the differential there is. Jane T. Elfers: Thanks, Adrienne. As far as the competitive environment, we haven't really seen a difference in Q1 versus where we've been for the last few quarters, so we haven't really seen it keyed up. As far as the second quarter being released, though, or being cleaner, I'm not sure yet based on Q1, which we've heard was pretty tough for most Kids retailers. It's hard to get a true look at it because there's not very many pure play Kids people that report. But what we've heard is that the Kids was obviously tough through February and March with the weather. So the wildcard really is where the inventory levels are in Kids and how promotional the competition is going to have to get to clear. We're in a very nice inventory position right now, and we intend to stay that way as we have been for the last couple of years. So we're hoping that it stays pretty much where it was or pretty comparable to LY.

And from the differential on the $22 million of the 53rd week versus the $12 million coming in, in the second quarter and then basically having the same EPS effect. Obviously, we needed to accrue the appropriate expenses for the 53rd week around occupancy and fixed cost, so that's really the difference there.

Next, to Lee Giordano with Imperial Capital. Lee J. Giordano - Imperial Capital, LLC, Research Division: Lee Giordano. Could you talk a little bit about the expected store opening cadence by quarter for this year? And then remind us longer term what your expectations are for store growth, including Outlet in Canada.

Yes. On a quarterly basis, we expect to open up roughly 55 stores. We've opened up 20 in the first quarter. We'll open up approximately 16 in the second quarter and probably another 15 or so in the third, and then the remainder will -- a couple -- 3 stores or so we'll open up in the fourth quarter. That nets against 30 closures, so we'll be plus 25. I will caution everyone that as we look at our store by -- market store portfolio review that, obviously, there could be more closures coming in the future. When we are-- when looking at Outlets, we're looking at it more opportunistically as, currently, we have over 130 Outlet stores. And we're in most of the centers that we want to be in. Obviously, the real estate market continues to evolve so when centers get redeveloped or opened, we're looking for those opportunities. But as we look at Canada, we're not looking to really to do any type of major expansion. We already have a big footprint there. We're more focused in on what we need to do from a remodel perspective with Canada. And as we got ready for competition coming into the market in the past, we've remodeled approximately 30%, 35% of the fleet. So we continue to look for opportunities in remodeling.

We'll go next to Brian Tunick with the JPMorgan. Brian J. Tunick - JP Morgan Chase & Co, Research Division: Two questions. First, on the Canada margins. I think they were as high as 20% 3 years ago. I'm just curious if you could maybe just talk about what were those drivers and sort of what's the opportunity do you think to get back towards those margins. And then the second question, longer term, Jane, when you think about what should be the right channel mix of the company, what should we be thinking, factory, e-comm, full-priced stores? What do you generally think as a percentage of sales that those different channels should represent for your company? Jane T. Elfers: Sure. I'll take the second part. I think when you look at e-commerce right now, it's about 12% to our total. And I think where we see it over the next couple of years, it's getting as high as 15% to the total business. As I said, I think we need to keep an eye on Canada from the competitive point of view. We just don't know what that target opening is going to mean to us over time. And certainly, with the onslaught of specialty retail that is headed to Canada, we need to really watch that. I think from an Outlet and a Place perspective, I think we're pretty much in line.

And from a margin perspective, obviously, we've diluted over the past 18 to 24 months and we see opportunities in terms of getting back there with some tighter control around inventory, which obviously hurt us in the first quarter of last year. So we feel we're in a much better position from a buy perspective. We're looking at AUC costs that are down year-on-year, so we think that, that also should contribute. And then just the whole marketing program up there, we think we can hopefully drive some additional sales. We've been investing in remodels, which we think modernizes our fleet, and we feel good about it. We've also implemented, really put into place a team up there headed by a merchant who had significant experience in Kids, in both the U.S. and in Canada. We've revamped the sales force up there and add a new leadership, and so we feel good about where we are from a team perspective.

And we'll go next to Taposh Bari with Goldman Sachs. Taposh Bari - Goldman Sachs Group Inc., Research Division: Mike, the back-to-school sales shift that you quantified. Does that actually impact the reported comps as well for 2Q and 3Q?

No, it does not. We report on a shifted basis, so it does not. Taposh Bari - Goldman Sachs Group Inc., Research Division: Okay, that's helpful. Jane, I wanted to follow up on Adrienne's question about the promotional environment. So looking at the industry, the public reporters in the Kids space seems like most missed first quarter sales versus planned, yet your merchandise margins were flat. And it looks like many retailers, kids, non-kids, kind of held out on pushing the panic bottom. So assuming that -- I guess, the question is, the uncertainty remains on how promotional it's going to get in 2Q. If it actually does get promotional, when would you expect that to actually happen? Jane T. Elfers: Well, usually, Memorial Day is a pretty good barometer and we're in the middle of Memorial Day weekend right now, so when you look at what the competition has and what the promos in the mall are and what the e-mails we have seen, we haven't seen anything that is materially different from last year. Memorial Day, the next big time would be June as Kids retailers will clear through getting ready for back-to-school. But I think the fact that we're not seeing the panic button pushed on Memorial Day is a good sign.

And we'll take our next question from Stephanie Wissink with Piper Jaffray. Stephanie S. Wissink - Piper Jaffray Companies, Research Division: I just have a question. Jane, if you could share with us a little bit about the loyalty program. Maybe some details on participation or conversion. Then I'm curious around your prospecting on some of the new moms as you think about your Baby and Infant initiative. Jane T. Elfers: Sure. Well, we launched our loyalty program in October and we had a nice increase in -- throughout Q4 and then into Q1. We now have over 5 million people enrolled in our loyalty program. And we think that it is going to be a key lever in our marketing efforts going forward. A significant amount of our transactions are happening with people enrolled in our loyalty program, and the other good news is that the loyalty program is driving people to our e-commerce site. On our e-commerce site is where you manage your points and manage your rewards. So as we know, our multi-channel customer is significantly more profitable than our single channel customer. So for us, even to move incrementally customers from single to dual channel has a big payback for us and we're starting to see that happen with the advent of the loyalty program. As far as prospecting with new moms, we're working on the Baby and the Newborn business. We're really attacking it from a merchandising strategy first. We've had some very difficult business as you know in Baby, and we're thrilled that we're starting to turn the corner. So what I really want to do is I want to make sure that the merchants are comfortable, that we really are where we want to be from a product and an in-store look before we really go out and invite people into more new customers into the store. We just want to make sure that the product offering we have is stable and right.

We'll go next to Richard Jaffe with Stifel. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: I guess, trying to understand the catalyst behind that, would you ascribe that to better sourcing, greater discipline, holding back in the cold weather, anticipating warm weather than not being so promotional? Or is there a third factor I'm not taking into account? Jane T. Elfers: Well, I think a big part of it is certainly the AUC, and that's the tailwind for us so we were able to have mid- to high-single, in apparel, decreases in AUC through Q1. I think another big piece of it was being able to come into the quarter with clean inventory. So we've been very focused on inventories for the last few years and being able to enter into the quarter with a cleaner inventory by channel has helped us as well. Also, I think the pullback of the spring buy up in Canada from a merch margin point of view was instrumental in helping us, particularly with such a cold winter, having less spring product was important. And then the made-for-outlet product is really a home run for us so far. We're really, really excited to be able to see that channel almost flat comp for the quarter. And the customer response and the customer acceptance of that product has been very, very strong. So we can -- are hopeful that we can continue to see that channel close in on Place and have parity by the end of '14 and from a merch margin point of view. Richard Ellis Jaffe - Stifel, Nicolaus & Co., Inc., Research Division: Just a quick add-on. With the loyalty program coming online, becoming more powerful, should we anticipate some margin pressure as people use their points more and take advantage of the discounts offered by the loyalty program?

We've modeled some dilution into that but, obviously, we think that as we can drive people to our web and change them from a single channel customer to a multi-channel customer, we think that we, overall, will drive sales and will drive operating margins.

And we'll go next to John Zolidis with Buckingham Research. John Zolidis - The Buckingham Research Group Incorporated: A question on merchandise margins and the longer-term opportunity there. We're looking at about a 6% operating margin right now based on the current guidance for 2013. And I know we talked about potentially getting to a 10% up margins, so 400 basis points of room to the upside. It feels like most of the SG&A cutting has been accomplished. And so to get to the higher operating margin, we need a combination of leverage and better merchandise margins. So if -- what could you -- what possibilities are there for improving merchandise margins from here other than just waiting for a windfall benefit from lower cost? How can we drive merchandise margins higher and help to achieve that 10% of margin over time?

As I look at it, it's a combination of factors and it's not just merchandise margin. As we continue to expand international and set off on a wholesale strategy, obviously, we're looking to leverage some of those expenses that we currently have. We look at international and the wholesale actually as dilutive to overall gross margins but accretive to operating margins. So as those businesses become bigger, obviously, we'll see our operating margin expand. Fleet optimization, we think, can also be a key contributor overall to operating margin growth. As we look at the current fleet and we look at the stores in terms of those underperforming or performing less than the corporate average, we think there's an opportunity and we think there's margin expansion as we begin to make decisions around our fleet. Obviously, e-commerce growth is key, which will help us begin to leverage expenses and we had a great first quarter, again, after 3, 4, 5 years of 20-plus-percent increases. First quarter was up 13 in a very difficult weather-related quarter. Obviously, we see e-commerce as a cornerstone of our growth. And then there's really all the systems that we need to undertake as a company. We implemented SAP finance and the end of last year, we're looking at core merch being implemented in the next 12 months, which will help us really from an inventory, pricing and planning and allocation perspective. And we think that there is margin that we can unlock as we start implementing these systems. So all in all, we think that's a combination that can drive overall operating margins for the company.

And we'll go next to Jay Sole with Morgan Stanley. Jay Sole - Morgan Stanley, Research Division: Mike, I just wanted to follow up on the last question. Can you talk more about the systems implementation? You mentioned something called core merch. Can you just define what that is? And talk about -- can you quantify at all the EBIT margin impact you expect to have? And then, Jane, can you talk about accessories? Have -- or has a bigger part of the mix become accessories? And are those higher margin? How have those performed in the store recently? Jane T. Elfers: Yes. The accessory and shoe business is about 20% to the total, and the accessory business has been a major growth for us since Natalie came on board. She has really directed us in those categories because we didn't have a big offering a few years ago when we started. It is our highest margin category and it is a pickup item, so we've been able to see some good expansion over the last couple of years in sales, as well as margin in all channels.

We look at core merch from SAP. We look at it as a set of capabilities really focused around a single point of inventory, i.e. visibility to inventory across all our different channels. We look at pricing as a key component in terms of capability in making certain price change, adding certain promotions, capabilities in support of things like couponing and bogos. We look at it from a sourcing perspective, really having visibility across our sourcing network. And also, just the ease of which we can manage our POs, which will help us from a balance of speed and cost. And then there's really capabilities around wholesale and franchising, which will help us from an order management perspective, which will help initiate orders and help us manage the order processing with a lot more ease than we currently have to go through. So it will facilitate growth in those 2 areas. Obviously, once we get that set of capabilities in place, we move into demand-driven forecasting, planning and allocation, which we think is the real game changer in terms of the ability to really analyze on a style, size, color on an individual door basis.

And we'll move next to Dana Telsey with the Telsey Advisory Group. Dana Lauren Telsey - Telsey Advisory Group LLC: Can you talk a little bit about what you're seeing on the factory side? It was flat this quarter, with the cold weather certainly the trend there. But how do you see the operating margin narrowing between full line and Outlets, given also the enhanced made-for-outlet product? And then also, on Canada, how would the -- any qualitative color on profitability there this quarter versus last year and what you're expecting going forward?

From a factory perspective, as I mentioned before, we were 1,000 basis points behind in margin when we started the MFO program. We now have it as basically an 80% mix between MFO and some of our core basics. We look at last year ending about 400 basis points behind in terms of merchandise margin, and quite frankly, we think will be a parity at the end of 2014. And our goal is to cut the 400 down to 200 by the end of '13. Obviously, when we look at the overall profitability of factory, when we look at expense levels and percentages of sales, they're quite favorable overall to -- in terms of where we stand versus our U.S. and Canadian Place stores, so we feel very good about the opportunity to continue to improve profitability in that sector. And we think that, over time, we'll see that factory is actually higher than U.S. Place. From a Canadian perspective, obviously, we're hurt in the first quarter based on the comps and trying to leverage the occupancy because the payroll definitely caused us to be low from an operating margin in Q1 from where we were last year. We would expect that differential between Q1 and end of year will start to mitigate. And -- but there's still a lot of pressure going on in the Canadian market. Obviously, there's competition up there and so we're watching it very closely, and we'll adjust our operating model accordingly.

And we'll take our last question from John Morris with BMO Capital Markets. John D. Morris - BMO Capital Markets U.S.: Most of my questions were answered. But, Jane, maybe, I guess, unless I missed it, if you can talk a little bit more about your -- if you step back and look at your approach to brand marketing, any changes there on your thoughts? And as a second part to that, any swing shifts in major promotional events that we should be aware of in Q2 or Q3? Jane T. Elfers: Well the big thing on brand right now, really, is this loyalty program and it has so many tentacles to it, mostly living on the website and really driving multi-channel purchasing, having customers increase share of wallet by introducing a loyalty program where I think we've been deficit for the past few years. So we think, over time, we have significant opportunities through this loyalty program to not only gain sales, gain share but also turn our existing customers into multi-channel customers and get more profit from them. From a shift point of view on promotion, Mike covered a little bit in his opening script, but a big shift is really at the end of Q2. The tax-free event that was last year week 1 August moved into week 4 of July. So that's Friday and Saturday, the last 2 days of the quarter, is where you see that tax-free event. So far in tax free, there are 16 states that have confirmed tax free. Florida, Massachusetts and Puerto Rico have not yet confirmed. Of those 16 states, 11 of them are moving into week 4 of July on that Friday and Saturday. And then you have Mississippi, which is in the true fiscal month of July and that anniversary-ed last year. So that's a pretty sizable shift. And then the other thing is, really, the 6 less days between Thanksgiving and Christmas. And then when you get into the third quarter, you'll see a little bit of erosion there because of the moving of the tax free to the last week of July.

And I'd like to turn the conference back over to Jane Singer for closing remarks.

Thank you for joining us today. If you have any further questions, please give me a call at (201) 453-6955.

This does conclude today's conference. You may now disconnect, and have a wonderful day.