Good morning, ladies and gentlemen, my name is Marcia, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] I would now like to turn this call over to your host, Ms. Peggy Reilly Tharp, Vice President of Investor Relations. Ms. Peggy, the floor is yours.

Thank you. Good morning, and thank you for participating in the Brown Shoe Company Fourth Quarter 2012 Earnings Call, which is being made available to the public via webcast. I'm Peggy Riley Tharp, Vice President of Investor Relations for Brown Shoe Company. Earlier today, we distributed a press release with detailed financial tables, which is available on our website at brownshoe.com. In addition, slides are available on our website for you to reference during today's call. Please be aware that today's discussion contains forward-looking statements, which are subject to a number of risks and uncertainties. Actual results may differ materially due to various risk factors, including, but not limited to, the factors disclosed in the company's Form 10-K and other filings with the U.S. Securities and Exchange Commission. Please refer to today's press release and our SEC filings for more information on risk factors and other factors that could impact forward-looking statements. Copies of these reports are available online. The company undertakes no obligation to update any information discussed on this call at any time. Joining us on the call today are Diane Sullivan, President and Chief Executive Officer; Russ Hammer, Chief Financial Officer; and Rick Ausick, President of Famous Footwear. Today, we'll begin with a strategy review from Diane, followed by financial summary from Russ, before turning the call back over for Q&A. And I would now like to turn the call over to Diane.

Thanks, Peggy, and good morning, everyone. Well, 2012 has come to a close and I'm very happy to report full year sales of $2,598,000,000 an improvement of 0.6% versus sales of $2,583,000,000 in 2011. Excluding sales in both years for brands exited, as part of our portfolio realignment efforts, consolidated sales were up 2.6% in 2012. We also delivered on our earnings promise each quarter of this year, culminating in 2012 adjusted earnings per share of $1.13. This was up more than 60% as we followed through and delivered on our strategic initiatives. Today, we are a slightly smaller but leaner and more profitable company, with adjusted operating earnings up 45% over 2011. Throughout the year, we worked hard to execute on our portfolio realignment efforts at the infrastructure, retail and brand level. We reduced our total SG&A by more than $18 million in 2012, while simultaneously investing in key Wholesale brands and our Famous Footwear stores. Importantly, we did all of this while strengthening our balance sheet by reducing our short-term borrowings by nearly 50% to $105 million. All in, very solid results. Let's take a deeper look into 2012 results, starting with Famous Footwear, which remains at the leading edge of our strategic efforts to build brand differentiation and brand equity. At Famous Footwear, we had a record year in terms of sales, crossing the $1.5 billion mark and also achieved gross profit of $666.1 million and record operating earnings of $94.1 million. In addition, we reported record fourth quarter sales at Famous, with same-store sales up 4.4% on a 52-week basis. For 2013, we plan to continue to focus on 3 key areas for productivity growth at Famous: Real estate, inventory optimization and omni-channel engagements. Our strong real estate strategy will continue to optimize selling square footage…

Thanks, Diane. Thanks, everyone, for joining us on the call and webcast this morning. We certainly appreciate it. Although Diane briefly reviewed our consolidated sales, I'd like to add a little more color. For the fourth quarter, we reported net sales of $640.2 million versus $628.9 million in the prior year. As a reminder, 2012 included a 53rd week, which increased our net sales by approximately $21 million and had an immaterial impact on earnings. Results for both the fourth quarter of 2012 and 2011 included sales of $2.8 million and $16.5 million, respectively, from brands and businesses we have exited. If we exclude these sales from both periods, net sales for ongoing businesses were up 4.8%. For the fourth quarter, we reported GAAP net earnings of $4 million or $0.09 per diluted share versus a loss of $8.2 million in the prior year or $0.21 per share. Fourth quarter 2012 results included portfolio realignment costs of $2.9 million, while the fourth quarter 2011 included portfolio realignment integration related cost of $18.5 million. On an adjusted basis, net earnings in the fourth quarter improved 43% to $5.9 million or $0.14 per diluted share compared to earnings of $4.1 million or $0.10 per diluted share in the fourth quarter of 2011. For the full year, net sales were $2,598,000,000 versus $2,583,000,000 in 2011. Excluding sales from exited businesses of $42.5 million and $92.5 million, respectively, resulted in sales improvement of 2.6% for 2012. GAAP net earnings for the full year were $27.5 million or $0.64 per diluted share versus $24.6 million or $0.56 in 2011. On an adjusted basis, excluding all portfolio realignment, organization change and integration related costs in both years, net earnings for 2012 were $48.6 million or $1.13 per share, up 60.4% when compared to 2011 earnings of…

[Operator Instructions] First question comes from the line of Steve Marotta with CL King & Associates. Steven Louis Marotta - CL King & Associates, Inc., Research Division: Just talk a little bit about first quarter. You mentioned it started a little late. Can you tell us where you are now and also how your assumptions changed for the balance of the year? Does the consumer need to just stabilize as their acceleration that's assumed? Can you talk a little about the assumptions from a quarter-to-date to the balance of the year standpoint?

Yes. So Steve, I think as we look at the quarter, we're seeing, as we mentioned on the call, the same consumer softness, whether it's from the consumers, from the tax hit that they're seeing or other financial impacts or the extremely cold weather that's been sweeping across the country. We have seen the slower first quarter. We do expect our back-to-school season in the third quarter to still be one of our strongest, and we do see some shift into the second quarter from third quarter on the back-to-school season as well that will occur this year.

Just a little bit more on that. We're actually seeing, so far in the first quarter, really lower traffic counts in general. And across, certainly Famous Footwear, and as we talk to other retailers, similar challenges. But at Famous, we are seeing higher conversion rates with the consumers that are coming in. When we take a look at our warmer markets, those warmer markets look very good, so it really is the colder ones that are the ones that aren't performing as well. So a lot of moving parts also in the first quarter here, with earlier Easter, all the stuff around the tax issues and you hate to say it, but a little bit of weather stuff that's creating a little more confusion in terms of how we read the cadence of our business right now. Steven Louis Marotta - CL King & Associates, Inc., Research Division: Has March been a little bit better than February?

Well, not really. I mean, we're actually -- this week last year, for instance, Chicago was 45 degrees warmer than it was yesterday in Chicago, so no. Steven Louis Marotta - CL King & Associates, Inc., Research Division: Okay. And also, can you talk about your marketing spend in total for 2012 versus 2011, the expectations for 2013? And is there any significant cadence differential in '13 versus '12?

I think we're actually pretty close to the percentage rate, '12 to '11, if my memory serves me correct. And as far as '13, there'll be some adjustments and shifts depending on timing for third quarter, second quarter, when the calendar falls a little differently. That might adjust some things. But our expected spend will be very similar as a percentage of sales as we were in '12.

And I think the focus, as we had shared with you guys earlier, between our victory campaign, the rebranding of our stores, the rewards customer base, the mobile focus is continuing. That's not changing.

Next question comes from the line of Jeff Stein with Northcoast Research.

A couple of questions here. First of all, on the Wholesale side, I'm trying to understand the various moving parts in terms of where you see things going. I guess, if I back out the sales of exited brands, which was about $42.5 million, and if you assume that you're expecting down low to mid-single digits, that would suggest that in the aggregate, on a like-for-like basis, you're probably looking for somewhere between a 1% and a 2% increase, if my math is correct. So I'm wondering, with Sam & Libby being kind of a new brand that you're rolling out to Target, with -- I think if I recall, you are working on kind of a refresh of the Avia brand, kind of wondering what's going on with that. And with Sam Edelman continuing to do well and I guess, the Contemporary Fashion brands seemingly continuing to do well, something -- I guess, something seems to be planned down for the New Year and I'm trying to understand what that is.

Yes. Good -- great question, Jeff. And your -- so your calculation, all the numbers is absolutely correct. If you think about it this way, there's 2 challenging pieces. As we mentioned, the first one is Naturalizer and the second one is Avia. Those are 2 of the businesses that we need to get corrected in 2013, and feel that on Naturalizer we're headed in the right direction, as I said. And spring so far looks good. Avia, we have to kind of see how it plays out over the spring season and 2012. And then the rest of our brands, like you highlighted, Sam Edelman or Franco Sarto or LifeStride or Dr. Scholl's, are all performing well. So it really is a question of those 2 businesses that we need to accelerate momentum on them. And I'll just add, we're again taking a very conservative top line assumption, staying more aggressive on our margin expansion, conservative on expenses across the company to drive really the quality of earnings up.

Okay. Question, I guess, for Rick. The comp store inventory at Famous Footwear at fiscal year end, Russ, I know you mentioned it was up, but can you can you tell us up how much? And then I've got a question on store growth at Famous Footwear, net additions, openings and closings.

The comps are for the end of February was up about 5.5%, Jeff. I got to remember, we also had an extra week in there. So it's actually as if we delivered the first week of February last year in January. So you have to factor that in a little bit, but that what's the number was at the end of February -- end of January, I'm sorry.

Okay. And store growth?

Store growth for 2013?

Yes.

I think we're planning to open about 55 stores and I think we're looking to close around 60. So it's probably a net minus 5 or flat, somewhere in that range.

Okay. And you guys set out a plan at your Analyst Meeting last spring when you were looking at kind of 2012 to 2014, the ability through store openings and closings, to see about a $20 million pretax improvement with that real estate strategy. Can you share with us how much of that $20 million improvement you realized in 2012? And how much you would expect to realize in 2013?

Yes, I think when you look at the 3-year projection that we showed then and then the fact that Famous has reported record sales and profit share, we're ahead of plan at the end of 2012 on that $20 million. So we were able to accelerate some of our openings and closings and stayed on that plan but the results actually came in a little bit better. Our sales per square foot came in a little bit better than what we thought on the stores that we're opening, so it's improving. So I would say that we'll stay on that plan for the 3 years. Rick, any other comments on that? No?

No.

Yes. Russ, what I'm trying to get at here is in terms of modeling, I'm trying to understand the increment. In other words, what is the path to get to $20 million? How much of the $20 million did you realize last year? How much in '13? And how much in '14 to get this going?

Yes, I think maybe the way to think about it is that $20 million is more back-end loaded because that's when you have more stores opened for full years that are contributing at the higher rate. So I would more back-end load that as your model from '12, '13 and '14.

Probably further down the road in '12 that we expected. So as we looked at it, it's probably not quite as back-end loaded as we had to -- we accelerated some of that in '12. But the rest is point [ph], more of that will show up in '14 -- '12 through '14 because of all the stores being fully operational and having -- getting closer to maturity levels.

Exactly.

Your next question comes from the line of Jill Caruthers with Johnson Rice. Jill R. Caruthers - Johnson Rice & Company, L.L.C., Research Division: Question on 2013 gross margin expansion guidance. A little lighter than I was expecting and just could you talk about your plans there? And I assume it's greater benefit as your Wholesale portfolio was restructured into kind of some higher-margin brands and you're going up against somewhat as easy comparisons given the system issues you dealt with.

Yes, I think when you look at the margin mix, it's kind of impacted by the sales growth. When you look at our -- the businesses, we're growing our Famous business at market growth rates. And our Wholesale business on the Healthy Living side is also growing at about market rates. So those are both growing at approximately a 3%-type rate next year. But our Contemporary Fashion is growing faster, and that's where the margin improvement, and Diane talked about the challenges that we had in the couple of brands, had more of an impact. So we see that improving more in the back half of the year. Diane talked about Naturalizer and we see that improving more in the back half of '13 versus the front half.

Yes, I think in the fourth quarter, too, Russ, in Wholesale, in total, we were up on our margins 70 or 80 basis points, I think it was.

In Q4, right.

And so we are really driving hard in '13 to continue to improve the margin rate in Wholesale. Jill R. Caruthers - Johnson Rice & Company, L.L.C., Research Division: Okay. And then the inventory allocation system you're talking about upgrading at Famous, I mean, I guess the timing of that, is there already -- any risk to implementation? And then kind of when do you expect some -- to see some benefits materialize?

Yes, we -- at this point in time, Jill, we don't see any risk yet. We're basically through the science of it. We're actually, I believe, start going into parallel mode testing next month, so in about 3 weeks. Our intention would be to have some categories, maybe not the entire store, on the program in June or July. And we don't see any -- at this point, we don't see any issue with that implementation. And we have put -- we put additional sales in our plan in the back half of the year to mitigate the costs to the -- or to capitalize the cost of the expense of the system. So we have factored in the numbers we're quoting you for our full year -- there is a number in there that's part of that sales plan that would be generated by the implementation of the system. We don't see anything today that will tell us that's not going to happen.

Your next question comes from the line of Chris Svezia with Susquehanna Financial.

So I'm just curious, when you guys talk about the trends that you're seeing currently in the business, could you just maybe answer the question? I mean, are you -- from a same-store sales perspective and what's happening on traffic, is the conversion enough to give you a positive comp in terms of what you've seen in the first quarter or no?

Well, right now, we expect it will get warmer someday. So with that ever optimistic view, we would still expect our first quarter to be flat or up a little bit or down a little bit. We've seen right around flat, for argument's sake, which is a little less than we hoped. But again, the beauty of what we're -- the kind of product we're talking about, Chris, as you'd know, we have a long life to sell the shoes, right? This is November 15 in boots or -- and it's still 70 degrees outside. So we have more opportunity, we think, to sell things in the second quarter than we would have than we normally would. And frankly, if you go back over the last few years, we've -- this is kind of happened over time where we've had warmer, early springs, February and Marches as retailers -- we all get aggressive about that. We keep pushing more and more product into February and March that we'll sell. And then we have a period of time like this where it's not conducive and all of a sudden, it goes back to normal because we used to sell more of our shoes in the second quarter or -- that are sandals and open footwear than we sold at first quarter in historic times. But it's a shift because of the way the customer was buying and their wants and needs. So it feels a little more like that. Again, we...

Looking and looking at warm markets.

Yes, and so we've done the whole thing about basically -- even though Seattle is not a warm market, if you look at the Seattle weather pattern over the last few weeks, it's been very much normal or a little warmer than normal. Our businesses in Seattle has done double digits. So it tells me that again, the economic issues and the gas prices and the taxes and all that stuff, I believe, is relatively equal at every part of the country. And then the only thing we can see is the difference between all those places is the weather and the urgency for consumers to change their wardrobe or wanting to buy different products. So again, that gives us the confidence that we'll get it. How it comes maybe a little different than we thought. But we're taking -- we're spending our time and energy making sure that our inventories are right. So things that aren't selling now, we're doing some adjustments. And if there are things that are selling really well, we're buying more of them, too. So it's a little bit of all of that.

And I think, Chris, as we mentioned earlier, we also took early receipt of key spring product in January. So we're well positioned when that weather does change.

Okay. And Rick, how are you thinking about from an athletic perspective? You're running assortment looks really good and continues to get upgraded. What are you doing in, I guess, in basketball, if anything? What are you doing in skate? And outside of athletic, what are you doing in the boat shoe business? Did you hit this...

Yes, well, you hit [indiscernible]. Our running business is still very, very healthy. And it's obviously our biggest category, it has been our biggest categories for several years and it's bigger than it was 2 years ago. I think we've had a 25% to 30% compounded growth in running the last several years, so grown it well. Basketball, Chris, this whole conversation about that trend, the reality is we never really participated in the basketball trend because we never have the access to the product that the customer really wants for basketball. Not only today, but in the last 25 years, we haven't had it. So it really is not part of what our -- we worry about or think about too much. We just -- we have product and our basketball business is okay, but it's a relatively small category, so it really won't make that big a difference in our mix. You've talked about skate, we would -- I would refer to it as alternative athletic or alternative sports, if you want, and canvas-based shoes. Our Chuck Taylor business is excellent. Some of our other canvas product business is excellent. Those are huge businesses for us. Those, far and away, are bigger businesses for us than basketball. So again, we have basketball shoes, we service that customer the best we can with what we think we can have assortment-wise. But our focus is on making sure our running assortment looks good and we will get increases in running this year. I don't believe it will be 25% or 30%. It will be probably mid to upper single digits, but that's on a much bigger base. And then we have the alternative business, which is really driven a lot now by our canvas piece of that business. I think those are the things that are driving our business right now, in addition to when we get the warm weather sandals, et cetera.

And maybe just to add to Rick's point there, fourth quarter running was up almost 7%.

Okay. And Rick, in the boat shoe business, just sort of how you think about that for spring?

Yes, the boat shoes business is -- we thought that we might see because we had to basically double that business last year. We thought it might be a little -- come back a little bit. And we actually saw much better selling of that product in January and early February than we expected. We've gone back and try to acquire more goods. It hasn't slowed down from our -- from a year ago's business right now. We've changed it a little bit. There's more canvas-based boat shoes in there and I think that's part of why we're seeing it on the men's side particularly. And on women's, I think we're offering a little broader assortment of fashion products, so prints, whether they be animal or sequins or glitter kind of product and customers seem to be responding to that. So I think that business still looks like it has plenty of legs through back-to-school for sure.

Okay. And then just on the Wholesale business, I guess the $845 million that you did in Wholesale, that includes brands that you've exited or it takes a hit because of brands you exited, correct?

Correct. So we had approximately $38 million of exited brands in that $845 million.

Okay. So then when I -- going back to a prior question, when you think about declines of low to mid single digit, I mean, there's some exited brand impact in that but it's very, very small, I would assume, relative to 2012 in terms of the actual impact, correct?

Well, actually, if you look at '12 over '11, just to give you context in that, in 2011, the exited brands represented about $96 million. And in -- I'm sorry, 2011, 2012 is, like I said, about $38 million.

And what would it be in -- I mean, what's your estimate -- what impact, if you just strip out, what's your organic growth rate in Wholesale, go forward brands?

So I think one of the earlier questions has mentioned that. It's a couple of percent.

Low single digits, Chris.

Low single digit growth?

Yes.

And when you -- okay. And then when you think about margins in this brand, I made a guess, Famous Footwear the opportunity to expand margin is comp and productivity. But at Wholesale, that's really the big opportunity. I mean, is it pretty broad-based across all the platforms? Is one stronger than the other? If you look at the Sam Edelman business and say, "Hey, you know what? They continue to expand and grow, therefore, the margin profile there reflects investment." Maybe just parcel out where specifically that opportunity to expand margin, because at the end of the day, at 4% EBIT margin ballpark for Wholesale, I mean, not the greatest but there's big opportunities. So I'm just -- more specifically want to understand where that opportunity is.

Sure. So when you look at the businesses and a lot of moving parts, 2 very different businesses within our continuing brands in Wholesale. The Healthy Living side, as Diane mentioned earlier, our Naturalizer was down, is recovering. We do expect that to continue to recover, so we will see improvement there. And in the Avia brand, that is down. Those did impact our margin and we are improving. We are seeing nice margin growth in the Sam Edelman brand. Our Fergie, Franco and Avia, as Diane mentioned, are all doing well. So a lot of moving pieces there. But our intention is to continue to improve our margins in Contemporary and in Healthy Living in 2013. And you'll see more of that impact in the back half of the year.

Your next question comes from the line of Sam Poser with Sterne Agee. Sam Poser - Sterne Agee & Leach Inc., Research Division: Just -- this is more technical regarding the -- first, the effect, how that, on a comp basis, how that 53rd week behaved? And number two, how the shift of the weeks affect the sales relative to the comps by quarter? So in other words, of the value of week ending February 9 that you've -- you're starting a week later, so your comp will be on a week-over-week basis, but your fiscal is still your fiscal number. So what that kind of variance is by quarter because you should have a big variance in Q2 and Q3 given that you gain a week of back-to-school in Q2 and then lose it in the third quarter?

We can take all day to answer that question, Sam. Sam Poser - Sterne Agee & Leach Inc., Research Division: Well, I mean, it's important because if you're going to model this, what's going to end up happening is, is that people will put in a 3 comp for second quarter and understate the revenue because you're losing a small week at the beginning of May and picking up a big week going into back-to-school. So there's a percentage that's just there regardless of what the comp is on the variance.

Yes, there is. Again, I think you're right. There's one that we have, I think, it's a week of -- back-to-school moves into July. Obviously, the replace -- gets replaced by -- the weather it replaces a smaller week, but I would get -- I'm just -- I think the numbers probably in the neighborhood of $7 million, $8 million worth of sales would be my guess, Sam, on the -- without looking explicitly at it. Because again, in our head, it's about the customer, right, when they're shopping. So we just worry about making sure we have the product and plan our business around that because they don't anything about our calendar and so... Sam Poser - Sterne Agee & Leach Inc., Research Division: No, I'm not saying that. What I'm just saying is for the sake of modeling...

But we don't necessarily -- we're not focused on it so much because we just to make sure we have our flows and our product right. Sam Poser - Sterne Agee & Leach Inc., Research Division: I understand that. I'm not -- I completely get that. What I'm saying though is just that if we model a 2 comp in Q2 for arguments sake, since the relative sales, if you didn't open or close any sales, might look like a plus 5 in total revenue for your business. And in Q3, if you model it plus 2, it could look negative just because of the gaining and the loss of those 2 weeks. Regardless of...

If we look at the quarter, Sam, or what the quarter looks like, I would probably tell you it's maybe up to 1% or something like that, 1% or 1.5% or something on that range of the difference from what we would had a year ago. Sam Poser - Sterne Agee & Leach Inc., Research Division: Okay, all right. And then lastly, I mean, how much do you think the shift of the tax refund impacted the business, I would say, from the middle of week 3 probably through whenever? I mean, how do you look at that?

Well, we've never felt as much an impact on any of those issues as some people have. The only thing I have to kind of give or to give you a relative measure against is, we had somebody who came out and talked about what their last 2 weeks of January were, and ours weren't anywhere near as bad as that. So ours were down like mid to upper single digits. That was our loss. So if that was -- if you want to tie that to the impact of tax returns or tax refunds being a problem, it had a much lesser impact on us than them. But that's about the only way I could -- only relative way I can look at them.

Yes, I think Sam, it's been... Sam Poser - Sterne Agee & Leach Inc., Research Division: Why do you think that is?

Well, because I think our customer has a little higher income. I think our customers in the different parts of the country, we're a much more suburban business than we are in urban business. I think those are all parts of it. That's the -- that seems to be the businesses that live and die with us some of that stuff. So Walmart is always talking about those things. Carnival talks about those things. Even some of the sports specialty guys talk about it because it's the mall kid, right? It's -- we've never been able to draw huge distinctions around it. We see some -- there's not no impact, but it's -- that's not the kind of impact that you see at other places.

There are no further questions. I would now like to hand the call to Ms. Diane Sullivan.

Thank you, everybody for joining us for our 2012 year end call, and we look forward to seeing you at the end of the first quarter. Take care.

And ladies and gentlemen, with this, we conclude today's presentation. We thank you for joining. You may now disconnect.