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

Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division Janet Kloppenburg Alex Pham - Wedbush Securities Inc., Research Division Mark Friedman Taposh Bari - Goldman Sachs Group Inc., Research Division Jay Sole - Morgan Stanley, Research Division Anna A. Andreeva - Oppenheimer & Co. Inc., Research Division Susan K. Anderson - FBR Capital Markets & Co., Research Division John Zolidis - The Buckingham Research Group Incorporated Rick L. Snyder - Maxim Group LLC, Research Division James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division Dana Lauren Telsey - Telsey Advisory Group LLC

Good day, everyone, and welcome to The Children's Place Second Quarter 2013 Conference Call. [Operator Instructions] 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 earlier this morning, announcing second quarter 2013 financial results. A copy of the release can be found on our website. Before we begin, I would like to remind participants that any forward-looking remarks made today are subject to the Safe Harbor statement 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. Overall, the second quarter was a challenging one for retailers with diminished traffic, cool wet weather and a constrained consumer. However, we did a good job navigating these headwinds. Our assortments were well received, and our second quarter sales came in as expected. We exceeded the top end of our earnings guidance due to a combination of stronger margin performance and tight expense control. As we continue to optimize our store footprint, we are increasing our focus on driving profitable growth by geographic region. Therefore, starting in 2014, in addition to consolidated retail comp sales, we will refer to sales results as total U.S. comp sales, which will include U.S. stores and U.S. e-commerce and total Canada comp sales, which will include Canadian stores and Canadian e-commerce. For the balance of 2013, we will start using these new metrics in addition to providing you with channel-specific highlights. I'm going to be somewhat brief in my remarks, as we have a lot of material to cover with you this morning, but let me touch on some key points from Q2 and some early reads on current business. Looking back on Q2. Net sales increased 6%. Consolidated total comp sales were slightly negative and improved approximately 500 basis points versus first quarter. Total U.S. comp sales were flat. Total Canada comp sales were down 3%, a 1000-basis-point improvement from Q1. Gross margin rate exceeded our forecast due to strong merch margin performance. Due to rigorous expense management, SG&A rate beat our forecast; and our adjusted net loss was $0.42 per share, a 32% improvement compared to a $0.62 loss last year. Channel-specific highlights include e-commerce. E-commerce continued its record of double-digit comps for the quarter, posting a 24% gain on top of a 21% increase last year. E-commerce is a key component of our growth strategy, and we expect this channel to continue to deliver outsized results. U.S. stores comped negative low single digits compared to a positive low single-digit comp last Q2. Merch margins expanded in both Place stores and outlets during the quarter with a particularly strong pickup in outlet merch margin due to positive customer acceptance of our made-for-outlet product. Canada. As I mentioned earlier, Canada realized a 1000-basis-point comp trend improvement for Q2 versus Q1, and we had significant merch margin expansion during the quarter, similar to the United States. We're keeping a close eye on competition in this market, but at the same time, our new merchandising and field teams are making significant progress, and we are expecting continued improvement in our Canadian channel. On the merchandising front, big kids continued to lead the way for Q2, and baby experienced a significant improvement in trend. Overall category performance was as expected with the exception of short-sleeve knits, sleeveless tops, sundresses and sandals, which we believe were impacted by the cool wet weather. Moving on to sourcing. We're continuing to make progress with respect to country migration and vendor consolidation, and we're currently working on 2014 receipts. For the second half of 2013, AUCs will be down low single digits. Marketing. Our loyalty program is continuing to gain traction, and we are emphasizing it in the back half of the year. And as I mentioned earlier, our e-commerce business is very strong, and we continue to shift marketing resources into this key channel. In closing, with respect to current business, we have our tax-free events behind us, and we are encouraged by our early back-to-school performance. While the majority of the quarter is still ahead of us, we're off to a solid start. And now I'll turn it over to Mike.

Thank you, Jane, and good morning, everyone. For the second quarter, we achieved our sales expectations and exceeded our EPS guidance. Net sales increased 6% to $382 million. Consolidated retail comp sales declined 0.4%. The slightly negative comp was driven by a 1.6% decline in transactions due to lower store traffic. Average transaction value increased 1.3%. Total U.S. comp sales were flat. A low single-digit decline in transactions was offset by a low single-digit increase in average transaction value. Total Canada comp sales declined 3.3%. Transactions declined low single digits, and average transaction value was flat. E-comm accounted for 13% of net sales in the quarter compared to 10.5% last year. Gross margin rate increased 120 basis points to 33% for the quarter, which exceeded our guidance of 60 to 100 basis points, driven by strong merchandise margins. SG&A was well managed in the quarter, primarily due to more effectively managing overall store expenses, particularly in the area of payroll. Adjusted SG&A rate leveraged 100 basis points to 32.1% of sales, which was better than our guidance of 20 to 40 basis points. Managing company-wide expenses will continue to be a key focus for the entire organization. Adjusted operating loss was $12.5 million compared to a loss of $22 million last year. Adjusted net loss was $0.42 per share compared with a loss of $0.62 per share last year. Moving on to the balance sheet. Our cash and short-term investments at the end of the second quarter were $185 million compared to $159 million last year. In the past 12 months, the company generated $209 million in operating cash flow while investing $85 million in CapEx and repurchasing $102 million in stock. During the second quarter, the company repurchased 456,000 shares for a total of approximately $24 million. Our inventory is in excellent condition as we enter the third quarter. Consistent with our guidance, balance sheet inventory at the end of the quarter increased 22.6% in dollars. Overall, inventory was up $60 million at the end of the quarter due to higher in-transit and early holiday receipts as result of the 53rd week shift. Summer and prior-season inventory was down $6 million compared to last year. Now I'll provide a progress update on 3 strategic initiatives: one, optimizing our fleet to increase return on invested capital; two, our longer-term systems implementation and transformation plan; and three, driving additional growth and profitability through our international and wholesale distribution channels. First, fleet optimization. After completing our exhaustive store-by-store review over the past 6 months, we have made the decision to close approximately 100 underperforming stores through 2016, including 45 stores this year. Impairment and other noncash charges associated with our fleet review and store closures was $12.1 million in the quarter. We will be incurring additional costs associated with the early closures, including severance and other related expenses as the stores close. We estimate those charges to be in the $8 million to $10 million range through 2016. The 100 stores slated for closure significantly underperformed the fleet average in both sales and four-wall profitability. In 2012, they generated $103 million in sales, had 2/3 the productivity of the fleet and barely broke even on a four-wall profitability basis. The closures are almost entirely U.S. stores, and they are concentrated in D malls, lifestyle malls, the old technicolor store format and stores that are oversized. The 45 stores planned for closure in 2013 generated $17 million in sales and had a four-wall loss during the first 6 months of this year. For your modeling purposes, we ended the quarter with 1,116 stores and square footage of 5.9 million, an increase of 1.7%. We plan to end fiscal '13 with approximately 1,105 stores, and square footage is expected to be approximately flat with last year. In addition to the 100 store closings, we have another 70 stores that are currently are on the fence in terms of financial performance, the majority of which have lease action dates in 2013 and 2014. We are currently reviewing options to improve the financial viability of these stores, including occupancy relief to get them above the minimum hurdle rate. But if we are unable to do so, these stores will move to our closure list. Going forward, we have continued opportunity to open smaller square footage stores in our Tech 2 format value centers, small markets, malls and Hispanic markets where we can meet the hurdle rate for productivity and perform at or above the fleet average on a four-wall basis. Systems implementations. When I arrived at The Children's Place, we partnered our IT group and the business teams with a world-class information technology and business transformation consulting firm to formulate a strategic long-term systems plan for the company. Over time, we believe this initiative will transform our business, and we are putting significant resources and focus behind it. Our first step is to complete our ERP implementation, which will set the foundation to enable us to significantly enhance our planning, allocation and omni-channel initiatives. As part of this process, obsolete systems were identified, and it became apparent that some initial development costs associated with our SAP implementation were no longer relevant and needed to be replaced by enhanced capabilities in order to incorporate industry best practices, as well as to service our international franchisees and meet the requirements of our wholesale business. As a result, we took a $10.3 million charge during the quarter to write down assets and systems that are being replaced. As mentioned on prior calls, the SAP financial module was successfully implemented at the end of 2012. The core merchandising and pricing modules will be implemented in Q2 2014. We are being very methodical in our planning and have significant resources and oversight in place to manage the process from the planning phase through testing and implementation and into the follow-up and refinement phases of the project. Additional channels of distribution. In addition to e-commerce, 2 major strategic plans for future growth are our international and wholesale businesses. On the international front, our franchise partners opened 6 new stores in the Middle East during the quarter, bringing our total to 26, and we are on track to have 40 stores in the Middle East by the end of this year. Also, we announced in July that we signed a franchise agreement with the Fox group to begin opening stores in Israel in 2014. Israel is a well-developed retail market with a strong children's apparel business, and we have the potential to open 25 to 30 doors there over the next few years. The Fox group operates over 300 chain stores across Israel and has a proven track record of operating successful apparel brands, including an international franchise brand. We are also pleased to announce that our wholesale customer base expanded during the second quarter to include another major retailer. In addition, we are in strategic discussions with other retailers to expand this channel of distribution. Now I'd like to move on to our guidance. As a result of our stronger-than-expected second quarter performance, we are raising our guidance for fiscal 2013. We are now projecting earnings per diluted share to be in the range of $3.15 to $3.28, assuming negative low single-digit comp retail sales for the year. We expected to leverage gross margin by 20 to 40 basis points, and we expect SG&A dollar spending will decline slightly for the year and the SG&A rate to be approximately flat as a percentage of sales. For the third quarter, we expect adjusted earnings per diluted share to be in the range of $1.83 to $1.89, assuming flat comp retail sales. Gross margin is expected to leverage by 10 to 30 basis points, driven by a stronger merchandise margin. SG&A expenditures will be slightly lower than last year, and SG&A rate is expected to leverage by 20 to 40 basis points. We expect inventory to be up mid-teens at the end of the third quarter. Inventory will be up approximately $40 million to $45 million at the end of Q3 with spring in-transit and replenishment inventory accounting for the entire increase. Carryover inventory will be down at the end of the third quarter. As you model the third and fourth quarter, there are also some calendar shifts to keep in mind. Q3 net sales growth will be negatively impacted by approximately $12 million as an important back-to-school week shifted into Q2 this year. Q4 has 13 weeks compared to 14 weeks last year. So you should anticipate lower net sales year-over-year in the fourth quarter this year. Just a reminder, the 53rd week last year represented $22 million in sales and an incremental $0.04 in earnings. 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 that 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 $33 million available under our current share repurchase authorization. At this point, we'll open the call up for questions.

[Operator Instructions] And we'll go first to Lorraine Hutchinson with Bank of America. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: I was just hoping to get your general comments on the environment. We've heard a lot about negative mall traffic and rough starts to the back-to-school selling season. How has your customer been reacting recently to these macro trends? Jane T. Elfers: Well, we've seen the same things with traffic declines. We're off to a good start as far as back to school is concerned. In our tax-free market, we saw a nice uptick in traffic during that time period, and we're seeing some nice response from the customer to units increasing, and we anticipate to continue to see that happen to the third quarter. I think the promotional environment is very difficult at this time as we're reading about it and as we've seen. I think we've done a pretty good job on holding market share. For Q1, we held it at 6.1%, which I think shows that we're competing pretty effectively in this environment. It's always -- the kids space has always been a competitive space. And with birth rates flattish or declining over the last several years, there's a lot of new entrants in this space, so there is increased competition for market share. And with the downdraft in traffic, it makes it even more competitive. But as I said, I think we've done a good job growing share over the past few years even in the midst of what's a pretty extensive turnaround at The Children's Place, and our key initiatives are designed to ensure that we continue to grow. Lorraine Maikis Hutchinson - BofA Merrill Lynch, Research Division: And then just a follow-up, we've had a couple of warm winters in a row. Does your full year guidance assume that things do get colder this fall? Or are you assuming kind of steady state with last year?

Well, our full year guidance, obviously, for third quarter, we said, was flat comp and assumes pretty much the same thing for the fourth quarter. So we're anticipating a promotional environment, traffic being under pressure and we've incorporated that into our full year guidance.

And we'll go next to Janet Kloppenburg with the JJK Research.

Just a couple of questions. I'm wondering about the baby business. I know it improved. Do you see encouraging trends there? And can we expect that to turn positive this year? And secondly, I was wondering if the wholesale business, Mike, was a threat to operating -- or to gross margins going forward, building that business. Jane T. Elfers: Thanks, Janet. In the baby business, we did see a significant improvement in trends in Q2 versus Q1. I think that when you look at the content of our assortment, we're much more focused on playwear and the knit categories. We started to see that into the second quarter receipts and certainly with the advent of the third quarter receipts. We're going to be much more focused on sleepwear and playwear starting with the September deliveries and going into fourth quarter. When you look at the NPT data, it tells us that we have a lot of opportunity relative to our competition in the baby and newborn zone with the respect to sleepwear and playwear, and we're to be going after that business in a big way starting with the September deliveries. I think as far as the future of baby, we feel really good about our ability to significantly close the gap on where we've been with baby. I think now that we really have the big kids fixed behind us, big kids is a much, much more complex business than baby. And now that we've really got that running and fixed, we think that we can take the time to really focus on baby, which is, I think, a little bit easier to get right. So we feel good about it.

Janet, as far as wholesale goes, we've mentioned in the past that we added a Vice President of Wholesale at the end of February to help develop a strategy for our wholesale channel. We were pleased to announce today that we added another retail customer in addition to Sam's Club in the second quarter. We're very excited about the wholesale channel. We think it's a big opportunity for the company. And obviously, as we look at our growth plans, it's key in terms of how we can get to expanding our operating margin because it is operating income accretive for us.

We'll move next to Betty Chen with Wedbush Securities. Alex Pham - Wedbush Securities Inc., Research Division: This is Alex Pham on for Betty Chen. My question is in regards to the outlet opportunity. Where are we in terms of the overall made-for-outlet penetration? And how far are we away from the 1,000 basis points operating margin opportunity in regards to the full line? And is there potential maybe longer term to maybe get above the overall full line operating margin? Jane T. Elfers: Sure. Thanks, Alex. We're at 80% right now made-for-outlet product. We feel really good about the outlet business right now. As I had mentioned, we had a 760-basis-point improvement in outlet margins. So we're feeling very good that our made-for-outlet strategy is solidly on track. We've said before that we're looking to close the gap with Place by the end of 2014, and we are on track to do that. I'd -- it's a little premature until we do close the gap, but I think we do believe over time that there is no reason why the outlet channel cannot be more profitable than the U.S. store channel. I think that is pretty consistent with what other people see with their factory channel. So I don't think there's any reason why we can't achieve that in Place over time.

And just as a reference point, we ended the year at 400 basis points below in merch margin compared to U.S. Place stores, and we said that by the end of '14, we would be at parity. And over the last 12 months, we're rolling to about a 280-point deficit, so we're making considerable progress.

And we'll go next to Marni Shapiro with Retail Tracker.

It's Mark Friedman filling in for Marni. Guys, could you talk on the e-commerce business, a little bit more as it continues to grow what you're learning about the consumer? How much of that is a consumer simply shopping online to get it delivered than try it on, bring it back and return? And what are you doing to try and then translate that into more stores? And then just on the timing on the stores on your watch list to achieve your hurdles, could you give us a little bit more insight as to how you're looking at them and from what we could expect when you make decisions on those stores?

So from a -- just, let's start with the store question first in terms of the watch list. We have 70 stores on the watch list, and as I mentioned, the majority of them, roughly 80% of them have lease action dates in 2013 and 2014. So our sense is we've just completed the study. We've finalized 100 stores that we will be closing, and we're getting right on these next 70 in terms of action plans to improve the profitability, including working with our landlord community in terms of rent concessions. So we'll move forward very quickly on these. Jane T. Elfers: And on the e-commerce front, as I mentioned, we continue to see double-digit gains quarter after quarter, and we don't see that slowing down. We don't see a measurable increase on any type of return rate from our customers. We continue to expand our e-comm channel. And as we've mentioned before in several calls, our multi-channel shopper is our most profitable shopper and spends approximately 3x more than a single-channel shopper. So we're putting a lot of effort behind e-commerce, a lot of effort behind online marketing and a lot of effort behind our loyalty program to continue to drive these results.

And we'll move next to Brian Tunick with JPMorgan.

This is Kate Simmons on for Brian. Just piggybacking on that loyalty program question, just wanted to get a sense of the new sign-ups in the quarter. Any commentary on conversion and just what metrics you're seeing there? And then also as we go up against last year's weakness associated with Hurricane Sandy, just any commentary on AUR outlook for the back half? Jane T. Elfers: On the loyalty front, I think we mentioned on the last call that we had signed up 5 million people for our loyalty program. Right now, we're a little bit over 6 million. So we're on a nice trajectory there. We're putting a lot of emphasis on our website to enhance our loyalty functionality and capabilities. So we see this as a -- as kind of a key stone of our marketing efforts going forward.

Yes. And as far as AUR goes in the second half of the year, we're basically planning it down low single digits at this point based on the difficulty around the traffic. So those are the numbers that are built into our forecast for the rest of the year.

And we'll move next to Taposh Bari with Goldman Sachs. Taposh Bari - Goldman Sachs Group Inc., Research Division: I wanted to ask you just kind of high level what's changing at the company. Macro environment's obviously tough, and I think recent history over the past couple of years would suggest that your company would have a hard time operating in this kind of environment. Yet you reported a pretty impressive quarter. And I'm just trying to understand what's structurally changing, just trying to assess the sustainability of this going forward.

Well, we have a lot of key initiatives underway, 3 of which I mentioned in the prepared remarks. And Jane, when she started, laid out 5 key initiatives, and we're starting to make progress on all of them. We've seen continued progress in the e-commerce front. We're continuing to move forward in terms of international and wholesale. We've completed our fleet review, which we think will be very -- which will be accretive to our overall operating margins. We have a sourcing strategy in place that we talked about many times in terms of country migration and vendor consolidation. And then last but not least, we're making progress now on systems. So stay tuned.

We'll go next to Jay Sole with Morgan Stanley. Jay Sole - Morgan Stanley, Research Division: Jane, just had a couple of questions about back to school and some of the initiatives in the -- for bigger kids. Can you talk about uniforms and back to school? How big of a piece is this in back to school? And how did it do? And maybe you can talk about progress in shoes and sandals -- sorry, shoes and accessories outside of sandals, which you called out as weak. What part of the mix was it in 2Q? And how much did it grow? Jane T. Elfers: In shoes and accessories, they're about 20% of the business. In Q2, we saw some weakness in the sandal business, and I think that, that, along with some of the things we mentioned earlier on sundresses and tank tops, I think that was driven by weather. Overall, we're pretty happy with our shoe and accessory business, and we continue to think that, that can grow. Particularly on the accessory side, there's a nice margin benefit there. As far as uniform and what's going on in back to school, uniform is a really big part of back to school, and it's very important, particularly in the tax-free markets during those events, and then it becomes very important in the Northeast as we move towards the later school openings that we see in the Northeast. We've had some really nice response to uniforms. There's really 4 major classifications that make up the back-to-school business for The Children's Place: denims, graphics, uniforms and backpack, and we've seen some really nice early reads on those key categories through the early part of August and into now.

And we'll move next to Anna Andreeva with Oppenheimer. Anna A. Andreeva - Oppenheimer & Co. Inc., Research Division: I was hoping you could talk a little more about the quarter-to-date comps run rate. You obviously said you were pleased with back to school so far, which is very impressive in this environment. I think you're also lapping easier comparisons towards the end of the quarter. So that should be a nice opportunity for you, and I wasn't sure why you're tweaking down comp guidance for the year. I guess, what's driving that? And then my second question was nice improvement in Canada. Maybe a little bit more color on that. And how are some of the reads with the Target openings so far? Jane T. Elfers: Sure. Well, I think as far as the consumer's concerned and the third quarter comp, disposable income in the lower-middle tier is continuing to be constrained, and we think that's the trend that seems unlikely to change in the near term. It is a challenging retail environment. Traffic is soft, and AUR is under pressure. So we're pretty comfortable with a flat comp for Q3, and we do expect that traffic and transactions will continue to be soft with UPTs and ATV driving towards the flat comp. As far as Canada's concerned, we did have a nice improvement, 1000-basis-point improvement from trend, from last quarter transactions. ADS, merch margin, they all improved from Q1. We've done a lot, as you know, over the last 3 years to strengthen our business in Canada. We've increased our square footage. We've launched a website that's doing well. We've remodeled 1/3 of the fleet into the Tech 2 format, and we have significantly strengthened not only the store leadership team but the merchandising team here in Secaucus. We've been up in Canada for over a decade, and we have the #2 market share in the country. So we're pretty well known, and I think we have significant potential to grow, particularly e-commerce, over the next several years. As far as Target, your question, with the competition. We're located right now. It's early days. We have 18 stores in malls with Target. It's about 14% of the fleet where we compete with them. And our traffic year-to-date is higher in those stores, but comp and conversion is lower but most notably right around the first few weeks of opening. After that, we start to see a stabilization. It's a little bit too early to know what the impact will be over time. But where we compete with them in the United States, we do very well.

And as far as comp guidance goes, we went from a flat to slightly negative to a negative low single digit. Really, we're just -- we're looking at the environment. We're looking at our consumer with the disposable income under pressure constrained by the payroll taxes along with gas prices. It's a challenging overall retail environment. AURs are under pressure. Traffic's under pressure. So we feel more comfortable in giving this type of guidance.

And we'll move next to Susan Anderson with FBR. Susan K. Anderson - FBR Capital Markets & Co., Research Division: I guess just a little bit more detail maybe if you could provide on your expectations for the stronger merch margin in the back half. I thought you did a good job this quarter, but just kind of wondering is it lower promos driving it or is it more lower unit costs.

Well, we're expecting overall unit costs in the second half of the year to be down low single digits. We had a high single-digit decrease in the second quarter, which contributed to very strong merchandise margins, and obviously, we got great product acceptance. But we also had some benefits in the second quarter in terms of overall margins with the shifting of the back-to-school event going from Q3 to Q2, which added sales, which helped leverage some of the fixed costs that are associated with our margins or gross margins. So as we look in the second half, we continue to see AUCs down, but we still continue to see pressure from a traffic perspective, which is moderating somewhat the gross margin growth. Susan K. Anderson - FBR Capital Markets & Co., Research Division: Got it. Okay. And then maybe just if you could provide a little bit more color on what's been driving the back-to-school business so far. Has it been mainly uniforms and backpacks? Or also, have you seen pretty solid sales of general apparel? And then also maybe if you could provide some color on the performance of boys versus girls. Jane T. Elfers: Sure. In the back-to-school business, those 4 key categories, denims, uniforms, the backpacks and the graphics, those really drive the lion's share of the business, particularly early in the quarter. And we have put a tremendous amount of focus over the past 12 months getting this back-to-school delivery right with particular emphasis, obviously, on the big kids part of the business. So we're getting paid back for that effort. We're in a better stock position. We're in a better buy position. And I think that when you go into our stores, you can really see from the in-store setup what we stand for and how important those categories are. When you look at the fashion quotient of the back to school, we made some significant changes this year in our fashion assortment. And when I speak of fashion, I speak of, really, the girls side of the business because the boys is so key-item driven at this time of year and just in general. And what we did with the girls business this year, if you look in the store, is at much more wear now. So you see a lot more short sleeves, a lot more 3/4 sleeves, a lot more "first day of school" looks, if you will, versus delivering heavy sweaters and long-sleeved product in the month of August. We have much more of our longer-sleeved product and our sweater type product delivering September, which, we learned from last year, is in a more appropriate flow for the customer and what she's really looking for. So that is also paying back nicely for us in the big kids business, and I think that's probably feeding into why we feel confident on our early results.

And we'll go next to John Zolidis with Buckingham Research. John Zolidis - The Buckingham Research Group Incorporated: Question on the 100 store closures. You gave us some data around the performance of those stores. Just wondered if you would just do us a favor of the math and tell us how much that reduced overall operating margin on a percentage basis last year. I.e., if you didn't have those stores in 2012, how much higher of an operating margin would you have reported? And then I didn't hear this. So I was just -- in connection with that, could you just talk about again the potential for opening new stores. So as you're closing these underperforming locations are we going to continue to see new stores opened up? Or is that effort being dialed back as well?

Okay. So from a store closure perspective, as I mentioned, the 100 stores in 2012 had sales of $103 million and barely broke even. So if you looked at our overall financials for 2012 and reduced sales by roughly the $100 million and left operating margins and dollars where they were, we'd actually pick up about 30 basis points. But key to this is not to lose the $100 million in sales. So we're putting into place a very comprehensive marketing program, which will include some bounce-back offers. We've revised our e-mail strategy regarding store closures. We're targeting direct mail to these customers and adding some more online and digital support to drive the customer to existing stores within the marketplace or to our web. So as I do simple math and I say if we can transfer 20% of those sales, we should have a pretty good flow-through rate to the operating margin line, and let's assume that's close to 50%. So if we added $10 million on a $20 million sales increase, we're talking closer to 80 basis points improvement overall. So it has a very profound effect on our operating margins, and that's why we're -- we took the time to really analyze this. It was a process that involved our real estate group, our store group, our finance group, and they all did a tremendous job getting this done for us. And then the 70 stores also basically are generating about $70 million in sales and have basically a mid-single digit four-wall average, so again, below where we want to be. So we're looking at those opportunities to improve them from a financial perspective, and it may include also having conversations with our landlords, obviously, about some rent negotiations, so really positive. From a store opening perspective, we feel good about our right-sized, well-located new stores going forward. We still can grow. We haven't given specific numbers out. We've averaged about 70 stores over the last 3 years in terms of openings, so call it 210, 220. I could see that dialing back a little bit as we continue to move up the hurdle rates in terms of openings, but we still see opportunity out there.

And we'll move next to Rick Snyder with Maxim Group. Rick L. Snyder - Maxim Group LLC, Research Division: Yes. Good job in Canada guys. Your team up there is doing a great job. Can you give us some color on the wholesale opportunities, how it might affect our numbers going forward?

Well, obviously, wholesale is a pretty small component of the business. It's less than 1%, but we view it as a big opportunity. And you can look at other retailers and apparel players who trade in the wholesale zone. There's big opportunity there. Obviously, from a gross margin perspective, it'll be dilutive, but the key in terms of both the wholesale business and the international business is to really leverage the infrastructure that we have built here. So our sense is it could be very accretive overall to our operating margins. But we'll provide more detail as these businesses get bigger.

And we'll go next to Jim Chartier with Monness, Crespi, Hardt. James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division: In the first half of the year, you shifted a lot -- some of the fashion into 6-month basic product. How did that perform for you? And is there an opportunity to do something similar on the second half of the year, which would reduce the volatility of weather on your business? Jane T. Elfers: Thanks, Jim. We shifted product into seasonal basics and regular basics during the first quarter. I think when you look at what we saw in Q2, I think, by category, the categories performed basically where we thought they would with the exception of what we mentioned earlier on the call with short sleeves, sleeveless, sundresses and some of the key items, sandals, that we had, and we think that was weather driven. But overall, I think we would say that we feel pretty good about how we've rebalanced by category. Your question about how we're going to go forward and try to mitigate against some weather challenges or maybe some category by challenges, I think what I had mentioned before on the call, answering another question about how we are much more wear now focused in the early part of the quarter. And then we move into more seasonably appropriate apparel starting with September and moving into October. I think that's a pretty big shift for us, and we're looking forward to seeing that pay off for us as we move into September. I also think some of the things we're doing, which I'm not going to get into for competitive reasons, but some of the things we're doing around dressy is also going to help mitigate as we move into the latter half of third and into the early part of fourth quarter. James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division: And then for Mike, is there an opportunity as you grow the wholesale business to reduce overall average unit cost for the rest of the business?

From a sourcing perspective, obviously, as we grow our volume and we consolidate, we hope to be able to continue to reduce AUCs, but it's a pretty competitive world out there. We're seeing increases around costs regarding labor. We have 15% of our production right now in Bangladesh, and obviously, the situation there has cost us a little more money than we had originally anticipated around, obviously, compliance issues and some of the interruptions that have taken place from a delivery perspective. But we're working our strategy. We continue to move to lower-cost countries, and we're consolidating with our top 10 vendors. And we feel good about it, but it is a pretty competitive world out there.

Our last question comes from Dana Telsey with Telsey Advisory Group. Dana Lauren Telsey - Telsey Advisory Group LLC: Can you talk a little bit when you do close a store, is there a comp lift at the other stores? And on the lease actions, is anything changing in terms of the occupancy costs and how -- what type of leverage you're seeing there? And just lastly, the e-commerce business has been very strong. Drivers of the e-commerce business and what you see going forward?

So from a lift perspective, when we close a door, we haven't really done a great job of measuring that impact, and we spent considerable time over the last few months talking about some marketing initiatives that we could put in place and how we were going to measure against control groups. Our sense is that we will see a lift in the existing stores within the marketplace or at our web, and we have the tools and the ammunition put in place in terms of the marketing programs and the tracking devices to ensure that we're able to measure that better than we did in the past. Jane T. Elfers: And on the e-comm front, it's really traffic and transactions, which are driving the outsized performance that's great to see.

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

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

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