Good afternoon, and welcome to the Ross Stores Third Quarter 2014 Earnings Release Conference Call. [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 2014 Form 10-K and fiscal 2014 forms 10-Qs and 8-Ks on file with the SEC. Now I'd like to turn the call over to the company's Chief Executive Officer, Barbara Rentler.

Good afternoon. Joining me on our call today are Michael Balmuth, Executive Chairman; Michael O'Sullivan, President and Chief Operating Officer; Gary Cribb, Executive Vice President, Stores and Loss Prevention; John Call, Executive Vice President, Finance and Legal; Michael Hartshorn, Senior Vice President and Chief Financial Officer; and Connie Wong, Director of Investor Relations. We'll begin with a review of our third quarter performance, followed by our outlook for the upcoming holiday season, after which, we'll be happy to respond to any questions you may have. As noted in today's press release, we are pleased with our better-than-expected performance in the third quarter. Our results benefited from our ongoing ability to deliver compelling bargains to our customers, which drove above-plan sales gains and strong merchandise gross margins. Earnings per share for the third quarter of 2014 were $0.93, up 16% from $0.80 in the prior year. Net earnings for the quarter were $193 million, up from $172 million last year. Sales rose 8% to $2,599,000,000, with the comparable store sales up 4% over the prior year. For the first 9 months of 2014, earnings per share were $3.22, up 13% from $2.86 for the same year-to-date period in 2013. Net earnings grew to $676 million, up from $619 million for the first 9 months of 2013. Sales increased 7% to just over $8 billion, with comparable store sales up 2% over the same period in 2013. Similar to Ross, same-store sales at dd's DISCOUNTS increased for the quarter and year-to-date periods, as their customers also responded favorably to dd's' value offering. Juniors and Home were the strongest businesses at Ross during the quarter, while the Midwest and Texas were the top-performing regions. Operating margin of 11.8% was up about 55 basis points over last year due to a 40-basis-point improvement in cost of goods sold and a 15-basis-point decline in selling, general and administrative expenses. Michael Hartshorn will provide additional color on these operating margin trends in a few minutes. As we ended the third quarter, total consolidated inventories were up 5% over last year, while packaway levels were 42% of total inventories compared to 45% at this time in 2013. Average in-store inventories were down 2% at the end of the quarter, and we continue to target selling store inventories for the balance of the year to be down 1% to 2%. We also completed our 2014 store expansion program during the third quarter. After closing some older locations at year end, we expect to end fiscal 2014 with 1,210 Ross and 152 dd's DISCOUNT locations for a net addition of 86 new stores this year. With respect to infrastructure investment, we closed on the purchase of our New York buying office property in September as planned, financing the transaction with proceeds from our recent public bond offering of $250 million. During the quarter, we also brought online a new distribution center in Rock Hill, South Carolina. While these investments create some expense headwinds in the short term, we are confident they will enhance our prospects for the continued profitable growth to our enterprise over the longer term. Now Michael Hartshorn will provide further color on our third quarter results and details on our guidance for the fourth quarter and the year.

Thank you, Barbara. Our 4% comparable store sales gain in the third quarter was driven by a combination of slightly higher traffic and an increase in the size of the average basket. As Barbara noted, third quarter operating margin grew 55 basis points to 11.8%. Cost of goods sold improved by 40 basis points, benefiting from a 55-basis-point increase in merchandise gross margin and a 5-basis-point improvement in distribution costs due to the timing of packaway-related costs. This was partially offset by a 10-basis-point increase each in freight and buying. Selling, general and administrative expenses improved by about 15 basis points during the period, mainly due to the leverage on the 4% same-store sales increase. During the quarter, we bought back 1.9 million shares of common stock for a total purchase price of $141 million. Year-to-date, we have repurchased a total of 5.9 million shares for an aggregate price of $418 million. We remain on track in 2014 to repurchase a total of $550 million in common stock, which would complete the 2-year, $1.1 billion authorization approved at the beginning of 2013. Let's now turn to our guidance for the fourth quarter. As noted in today's press release, for the 13 weeks ending January 31, 2015, we continue to project a 1% to 2% increase in same-store sales and earnings per share in the range of $1.05 to $1.09. This compares to $1.02 for the 13 weeks ended February 1, 2014. For the fourth quarter of 2014, operating statement assumptions include the following: Total sales are forecast to increase 5% to 6% on the previously mentioned 1% to 2% projected increase in same-store sales. If sales are within this range, we would expect fourth quarter operating margin to decline about 30 to 50 basis points to 12.2% to 12.4% on relatively flat merchandise gross margin with some deleveraging on expenses. As previously mentioned, buying and distribution costs are forecast to increase as a percent of sales due to the acquisition of our New York buying office and the ramp-up of our new distribution center in South Carolina. In addition, we are planning about $2 million in net interest expense in the fourth quarter mainly related to our aforementioned bond offering. Our tax rate is expected to be 37% to 38%, and weighted average diluted shares outstanding are estimated to be about 207 million. Again, if the fourth quarter sales and margin perform in line with our forecast, then we project that earnings per share for the 52 weeks ending January 31, 2015, would increase 10% to 11% to $4.28 to $4.32. Now I'll turn the call back to Barbara.

Thank you, Michael. To sum up, our ongoing focus on delivering compelling bargains on name-brand fashions for the family and the home have driven respectable sales and earnings per share growth in the first 9 months of the year. It's important to note we achieved these gains in a very challenging climate for apparel retail, especially given the ongoing difficult and volatile macroeconomic backdrop that continues to especially pressure the low- to moderate-income customer. Looking ahead, we are pleased with our assortments as we enter the important fourth quarter. Our merchants have done a terrific job of acquiring a wide array of exciting and sharply-priced name-brand fashions and gifts to appeal to today's value-driven shoppers. That said, we believe it is prudent to maintain a cautious outlook as we have all year, given continued uncertainty in the overall environment and the likelihood of an intensely competitive and promotional holiday season. To address these headwinds, we will stay focused on operating our business with lean selling store inventories and tight expense control. As always, our most important priority is our unwavering commitment to offering our customers the best bargains possible. We are confident that the investments we are making in infrastructure, people and processes will further strengthen our ability to deliver the value our customers expect. As we have said a number of times, consistently delivering on this mission will always be the key to maximizing our potential for future sales and earnings growth over both the near and the long term. At this point, we would like to open up the call and respond to any questions you may have.

[Operator Instructions] Your first question comes from the line of Lorraine Hutchinson of Bank of America Merrill Lynch.

I just wanted to ask about your fourth quarter merchandise margin guidance of flat. Is there an opportunity there, given the decline that you saw in the fourth quarter of last year on the gross margin line? And anything to call out as opportunities there?

Lorraine, this is John. As Barbara mentioned, similar to how we've operated during the year, we are entering the quarter cautiously, optimistic that if things go our way, we can do better. So I wouldn't read anything into the -- in terms of how we have it planned flat. We think we do have some upside if we can operate into what looks to be a very, very competitive fourth quarter.

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

Can you just talk a little bit about -- we heard a lot of noise about the weather, and I know it's not something that's usually a big deal for you guys. But now that you're in the Midwest and we're coming up against a very cold third quarter of last year, can you think -- can you talk a little bit about the Midwest and how you're thinking -- how the third quarter was and how you're thinking about this winter versus last winter? Michael O'Sullivan: Yes, I guess -- Marni, it's Michael O'Sullivan. Let me cover that with 2 points. First of all, in terms of weather, weather can always be more or less favorable, especially at this time of the year going into the fourth quarter. Certainly, in the third quarter, weather really wasn't a factor. We don't know what's ahead of us in the fourth quarter from a weather perspective. In terms of the Midwest, more broadly though, we've been very happy with how we performed in the Midwest over the last few quarters. And I think we've mentioned almost a year ago that we were unhappy with some aspects of the Midwest, particularly the assortments. And we don't think those were -- those problems were caused by the weather. They were caused by internal issues in terms of how we plan those assortments. We've corrected those, so we're hoping to do better. And as we go into the fourth quarter, we'll have to find out whether those things have paid off or not.

Fantastic. And if you could just give us an update as well on the Accessories part of the business, any color around it?

The Accessories business, the first half of the year really struggled, but we saw in the third quarter that we've seen some improvements. It's still trailing the chain. We feel a little bit better about it in the fourth quarter, and we expect to be back on track by spring of '15.

Your next question comes from the line of Paul Lejuez of Wells Fargo.

As you're thinking about growth, store growth for next year, I'm just wondering how you're thinking has evolved in terms of the optimal store size as you continue to grow both in existing and new markets. Have you thought any differently about what is the right size for any given store, considering that you've been able to take a lot of inventory out of the stores over the last couple of years?

Sure, Paul, I'll take that. This is Gary. We have looked at our store prototype, and we have a very flexible model that allows us to take advantage of real estate opportunities as well as right sizes in any particular location.

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

I'm just wondering if you can let us know how you assess that the promotional environment will be more competitive this Q4 than it was a year ago. Is it just the pace of the promotions? Or how do you look at your competitive set?

We are anticipating that the promotional environment will be much more aggressive. And we look at 2 things: we look at the pace, the amount of times that our competitors promote; and we also look at the depths that they promote. Since we're in the value business off of mainstream retailers, we're constantly monitoring that.

Your next question comes from the line of Daniel Hofkin of William Blair & Company.

I guess, one question I would have would be, I know it's still somewhat early in this, but with gas prices coming down, how big a benefit do you think it was in the tail end of the quarter? And is that something that you think could be a potential source of upside in the fourth quarter if things kind of hold where they are right now, not assuming they continue to go down, but... Michael O'Sullivan: Yes. Daniel, I guess, conceptually, lower gas prices, in fact, anything that puts more money in the customers' pockets is a good thing. But it's very difficult for us to isolate a single variable like that, like gas prices. There are so many other factors, some good, like the decline in unemployment rates or the anniversary-ing of cuts in government programs; but some bad factors as well, like the increase in part-time work or the lack of wage growth for low-income workers. So we're not economists, so it's hard for us to sort of calibrate those things and trade them off against each other. So we really don't know to what degree gas prices helped or to what degree they'll help going forward.

Okay. And then, can you talk about maybe some of the other regional performance? You talked about the best regions, what were -- if there were any regions that were below the chain materially. And same thing on the merchandise side in terms of the other categories that maybe performed not as well or better than average. Michael O'Sullivan: Sure. On the regions, as Barbara said in her remarks, the top-performing regions were the Midwest and Texas. Other than that, there were no other areas of regional performance that are worth calling out. And then on the -- in terms of businesses, our top-performing businesses were Juniors and Home.

Okay. And then kind of by the same token, nothing else was materially different on the other direction? Michael O'Sullivan: That's right.

Okay. And then would you -- I missed a little bit of the part where you discussed the gross margin, the components of the gross margin. Would you mind just repeating those quickly?

Sure, Daniel. It's Michael. So for the quarter, merchandise margin was up 55 basis points, and that was offset by freight and buying, which is about 10 basis points each. And then distribution was slightly better due to the timing of the packaway.

Your next question comes from the line of Randy Konik of Jefferies.

I guess my question is regarding the infrastructure and process improvements or investments you're making. You talked about some of the near-term expense headwinds. When do those headwinds lift? And what are some of the measurable benefits you expect to see from these investments? Is it things like stronger inventory turns? Or what should we expect in terms of the penetrated payout long term on those investments?

So Randy, it's Michael Hartshorn. So the infrastructure investment, as we mentioned, there are really about 3 things: it's opening 2 new distribution centers and opening -- purchasing our New York buying office. In terms of the distribution centers, it gives us the capacity to grow into what we believe to be 2,500 stores. So that is the capacity play. Those investments tend to be a bit lumpy. But we -- after we get through the 2 new distribution centers, the second of which will open mid next year, we shouldn't need any capacity for the next couple of years.

And can I ask you a follow-up then on the buying office? Michael O'Sullivan: Sure.

Sure.

So do you expect to see any measurable change in the number of vendor partners you're using over the next 5 years? Or kind of how should we think about the sourcing side of the business over the next 5 years and how that may change or not change?

We're always looking to increase our vendor base, and so that's why we continue to invest in the merchant organization, so that they can go out and build relationships to get better access to closeout and to add additional resources. So we expect it to grow.

Your next question comes from the line of Kimberly Greenberger of Morgan Stanley.

Michael, just a couple of questions for you. Did you receive any benefit in the third quarter from your physical inventory in margin? Also, you mentioned that traffic was up slightly in the quarter. It sounds like you saw a bigger increase in the average basket. Is that coming from the average unit retail price or units per transaction? And then for Barbara, I'm wondering if your buying team is starting to see any inventory dislocation from the disruption of goods flowing through the port? And if not yet, do you think that might be an opportunity for inventory acquisition in the future?

Kimberly, on shortage, so like last year, our physical inventory results were very similar to our ongoing shortage accrual, so there was no impact of a true-up during the quarter when we took the physical inventory. Our results, again, improved on top of historically low levels, so we're very happy with the progress we've made there. In terms of the composition of comp, as we mentioned in the remarks, our comp was up 4%, driven by a slight increase in transactions and a higher basket. The basket increase was entirely driven by higher units per transaction as AUR was flat to last year.

And as it pertains to inventory from the port, it's hard to tell. There is -- it's a buyers' market. There's a lot of merchandise in the market right now to buy. It's hard to differentiate if it's from the port or not. But what I would say is that whenever there's a disruption like that in the marketplace, it definitely leads to supply. So you would expect that we would see supply sometime at the end of this year and into the beginning of next year.

Your next question comes from the line of Jeff Stein of Northcoast Research.

A question on dd's. So I'm wondering, are the same factors that are driving your performance at Ross also driving dd's with respect to traffic transaction? And also maybe you can just talk a little bit about some of the category performance there. Michael O'Sullivan: Sure. Jeff, as you know, we don't disclose dd's financials separately. It's just not material to the overall corporation. But in broad terms, as Barbara mentioned in her remarks, dd's comp performance was strong in the third quarter, so we're very happy.

Any comment -- can you comment at all, Michael, on category, just category performance at dd's? Michael O'Sullivan: No. We typically don't break that out separately for the dd's business.

I see. And then finally, can you just talk a little bit about your trend, your business trend during the third quarter? Was it fairly even throughout the quarter? Or did it get better or worse towards the end of the quarter?

Sure. This is Michael again. Sales ran ahead of plan for us throughout the quarter. The strongest months were August and September when we -- when the back-to-school customer was motivated to shop. The trend slowed a bit in October with warmer weather.

Great. And Michael, CapEx for next year, do you have any thoughts?

At this point, we wouldn't talk about next year. It will come down, though, based on the infrastructure investments we made this year.

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

A question about the SG&A line. I'm just curious, with the 4% comp, anything that held you back about leveraging that operating expense number a little bit more, which might have been expected on such a good comp?

David, it's Michael, again. So I think what we said longer term is that we usually lever around a 3% comp. So with the 4% comp and 15-basis-point improvement, it's about in line with that longer-term model. It is a bit worse than the second quarter. But as a reminder, we had about a 20-basis-point benefit from a legal matter in the second quarter.

And then in terms of inventories at the store level, what's your latest thought process about any ability to take those inventories down further? Michael O'Sullivan: Yes. David, as you're aware, we've taken inventories down very aggressively over the last several years, something in the order of 40%. We continue to shave inventories and trim them where we can. At the end of the third quarter, inventories were down 2%. We're expecting them to be down another point or 2 at the end of the fourth quarter. And then we're putting our plans together for next year.

Your next question comes from the line of Ike Boruchow of Sterne Agee.

Two quick ones, I guess. I know you've already talked about this, but the merchandise margin increased 55 basis points, so sequentially better than Q2. I'm just curious, I guess, Michael, if you could just dig in what exactly helped drive the sequential improvement in the year-over-year margin gain. And also, it doesn't look like you bought back any stock in Q3. I can't remember the last time you guys didn't buy back stock in the quarter. Was there a reason for that or just a timing thing? Just curious there.

So first on the stock, we did buy back stock during the quarter. We bought it back sequentially, pretty similar to what we bought back in the first half of the year by quarter. So -- and then on margin gains, the improvement during the quarter was a combination of faster turns and lower inventory, and also our ability to take advantage of the buying opportunities in the marketplace, which customers responded favorably to. So a little bit of markdowns and a little bit of markup drove the margin performance.

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

Can you give an update on the planning and allocation at the more local level and what you're seeing there? How is that going? And then as you think broadly about improving sales productivity over the next few years at dd's and at core Ross, where should it come from? And how do you think of the size of the box? Michael O'Sullivan: Okay, Dana. It's Michael O'Sullivan. I'll take the first part of your question about more local planning and allocation. As you know, we've rolled out a fairly major program, micro-merchandising, about 3 years ago. And the idea of that, the intent was that we would be able to plan and trend our business at a more detailed level, a more local level. It's impossible for us to isolate the impact just of micro-merchandising, but certainly, it's been a major enabler of our ability to reduce inventories over the last several years by making sure that we have the right product in the right place at the right time.

Okay. And then sales productivity? Michael O'Sullivan: Sorry, what was the second part of your question, Dana?

On the sales productivity, where do you think -- what is an optimal sales per foot for dd's and for Ross? And what drives it there? Is it new categories? Is it tickets? Michael O'Sullivan: At a high level, I think what really drives our sales productivity is having the best values we can in the store. And we -- all the time, we're looking at across different categories, different areas of merchandise, even new categories to see whether we can drive additional productivity. That's kind of the ongoing program.

Your next question comes from the line of Mike Baker from Deutsche Bank.

So my question is, how do you guys think about what's going on with department stores and how that impacts your business? One thing we've seen this quarter, and even last quarter, is that department store inventories are in much better shape and their gross margins look better. Does that raise the pricing umbrella for you guys, making it easier for you to operate and not have to discount as much? Conversely, I guess, one risk might be that there's less product available. Although I think if you're getting less from department stores, you're getting more from vendors. How do those dynamics play out?

Well, I would say there's a few things, Mike. One, first of all, in terms of availability, there is a lot of products in the marketplace. In terms of department stores versus how they price, we really look at the value. So we look at where they are in pricing versus where we need to be in pricing so that we offer the customer great branded bargains. And so that's really how we kind of -- how we look at it. Their level of inventory...

Right. And so...

I'm sorry, their level of inventory and how they promote usually increases with their level of inventory, traditionally.

Right. So I guess that's the question. Their inventories have actually -- the year-over-year growth inventory is as low as it has been in 5 or 6 quarters, so I would suspect that they're not promoting as much. And then because of what you just said and because of that, I would think that you wouldn't have to promote as much. Has that had any impact in your business this quarter or do you think it might going forward?

So actually, Mike, they have promoted significantly this quarter, both in -- most department stores, particularly the mid-tier. And so there's been heavy promotions that have gone on this quarter, and we're expecting that to have -- to continue into the fourth quarter. Actually, we're expecting that to get even more promotional. We don't promote, so we're in an everyday-value business, so we have to anticipate where we think they're going to be, and then set our values based off of where we think they're going to bench their promotions. But in Q3, they absolutely promoted, and we are anticipating them to be even more aggressive in Q4.

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

My question is about Home. I'm just wondering how far above the chain did Home perform? And can you talk to the areas of Home maybe that led in performance and whether there's still opportunity for some niches within Home to still ramp up?

We were very pleased with our performance in Home. It was a better-than-expected performance. We feel the merchants really did a fine job of delivering exciting, great products at great values. In terms of what areas performed in Q3, I really -- don't really think it's appropriate for me to talk through that. What I can tell you is that in Q4, we're very focused on gifts and home. And I would say our Home performance was better than the chain in terms of measurement.

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

And I know you've talked about the opportunities out in the marketplace, and I'm wondering if you could just comment further on that. The port strike seems to have -- or the slowdown in the Port of Los Angeles seems to have provided some opportunities, particularly not only for this season, but for packaway. I'm wondering how you're thinking about those opportunities and if you might get more aggressive, given what might be the unique nature of some of the opportunities this year.

Well, Richard, the way we look at that is, packaway is really -- it is opportunity. So we look at each deal on a deal-by-deal basis. So we don't go out and say we want to raise our packaway levels or contract our packaway levels. The merchants are really out in the market, constantly shopping to see what becomes available. And if the port could become available a little bit sooner than later, some we would slow this quarter, some we would move into '15, depends when we get them. But really, the science to it is it has to be a terrific brand to great value to put it into packaway so that the customer really feels good about it when it comes out the following season.

So even though you've operated in a pretty tight parameter of packaway, sort of 38% to 42% roughly, you wouldn't, given the circumstances, allow that to increase should circumstances, as you describe them, prevail?

There's no target number up or down. Packaway is really the result of what's available and how great the bargain is. So if we found packaway that was terrific, that we could -- and the number would go above 42%, that would be fine. And when it drops, sometimes that's based on the quality of products that we see. It moves -- it's kind of a moving target. It really becomes -- it really goes to the value of the product and what we see, and when we bring it back out to the customer, will she appreciate that.

Your next question comes from the line of Bob Drbul from Nomura.

I guess the 2 questions that I have, can you just give us an update on your thoughts around the Internet and e-commerce? And any potential interest internationally? Michael O'Sullivan: So Bob, so on e-commerce, we've looked at e-commerce a number of times. We continue to monitor what's happening in terms of e-commerce, but we don't have any plans to launch an e-commerce business at this point. We operate a $10 average unit retail business, and we just -- every which way we've looked at it, we just don't see how there's an economically sustainable model at that kind of price point. There may be at a much higher price point, but then you're no longer in the moderate off-price business. So we don't plan to pursue e-commerce at this point. And in terms of international, no, no plans at this point to launch an international business.

Got it. And on a category basis, can you talk a little bit about how you're positioned on outerwear heading into the fourth quarter?

Sure. Our outerwear business, we plan outerwear and seasonally sensitive products in Q3 pretty conservatively. As we get into Q4, we plan it specifically by region. So from what we gather from micro-merchandising, which tells us which regions and what types of products, we take that along with the merchant instinct and what we see in the market. But overall, we feel that outerwear is an opportunity for us as we go forward.

Your next question comes from the line of Mark Montagna of Avondale Partners.

A question about gift giving versus last year. I'm wondering, did you place a bigger emphasis on gift giving this year? I think that's what you had mentioned on the last call. Is that across all categories? Or is it primarily in the Home category?

Yes, we have increased gift giving this year. It is primarily in Home, but it does go across Apparel also and other categories, whether it's in sweaters or tops or men's fleece or across the board.

Okay. And then just back to the outerwear question. Did you bring it in earlier this year versus last year? Or -- I'm just curious how it anniversaries versus last year.

Seasonally sensitive products in Q3, we traditionally plan conservatively. And if it sells -- since October is kind of a dicey month, if it sells, we go out and we chase it, or we pull up packway if we have packaway goods available. So -- I'm sorry?

Yes, I'm referring more to Q4.

Oh, to Q4?

Yes.

We feel pretty good about outerwear. We have -- listen, outerwear is one of the areas where we are finding our way and learning as a company, especially as we move into these colder regions. So our strategy for outerwear this year was really to expand the assortment and to try to really get the regionality correct of heavyweight versus mid-weight. So we feel pretty good about it.

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

Question on new store productivity and just new stores in general, since you continued to open 80 to 90 stores. So the question is -- and maybe you could just provide some general commentary around your new store performance. The way I look at it, the new stores are doing about 70% or so of a mature store volume in their first year. So just wondering if that's accurate, and what you're seeing on the real estate front, those kinds of things.

So in terms of new store productivity, as we've entered the new markets, they have fallen a bit as expected based on customer recognition in those markets. In terms of how they're performing versus our plans, we're pleased with the performance as they've actually run ahead of our initial plans.

Say, Patrick, your calculations are about right.

Okay. And then on real estate, any changes in terms of what's out there? I mean, I've heard from a few retailers that the commercial real estate market is tightening up a little bit here as the economy continues to improve. Are you seeing that in the locations that you're targeting as well? Michael O'Sullivan: Well, I would say, Patrick, we're happy with the availability of real estate locations that we're looking at. We have a very strong real estate team, and they're pretty well networked. So we don't see any major issues in terms of real estate availability at this point.

Your next question comes from the line of Stephen Grambling of Goldman Sachs.

So just a follow-up on one of the questions that was asked earlier on CapEx next year. Can you just remind us of some of the buckets of incremental spending that you had over the past couple of years? And then, I guess, as a follow-up to that, what's the capacity that you have for packaway at this point?

In terms of CapEx, Stephen, so a base level without the infrastructure investment is somewhere around $400 million to $450 million. This year, we're projecting it to end about $700 million, and that includes the New York buying office for about $222 million and $150 million of DC infrastructure. And Stephen, if you go back to 2012, you can look at base levels there. We added -- '13, '14, we started building DCs. They'll complete in '15. Michael O'Sullivan: And on the last part of your question, Stephen, on packaway capacity, we operate a pretty flexible distribution infrastructure in terms of storage. So packaway capacity is really not a gating factor in terms of how many -- what the packaway balance can go to.

Great. And one other follow-up, if I may. Your plans for, I mean, not necessarily e-commerce, but just digital as a strategy into the holiday or any other things that you're doing differently as you've described a more -- as you're anticipating a more promotional environment. Michael O'Sullivan: Yes. Not a lot of new news in terms of marketing. We have over the last several years devoted more and more of our marketing budget to digital. We see digital as a good sort of proxy for word-of-mouth, which is kind of something we've always relied on very heavily, that the customer will spread sort of the -- will talk about the great deals they've gotten at Ross with their friends. And we see digital as a way of doing that. So we're doing more of that this year, but other than that, nothing else significant to call out.

There are no further questions in the phone lines at this time. I would now turn the call back to Barbara Rentler.

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

This concludes today's conference call. You may now disconnect.