Good morning, and welcome to the Ross Stores First Quarter 2012 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 expectation 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 2011 Form 10-K and fiscal 2012 Form 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. Joining me on our call today 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, Group Senior Vice President and Chief Financial Officer; and Bobbi Chaville, Senior Director, Investor Relations. We will begin with a brief review of our first quarter performance, followed by our outlook for the second quarter and fiscal year. We'll conclude with some comments about our longer-term growth prospects. Afterwards, we'll be happy to respond to any questions you may have. We are pleased with our much better-than-expected financial results in the first quarter. Our robust sales and earnings were driven mainly by our ongoing ability to deliver a wide array of fresh and exciting name-brand bargains to today's value-focused consumers. In addition, we believe that favorable weather across many of our markets also contributed to our above-planned performance. Our ability to operate our business with lower in-store inventories and strictly controlled expenses also continued to enhance both sales and profit margins. Earnings per share for the 13 weeks ended April 28, 2012 were $0.93, up from a split-adjusted $0.74 in the prior year. These results represent a 26% increase on top of a 28% gain in the same period last year. Net earnings for the 2012 first quarter grew 21% to $208.6 million. Sales rose 14% to $2,357,000,000, with comparable store sales up 9% on top of 3% growth in the first quarter of 2011. Merchandise and geographic trends were broad-based. Juniors and Accessories were the best-performing categories, while Florida remained the top region. Earnings before interest and taxes grew to a record 14.4% of sales, up about 70 basis points on top of an exceptional 160-basis point increase in the prior year. Our improved profit margin versus last year was driven primarily by leverage on expenses from the strong gains in same-store sales and higher merchandise gross margin. John will provide some additional color on these operating margin trends in a few minutes. As we entered the first quarter, total consolidated inventories declined about 3% compared to the prior year, mainly due to lower packaway levels that were about 45% of total inventories, down from 48% at this time last year. More importantly, average in-store inventory declined about 9%. For the balance of the year, we are targeting a mid-single-digit percentage decrease in selling store inventories compared to 2011. Like Ross, dd's is also benefiting from our ability to flow a larger percentage of fresh product to our stores by operating on lower inventory levels. dd's above-planned sales and margin in the first quarter reflect that its merchandise offerings continue to resonate well with its value-focused customers. Our store expansion program is on track, with a total of about 80 locations scheduled to open during 2012, comprised of 60 Ross and 20 dd's DISCOUNTS. Now John will provide further color on our first quarter results and details on our second quarter 2012 guidance.

Thank you, Michael. Our 9% comparable store sales gain in the first quarter was driven by mid-single-digit growth in the number of transactions, combined with the low-single-digit increase in the size of the average basket. Again, operating margin grew by about 70 basis points in the quarter to 14.4%. Leverage on the robust 9% comparable store sales gain drove a 55 basis point reduction in selling, general and administrative expenses, while cost of goods sold as a percent of sales was 15 basis points lower than the prior year. Merchandise margin grew by 35 basis points, including 10 basis points from a lower shrink accrual, while occupancy expenses levered by about 20 basis points. These favorable trends more than offset higher distribution costs of 20 basis points related to packaway timing and 10-basis point increases each in freight and buying cost. The 55 basis points of improved SG&A was driven mainly by lower store expenses as a percent of sales. During the first quarter, we repurchased 2 million shares for a total purchase price of $111 million. We remain on track to buy back a total of $450 million in common stock during fiscal 2012 to complete the 2-year $900 million program authorized in early 2011. Let's turn now to our second quarter guidance. For the 13 weeks ending July 28, 2012, we now are targeting in-store sales to increase 3% to 4% on top of a 5% gain in the prior year. Second quarter 2012 earnings per share are forecast to be in the range of $0.72 to $0.75. This represents projected EPS growth of 13% to 17% on top of a 20% increase in the prior -- in the second quarter of 2011. Our second quarter 2012 EPS targets are based on the following assumptions: Total sales are expected to grow about 8% to 9%, driven by a combination of new store growth and as I just mentioned, same-store sales are forecast to be up 3% to 4%. We plan to open about 28 net new stores during the period, including 21 Ross Dress for Less and 7 dd's DISCOUNTS. Comparable store sales are forecast to increase 4% to 5% in May, 3% to 4% in June and 2% to 3% in July. Last year, same-store sales rose 4%, 5% and 7% in May, June and July, respectively. We are targeting operating margin of 11.9% to 12.1% for the 2012 second quarter, up 20 to 40 basis points from 11.7% in last year's second quarter. An increase in merchandise gross margin, combined with leverage on selling, general and administrative cost, is projected to drive the operating margin improvement. Net interest expense is planned to be approximately $2 million, and our tax rate is expected to be about 39%. We also estimate weighted average diluted shares outstanding of about 224 million. Now I'll turn the call back to Michael.

Thank you, John. As noted in today's press release, we are raising our 2012 guidance, with earnings per share for the 53 weeks ending February 7, 2013 now forecast to be in the range of $3.26 to $3.37. This compares to our prior guidance of $3.12 to $3.27 and earnings per share of $2.86 in fiscal 2011. The 53rd week in 2012 is projected to add about $0.08 to $0.09 to earnings per share. We are confident in our ability to meet these targets for a couple of reasons. First, we remain well positioned in the off-price space in the current retail environment. Equally important is our strong belief that we can continue to diligently execute the most critical strategic initiatives of our business. These include ongoing investments in our merchandise organization, further reductions to inventories in our stores and our continuing efforts to fine-tune and implement systems and processes that strengthen our ability to get the right merchandise to the right store at the right time. In addition, we are pleased to report that our accelerated growth into new markets for Ross Dress for Less remains on plan. We initially entered Illinois last October with 12 stores in the greater Chicago area, followed by openings in Arkansas and Missouri. During the balance of 2012, we expect to add more locations in these 3 states while also entering Kansas, Kentucky and Indiana for the first time. We also are now even more bullish about our total expansion prospects over the longer term. As noted in today's press release, we have increased our long-term projected store potential to 2,500 locations in the United States. Our current in-depth research and proven ability to cluster stores closer together indicate that we can more fully saturate existing and new markets. As a result, we currently believe that Ross Dress for Less can grow to approximately 2,000 locations across the country, up from our prior target of 1,500. We also continue to project that dd's DISCOUNTS can become a chain of about 500 stores. Combined, this means we have the ability, over time, to more than double the size of our company domestically, an exciting prospect. At this point, we would like to open up the call and respond to any questions you may have.

[Operator Instructions] And your first question comes from the line of Kimberly Greenberger with Morgan Stanley.

Michael, I'm wondering what analysis, if you could share with us, you performed to assess the real potential of Ross Stores. And obviously, we can look at the map and the geographical exposure and see there's so much more potential here in the United States. But maybe you could just share with us a bit of the analysis behind how you determine the long-term potential for your store base and what was it that in particular drove the update to guidance today. That would be great. Michael O'Sullivan: Kimberly, it's Michael O'Sullivan. I'll answer that question. There are really 2 sets of things that we did. The first was we looked at the market that we currently operate in, in terms of number of stores per population, and we looked at broader demographics in terms of in our target customer and how many of our target customer are within each market. And then, we tried to make an assessment of what the real estate opportunities would be in each market. And then, we built it up, so bottom-up market by market to come up with sort of the updated estimate, which, as Michael described, went from 1,500 stores to 2,000. The other point I would make though is we also -- we've taken a look at the success that we've had over the last several years in some of our newer markets, the Southeast and the mid-Atlantic that, again, that gave us confidence in terms of some of the density estimates that we've used to come up with the assessment.

Your next question comes from the line of Paul Lejuez from Nomura.

Just wondering when you look at the Chicago market and the 12 stores that you opened in Illinois, how many are hitting plan versus above plan? And I guess, I'm just wondering given that, that market tends to be a little bit more weather-sensitive than some of your other regions, how do you feel you guys did in terms of getting that right product in those stores at the right time? Michael O'Sullivan: So Paul, as Michael mentioned, we opened 14 stores in October in new markets. 12 of those were in Chicago, and then we opened another 4 in new markets this past March. And so far, I mean, I would caution you, it's still pretty early. I mean, those stores have been opened 6 or 7 months. But so far, we're pretty happy with how the openings have gone. And I'm basing that not just in terms of sales, but also all of the customer research that we've done and feedback that we've had from the customers. So we're pretty happy with how those stores have gone so far. I think the more important point is everything we see in terms of what we've learned in that market sort of reinforces, for us, that we're going to be successful in those new markets long term. So we're feeling pretty good. The final aspect of your question, have we learned anything or seen anything in terms of were there patterns or assortment issues, nothing out of the ordinary. I think we've planned the market pretty well. We feel pretty happy about our plans. Now, there are some tweaks we're going to make to the assortments, but nothing different than what we would do with most new stores. But I think we're pretty happy with how things are going.

And in terms of a great -- you asked about how we assess our assortments, right, give us a good -- okay, we see a lot of opportunity to keep improving there based on learnings that we've gotten so far, both statistically and visually.

Got you. And how many of the 500 incremental Ross stores should we look at as being fill-in and more part of a cluster strategy, as opposed to new markets? Michael O'Sullivan: The break -- I think we need to go back and look at that breakout, Paul, in terms of which are in existing markets versus which are in new. So let us take a look at that.

Your next question comes from the line of Rick Patel with Bank of America.

So packaway inventories declined on a year-over-year basis as a percentage of total inventory and in dollars. So can you just help us think about the implications of that? Are you seeing less compelling product in the marketplace than you did versus last year? Does it have to do with changes in product cost? And then, how do you expect the packaway inventories to trend as we go through the year?

It's hard to say how they'll really trend through the year just based upon opportunities. We're seeing buying opportunities that are actually improving significantly as we move through the season. Part of the reason our packaway level is a little below last year is we're, so far, exceeding our sales plans that we've pulled some of that forward into our stores. So I think and some of the product also that might have went to packaway has flowed directly to our stores now. So packaway, keep in mind is some of the best product that we can buy and is close outs. And we expect, based on market conditions that we're seeing at certain levels of retailing, that there's going to be a sizable amount of product, and we're seeing that bust open at this point.

Okay, great. And then, a question on your longer-term real estate targets, can you just drill down a little bit and talk about how much -- how many of these locations are A quality versus B and C? And then how should we think about the sales productivity and 4-wall margins of these stores that you can build out over the outer years? Michael O'Sullivan: On the first part about breaking out by type of real estate, very hard for us to predict. Obviously, in order to make the cut, in order to sort of be included in our assessment, these would have to be locations that we believe we'd be successful in. Sorry, what was the second part of that, apart from the real estate ratings?

Yes, how should we think about sales productivity and 4-wall margins of your incremental stores as you think about the longer-term time horizon? Michael O'Sullivan: Sure, we would expect these stores, over the long term -- obviously, in our first few years, they take a few years to ramp up. But over the long term, we'd expect them to sort of hit our corporate targets and sort of be in line with sort of what we have today.

Your next question comes from the line of Jeff Klinefelter from Piper Jaffray.

Michael, I just had a question on some of the product trends. I mean, Juniors and Accessories standing out as top-performing, I think that's great and in some cases, in contrast to some of the other kind of moderate department stores' own trend. Just curious if that's -- any other context around it or any other detail around it? Tops versus bottoms, are you seeing it broad-based across those categories? And specifically on color, I think we're all hearing about color driving business right now in fashion and some others are kind of caught behind and chasing that color product. Just curious given your packaway business model, how you're dealing with that kind of quickly up-trending product category.

Okay. Well, color is the key fashion component this season. And in our business, when we really want to get current in color, something like that, that really is done in more upfront product rather than packaway. It wasn't there last year. And in all likelihood, we probably would not be buying into that for packaway for 2 reasons: one, it would be less available; and two, it would be more risky. Of course, the successful colors today aren't necessarily going to be the right ones for next spring when you have the fashion shift that we're going through. So the color is driving the business in the areas you said and beyond in the store.

Okay. And then, in terms of just keeping up with that and potentially chasing it into -- all the way through the summer, eventually into fall, that's something that you feel very comfortable you can keep up with, with upfront buys in your current market?

To a degree, to a degree, okay? Those -- so where we've seen the fashion trends early enough and we're able to buy into it, the answer is obviously yes, and there are certain pockets where we didn't. Remember, the market is -- on color, there's a certain level of clothes out that are available, and it's probably not enough to fill everyone's pipeline. So we think we'll have an adequate level, okay? It's probably the best way to answer it.

Your next question comes from the line of Evren Kopelman from Wells Fargo.

I wanted to ask about -- what's impressive is your ability to run your stores and comp positively with the lower inventory levels. Can you talk about what kind of changes you have made so far in your supply chain and distribution? Is there further investments you need to make to continue with the strategy? Michael O'Sullivan: Evren, it's Michael O'Sullivan. In terms of additional investments, I think we've mentioned before that over the next few years, we expect to open up a couple of major additional distribution centers to keep pace with our growth. So that's the forward-looking piece. In terms of the changes we've made over the last 5 or 6 years, we've made a number of adjustments to how we process goods in our DCs and how we flow those goods from the DCs to the stores to try and speed up that process and get that in-transit time down as low as possible. And I think that certainly contributed to our ability to carry that inventory in the stores.

I would also add that the investment in dollars and processes and people that we put in place in planning at a more localized level also has helped to make our ability to turn our merchandise faster and have the right product in the right store at the right time possible.

Your next question comes from the line of Adrianne Shapira from Goldman Sachs.

I was just wondering -- I mean, we obviously saw a clear step function, higher in your comp growth this quarter to the 9% range. I'm just wondering if you could shed some light what you're seeing out there on the competitive landscape. Clearly, we're seeing some share shifts across the mid-tier department stores -- what you're seeing, and is there anything that you can read where you're getting a disproportionate share in terms of overlap with some key competitors?

I think that overlap of share is hard for us to quantify. I think we're fortunate in our performance that we had for the first quarter. Certainly, weather aided us and as you said, some shifts that are going on in the mid-tier. We think about this, although it's hard to quantify. Michael O'Sullivan: The one thing for sure, with a 9% comp we're obviously -- we are pulling in customers. We're pulling in business from someone. But as Michael said, it's hard for us to give you a breakout of where that's coming from.

And then, just following on that, given that there does seem to be some shifting in the competitive landscape, what, if anything, are you seeing in terms of the pricing structure? Are you seeing a more intense, progressive response as everyone is looking to grab some of that available share?

I think pricing is pretty aggressive out there. I think it's a fairly promotional time frame. I don't -- I think people are, as you said, trying to grab share from -- and trying to position themselves in the shifts that are going on.

And so then the follow-on to that is, given that aggressive environment, how do you think about merchandise margins going forward for the remainder of the year?

So we'd look to take our inventories down probably in the single-digit stature, and that should help us with turn and clearance balances, so you'll see a positive there. I'd also remind everyone that in the third quarter over the past several years, we have had nice baskets from our shrink results. We haven't planned any such benefit this year over and above our accruals. So having said that, those 2 elements for the remainder of the year -- for the year would see our gross margins being flattish. Merchandise margins being flattish, assuming we don't do better in shrink than we have planned.

Your next question comes from the line of Laura Champine from Canaccord Genuity.

I just had a question about the timing of the disclosure that you have more square footage opportunity than we'd previously thought. And also, Michael, you mentioning the new states where you're operating, should we be thinking about a step-up in the percentage growth for your store units as we move into 2013 and beyond? Michael O'Sullivan: So Laura, I mean, right now there's 2 pieces. So in terms of the store potential that Michael referenced, the 1,500 stores to 2,000 stores. Obviously, that's our long-term potential, and we look at that periodically. And based upon a number of factors over the last few years, we felt that it was appropriate to raise that number. Now there's a separate issue which you're referencing, which is our unit count growth or our store count growth. And that's been running at around about 6% to 7% per year, so about 70 stores -- 70 new stores a year, which is what we'll open this year. And again, separately, we look at that periodically, and from time to time, we'd watch if we hit. I think it's unlikely that we'd make any radical changes to that number. For your modeling process, it's unlikely that, that would change radically. But it's certainly possible that it would get tweaked over time. But those 2 things are separate assumptions, separate issues.

Your next question comes from the line of David Mann with Johnson Rice.

In terms of the dd's performance, can you update any details of how they're doing and what kind of contribution we should expect this year? Michael O'Sullivan: Sure. So David, as you know, dd's has been fairly profitable for the last couple of years, it's been accretive to our earnings. And dd's in 2011 saw a pretty significant increase in profitability. dd's has benefited from a similar approach to what we've taken at Ross in terms of lowering inventory levels and using that to drive margins and drive sales. So given that improved profitability, we've seen that continue into Q1, and we expect dd's contribution to continue to improve in 2012.

And John, the distribution cost issue tied to packaway, how should we think about that in the guidance for the rest of the year?

So we had a 20-basis point exposure in the first quarter based on the packaway timing. As we look to the year, we see costs being relatively flat, and we don't see -- again, if packaway comes in as planned, although we're optimistic about what those levels might be. But if it comes in as we have it planned, we see really no impact in any significant quarter throughout the year.

And in -- one last question on freight costs, do you now expect that to delever this year?

Slightly. So we're up against some headwinds in freight. Fuel is up a bit. First quarter, we had some mix issues. But I think we've got some slight headwinds in freight.

Your next question comes from the line of Marni Shapiro with The Retail Tracker.

If you could just -- I believe you mentioned that the basket was up. I was just curious if you're seeing that more in units or if its cost per unit -- the number of units or cost per unit. And if you can just talk a little bit about traffic. Are you seeing your core consumer come in more frequently? Or are you still seeing new customers come into the store?

In terms of the first piece of that, Marni, we're seeing actually the basket of the FG [ph] in retails are up a little bit, but most of it is -- the preponderance of it is based on traffic. Michael O'Sullivan: And in terms of the traffic itself, Marni, it's a mix. It's new customers and existing customers that are coming to the store more often or spending more when they come to the store.

Your next question comes from the line of Richard Jaffe from Stifel, Nicolaus.

Just as a follow-on, obviously, margins are improving despite a little bit of a decline in the packaway, your best business, as you described it, your highest margin merchandise category. And so I'm wondering what's changed in your buying methodology or what you see different in the marketplace that's helping you fuel some significant improvement in the merchandise margins, not only good but even better to offset some of the costs on the freight buying side.

I'm not -- could you repeat that question?

Why are the merchandise margins up so much?

That would be good bargain.

I think, also, Richard, inventories were down, turns are faster. So clearance is down and we had lower markdowns. So that trend has continued, and we expect it will continue in the future. As it relates to packaway, as Michael alluded to, we were chasing a nice comp in the quarter, so we used some of that packaway to chase back to that comp. Our philosophy around packaway hasn't changed.

I understand, it just -- it means that your buying was even better. And I'm just trying to understand at what end of the equation was it better, in the marketplace or in the stores, the faster turns.

It's a combination.

Your next question comes from the line of Roxanne Meyer from UBS.

A couple of questions. I'm just curious, Juniors has been strong for a while now, and I'm just wondering if the spread has been widening lately between Juniors and some of your other categories. Or have you seen pretty much broad-based strength in your recent comp acceleration? And then, as it relates to your expansion strategy, are there any major markets included now that weren't there before? And do you have any plans to change average store size?

Juniors has been strong for a while, and its distance from other business is relatively constant. Michael O'Sullivan: And then in terms of expansion markets. The answer to your question is no, there's no additional markets that weren't there before. I mean, we're in -- we're currently in 29 states. As you can imagine, to get to the 2,000 stores that Michael described as our sort of estimated full potential, we have a plan to sort of over time expand into additional markets and additional states. But there's no real change to, I guess, that sequence in terms of which markets we're moving to first. And then in terms of the average store size, we frequently look at average store size, and we actually prefer [ph] to be flexible based upon real estate availability about store size that we'll take. But no major changes to average store size at this point.

[Operator Instructions] And your next question comes from the line of Mark Montagna from Avondale Partners.

I've got 2 questions. Was wondering, regarding demographics, are you seeing any changes in terms of your customer demographic with regard to age and income? And then also, with the 2,000 store count, does that include any expansion towards more rural-type locations? Michael O'Sullivan: Sure. So Mark, in terms of demographics, we slice and dice our business all the time by demographic: age, income, ethnicity, et cetera. No real call-outs there. I think we're pretty happy with how we're doing across various demographic segments. What all of our customers have in common is they love a bargain, no matter what the demographics are. And consequently, our business has been driven -- has been broad based in terms of the customer mix. The second part of your question in terms of getting to the 2,000 store count potential, I would say that the mix of urban and rural stores would be much the same as it is for our chain at the moment. I mean, we're not -- it doesn't represent any kind of [indiscernible] in terms of that mix to get to the full potential.

Again, by rural, what I'm talking about is more taking a step further out in your normal geography. So you're not taking any further step out to smaller towns than is normal? Michael O'Sullivan: There's no assumption of that in the estimates that we've given, no.

Your next question comes from the line of Brian Tunick with JPMorgan.

Two questions. I guess, was curious if you could maybe talk about the differences in the 4-wall margins between the dd's and Ross and sort of what would be the differences in margin there. And then, maybe also on the third quarter, are you guys updating your guidance at all on how you think the shrink will play out given how strong your inventory turns and your above-planned sales have been here in Q1? Michael O'Sullivan: Sure. On the dd's piece, Brian, dd's 4-wall contribution is very similar at a store level to Ross, and let me define 4-wall contribution as strictly 4-wall, gross margin, less store-related expenses. When you do that math for a dd's store and you do that math for a Ross store, you end up with a very similar number.

And Brian, as it relates to Q3 and quite frankly, the back half of the year, we would typically update that and review that with our second quarter earnings call when we have more visibility in that period.

Your next question comes from the line of Patrick McKeever from MKM Partners.

Understanding that it is difficult to say where the market share gains are coming from, are you seeing stronger sales at stores that are located near a Penney store or in markets where Penney's has more stores? Michael O'Sullivan: So Patrick, I think that's a good question. So that is something we've looked at. I go back to a point we were talking about a moment ago. With a 9% comp, we know we're taking share from somewhere. As we've looked at where it's coming from -- so think about the retail market, your power retail market, is it's very fragmented from a competitive point of view, so the customer has lots of choices, lots of places they can shop for value. So we know if we deliver value to the customers, we'll draw shoppers. We'll draw customers from a range of different retailers. To answer your question, as we've looked at our stores that are near a J.C. Penney or near other mid-tier stores, they're doing very well. So we also look at our stores that aren't near J.C. Penney and they're doing very well, too. So it's hard for us to give you an exclusive answer in terms of quantifying where we're getting our share gains. Suffice to say that with a 9% comp, they're coming from somewhere.

Have you or do you plan to do -- to make any adjustments in your marketing to pick up more share or to go more aggressively after those customers?

No. Our marketing position is just working.

And then, just a second quick one, product costs. I mean, we're hearing from other retailers about some declines they're looking into the back half of the year, maybe in the mid-single-digit area. I mean, is that consistent? Are you seeing any -- that same kind of dynamic? I mean does that...

Of course, in many categories, not all. And in some cases, it can be a little better than that; other cases, not quite as much. I mean, labor costs are going up. Much of our product is going up. In some cases, that mitigates some of it. So it's a little bit of a mixed bag, but we are seeing some modest improvement.

And you would view that as favorable to your model?

No. Remember, we price off -- we have to price off of how mainstream retailers are pricing. So if they drop their prices accordingly, then it really doesn't mean much for us.

Your next question comes from the line of Dana Telsey from Telsey Advisory Group.

You mentioned in the new store targets you're talking about that some of the stores are going to be put closer together. How are you modeling -- or size of stores, sales productivity of stores, how should we think about the breakeven cost to open stores in this new prototype for both concepts? Michael O'Sullivan: Dana, in terms of getting to that 2,000 store potential, we actually haven't made an assumption that stores will necessarily be denser in that style. What we've done is we've looked at places where we don't have stores or places where we have opportunity to backfill [ph] stores. And based upon what we already know in terms of how many Ross Stores a certain market can support and based on what we already know about Ross store volumes and the possibility of those stores, that's how we built up the 2,000. We haven't stretched it out and said can we load in even more stores than we currently operate in certain markets or can we achieve sales productivity levels that we don't currently achieve. We've really modeled it on what we've already achieved in terms of individual store performance. And then as I said, we looked at places where we don't have stores or places where we know we have backfill [ph] opportunities for additional stores.

Is there a time frame to get to this number? Michael O'Sullivan: Well, we have approximately 1,100 stores right now. Given that our pace of new store growth is around 70 stores a year, to get to 2,000, it's a long way off before we would -- before we hit that potential.

[Operator Instructions] Your next question comes from the line of Daniel Hofkin from William Blair & Company.

I guess just one follow-up question to, I think, Brian's question about the guidance. Taking up the full year guidance by, I think, roughly $0.03 additional above and beyond what you beat the first quarter by from your original guidance, is that primarily just with a strong visibility here early in the second quarter? Or is there something else that's playing into that? That would be my first question.

Sure. So we guided the year to 1 to 2 comp. With our first quarter results and our anticipated second quarter comp, that would put the year to 3 to 4 comp. So it's really a function of first quarter results and our anticipated second quarter results that is informing us on what the total year may look like.

Okay. And with regard to margins and product costs and your comment earlier about the promotional pricing environment, are you seeing that -- you described it as intense, are you seeing it as more intense than, I guess, the preholiday period last year?

No, no, no. Preholiday last year was a whole another world, okay? This is more intense than a year ago at this time.

When I say preholiday, I guess, I mean prior to the fourth quarter of last year in other words.

It's a little more intense than that, yes. Yes.

Okay. But you feel like from a product -- given that you need to price on a relative basis compared to full price, do you feel like on a relative basis the product cost picture, the procurement cost is favorable enough that the spread is neutral, would you say? Or how would you describe that?

It's neutral to favorable.

I'm showing there are no further questions at this time. I'll turn it back over for any closing comments.

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

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