Michael Balmuth - Vice Chairman and Chief Executive Officer Gary Cribb - Michael O'Sullivan - President and Chief Operating Officer John Call - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Rick Patel - BofA Merrill Lynch Rob Wilson - Tiburon Research Group, Inc. Stacy Pak - Barclays Capital Dana Telsey - Telsey Advisory Group LLC David Mann - Johnson Rice & Company, L.L.C. Richard Jaffe - Stifel, Nicolaus & Co., Inc. Jeff Black - Citigroup Inc Paul Lejuez - Nomura Securities Co. Ltd. Mark Montagna - Avondale Partners, LLC Brian Tunick - JP Morgan Chase & Co Pamela Quintiliano - Oppenheimer & Co. Inc. Omar Saad - ISI Group Inc. Marni Shapiro - The Retail Tracker Kimberly Greenberger - Morgan Stanley Evren Kopelman - Wells Fargo Securities, LLC Laura Champine - Cowen and Company, LLC

Good morning, and welcome to the Ross Stores Second Quarter 2011 Earnings Release Conference Call. The call will begin with prepared comments by management, followed by a question-and-answer session. [Operator Instructions] Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, and other matters that are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release and the company's fiscal 2010 Form 10-K and 2011 Form 10-Q, and 8-Ks on file with the SEC. Now I'd like to turn the call over to Michael Balmuth, Vice Chairman and Chief Executive Officer.

Good morning. Thank you for joining us today. Also on our call are Norman Ferber, Chairman of the Board; Michael O'Sullivan, President and Chief Operating Officer; Gary Cribb, Executive Vice President, Stores and Loss Prevention; John Call, Senior Vice President and Chief Financial Officer; and Bobbi Chaville, Senior Director of Investor Relations. We'll begin with a brief review of our second quarter performance, followed by our outlook for the remainder of the year. Afterwards, we'll be happy to respond to any questions you may have. We are pleased with our better-than-expected performance for both the second quarter and first 6 months of 2011. Our ability to increase the percentage of fresh name-brand bargains our customers see, while also strictly controlling inventories and expenses, has enabled us to capitalize on our favorable position as a value retailer. Second quarter earnings per share grew to $1.28, up from $1.07 for the same period last year. These results represent a 20% increase on top of exceptional gains of 30% and 52% in the second quarters of 2010 and 2009, respectively. Net earnings for the current year quarter grew 15% to $148.3 million, up from $129.3 million last year. Second quarter 2011 sales increased 9% to $2,089,000,000, with comparable store sales up 5% on top of a 4% gain in the prior year. For the 6 months ended July 30, 2011, earnings per share were $2.76, up from $2.24 in the first half of 2010. These results represent a 23% increase on top of outstanding earnings per share growth of 45% and 37% for the first half of 2010 and 2009, respectively. Net earnings for the first 6 months rose 18% to $321.2 million, up from $271.6 million last year. Sales for the first 6 months of 2011 increased 8% to $4,164,000,000, with comparable store sales up 4%, which was on top of robust 7% growth for the first 6 months of 2010. Merchandise and geographic trends were broad-based in the second quarter. Dresses was the top-performing merchandise category with double-digit percentage gains in same-store sales while Accessories and Shoes saw high single-digit increases. Florida and Texas remain the strongest regions, posting high single to low double-digit gains in comparable store sales. Operating margin in the second quarter grew about 55 basis points to 11.7%, driven primarily by a 50 basis point improvement in selling, general and administrative costs as a percent of sales. Cost of goods sold declined by about 5 basis points as higher merchandise gross margin and leverage on occupancy expenses were partially offset by an expected increase in packaway-related distribution costs as a percent of sales. John will provide some additional details in a few minutes. As we ended the second quarter, total consolidated inventories were up 30% compared to the prior year. This increase was mainly driven by higher packaway that was about 49% of total inventories, up from 37% at this time last year, but similar to levels at the end of the 2011 first quarter. Packaway is a very important buying strategy that enables us to offer customers some of the most compelling bargains in our stores. While this type of inventory can have somewhat higher supply-chain costs, these expenses are more than offset by its ability to enhance both top line and profit performance. As a result, we are thrilled that our merchants are finding a wide array of terrific deals in the marketplace on packaway in addition to in-season buyers. Average in-store inventories were down about 6% at quarter-end versus the prior year. We continue to target a mid single-digit percentage decline in selling store inventories over the balance of the year compared to 2010. Now let's talk about dd's DISCOUNTS. dd's continued to perform well with above-planned sales in gross margin in the second quarter. We believe these results reflect that dd's value-focused merchandise offerings are resonating well with its target customers. Based on our first 6 months results and outlook for the balance of the year, we continue to expect this promising young business to generate improved growth in pretax earnings for 2011 compared to last year. Let's turn now to our overall store expansion program. At the beginning of August, we announced our plans to open 12 Ross Dress for Less stores in the greater Chicago area in early October. This marks our first major new market entry since moving into Atlanta and other cities in the Southeast region about a decade ago. We are very excited about the long-term growth opportunities that Chicago offers, especially considering its population density and other favorable demographics that are in line with our target customer. With nearly 30 years of successfully delivering terrific savings on name-brand bargains for the family and the home, we are confident that Ross Dress for Less will become an attractive destination for Chicago area customers, and over time, another productive market for the company. In addition to these new market openings, we plan to add another 24 net new stores in the third quarter, 14 Ross and 10 dd's DISCOUNTS. Now John will provide some additional color on our second quarter results and details on our guidance for the back half of the year.

Thank you, Michael. Our 5% comparable store sales gain in the second quarter was driven by a low single-digit growth in both the number of transactions and the size of the average basket. Again, operating margin improved by about 55 basis points in the quarter to 11.7%. The 50 basis point decline in SG&A as a percent of sales was due about equally to a combination of leverage on store operating costs, and general and administrative expenses. As Michael noted, higher merchandise margin and leverage on occupancy expenses more than offset an expected increase in distribution costs as a percent of sales. Merchandise margin grew by about 45 basis points mainly due to fewer markdowns resulting from above-planned sales and faster turn. The merchandise margin improvement includes a 15 basis point benefit from a lower shortage accrual compared to last year. As expected, distribution expenses as a percent of sales increased by about 45 basis points compared to a 40 basis point decline in the prior year period, reflecting year-over-year timing differences in packaway-related processing costs. While distribution costs can fluctuate significantly from quarter-to-quarter based on these timing issues, for the full year, we now expect DC expenses as a percent of sales to be flat to slightly up from the prior year. The quarter also benefited from 15 basis points of leverage on occupancy expenses that more than offset higher freight costs equivalent to about 10 basis points. Turning to our stock buyback program. During the second quarter, we repurchased 1.5 million shares for a total purchase price of $118 million. We remain on track to complete approximately $450 million or about half of our current authorization by the end of 2011. As planned, we opened 23 net new stores in the second quarter, 15 Ross Dress for Less and 8 dd's DISCOUNTS. We are on track with our 2011 planned openings, which as Michael noted, includes our initial entry into the greater Chicago market. Let's turn now to our guidance for the back half of the year. As mentioned in today's press release, while we are pleased with our ahead-of-plan performance year-to-date, based on the recent stock market volatility and increased economic uncertainty, we believe it is prudent to be cautious in our outlook for the back half of the year. As a result, our sales and earnings targets for the second half of 2011 remain unchanged. For the third quarter ending October 29, 2011, we are projecting same-store sales to increase 1% to 2%. We are planning comparable store sales gains of 2% to 3% for August, and 1% to 2% for both September and October. Last year same-store sales rose 5%, 2% and 4% in August, September and October, respectively. Total sales are expected to grow about 5% to 6%, driven by a combination of new-store growth, and as mentioned, same-store sales that are targeted to be up 1% to 2%. Third quarter 2011 earnings per share are forecast to be in the range of $1 to $1.04 compared to $1.02 in the prior year period. There are a couple of issues -- key issues impacting projected earnings in the third quarter. First, we have realized significant improvements in shrink over the past few years from our ongoing shortage control initiatives. As a reminder, last year, our much better-than-expected shortage results added $0.10 to earnings per share and about 100 basis points to EBIT margin in the third quarter. While we take our full fiscal inventory every year in September, our guidance does not assume any potential benefit to earning to this year's actual shortage results coming lower than our accrual. We always need to complete this fiscal inventory to quantify actual shortage for the full year. Second, we currently are projecting about a 70 basis point increase in distribution expenses as a percent of sales in this year's third quarter primarily due to the timing of packaway-related expenses. This compares to a 50 basis point decline in DC costs in the prior year period. If same-store sales perform in line with our forecast for a 1% to 2% increase, we should also expect some slight deleveraging of occupancy and store expenses. As Michael mentioned, we are forecasting about 36 net new stores to open during the period, including 26 Ross Dress for Less and 10 dd's DISCOUNTS. We are projecting operating margin of 9.2% to 9.4% for the 2011 third quarter. This compares to 10.5% in the third quarter of 2010, which is up about 60 basis points from the prior year period, on top of an exceptional 385 basis point increase in 2009. Again, the main drivers of the projected decline in third quarter 2011 EBIT are the prior year comparisons on both shortage and packaway-related distribution costs. And interest expense is planned to be approximately $2.5 million, and our tax rate is expected to be about 35% to 36%. We also estimate weighted average diluted shares outstanding of about 115 million. For the fourth quarter ending January 28, 2012, same store sales are projected to increase 2% to 3%, and earnings per share are forecast to be in the range of $1.53 to $1.59. This represents a 12% to 16% increase over last year's $1.37 per share. Given our performance for the first 6 months of the year and our guidance for the third and fourth quarters, earnings per share for the 52 weeks ending January 28, 2012, should be in the range of $5.29 to $5.39, up from our prior guidance of $5.16 to $5.31. This updated EPS range represents projected growth of 14% to 16% in fiscal 2011, on top of outstanding 31% and 52% gains in 2010 and 2009, respectively. Now I'll turn the call back to Michael.

Thank you, John. Again, we are very pleased with our above-planned performance for the second quarter and first half of 2011. Looking ahead, however, there are a number of unknowns that could impact our business. In addition to the increased uncertainty in the markets and economy, we also don't know how higher sourcing costs will impact us or how customers might react to expected price increases throughout all of retail. We also can't predict how promotional traditional retailers could become in the back half of the year. All of this makes it much more challenging to forecast business trends for the important back-to-school and holiday periods. As a result, although we hope to do better, we believe it is prudent to maintain our second half sales and earnings targets. That said, history has shown that our flexible business model will help us navigate today's uncertain environment better than most other retailers. We plan to stay focused on the same tactics that have been so successful for us over the past few years. In other words, offering compelling name-brand bargains while operating our stores with lower inventories and turning our merchandise faster. In addition, we are extremely liquid in our open-to-buy as we enter the second half of the year, which strengthens our ability to react quickly to opportunities that arise in the marketplace. During the past several years, we have seen customers gravitate more toward value retailers. By focusing on and efficiently executing the right business strategies, we believe we can continue to take advantage of this ongoing shift in consumer spending and leverage our favorable position as one of the country's leading off-price retailers. At this point, we would like to open up the call and respond to any questions you might have.

[Operator Instructions] And your first question comes from the line of Evren Kopelman from Wells Fargo. Evren Kopelman - Wells Fargo Securities, LLC: Can you talk about the distribution expenses? You said both in Q2 and you expect in Q3 the timing of packaway-related is hurting those quarters. Could you talk about 2 things: one is, what does that, assume for by the end of Q3? And then secondly, does that wind down as you sell packaway potentially in Q4? Can you just talk about the dynamics of how that plays out quarter-by-quarter?

Sure, Evren. We capitalize certain processing and buying costs into those packaway balances. As those packaway balances increase, it actually benefits the quarter. As packaway sells through, those costs will flow through the P&L. So implicit in our third quarter assumptions is packaway levels would come down relative to where they are today. I hope that answers the question.

Your next question comes from the line of Paul Lejuez from Nomura. Paul Lejuez - Nomura Securities Co. Ltd.: Just a follow-up to that last one. Your packaway levels stayed flat 2Q versus 1Q, so just wondering why we did see those distribution centers, the distribution cost tick up so much? And then just second, Michael, I'm just wondering, which piece of your business are you most cautious about? You kind of had a cautious tone on the last quarter. Sales came in strong. I'm just wondering if there are any particular categories or regions that you have a certain cautious view towards.

I'll take the first piece of that, Paul, related to distribution costs. In the second quarter, we were up against the 40 basis point improvement from the prior year, so it was the compare that made it difficult in the second quarter when we were actually building packaway last year.

And in terms of cautious, I feel cautious just really primarily about what's going on externally. It's obviously, without my going into it, there is so many things going on. And certainly, the rising prices that we're going to be looking at, are less -- they are less in our home business, really less in footwear and they're more in apparel, so we have to wait and see there. But overall, the big cautiousness that we feel is relative to the overall external environment. Paul Lejuez - Nomura Securities Co. Ltd.: Michael, are you seeing higher costs already in the product that you're buying?

Well, a lot of the product -- we've seen it several months prior as product has been put in front of us in certain places. Some places we bought, some places we haven't. But this was everything we've been reading about between cotton and labor costs coming out of the Far East. And we can see it translating, to some degree, in mainstream retailing in really sporadic spots now. The big receipts for all of retail are really from September forward. So we'll have to wait and see how that plays out.

Your next question comes from the line of Jeff Stein with Ticonderoga Securities.

I'm just kind of curious, in terms of looking ahead of your packaway strategy perhaps 3 to 6 months out, it seems now that commodity prices are beginning to come down rather sharply, specifically cotton. And I'm wondering as you look ahead to spring of 2012, does it make sense to be less active in packaway and wait for the prices to come down or does that not even enter into the equation?

It enters into the equation but our merchants are very aware of the price dropping in cotton. And so as we buy into packaway and as we bought into packaway in the latter part of spring, we were very aware of that in our -- the price points we were looking for from the market reflected our knowledge of it and that it would be -- prices would be moderating somewhat next spring. So we went in informed.

Okay. And as far as the current sales trends, it's -- you've got a little bit of -- well, you've got about half of August behind you now and you're kind of guiding to a slightly higher comp for August. I assume that you're just kind of feeling better about the early trend in August or is there just something about August last year and timing of what's going into the stores this year that just gives you reason to be optimistic for the entire month looking ahead?

I actually think we really can't comment on that, all right. It's just -- it's a midmonth comment of -- about -- you're asking me almost to imply -- to comment and we really can't.

Okay. Final question, order cancellations, what are you hearing from the vendors right now, and are retailers beginning to get a bit gun-shy? Are they beginning to cancel orders? And are you hearing -- are you getting more incoming calls from your vendors?

I would answer it this way. We don't always know why product is surfacing in the market. In fact, usually, the market doesn't share that with us. But in the last month, there has been an uptick in availability. So I would assume there's been some, some of what you're asking about, but we don't know factually why that product has been surfacing.

Your next question comes from the line of Brian Tunick with JPMorgan. Brian Tunick - JP Morgan Chase & Co: Question is, I guess, shifting from packaway to shrink, I know it's the third quarter where we obviously have the most discussion around it. We're just trying to understand between the systems implementation you guys have had and the inventory per store declines over the last couple of years, you have that 100 basis point benefit in '09. Are you at an abnormally low rate of reserve? We're just trying to understand why does that have to normalize? Hasn't the business changed about how you operate it today? And then the second question, can you talk about what you're expecting now for the dd's contribution for this year's earnings? Michael O'Sullivan: Brian, I'll answer the first part of that on shrink. We've done a number of things over the last few years to better control shortage in terms of improving security at stores, lowering inventories, all those kinds of things. And they've been pretty successful and as you know over the last couple of years, we've been able to take advantage of that and bring down our shrink costs. We're now accruing shrink and it's what we experienced last year. And we have no reason at this point to think it's going to be different than that, but we won't really know until we take our September for this inventory. And once we know that, we'll know whether or not shrink is adding accrual, or better or maybe even worse, but we won't know until we take that -- this inventory.

And Brian, as far as your dd's question is concerned, last year, dd's was just slightly over breakeven, and this year, we're -- we'll be even slightly ahead of that, so we're pleased with dd's financial performance today.

Your next question comes from the line of Jeff Black with Citigroup. Jeff Black - Citigroup Inc: Michael, any precedent in the packaway dynamic with seeing a slowdown with these kinds of levels of packaway? I mean, I know you planned the business for a certain level of sales trends. And I know we're not changing those a lot, but assuming they decline for whatever reason, I mean, how sensitive is gross margin? Wouldn't it be more with these levels of packaway than less? And just what's the currency, in your opinion, of the packaway levels should we get a slowdown?

Okay. We're -- we have a lot of detailed information on currency and we manage currency in packaway in a very aggressive manner. And what I would say about packaway, to us, it's some of the best bargains in our store. So if we have a downtick in business, okay, packaway is least what I'm worried about, okay. This is -- this product is really terrific name-brand bargains that we are buying, what we believe, and usually, we're -- we've been right more than wrong, by a lot in this, we're usually at the right prices. So we're not worried in that regard, okay? We're very confident in what we have there and we manage it very aggressively.

Your next question comes from the line of Rick Patel with Bank of America Merrill Lynch. Rick Patel - BofA Merrill Lynch: Your guidance assumes that comps will modestly accelerate from the third quarter to the fourth, but you'll be going up against some more difficult comparisons. So can you just put that into context for us? Perhaps talk about the drivers of that increase and your level of confidence of hitting those numbers given the economic challenges that we're seeing?

Okay. The Q4, we have some confidence in Q4 relative to Q3, greater confidence based on some merchandise strategies that we have in place that have been carefully thought out that relate to what customers usually want more in Q4 that they're not looking for in Q3 that's really related to more gift giving. And frankly, there's also a better calendar, with an extra Saturday in Q4 versus last year. Rick Patel - BofA Merrill Lynch: And then, can you talk about your outlook for dd's? Those customers could be a little bit more sensitive to economic headwinds than the people shopping Ross. So are you doing anything differently in that business from a pricing or merchandising perspective to get that going?

Really, we're sticking to our knitting there, and so far, we're very comfortable with how customers reacted to how we've adjusted. We haven't had to make major adjustments at all, okay. We might be buying a little closer to need there than we had. That's about it.

Your next question comes from the line of Kimberly Greenberger from Morgan Stanley. Kimberly Greenberger - Morgan Stanley: John, I'm wondering if you could help us understand third quarter guidance, dd's expected performance of your physical inventory counts? In other words, does the $1.00 to $1.04 assume that your shrink results are in line with last year or would there be a benefit or a decrement to that guidance if your shrink results were more in line with your 2010 performance?

The current guidance assumes that their performance is in line with last year. It doesn't assume any benefit if our shrink rates go down... Kimberly Greenberger - Morgan Stanley: Okay. So the shrink -- sorry, go ahead.

I mean, we're using -- our accrual rate is based on last year's results and that's what we're using. Kimberly Greenberger - Morgan Stanley: Okay. And you'll get a small benefit, I guess, a 15 basis point benefit in the third quarter from -- or would you get a benefit in third quarter if the shrink results are in line with last year? Or did you catch up on that accrual in the second quarter?

No, we'd get a benefit, the 15 -- there would be a 15 basis point benefit if shrink results came in, in line with our accrual. Kimberly Greenberger - Morgan Stanley: Okay. So that's basically embedded in your guidance already?

That's correct.

Your next question comes from the line of Stacy Pak with Barclays Capital. Stacy Pak - Barclays Capital: I guess there was some more macro type questions and then, just on the buying, I want to understand what you said on the pricing. I think you said you are experiencing higher pricing, sort of higher costs, and I'm wondering is that just on upfront buys? It doesn't seem like it makes sense that it would be on excess. And if so, what percent are you doing upfront? I guess as a follow-up to that is, do you need to take prices up to maintain a flat merchandise margin in the second half? And with packaway at 49% now, you said there is more product available in the last month. Do you have enough room to take advantage of that product? And I have 2 other follow-ups.

Okay. That's a lot. Okay. Your first question is prices that I was talking about are -- we've seen across the board, line prices and manufacturers took their product prices up to mainstream retailers, so that would be on any name brand -- virtually any name brand that was cotton-based. I shouldn't say it that way. Many name brands, okay, with cotton-based products took prices up. I think that's not new news. We buy a -- some small part of our business or a portion of our business on an upfront basis. It's not a significant -- it's not our main part of our business. It's not the significant part of what we buy, but we do some of that around. And do we need... Stacy Pak - Barclays Capital: And that's where you're seeing the price -- the cost pressure, though? Because you don't see it under the excess you buy in the market, do you?

No, everything is bought -- when we buy excess, it's every item as a negotiation. And so, no, that we haven't seen. And excess prices, to be -- if most of the product that's coming in at higher retail, that's coming in starting in September, that excess really hasn't been sold yet. So it's premature for me to answer that piece of that, but we haven't seen it so far, okay. Do we need the -- the third part of your question or the second, might -- do we need prices to be up to achieve our sales trend? Did I capture that correctly? Stacy Pak - Barclays Capital: To be a flat merchandise margin, do you have to take pricing up to achieve a flat merchandise margin?

No. Okay. And that we don't have to do. And do we have room, if more packaway opportunities are available to us? We'll find room, okay? We think packaway is a great tool for us in our model, and we're happy if we can find great bargains and we're thrilled our buyers are doing that, so we will find the space. Stacy Pak - Barclays Capital: Okay. And last 2 questions are, are you seeing any difference in the response to the macro, whatever piece you want to call out, whether it's gas prices or the market or the volatility or et cetera, in the dd's customer versus the Ross customer? And then the last question is, how many of the Ross Stores are in the new format like I've seen in -- on Market Street in San Francisco, and what kind of metrics are you achieving in those stores, which I've got to tell you, I think look fabulous?

First, I'll take the dd's versus Ross, we're not seeing a materially different response from our customers. Michael O'Sullivan: On your question about the store refurbs in Market Street. Stacy, we continually upgrade our stores from time to time. Market Street is an unusual store, it's a downtown store. And over the last few years, I think we've pretty much upgraded all of our downtown stores. And similarly, in our non-downtown stores, we continue to cycle through a program of upgrading those in terms of fixtures and climate [ph] over time. Stacy Pak - Barclays Capital: So what percentage of the fleet is remodeled now? And do you get different metrics in there that you would share?

By the end of Q1 next year, the entire fleet will have -- we're not calling it a remodel, but we're refreshing our sign and refreshing fixtures as well. So by the end of Q1, the entire fleet will be done. We went into it not looking for a return, so to speak, but we are seeing, as we clean, as we brighten up our stores and as we put in new sign, package new fixtures, it provides us with the flexibility that we need to merchandise our product and the customers responded well to what we're doing.

Your next question comes from the line of Laura Champine from Cowen and Company. Laura Champine - Cowen and Company, LLC: I was hoping you would talk a little bit about the new market openings in Illinois and Arkansas, and what the store launches might look like for next year in those new markets. And also, I know it's been years, but what did you learn when you launched at Southeast that will help you get that Midwest customer to know your brands? How are you advertising as you enter those markets? Michael O'Sullivan: Laura, Michael O'Sullivan. I'll take that. So yes, as Michael mentioned, we'll be opening 12 stores in the Chicago area later this year. And you could expect that, obviously, in 2012 and 2013, we'll follow that up with other new stores opening in the Midwest. Over the last few years, we've grown by backfilling an existing market. That's been an important strategy for us. We've been able to use that time to make a number of improvements that we think will help us as we expand in new markets. Many of those are based upon learnings that we had in the Southeast, things like improving our assortment mix, and we've also had time to improve level of assortments and we think that will help us. We've also, I think, learned some things in terms of building awareness and our marketing programs that will apply. And I think the third thing that we learned is it does take time when you enter new markets, and we are sort of going in with that philosophy, that we are committed to the market, we know we'll be successful long-term, but it's going to take a few years to build our awareness. In that context, what you should know is, in the next 2, 3 years, the new markets really aren't going to be material. I mean, we're talking about 12 stores in the Chicago area at the end of this year on a base of thousands, so financially, it's not very material commitment. Over a longer period of time, obviously, those stores will be important to us, but for the next few years, they really won't be that significant.

Your next question comes from the line of Marni Shapiro with the Retail Tracker. Marni Shapiro - The Retail Tracker: Could you talk a little bit about some of the non-apparel categories, any updates you can give there? You talked about jewelry and accessories, but have some others, personal care, shoes and things like that. And I was also curious, if you've seen traffic fall off at all since, what I guess they call the CNN effect has taken hold.

Okay. Non-apparel categories, broad question. I'd say we're happy this year with our results. We were happy last quarter with our results, primarily driven by home and footwear, okay? And accessories, as I called out. So we're very happy with that piece of our business. They keep -- it keeps -- those businesses keep becoming a more important part of our total and having more business like that, that are non-apparel, the customers vote a yes. So we think it's -- we're happy. We're building our investment and building our merchant organization there.

Your next question comes from the line of Richard Jaffe from Stifel, Nicolaus. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: I guess a couple of questions on dd. Obviously, a business that's been on a growth tier and with your confidence of building a fair number of stores in the second half, 10 more stores, wondering how the profit outlook looks. Will this be materially profitable this year? I know you've talked about it turning a corner this year. I'm wondering how favorable that might play out to be or how favorable you think it could be. Michael O'Sullivan: Yes, sure. So Richard, yes we've been happy with dd's. The comp performance of dd's has been very good and above-planed, and actually maybe even the biggest story of dd's in the last few years has been how successful we've been in expanding contribution margin. So from a profitability point of view, we're happy with the dd's business and I think as we've announced before, expectation of dd's will be accretive to our -- slightly accretive to our earnings this year. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: Okay. And just if you could remind us the difference between Ross and dd in terms of average unit retail, has that changed at all?

No, the average unit retail at dd's is probably about 20% lower than Ross so it's probably an $8-ish price point while Ross is $10, $11 price point.

Your next question comes from the line of David Mann with Johnson Rice. David Mann - Johnson Rice & Company, L.L.C.: If we could go back to shrink for a moment. I'm curious about if you can talk about the opportunity that you might have envisioned when you embarked on some of these initiatives. And how does the current shrink level maybe compare to where you thought you could be or to some industry standard that you might be benchmarking? Michael O'Sullivan: Sure. A typical question to answer, David. I think we've taken a number of measures that we believe would help improve shrink and they have. We don't know whether we've reached the end of that yet or not. So it's possible we'll see further improvements, but until we take this inventory, it'd be very hard for us to know. David Mann - Johnson Rice & Company, L.L.C.: Okay. And then one of the, I guess, drivers has been the reduction in inventory per store, can you give us a sense when you start looking out to 2012, do you see any or material further opportunity to reduce inventory per store?

Yes. We haven't finalized our inventory plans, but we'll be reducing inventory. David Mann - Johnson Rice & Company, L.L.C.: Inventory per store?

Per store, yes.

Your next question comes from the line of Omar Saad from ISI Group. Omar Saad - ISI Group Inc.: I wanted to ask you guys another question about the Midwest expansion. Obviously, reflects a lot of confidence in the business and the results certainly belie that as well. Can you talk about what really brought you over the top more recently to make that -- to pull the trigger on that after like you said, 10 years of not really moving into a new market? What were the key factors that made you guys really comfortable with that move? Michael O'Sullivan: Yes, Omar, I think our plan has always been to expand geographically. We have 1,000 stores, but we're only in 27 states. And we have a firm belief that customers across the United States will respond well to Ross when they have an opportunity to shop there. So our plan has always been to expand, it's just a question of timing. And over the last few years, as I mentioned before, we've made a number of investments, particularly in merchandise planning but in other areas, too, in preparation for this kind of expansion. So based on that, 2011 is the first year that we'll start expansion. Omar Saad - ISI Group Inc.: Okay. And if I could, could you talk a little bit about the inventory, the pick up in inventory? I know you've been seeing great buys out there and building the packaway, should we be looking for a comp acceleration as this great packaway inventory flows in the stores over time and when we might see that as consumers see the great product and respond at the sale -- at the retail level?

Yes, we are very pleased with finding these bargains and we're very pleased we have them in packaways. But to be talking about further comp acceleration in the current environment, I'm not prepared to do. I would just say this will enhance our ability to do as well as we can in what the environment brings.

Your next question comes from the line of Pamela Quintiliano from Oppenheimer. Pamela Quintiliano - Oppenheimer & Co. Inc.: I had a few questions. I was wondering if you could possibly quantify, when you talk about higher costs, if it's in that 10% to 15% range we're hearing from others? And also along those lines, if the other retailers do -- are actually able to take up pricing, are you going to respond accordingly and take it up while continuing your pricing continuum, and if so, how quickly can you do that?

Okay. I would say, what I've read, produced and from other conference calls, somewhere between, depending on the category, 5% to 7% or 10% to 15%, okay? That's what we see happening in mainstream. Will that happen at Ross? We haven't planned our business that way, okay? They'll be up but not in that manner, okay? Your part 2 was -- could you repeat the part 2, please? Pamela Quintiliano - Oppenheimer & Co. Inc.: If full-line retailer were to take pricing up, would you do so on the comparable product while maintaining that pricing continuum that your business is based on?

Over time, we would look at it, okay? But we wouldn't -- full-line retailers take prices up. They also have a vehicle of POSing it down, so we really have to watch and see how they behave before we respond too rapidly in price increases. Pamela Quintiliano - Oppenheimer & Co. Inc.: So there would be a potential gap then? If they took up pricing, you wouldn't be following right away?

We would ultimately end up in the same value differential, but in the period we were watching this, I would say we won't be up as much. Pamela Quintiliano - Oppenheimer & Co. Inc.: And then if I could just ask one more question regarding -- when you talked about the uptick in availability of inventories in the last month, can you give any further detail on particular classifications? You've mentioned just apparel, men's or women's, shoes, anything like that?

I would say across the board.

Your next question comes from the line of Rob Wilson with Tiburon Research. Rob Wilson - Tiburon Research Group, Inc.: John, can -- does packaway -- the increased use of packaway, does that impact shrink at all?

No. Our shrink happens in the starts not the DCs. So no, it doesn't impact our shrink perspective at all. Rob Wilson - Tiburon Research Group, Inc.: Okay. And in your original guidance in early February, you suggested that depreciation expense would be $200 million to $210 million, but it keeps coming in below LY the first 2 quarters. Do you have a new expectation for depreciation?

No, probably for the decrease in depreciation may be slightly slower capital spending than we had before, so we haven't put out a new perspective on depreciation. Rob Wilson - Tiburon Research Group, Inc.: Well, I guess, to go to capital expenditures, you had a $390 million expectation. Has that been lowered?

It has. So right now, the expectation is about $315 million. We have certain projects that we'll plan to kick off in the fourth quarter this year that will move probably the first quarter, first half of next year. Rob Wilson - Tiburon Research Group, Inc.: Okay. You said $315 million, 3-1-5?

That's correct.

Your next question comes from the line of Mark Montagna from Avondale Partners. Mark Montagna - Avondale Partners, LLC: Just a couple of questions about shrink and your open-to-buy. Regarding open-to-buy, can you give us a order of magnitude as to how much bigger your open-to-buy for the second half is compared to last year? And then as far as shrink, you've pulled a lot of levers over the years to benefit the shrink in terms of changing your procedures. Is the last key lever that remains continuing to -- is it to continue to reduce in-store inventories?

Those open-to-buy, I would answer it this way, it's significantly more than a year ago.

On the shrink, reducing inventories, there's been a clear relationship to our shortage reductions. But as we've implemented new initiatives, a couple of things have become clear to us. One, we can always execute those initiatives better and are hopeful that we'll see improvement when we do that. And two, as the shortage is reduced, we see new opportunities to target. So as we continue to move on, we're hopeful that we'll do better. Mark Montagna - Avondale Partners, LLC: All right. Just a follow-up question, last question in terms of costs, clearly apparel costs have gone up, but can you give us an order of magnitude on comparing the rise in apparel costs versus maybe the rise you're seeing in footwear costs?

Apparel, sizably more.

Your last question comes from the line of Dana Telsey with Telsey Advisory Group. Dana Telsey - Telsey Advisory Group LLC: Michael, can you talk a little bit about compared to 2008 when we saw a period of weakness, how is this time different of what you're seeing in product availability? Is it different in terms of quantity, product categories, pricing?

Okay. It's -- I'd say the biggest difference is the level of availability, okay. Just how much is out there, okay. And I think part of it is -- 2008 is just pretty recent news for everyone. So I think retailer manufacturers just lived through this and they're acting -- they're going to act somewhat quicker than they have in the past. I think everyone's learned their lesson. Dana Telsey - Telsey Advisory Group LLC: And as you see pricing, is the pricing different this time than how you compare with the department stores?

I'm not exactly sure what you mean by that. We know department stores' pricing is going up, so tell me what you're looking for. Dana Telsey - Telsey Advisory Group LLC: Right. So what I mean by that is, is your pricing going to be even more competitive this time than it's been in the past?

That would be our plan. That would be how we're trying to do it. Dana Telsey - Telsey Advisory Group LLC: And with having dd's in the mix now, does that differentiate the margins complexion of the company?

I don't think so. I don't think so.

There are no further questions at this time. I'll turn it back over for closing remarks.

Thank you for joining us today and for your interest in Ross Stores. Have a great day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.