Good afternoon, and welcome to the Shoe Carnival's Fiscal Year 2012 Third Quarter Earnings Release Conference Call. Today's call is being recorded and is also being broadcast via live webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. This conference may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. These forward-looking statements should be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak of only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements talked about during this conference call or contained in today's press release to reflect future events or developments. I will now turn the call over to Mr. Cliff Sifford, President and Chief Executive Officer and Chief Merchandising Officer of Shoe Carnival. Mr. Sifford, please begin.

Thank you, and welcome to Shoe Carnival's Third Quarter Fiscal 2012 Earnings Conference Call. Joining me on the call today are Kerry Jackson, Chief Operating and Chief Financial Officer; and Tim Baker, Executive Vice President of Store Operations and Real Estate. Before we begin today, we would like to take a moment to acknowledge and thank Mark Lemond for his 25 years of service and his 16 years of leadership as Shoe Carnival's President and CEO. His contributions have helped make Shoe Carnival the successful and innovative retailer we are today. As many of you are aware, Mark retired at the end of October, and we definitely wish him all the best. This afternoon, I will begin with an overview of our third quarter financial and merchandise performance, Kerry will then review the financial results for the quarter and our guidance for the remainder of fiscal 2012 in more detail. We will then open the call up to take your questions. First, however, while I have met many of you through my years here as the Executive Vice President and General Merchandise Manager, there are some of you I have not had an opportunity to meet, and I would like to take a moment to tell you a little bit more about myself. I have been in the footwear industry for more than 30 years and, more importantly, with Shoe Carnival for the past 15 years. I have had the opportunity to experience the growth and evolution of Shoe Carnival from 88 stores in 1997 to 352 stores in 32 states and Puerto Rico, as well as online. I am very passionate about footwear and the excitement this fashion-driven industry presents to us. Since my arrival at the company, I have led the merchandising strategy. However, with my recent promotion, we are actively conducting a search for a new General Merchandise Manager who will report directly to me. As CEO, I will oversee all aspects of the company, but I will be focused intensely on growing this company into a nationally recognized footwear chain. I enjoy working with our ambitious, enthusiastic team and believe that Shoe Carnival is better-positioned than ever before to expand our brand deeper in existing markets and enter new markets with our business model of providing the right product assortment of namebrand footwear for the entire family at compelling value. I am extremely excited to be CEO and look forward to speaking with many of you over the coming months. Now onto the business at hand. In the third quarter, we continued to execute on our key strategic initiatives, which includes capitalizing on fashion trends currently driving consumer footwear demand and aggressively opening stores in new and existing markets to increase sales. We are well-prepared to meet customer demand as we headed into the key back-to-school sell season. As a result, comparable store sales increased 6.2% as compared to the third quarter last year. This sales increase helped us generate record third quarter earnings of $0.60 per diluted share, which was at the high-end of our outlook. Traffic for the quarter was up low-single digits, and conversion was down slightly. Both average transaction and average unit retail increased mid-single digits as compared to the prior-year period. Merchandise margins increased 60 basis points due primarily to selling fewer units of low-margin toning product compared to the same time period last year and a lower inventory ownership of spring sandals going into the back-to-school selling period. Turning now to store expansion. In the third quarter, we opened 6 new stores, including our third and fourth store in Puerto Rico, to end the quarter with 352 stores operating in 32 states. We continue to be pleased with the grand opening of these new stores as Shoe Carnival's assortment of family footwear at compelling value increasingly resonates with the base consumer looking for the footwear brands they desire. In early November, we opened the last new store for the fiscal year and just recently closed 1 store. One additional store will close late in the fourth quarter, ending the year with 351 stores. Looking to fiscal 2013, we plan to open an additional 30 to 35 stores, while backfilling existing markets or opening in smaller new markets where we can have immediate brand awareness. While backfilling the large markets we opened this year, we expect to leverage our sales and marketing efforts in those markets next year. The effort of our entire Shoe Carnival team, from our corporate headquarters to store level associates, continue to be tremendous as we execute on our growth strategy. We believe our strong unleveraged financial position leaves us well-positioned for additional square footage growth over the next several years. Now I will provide you more information on our merchandise performance in the quarter. In our women's nonathletic department, comparable store sales were up low-single digits for the quarter. This increase was driven entirely by average unit retail as we sold fewer units of sandals and more units of higher unit retail categories such as boat shoes, boots and casual flats on a comparable store basis than last year. In addition to these categories, we also saw comparable store increases in vulcanized canvas and molded footwear. Although dress shoes were still trending down on a comparable basis, we are seeing double-digit increases out of our traditional pump classification, driven not only by average unit retail but also in units. In our men's nonathletic department, we ended the quarter with a low-single-digit sales increase on a comparable store basis. As in women's nonathletic, this increase was driven entirely by average unit retail as we sold fewer units of sandals on a comparable basis than last year. Categories that achieved both unit growth and average unit retail growth were boat shoes, traditional pennies, driving mocs and sport hikers. Our children's business ended the quarter with a mid-single-digit comparable store sales increase. This increase was driven by the children's athletic business, which came in with a high-single-digit comparable store increase as a result of both higher unit sales and higher unit retail. Key product categories were girls and boys retro fashion, skate, running and infants' athletic. In adult athletic, comparable store sales were up high-single digits. As in children's athletic, this increase was a result of both higher unit sales and higher unit retail. The classifications of products driving these gains in adult athletics for the third quarter were: men's and women's basketball, men's and women's skate, men's and women's running. Both -- color remains a key driver for both men's and women's running. We ended the quarter with inventory up 5.1% on a per-door basis primarily due to increased unit cost and increased depth on key categories such as athletic. On-hand footwear units were down 2.6% on a per-door basis at the end of the third quarter. Aged inventory remains low, and we believe we are well-positioned to capitalize on holiday sales in the fourth quarter. Moving to the fourth quarter. Although comparable store sales quarter-to-date are slightly negative, as we all know, the current week is one of the largest sales weeks of the fourth quarter. On Black Friday last year, we felt that we were out-positioned in both opening times and promotions. We have worked very hard this year to make sure that we are in a position to capitalize on this important retail day. We will be open 5 hours longer than last year, and our promotions are spot-on as compared to the circulars we have already seen on blackfriday.com. Our stores are ready and our associates are excited to take on the #1 sales volume day of the quarter. As we move out of this week and move into the more traditional holiday time period, the Americana trend we spoke of during the last 2 conference calls will continue to grow. We view Americana as nautical, western, bucks and riding boots just to name a few. Additionally, we still believe that the athletic sales trends that we have experienced all year will continue with fresh color and exciting technologies. Lastly, we expect a positive but promotional performance in our boot categories as we begin to experience a more seasonable weather pattern versus what we experienced last year. Focusing on e-commerce, we are pleased with our current sales trends. During the third quarter, we launched mobile technology, and as expected, traffic from mobile and tablet is now accounting for over 20% of our overall traffic to the site. Our next digital opportunity is a kiosk test that we are launching at some of our smaller stores at the end of fiscal year 2012. This test will allow our customers the opportunity to see the broad assortment found online, while shopping our smaller stores that often do not carry our full footwear assortment. In addition to e-commerce, we continue to focus on signing up new loyalty members, utilizing both our brick-and-mortar stores and our e-commerce site. This is a huge opportunity for us as our loyal team members account for over 10% of our total sales, which is a tremendous increase from earlier in the year. These loyal shoppers, on average, spend 30% more per transaction than the company average. We started well behind some of our closest competitors, but our store personnel, marketing and e-commerce teams are focused in executing on the goal of increasing our loyalty members threefold in the next 12 months. In closing, I would like to thank our entire team for their extraordinary efforts as they executed our key initiatives by successively opening 31 stores in the U.S. and Puerto Rico, and ensuring our stores are merchandised with a broad assortment of trend-right footwear for the entire family while raising average unit retails in a difficult economy. We have incredible associates at every level of the company who are committed to making Shoe Carnival best-in-class and a family footwear channel. Our team looks forward to driving organic growth and generating increased cash flow to enhance shareholder value long term. With that overview, I would like to turn the call over to Kerry Jackson for details on our financial results and outlook for the remainder of 2012. W. Jackson: Thank you, Cliff. I will discuss our third quarter and year-to-date financial results in more detail, followed by information on cash flows and conclude with our outlook for the fourth quarter of fiscal 2012. Our net sales increased $29.0 million or 13.4% to $24.4 million during the third quarter of fiscal 2012 compared to the prior year's net sales of $215.5 million. This increase was primarily due to an $18.9 million increase in sales generated by new stores opened since the beginning of the third quarter last year, as well as our e-commerce site which we launched in September of 2011, and a 6.2% increase in comparable store sales. These increases were partially offset by a $2.9 million loss in sales from the 7 stores closed since the beginning of the third quarter of fiscal 2011. The gross profit margin for the quarter increased 1.1% to 31.3%. Our merchandise margin increased 0.6%, and our buying distribution occupancy cost decreased as a percentage of sales by 0.5%. The decline in buying distribution occupancy as a percentage of sales was primarily due to improved leverage on our occupancy costs associated with the higher sales in the quarter as compared to last year. Selling, general and administrative expenses increased $7.6 million in the third quarter of fiscal 2012 to $55.9 million from $48.3 million in the third quarter of last year. As a percentage of sales, these expenses increased 0.5%. The increase in SG&A was primarily due to a $5.1 million increase in expenses for new stores net of expenses -- expense reductions for stores that have been closed. In addition, we experienced an increase in incentive compensation of $1.8 million due to the company's improved financial performance. Total preopening costs for Q3 were $830,000, an increase of $475,000 over the third quarter last year. Of the total preopening costs incurred in Q3, $523,000 is included in SG&A and $307,000 is included in cost of sales for preopening rent and freight. In Q3 last year, we incurred $355,000 of preopening expense, of which $178,000 was in SG&A and $177,000 was included in cost of sales. With Mark's retirement, a onetime retirement and severance payment of $1.4 million was authorized by our Board of Directors and was included in our quarterly results of operations. Our quarterly results also included expense reductions for amounts previously accrued for him under our performance-based executive compensation plan and forfeiture of his non-vested stock awards. The difference between the payment and the accrual reversals was not material. The effective income tax rate for the third quarter of 2012 was 40.2% as compared to 37.8% in the same period in fiscal 2011. The increase in the effective income tax rate between the comparative periods was primarily attributable to a non-deductibility of compensation attributable to Mark's retirement. The effect of the increase in tax rate reduced earnings per diluted share by approximately to $0.025. Now let me briefly discuss our year-to-date financial performance. Net sales during the first 9 months of fiscal 2012 increased 11.8% or $68.7 million to $649.3 million as compared to the same period last year. Comparable store sales increased 5.7%. Net earnings for the first 9 months of fiscal 2012 were $26.1 million or $1.28 per diluted share compared to net earnings of $23.1 million or $1.15 per diluted share in the first 9 months of last year. On a percentage basis, net income increased 13% and diluted earnings per share increased 11.3%. Included in the year-to-date earnings is a $2.4 million pretax increase in store preopening costs. This increase reduced diluted earnings per share by approximately $0.07. Now let me discuss our cash position and information affecting cash flow. Depreciation expense was $4.0 million in Q3 and $11.8 million on a year-to-date basis. Depreciation expense is projected to be approximately $15.9 million for the full fiscal year. We expended $20.8 million in cash during the first 9 months of 2012 for the purchase of property and equipment, of which $17.7 million was from new stores, remodeling and store relocation activities. The remaining capital expenditures were used for continued investments in technology and normal asset replacement activities. Cash lease incentives received from landlords were $4.7 million during the first 9 months of 2012. Capital expenditures for fiscal 2012, including actual expenditures during the third quarter, are expected to be between $25 million and $26 million. Approximately $13.6 million of our total expenditures are expected to be used for new store construction, and 17 -- and $7.6 million will be used for store relocations and remodels. Lease incentives to be received from landlords during fiscal 2012, including actual amounts received during the third quarter, are expected to be approximately $6 million. We currently have $25 million authorized under our share repurchase program. And during the third quarter of fiscal 2012, we repurchased 81,300 shares for $1.9 million. My final comments today will focus on sales and our expectations for the fourth quarter of fiscal 2012. We expect fourth quarter net sales to be in the range of $215 million to $220 million, with a comparable store sales increase in the range of 2% to 4%. Earnings per diluted share in the fourth quarter of fiscal 2012 are expected to be in the range of $0.19 to $0.23. In the fourth quarter of fiscal 2011, comparable store sales decreased 3%, and the company earned $0.16 per diluted share. Included in the earnings at the high end of the estimates for the fourth quarter is the expectation that merchandise margins will be up approximately 50 basis points and buying, distribution and occupancy costs, along with SG&A, will show slight leverage. The fourth quarter this year will include 14 weeks compared to 13 weeks in the fourth quarter last year. The extra week is worth about $15.8 million to $16.8 million in sales and increases diluted EPS by about $0.03 in Q4 this year. The extra week is not included in the comparable store sales calculation for the quarter. For fiscal 2012, we expect net sales to be in the range of $864 million to $869 million, with a comparable store sales increase in the range of 4.8% to 5.3%. Earnings per diluted share for fiscal 2012 are expected to be the highest in the company's history and be in the range of $1.47 to $1.51. This is a 12% to 15% increase over the prior-year diluted earnings per share and includes a reduction in diluted EPS of approximately $0.07 due to an increase in store preopening cost. For fiscal 2011, comparable store sales increased 0.7% and earnings per diluted share were $1.31. This concludes our financial review. Now, I'd like to open up the call for questions.

[Operator Instructions] And we'll take our first question from Sam Poser of Sterne Agee.

I have a bunch of questions about guidance. I guess, number one, last year in the fourth quarter, gross margin was down 168 bps, and you're expecting, it sounds to me, to get about, I would say, 70 bps back on the best, on the high side, after picking up 103 off of 15% -- 15-bp increase last year. Can you give me some idea of why you're not expecting more gross margin recovery off of a such a low gross margin last year?

Sam, the best reason I can gave you is that our business has been rather soft for 4 out of the past 5 weeks. And other than athletic, our athletic business has been good but the brown shoe business has not been where we wanted it in the past -- like I said, 4 out of the past 5. And that's a little concerning. And until we see a little better run rate and we get through this weekend, we really wanted to plan conservatively. We think there's -- I will tell you, Sam, there's opportunity there, but there's -- we feel best at this point until we can see whether -- what the customer participation rate is going to be for the -- as we move further in the quarter before we can look any more positively at it.

Okay. And just to clarify, the revenue number that you've given us, does that include the additional $16 million or not? W. Jackson: Yes, it does. The revenue number, the top line sales includes the extra week, but the extra week is not included in the comp store percentage increases.

Correct.

So you're looking -- so what -- I mean, so your new store productivity, I mean, it sounds like -- so you're looking for new store productivity about, what, 90% to 110%? Is that because of the stores in Puerto Rico, because those guys seemed to crank basically? W. Jackson: No, I think you're overestimating in your -- if that's what your model's coming out, I think you're overestimating our new store productivity. We've been pleased with our new stores, how they've come out. And we have talked about that the Puerto Rico stores have been a very nice surprise, plus Dallas has come out of the box well, because the way we changed and opened more stores in high concentration. But they're not achieving that as a group, they're not achieving that level of a mature store yet.

Okay. And then -- it's just -- I mean, I'm just a bit confused because if you back -- and you said it's $0.03, so on the low-end basically, in the low-end of your guidance, you say that you're going to earn a $0.01 more than last year, and last fourth quarter was -- I mean, last fourth quarter was bad, I mean, I'm just -- I understand you started off slow, is this something that you may think of rediscussing at ICR or something if things change? W. Jackson: Well, actually, we made -- in the fourth quarter, we made $0.16, and we're guiding at the low end to be $0.19.

But then you got $0.03 of that is the extra week. So right -- so you're flat on the low-end?

Yes, but the -- you have the extra week and then you also have the -- Mark's severance or the tax rate of that play into that, so it's a wash.

What's the tax rate we should be using for Q4? W. Jackson: The effect to the tax rate from the severance -- the retirement and severance package is going to be $0.005 in the fourth quarter. It was $0.025 in Q3, it will be $0.005 in Q4. So your point is correct.

We're looking for flat earnings on the low-end when last year was about as bad as it could get. I guess even with the slow start, and I would argue probably less than the last 3 -- the first 3 weeks of the month or where we are so far month to date or less than -- given the extra week or probably less than 7% or 8% of the month, of the quarter, excuse me, given how strong it got later. W. Jackson: It gets back to, Sam, as we said, we're -- even though last year was difficult, we're actually slightly negative on comps, so for the first 3 weeks of November, even though that was a difficult November last year also, so we're a little concerned on the trend. However, we think we're much better positioned for the day after. However, if you look at what as Cliff said, all the other people at Black Friday are advertising in boots also, we think we're very well-positioned for boots, fresh looks at aggressive pricing. However, we feel that at that promotional boot category is going to be promotional in the fourth quarter. And therefore, that's where we somewhat tempered our previous expectations. We've given qualitative expectations at this point but because of what we're seeing in the marketplace, this is where we're -- this is the guidance we feel comfortable right now. Now we may end up being proven that our -- the assortment that we selected is very strong and our promotional pricing is going to drive the people in our stores. However, what we're doing is the same, taking a more of middle-road approach and leaving some opportunity for overachievement, but we want to be a little cautious going into it based on the trend.

Are your margins to date ahead of last -- I mean, are your margins, even with the negative comps, running ahead of last year?

Sam, we're not going to talk about margins quarter to date, but I will say this. As we are hearing in the marketplace, and I do believe it's going to be the case, that the boots are going to be a very promotional category as we move through the quarter. That is built into our guidance at this point. If boots are not as promotional as what we're hearing in the marketplace, and there's opportunity, but boots are such a large percentage of our fourth quarter sales guidance that when you hear and when you see, and I encourage you to take a look at the inserts online on the website I mentioned, and you'll see what I'm talking about. And from what we hear, that's going to continue through the fourth quarter.

And our next question will come from Jeff Stein of Northcoast Research.

So taking a look at -- again, to follow-up on Sam's question. It seems to me everybody in the industry bought boots down this year compared to last. So it would seem to me that unless everyone has suddenly recognized that even that is too aggressive, I am a little bit confused as to why the industry would be so promotional. And maybe again, this is stepping from Shoe Carnival for a moment, can you perhaps provide us with the little insight into why that might be?

I'd be glad to, Jeff. Here's -- we also bought boots down. We planned all along and talked about it most of the year, that we would sell fewer units of boots at a higher retail. And that's the way we bought it, that's the way we owned it and that's the way we planned it for the fourth quarter. So that -- and I believe that other retailers planned pretty much the same thing. There's a category or 2 of boots that aren't working. And in fact, those boots, the shearling kinds of boots that were so bad last year are even worse this year than they were a year ago. So the promotion with those kinds of boots start maybe not at the top because they're protected, but in the middle and all the way down from a price point standpoint. And if you -- and then, what we're seeing is not only a promotional cadence on those kinds of boots, but we're seeing promotional cadence on riding boots, which we had planned to sell at a higher retail. We're seeing promotional cadence on Western boots. If you look at some of the inserts that are posted online, you will see Western boots selling for $19.9 to $25, and not in cheap stores but in full-line department stores. So we are concerned about the promotional cadence of late that other retailers are reacting to their boot business. One other aspect to this is the weather. As bad as the weather was last year, and I didn't get the chance to say this to Sam, but as bad as the weather was last year from a warm trend, it's as bad this year. And when I look at our weather boots, and we're down double digits in weather boots as compared to last year, that creates an issue as well. So we, again, our plan all along was to sell fewer units at a higher average retail. We believe that we're going -- we're definitely going to sell fewer units but those fewer units are going to be sold at slightly higher retails than what we -- from what we planned -- slightly lower retail, excuse me, than what we planned.

Okay. And Cliff, any -- away from boots, are there any other issues within the brown shoe categories that you can call out? Any areas of weakness?

No, the only area that we're concerned of -- the only area that is still weak is women's dress shoes. I mentioned it in my prepared remarks. This is -- We're getting on the second -- getting ready to go on the second year of down-trending dress shoes sales. Now we've positioned some of those dollars out of dress shoes and into other categories that are retailing well like molded footwear. We're doing well with boat shoes, doing well with other sports shoes. Flats, women's flats, are not selling as well as we had expected, and that is one area of slight concern. We don't expect to sell a lot of flats this time of year anyway, but -- so that's an area of slight concern. I mentioned it to Sam, and I'll just need to reiterate, one last point, Jeff, is that outside of the brown shoe business, which has driven -- the negative comps in the brown shoe business is driven by negative comps in boots month to date. Our athletic business is trending ahead nicely.

Good, very good. If I can, one last question. I'm wondering, are you guys including e-commerce sales in comps? And how -- if you are, what effect did it have on third quarter and maybe is it large enough at this point to start calling it out in terms of its contribution to top line?

It did not -- it was not comp in the third quarter, Jeff. It just went comp in the fourth quarter.

Okay. And will it be included in comp store sales on a go-forward basis?

It will be included in comp store sales, but we will not call it out separately.

And our next question will come from Scott Krasik of BB&T Capital Markets.

So just a little bit more commentary, I mean, you made a statement that last year, November wasn't strong either. Can you just go back a little bit, maybe say what was happening last November or what wasn't hitting as well, and then as far as December and January go, any big differences a year ago?

The issue with last November and last fourth quarter period, as Sam was calling out, is the fact that we had a very mild fourth quarter over the entire country, and it affected our boot sales. We're experiencing somewhat the same trend this November. Now, that doesn't mean that that trend is going to continue forward, we don't know. I mean, we are not very good weathermen, but we are -- we have seen that same pattern, actually probably a little milder this November than last, and that has affected the boots sales and [indiscernible]

So Cliff, I'm sorry, but if you look at the minus 3 comp in the fourth quarter last year, maybe just sort of the monthly progression, was it worse than that in December and January? Was it better than the minus 3 or 4 in November? W. Jackson: What we saw, Scott, was that November was the worst of the month. What we -- we had -- kind of what we saw now, kind of a weak start to the month. But really, November is all about the day after and that weekend. And that weekend was extremely tough for us because -- Cliff talked about it, that we think we were out-positioned and we weren't open as early as other retailers were and we got -- we were out-positioned that way. That won't happen to us this year, but we did have a very difficult day after and the Saturday following, and we ended up down just in the double digits decline on comps in November. After that, we decided to -- that we had to get aggressive and mark, because the weather wasn't -- we were too far into season and we had to get aggressive on markdowns and we ended up coming out in December and January rather flattish.

Okay. That's helpful actually. And then Cliff, the nonathletic trends, Americana, the boat shoes, similar to what you said about the boots, I mean, you've been talking about them for a while, so I know you planned boots down on a unit basis. I mean, should we just assume that a lot of these nonathletic trends that have been around for a while are going to be tailing off in the next season or so?

Well, from a boat shoe perspective, because we have been talking about boat shoes now for several years, what's happening with -- in boat shoes is that it started in the South. It started actually in the Gulf Coast region and it's worked its way North, and now it's expanding into newer Northern markets. So we see that as an opportunity at least through back-to-school to show nice increases as new markets get on to this boat shoe trend. The markets that began the boat shoe trend are running increases. They're just not running the kind of increases that the Northern new markets are running. From a Western standpoint, because we also look at that as Americana, we see that continuing on, and it's actually performing well for us today, and we see that as something that will continue in through the spring. Riding boots will still be strong through the fourth quarter. But obviously, as we go into the first quarter, we won't see riding boots play much of a part of our business. So what I think is that that whole trend, not only in women's, but it's also happening in men's with boat shoes and pennies, and I mentioned that. And I know you've seen bucks everywhere and we think that is going to gain the momentum as we head into spring and then toward back-to-school.

Okay. And then any of this commentary around -- or your traffic was up last quarter at least relative to November what you're expecting, any big difference that the fact that you're an off-mall operator versus on-mall? Are you just not able to attract the traffic of these big promotional periods other than back-to-school?

No. We truly believe, Scott, that our big issue last year was twofold. One, we didn't open up with the competition. We opened up later than the competition, and that was a miss on our part. Number two, the department stores were much more promotional than we expected on the day after. And we weren't as prepared for that as we should have been. This year, we are prepared for both of those 2 issues. We will open up with the department stores and we will be, actually, if not as much, as promotional, more promotional as they are. So we feel like we're very, very well-positioned for a Friday sales.

Okay. And then just finally, Kerry, the comp that you accounted for Q2 this year, the $780,000 or so, and you had talked about potentially reversing that in Q3 or Q4 via an EPS target, where do we stand with that? W. Jackson: Based on the guidance we gave, that is one of the factors that was taken into account on the expense side of it. Previously, we had talked about that it would be difficult for us to leverage Q4 from an SG&A standpoint, but I said in my prepared remarks, we are going to expect slight leverage on that. So as given the sales and margin trends that we're looking at, we've been aggressive about trying to control expenses in the fourth quarter. And if we hit those numbers, we would not be able to vest that stock. So that's included as a reversal in some of the cost savings in helping to leverage the SG&A in fourth quarter.

Okay. So your current sales and margin outlook, assume that you wouldn't hit it, so you are assuming a reversal in that Q2 charge? W. Jackson: Yes, that stock would only vest if it was at a higher level of EPS than $1.51.

And Jill Caruthers of Johnson Rice has our next question.

Question, I was wondering if you would quantify the percentage of boots that make up fourth quarter another significant category for you.

You know, Jill, I have that number, if you could give me a minute to get it for you. W. Jackson: Last year, Jill, just to give you a reference, our men's, women's and children's boots, all types of boots, were about 27% of our total business.

For the year or for the quarter?

For the quarter.

Okay, okay. Then I guess, just speaking on inventory, I guess how are you feeling about that on the boots side? It sounds as though you are being more promotional to be competitive with the department stores. Just some more commentary about how you feel about the inventory right now today?

We feel good. Our inventory, from a peer standpoint, is down from a year ago on a per-door basis, which is exactly where we planned it to be. And we -- as I've said, we have fully expected to sell fewer boots than we sold a year ago, just at a higher retail price due to the fact that we felt weather last year was such a factor and the fact that we had to mark down our boots to get them to move, and that primarily happened in December. If weather cooperates, we'll be able to drive even higher retail prices out of the boots that we own.

Okay. And then just last question, with a couple of more months under your belt in Dallas and Puerto Rico, could you talk about any new findings, opportunities there?

We're-- as Kerry mentioned, we're very bullish on both Puerto Rico and Dallas. And next year, we're looking to open up in Puerto Rico an additional 2 to 4 stores, but we can't get specific at this point because we're still in negotiation stage. And the same in Dallas, 2 to 4 additional stores.

And our next question will come from Mark Montagna of Avondale Partners.

Just wanted to kind of hit on the boots like everybody else. When you mentioned third quarter comp, it was obviously quite strong and it sounded like boots were okay. But did you have to promote the boots in the third quarter to get a pretty good comp out of those?

Actually, we didn't, Mark, the boot sales came actually earlier in the quarter instead of later in the quarter, and that's why we felt like that, and we still feel like that if the weather cooperates that we have opportunity there. But the -- we were selling early in the quarter for back-to-school, and as we go -- went through the first couple of weeks of September, we were selling Western boots at really good rates and riding boots at a really good rate, which is something that we expect us to continue to be good as we go through the fourth quarter.

But when you say good rate, do you mean pace of sales or are you talking the gross margin rate was like would you say the gross margin rate...

Well, I'm talking about from an increasing sales standpoint and from a gross margin. We have not had -- we have not taken markdowns. In fact, we did not have to really promote boots that much in the third quarter at all.

Okay. But it sounds like, obviously, you're going to be promoting them now. And even if the weather did cooperate, you're kind of -- just with the marketing already in the chute, it would be hard to retrench from promoting the boots at this point.

No, that's not the way we operate. We will promote the boots on the day after. That's baked into our plan, has been since the first of the year and we bought to that. The way we operate our business is that we can -- we will -- we hang signs on the product based on the way the product sells. So if boots continue to be -- if boots pick up, the signs come off, either off the product or the signs go up. We don't -- the marketing that we do from day-after through the end of the year is not item-specific, so it gives us the flexibility to reach a higher retail on a category that's hot or gives us the flexibility to take markdowns on a category that's not.

Okay. And then are you able to rebalance inventory going forward to perhaps put a greater emphasis on athletic? Would you have to relay some of the store in order to do that? Or do you think you're going to have to rebalance more towards athletic?

Well, what happens is in January and February, the past couple of years, is athletic has been a very strong part of our business, and we planned that already. So our athletic business, from an inventory standpoint, is planned up as we go into January, and it's planned further up as we go into February to fully execute or be prepared for the sales that we expect to come.

Again, and then just lastly in terms of the running shoes. When you mentioned the strength in athletic, running was the third one that you mentioned, are you seeing a slowing in the running category?

No, please do not read into anything I said as an order of importance. So just those categories -- Mark, I hate to even admit this, but I called out the categories in the order in which they show on my report, not in the order of importance.

And our next question will come from the Chris Svezia with Susquehanna Financial Group.

I guess, first question I have is -- I guess, first, Kerry, for you, the -- just so I have it, the extra week, it's included in your revenue, is included in your -- I guess your merchandise, I guess your occupancy and SG&A leverage assumptions as well, the extra week? W. Jackson: Yes, yes. I mean, the extra week is included in all of our assumptions for the fourth quarter in revenue and expense.

Except comp? W. Jackson: Except comp because we're comparing 13 weeks against 13 weeks. [indiscernible]

Right, right. No I got that. Okay, I got you, okay. And then just not to beat this to death, but just so I understand this on the boots side for a second, you saw a strength in the third quarter, riding and Western-influenced boots. What you're seeing right now is, I guess you would characterize it as those categories have slowed? Or is it also...

No, not at all. Chris, not at all. Those categories are still trending way ahead, but we had also planned for dress boots and sport boots and weather boots to all be selling by this time as well. And those are the categories that aren't trending.

Okay. So Cliff, it's fair to say that the colder weather category has really been more of the underperforming than more of the fashion piece?

Absolutely, that is exactly what is happening.

Okay. All right, that's helpful. And then just, I guess what gives you -- Play devil's advocate; I mean, what gives you the confidence that you can do the 2 to 4 comp given that you're trending down low-single digits right now? Is it the fact that you'll be opening up 5 hours longer? Is it -- just walk us through why do you have that level of confidence.

That is one of the reasons. I will admit that, that we expect a big day on Friday. And this is a large part of our -- of not only this month but it's a pretty good part of our quarter. That, plus the fact that we do expect, truly expect, to sell these boots that we own at a higher retail price than we sold them last year. And when you factor this week into our plans and what's going on with athletic, which again I'm going to tell you is trending up this quarter, and along with selling boots at a higher retail than we had to give them away for last year. Remember, we had a very -- as Kerry mentioned, we had a weak day-after last year, so all the boots that we had planned to sell the day after last year that we didn't sell, we had to take markdowns on. We don't see that continuing. So therefore, we should be able to sell those boots at a higher retail going through December and in January.

Okay. And if you -- but if you have to get more promotional on the -- on the cold weather...

Can I add just one thing to that commentary? And that's exactly how we built the 2 to 4 comp increase as we looked at the trend that we were running in all, what we call, buy groups. And then we took the boots that we expected to sell at the price we expect to sell them and then we came up with our comp guidance. We didn't -- we truly believed that these boots are going to sell at slightly higher retail then we got last year.

Okay. Even if you take into consideration you guys being promotional on more of the cold-weather products, reducing price there, you're still -- that's taken into that consideration there?

Absolutely. Because of the fact that, again, we got to remember, we didn't sell them the day after last year. And I can't -- that weekend, from Friday through Sunday, is a big, big portion of our fourth quarter sales.

And our next question will come from Harry Ikenson of Ikenson Research and Consultants.

On the boot category, could you just give us an idea of what percentage is the weather, the category that's weak right now?

Well, right now, it's not a very large percentage. As a category, it really trends differently every year based on the weather. And it also trends -- you also have to ask yourself what you'd consider to be weather: is that sport boots or is it true weather boots, is it -- so I don't know, that's a difficult percentage for me to give you from season to season. I will tell you this, it's a much larger percent in December than it is -- in November, December than it is in any other month of the year. And I know that's not an answer, Harry, but I don't have the percentages.

Let me ask you a question about the numbers I heard. How are your inventories this year as far as starting the quarter with the percent of clearance versus last year? And then second, how is -- it sounds like you have much more newness this year than last year. Could you give us an idea of how much more newness you have this year than last year?

Are you talking specifically about boots or our clearance overall? Our clearance overall is better this year than last year, so let's get that out of the way, whether it's boots or shoes or anything. Our newness factor is better than last year as well. It would be, the cost clearance is down. But the boots, we completely redid the boot category, we decided last year that we took such a hit in boots that we started from the ground up and cleared all those boots out, bought all new boots for this year. And up until the last 2 weeks of October, thought we had done a good job of identifying and still think we've done a good job. I truly believe that what we've seen from a weather pattern over the last 4 weeks is what's going on with our boot category.

Okay. And last year, you have not priced as competitively and you're saying now you're equal to or even more competitive. So last year...

For the day after.

Okay. Were you maybe 10% higher than the competitors last year? Just to get an idea of difference in magnitude for this year.

It was more than 10%, Harry. It was more than 10%.

Okay. All right. So to me that explains why you feel confident that -- and plus the other fact you mentioned.

Now we'll take a follow-up question from Jeff Stein of Northcoast Research.

Kerry, just a clarification on the SG&A. You mentioned that the severance compensation was $1.4 million in Q3, but there were offsets to that, so the net effect was 0, is that correct? W. Jackson: The net effect was immaterial, and that is correct.

Immaterial. Okay, great. All right. And the other thing I want -- another comment, another question I have for you on e-commerce. I'm just kind of curious, what percent of your business that's been kind of coming in through the first 9 months is coming from markets that would be outside of your core store territory? So in other words, are you getting business -- go ahead.

We're getting -- we're actually making sales in all 50 states. We just looked at that the other day. But the core part of our business from e-commerce is coming from where our stores are mainly located. But we have made sales in all 50 states.

Okay. And the -- can you talk a little bit about average order size, and I know there were some issues with your e-commerce business early; earlier in the year you weren't happy with it. You made some changes to the site itself and, I guess, on one of your vendors. Can you talk about how you're feeling about that business as the year comes to an end here and as we head into next year? Do you see that as being an important driver for you in 2013?

You know, I don't -- it's not at the size yet, Jeff, that I think it's going to be a huge driver of our comps. We are happy with the way it's trending up. We're actually happy with the -- much happier with the site today than we have been at any other time during the year. We've begun to market the site more aggressively, but the volume is just not there yet to be a huge percentage or a huge boost to the comps.

Okay. And you mentioned that about 20% of your traffic now is coming from mobile apps. Would that also mirror the percent of transactions that are coming to the site? Or is it...

No, not yet, but we didn't expect that to happen either, Jeff. We didn't expect it to mirror the transactions. What's unique -- the reason mobile is important is that when customers are in our competitors or are in their own store and they see something that they like and there are 2 things that can happen, either they can -- if the sizes are there are, they can make the purchase online right there in the store, or if they're in a competitor's store, they can comp shop right there with their mobile phone. And that's why it's important for us to have mobile, to make sure that the customer, no matter where they're shopping, whether it's the mall or they're driving by or wherever, that they can see what is going on in Shoe Carnival.

Are you working with your vendors to carry the inventory for you? In other words, is there a consignment aspect to your e-commerce business?

Not yet, and it is something that's on the list to get done, but that is not -- that's not part of our capabilities yet.

Okay. And the final question for Kerry. Kerry, I know preopening expenses have been a burden this year. Can you give us some guidance in terms of your thinking for next year given the fact that next year is primarily a backfill year? W. Jackson: Well, we should see a reduction, a significant reduction, in preopening costs next year even with opening more stores. And the reason is that we're not going to be opening the 2 big markets like Dallas and Puerto Rico where we had to do a significant amount of investment spending in there. Now, however, we will still continue to spend a lot of money in Dallas and Puerto Rico for just regular advertising. So what happens is the preopening costs that we're incurring this year turn into just the base revenue or base expense structure of those markets for next year. However, we'll have more sales to go against them because we're going to be opening more stores, and we'll have that full year effect of having those stores open to full year, particularly in Puerto Rico since it opened in July of this year for us. I think what you're going to see is the expense structure will be easier to leverage next year than it was this year, because the preopening costs won't be as big a burden.

And our final question will come from Sam Poser of Sterne Agee.

I just have a -- I mean, just a what if question. I mean, given that the month is going to be made as of Friday and Saturday for all practical purposes, why didn't you wait until next week to do earnings or the following week so there wasn't all of this what if then -- so you'd have a much better handle on a lot more of your quarter in the hat and trend and how promotional things really are looking and where the customer really is. So just a question of -- just thinking about giving earnings 3 days ahead of Thanksgiving versus just after, when you have a lot more information at your disposal? W. Jackson: Well, it's a good question, but we are reporting in line with our competitive set. And I think that if we would have announced that we're going to open, we were going to release earnings sometime in December basically, that it might have worried the analysts despite it, if we were the only ones who weren't reporting. I think what we have to do is report on our normal cycles that we typically do and inform the shareholders and give them our best viewpoint at that point in time. If we find that we've significantly underestimated the opportunity, we'll come back and communicate with the shareholders, again. If we -- just as we'd be good, prudent managers of the business and communications to the street on top of it.

And gentlemen, it does appear there are no further questions at this time. Mr. Sifford, I'll turn the conference back over to you for any additional or closing comments.

All right, thank you. I would like to once again congratulate our Shoe Carnival associates for recording another record quarter and thank our vendors for their continued support. We do appreciate you joining us today and I look forward to speaking with many of you over the coming months. Thank you.

And that does conclude today's teleconference. Thank you all for your participation.