Jane Singer - Vice President of Investor Relations Jane T. Elfers - Chief Executive Officer, President and Director Michael Scarpa - Chief Operating Officer, Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Betty Y. Chen - Mizuho Securities USA Inc., Research Division Susan K. Anderson - FBR Capital Markets & Co., Research Division Anna A. Andreeva - Oppenheimer & Co. Inc., Research Division Janet Kloppenburg Adrienne Tennant - Janney Montgomery Scott LLC, Research Division Dorothy S. Lakner - Topeka Capital Markets Inc., Research Division John D. Morris - BMO Capital Markets U.S. Chad Sutherland - Goldman Sachs Group Inc., Research Division Maria C. Vizuete - Piper Jaffray Companies, Research Division Jennifer M. Davis - The Buckingham Research Group Incorporated Richard Ellis Jaffe - Stifel, Nicolaus & Company, Incorporated, Research Division Brian J. Tunick - JP Morgan Chase & Co, Research Division Jay Sole - Morgan Stanley, Research Division Dana Lauren Telsey - Telsey Advisory Group LLC

Good day, everyone, and welcome to The Children's Place Fourth Quarter and Fiscal Year 2013 Conference Call. [Operator Instructions] Please note this call is being recorded, and I will be standing by, should you need any assistance. It is now my pleasure to turn the conference over to Ms. Jane Singer. Please go ahead.

Thank you, Zack. Thank you for joining us this morning. With me here today are Jane Elfers, President and Chief Executive Officer; and Mike Scarpa, Chief Operating Officer and Chief Financial Officer. We issued a press release earlier this morning, announcing fourth quarter and fiscal 2013 financial results. A copy of the release can be found on our website. Before we begin, I would like to remind participants that any forward-looking remarks made today are subject to the Safe Harbor statements found in this morning's press release, as well as in our SEC filings. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially. The company undertakes no obligation to publicly release any revision to these forward-looking statements to reflect events or circumstances after the date hereof. After the prepared remarks, we will open the call to questions. [Operator Instructions] Thank you. And now, I will turn the call over to Jane Elfers for her opening remarks.

Thank you, Jane, and good morning, everyone. We delivered earnings at the high end of our guidance range for fiscal 2013 despite the highly promotional environment and the series of storms brought on by the polar vortex during Q4. We achieved these results through a combination of superior value, tight expense discipline, strong merchandise offerings that resonated with our customers and well-controlled inventories. 2013 sales of $1.8 billion were flat compared to 2012 on a constant currency basis and adjusting for the 53rd week last year. Comp sales declined 2.8% compared to a 1.6% increase in 2012. Adjusted EPS increased to $3.26 near the top end of our guidance range. We generated $173 million in operating cash and returned $66 million to shareholders in 2013. We are expanding our capital return program in 2014 with the initiation of our first ever quarterly dividend, and our Board has authorized an additional $100 million share repurchase program. Today, we also announced we are changing our name from The Children's Place Retail Stores Inc. to The Children's Place, Inc. Our business model today is markedly different from when I arrived in January of 2010, and The Children's Place, Inc. more accurately reflects our strategic positioning as a leading global children's brand. For example, we didn't have any international stores outside of North America in 2010. At the end of 2013, we had 35 international stores and we expect to double that number to 65 to 70 by the end of 2014. We're also in talks with several new partners for planned 2015 opening. We didn't have a wholesale business in 2010. We began working with one major club customer in 2012, a major off-price retailer in 2013 and we are adding several new customers in 2014. Online sales have doubled from 7% to…

Thank you, Jane, and good morning, everyone. We are pleased with our overall performance in the fourth quarter, achieving adjusted earnings per share of $0.96. In doing so, we managed our ending inventory slightly better than planned, incurring deeper promotions, which had an impact on both our top lines and gross margin during the quarter. We made up for that shortfall by effectively managing our SG&A. Details for the fourth quarter are as follows: Net sales were $467 million. Comparisons to Q4 2012 were negatively impacted by foreign exchange and the 53rd week in fiscal 2012. On a constant currency basis and comparing similar weeks, net sales decreased 1.8% in 4Q 2013. Comparable retail sales declined 4.3% compared to a positive 4.9% comp last year, which was our most difficult compared to last year. We anticipated traffic would be weak in the quarter, which would pressure AURs, ADS and transactions, and the seasoned played out the way we had predicted. However, the multiple number of severe storms and unseasonably cold weather in January put more pressure on our top line, resulting in a miss to our comp guidance. The negative 4.3 comp for the quarter was primarily attributable to a 3.2% decline in transactions due to lower traffic, partially offset by higher conversions. Average transaction value declined 1.1% with AURs declining high-single digits being partially offset by higher units per transaction. U.S. comp sales declined 3.8% in Q4, transactions were down 2.4% and average transaction value was down 1.3%. Canada comp sales declined 8%, which was entirely due to a decline in transactions. Average transaction value was flat. eCommerce accounted for 14.5% in net sales in the quarter compared to 12.7% last year. Adjusted gross margin rate deleveraged 150 basis points to 35.5% of sales for the quarter due to…

[Operator Instructions] And we'll take our first question from Betty Chen with Mizuho Securities.

Jane, I was wondering if you can talk a little bit about the baby business. It definitely sounds like the team has made tremendous inroads. With some of the results already in the fourth quarter, where do you expect the business to be size-wise relative to the whole company sales over time? And remind us where it was in 2013, if you could. And then my second question is regarding the weather variability. It certainly makes a lot of sense given the fleet exposure, especially in the East and the Midwest. Could you share with us if perhaps you're seeing some differences in performance on the West, where the weather is a little bit more cooperative?

Sure. Well on the baby business, the way that I'm thinking about it and the team's thinking about it right now is really the toddler side and the newborn side. And during the fourth quarter, we saw as I mentioned on the prepared remarks, our best positive comps that we've seen in 5.5 years. What we've done in the newborn part of the business, which we really think about as 0 to 24 months, is we have invested significantly in the sleepwear pieces of the business, and it cut way back on the fashion elements of the business. And that is clearly working for us. And I think it really speaks more to what that customer is looking for. So you'll see through the balance of 2014 in newborn, you'll see us continue to put more receipts behind sleepwear and playwear. And you'll see us as we move towards the back half of the year move more towards a sets business versus a separates business. And by sets I mean 2- and 3-piece sets versus single pieces of sportswear, if you will. That's newborn. On the baby side of the business, baby has really lagged the company over the last few years. We have spent a tremendous amount of time, an inordinate amount of time trying to fix big kids, and to put an the accessory business into a company where there really wasn't an accessory business when we came. I think the team has done a really good job on both those areas and both those categories. And I think we understand the formula in big kids right now. And we've seen good progress on that in the last few years. In baby, I think that we've seeded a lot of the business in baby over the last few…

And we'll go next to Susan Anderson with FBR Capital Markets. Susan K. Anderson - FBR Capital Markets & Co., Research Division: And I agree, it's not warming up anytime soon here in the Northeast, so. So I guess, can you talk about product costs for this year. Are you still expecting them to be flat? And how should we think about merch margin, I guess probably first quarter then because it's going to be so different, and then the rest of the year also?

Sure. From the cost point of view, and then I'll turn the merch margin over to Mike. The -- our AUCs are flat in the first half, and we have not finished the second half. We're working on that now. There has been significant increases in labor costs, but our sourcing team, Greg and his team, through his strategies that he put in place about 1.5 years ago was country migration and vendor consolidation. We've really been able to mitigate all of those increases through those strategies. So we're looking at flat AUCs in the first half. We're working very hard to make sure that we keep those AUCs as close to flat as possible -- as I said, we don't have the final numbers yet. But with the AUR pressure the sector is under, that is clearly not an environment where we believe one could successfully attempt to pass on any type of price increase to consumers.

And from a merchandise margin perspective, quarter-to-date, we're basically down 150 basis points. We would expect that to improve over the -- the remainder of the quarter, and expect to be settling in somewhere in the 80 to 100 basis points range of the negative merch margin, so improvement there. And then we would expect improvement overall. As we move throughout the rest of the year, and currently you're looking at probably in the around the negative 25- to 50-point range in terms of merch margins for the year.

And we'll go next to Anna Andreeva with Oppenheimer. Anna A. Andreeva - Oppenheimer & Co. Inc., Research Division: Your guidance for down earnings for the year basically implies almost continuation of this difficult 1Q trends for the rest of the year. Just given the levers that you guys have, I guess we're trying to understand why would that be the case? Are you seeing promotional environments getting worse here just outside of the weather situation? Obviously, we had a difficult '13 and you guys still executed very well. And just longer-term as we think about the 10% operating margin goal, maybe just remind us what are some of the levers you guys have to get there? And then finally, I think you mentioned newborn is comping positive quarter-to-date which is great to see. Talk about the other categories maybe, performance to get you to that negative 6% comp.

So from a guidance prospective, as we look at Q1, we're looking at operating income in the $20 million to $22 million range against $28 million achievement in 2013, which is a $6 million to $8 million hit in Q1. As we look at the business so far quarter-to-date, the majority of that hit is behind us at this point. It's happened in the month of February and the first couple of days in March so far. So we expect to see that starting to migrate. For the remainder of the year, quarters 2 to 4, we achieved $82 million in operating income, and are -- expecting somewhere in the $75 million to $80 million range. And that includes about a $3 million impact on FX. So we're planning the business flat to slightly down in terms of operating income. Obviously as we get better visibility as we move forward, we'll be in a position to look longer range, but there's still a lot of uncertainty out there given the promotional environment.

And to answer the question where everyone is, where the rest of the businesses are q-to-date, newborn is certainly the shining star and the rest of the businesses are pretty much kind of trending all at the same place. There's nothing bright spot, nothing worse than anything else really to speak of. Like I said, where we have the weather, spring response has been good, and where we don't, it's been real tough.

And just to talk a little bit about the levers that we do have to get to a double-digit operating margin. As Jane talked about, we think we have the right team in place that can get us there. We're focused on our strategies. Those strategies have in turn changed long term. Still focused on product, and Jane talked to you about all the improvements that we've made and the progress that we've made in that area. Technology obviously is key. And dealing with systems where we don't have markdown optimization, we can't assortment plan, our allocation systems are old and inadequate. Managing a replenished program by basically increasing weeks of supply is a basics is not really where we want to be, no Omni-channel capabilities today. So ways to go on that, and obviously we're thrilled to have our eCommerce platform now in place, and it was a successful launch for the U.S. site. We're looking forward to getting our SAP, ERP in the beginning of the second quarter. So we think that, that will provide the framework for us to add these capabilities. Obviously, we're thrilled with where international and wholesale are headed. We've shown improvement in 2013. We've added new customers and are adding stores for '14, and that will continue through '15. And obviously fleet optimization, we announced today that we're moving our closure list from 110 to 125, which we think is the right thing. We're encouraged from early data in 2012 that we can migrate the customer. So those are just a few of the things that we have that can add to that double-digit operating margin.

And we'll go next to Janet Kloppenburg with JJK Research.

I was wondering if you could talk a little bit about your eCommerce trends in the fourth quarter and in the first quarter? And if there's a discernable difference in those trends versus the store comps? I was also wondering about inventory levels in light of sales trends. Will you be making an effort to bring them down even further? And I understand about the in-transit adjustment. And for Canada, it's been troubled for a while. Wondering what's going on with pricing pressure in Canada and how you're thinking about the margin sale, which at one point were premium to the company average, but I think now have been pressured quite a bit? And lastly, Mike, on gross margin. Is it -- is there a big in-sourcing advantage to gross margin -- sourcing-base advantage to gross margin here offset by an outlook for increased promotional activity versus last year?

Thank you. On the eCommerce front, we certainly had a great quarter in eCommerce. We continue to deliver outsized results, and quarter-to-date eCommerce is also outtrending the other channel. We feel very good, as Mike said, about the new platform. When you look at what we're able to do on the new platform really at the end of the day, we think we have a big opportunity to increase conversion because of the new attributes that we put on there. So we will keep you posted as we move into second and third quarters, but we have a tremendous amount of traffic coming through our regular site, as well as our mobile optimized site, and we believe that with these upgrades we've made to the platform and to the navigation and to the other things we talked about on the call, that we have a significant opportunity to get more of that traffic converted into sales. From an inventory point of view, we feel very strongly that we're in great shape on our inventories. We are extremely clean on clearance. We liquidated what we needed to do in the month of January, and we're entering the new season very clean. We were able to do some things in the last quarter, as Mike had said, to bring goods ahead for Chinese New Year and with the disruption overseas in some of the markets that we deal with. We were happy we're able to do that. And now we're being very careful as well going into second quarter with the SAP cutover to make sure that we have the merchandise in place in advance of that cutover. So I think we've got a pretty good track record at this company of inventory management, particularly in light of the fact that we don't have the tools that most other retailers of our size have to manage inventory, through allocation assortment planning, replenishment and so on and so forth. But the team has done a good job there.

And from just an overall gross margin perspective, as Jane said, we see that our costs in the first half of the year are relatively flat, and we're currently working on the second half of the year. So that would kind of indicate that it's really the promotional aspect that's driving merchandise margins now.

And we'll go next to Adrienne Tennant with Janney Capital.

My question, the first one is kind of housekeeping. I was wondering of the stores, the 1,107 at the end of the year, can you give us a breakdown U.S., Canada, Outlet? And given that you're increasing the number of closures, what's the ideal footprint for each of those divisions? And then I'm not sure if I missed this, but did you actually give any quantification of back half inventory or deliveries, or receipts, however you want to talk about it, flat to down in terms of dollars? And then finally, Jane, can you talk about the wholesale business? What opportunities are you seeing there in the early stages? And if you can give us any more color? I think at one point, Mike, you had said that the wholesale margins are accretive to the overall business? So if we can get any more color on that, that would be wonderful.

So from a fleet perspective, we're looking at U.S. right now with about 974 stores and Canada's at 133. Square footage breaks up 4.574 million for U.S. and 635 for Canada. Looking from an inventory perspective, we're not giving guidance for the full year at this point, because there's been certain things that have come up like accelerating shipments at the end of Q1 to ensure that we have goods on the water as we cut over our turnover. So we'll continue to give quarter-by-quarter guidance, and we'll keep you updated. But as Jane said, we feel really good about our opening inventory in terms of carryover goods and actually expect what is currently about 1/3 down in overall inventory levels on carryover to approach 50% as we exit Q1. From a wholesale perspective, we're thrilled with the wholesale progress we've made. Obviously we need to get both the international and wholesale businesses up to critical mass, and that's a ways off, but feel good with the progress we're making so far. And both international and wholesale are accretive to the overall operating margins.

And we'll go next to Dorothy Lakner with Topeka Capital.

Just wondered, you've done a really good job in terms of supply chain, country migration and vendor consolidation, just wondered where you are on China at this point? And where you want to take that exposure to? Secondly, just wanted to make sure SAP, the costs for that are going to be second quarter and not beyond, if I'm not mistaken, but correct me if I am wrong on that. And if you could quantify that, that would be great. And then lastly, I wondered if you could just talk a little bit about trends between outlets and mall stores in the quarter? That would be helpful too.

Sure. On China right now, we're at about at 36% out of China. We were at 38% at the end of last year. And Greg and his team have been working on that number to get that down. I think over the next few years, that we'll see that number fall below 30%, which is really where we're going at right now. From an outlet versus a mall store perspective, we have the same issues that you've heard from other retailers in Q4 in outlets, with the storms and the below-freezing temperatures, a lot out of these outlet centers are located outside. So we had some pretty big traffic hits to the outlet centers when we were experiencing the storms in Q4, and also into the first weeks of this quarter as well.

And from an SAP perspective, from a capital perspective, the total project will be in roughly the $35 million range. And we will spend the majority of our capital in Q1 and Q2 this year against that. Obviously, we'll keep some capital dollars to assist as we implement and refine what we've done from an SAP launch perspective, so there'll be continued spending throughout the year from a capital perspective and then obviously we're seeing some training dollars and cutover expenses in both Q1 and Q2, and there'll be minor expenses as we end the year in 3 and 4.

And we'll go next to John Morris with BMO Capital Markets.

Back on baby, I guess, thinking about newborn and I guess if you want to include toddler there. Can you just tell us, are the -- Jane, are the merchandising margins there above the company average? And what would that category grow to be a percent of the mix with your new initiatives? And then I guess maybe for Mike and/or Jane on the outlets. The margin's I guess currently running about 200 basis points below the full line stores, a nice improvement there. I think you had put out a target of achieving parity in 2014. Are you still on track to do that? And can you talk about the strategy and the main drivers to getting to that goal?

Sure. Thanks, John. On the baby and newborn margin, we have struggled in baby and newborn margins, I think because of the product offerings over the past few years and having them not resonate. When baby is doing well and the opportunity for margin is higher in baby, baby does run a higher margin than big. But inherent in that is making sure that the product does resonate with mom. So I think there is opportunity to move not only the sales forward in newborn and baby, but also as we get some traction on both of them to get some margin help there as well.

And from an outlet perspective, we're -- we've closed what was 1,000-point gap to 280. We were projecting to be at 240 at the end of 2013, but obviously the fourth quarter margins had an impact. We had guided that we would hope to be at parity by the end of '14. We've made progress in the month of February in our outlet business in terms of margin, so it's kind of bucked the trend a little bit in terms of our overall business from a merch margin perspective. So we continued to see that, we'll close that gap there in '14. But given the difficult start on '14, we'll see where we end up and we'll continue to update you on that.

And, John, on the percentages of the business, big right now is about 50% of the business, baby is about 30% of the business, and accessories and footwear about 20% of the business. Before we really started our push on big, baby was bigger percent of the total, not usually bigger percent, but it was a bigger percent. But I think we do have -- as I said earlier, I think our opportunity is to really stabilize the negative comps in baby and move that business closer towards the flat comp, and I think that's where the opportunity is for us over the next period of time.

And we'll go next to Taposh Bari with Goldman Sachs.

This is Chad Sutherland on for Taposh. Looking out into 2014, how much flexibility is there in your SG&A? In other words, if the environment remains difficult, are there sort of incremental cuts you can make? How are you thinking about that?

Well, we've guided to leverage SG&A for 2014. We feel we made excellent progress in '13 in managing SG&A, but there is a certain amount of investment that we need to continue to make in the business in order to fully realize our -- where we want to go from an operating margin perspective. So all I could say is we continue to look, we continue to look for refinements, we continue to look at processes and efficiencies within and continue to think that we can show progress overall on the SG&A line. But at this point, we're not calling out anything that's significant in terms of overall.

Okay. And then, how are you guys planning promotions in the next year? Obviously the environment is promotional. How are you thinking about the environment for the full year? What's baked into the gross margin guidance?

We're pretty much anticipating that the promotional environment is going to be pretty heightened, particularly with emphasis on the this quarter. When you look at where Easter is falling, last year Easter fell on March 31. So even though last year there was a lot of talk out in the marketplace of March being a difficult month because it was also extremely cold, you did have at least in the kids sector a natural catalyst to drive traffic in the month of March, which was Easter. Now you kind of have a double whammy in Q1 because Easter is not until April 21, so there's not a natural catalyst to drive traffic to our stores in the month of March without a sustained weather break. So we anticipate that once the weather does start to normalize in April, that it'll probably be a very promotional environment in the kids space heading into Easter, with people running tougher business to the first 9 weeks due to the weather. The rest of the calendar, the rest of the guidance pretty much assumes the promotional environment stays pretty intense, which is what we're used to and what we've seen for the last year or so.

And we'll go next to Stephanie Wissink with Piper Jaffray.

It's actually Maria Vizuete on for Stephanie. We're just wondering if you can talk a little bit about the mobile base engagement and your loyalty program. Maybe how you're integrating the mobile strategy into your eComm and marketing program as well?

Sure. I think we're making sound progress on our loyalty program. We have several goals for our loyalty program, but I think the 2 main ones are: First and foremost, to further engage moms with The Children's Place brand. And then secondly, the goal would be to move our customers from single channel shoppers to multichannel shoppers. We have about 92% of our customers who are still single channel shoppers, so the potential here is pretty significant to move some percentage of them over to dual channel. The multichannel shopper spends about 3x as much as the single channel shopper. And the combination of our loyalty program, which we launched back in the latter half of 2012, that loyalty program requires customers to manage their account online, and when you take that and couple it with our newly-launched website, our mobile-optimized site and our 2 new mobile apps, it makes it much easier and faster for moms to navigate and to shop, but I think the ability to seamlessly redeem loyalty points across channels is also a big plus for us. So it's a big win and we're encouraged by the potential here, and we'll keep you posted as we move through it.

Great. And then if I can just squeeze one more in. Can you just remind us on the store closures. Are they concentrated by mall type, or are they some really off-mall [indiscernible]?

They pretty well represent the strategy of our fleet. But 80% of the stores that we plan on closing are 2009 and prior openings. And also from a format perspective, approximately 60% are in the older formats of Apple Maple and Technicolor.

And we'll go next to Jennifer Davis with Buckingham Research.

I am going to apologize in advance if this has been asked. But, Mike, I was wondering if you could parse out kind of some of the pieces around merchandise margins? Maybe better sourcing, the improvement in outlet margin, I guess offsetting or partially offsetting the promotional environment, which is obviously hurting merchandise margins. And then I was wondering if you could talk a little bit about the structure of wholesale sales, operating margins are higher, but I think gross margins are lower. So how should we think about the impact of that going forward?

Sure. We could talk about merchandising margins, which we indicated would be down. And we're seeing AUCs, at least for the first half, being flat. We're working on the second half, but we obviously think that our sourcing strategy has added tremendously to our ability to keep AUCs flat this year. The country migration, the vendor consolidation, all the things that we're doing has helped our merchandise margins from a cost perspective. The promotional environment -- you're out in malls every week, so you understand what we're facing. And obviously with traffic down quarter-to-date, down 10%, and AURs under pressure, we're feeling it from an overall merchandise margin perspective. From a gross margin perspective, we're also feeling a little bit as our fixed costs are not being leveraged based on the negative comp sales that we are forecasting for Q1 and the sort of flattish comp sales that we're projecting for the remainder of the year. We've made significant investments in supply chain, which are adding cost overall to the gross margin. And then we've also -- the bigger eComm gets, the more eComm freight gets added into that. So those are 2 things that are also hurting us a little bit on the gross margin line. From a wholesale perspective, you called it right, that gross margins are slightly dilutive. And -- but we run a pretty lean operation in wholesale, which means that the overall operating margins are accretive to the business. We use the leverage of the organization in terms of merchandising and sourcing to help generate those stronger operating margins.

And we'll go next to Richard Jaffe with Stifel. Richard Ellis Jaffe - Stifel, Nicolaus & Company, Incorporated, Research Division: A question about the eCommerce business and its opportunity. You talked about adding categories and broader assortments online. I'm wondering where that stands. How much more is available online than in stores, either percentage or customer choices? And how you see that business developing over time, over the next year?

Sure. From an eCommerce point of view, when we started this back in 2010, we didn't have any exclusive product on eCommerce. We've put a lot of effort back into that over the past few years. And now over 1/3 of the assortment online is exclusive. Right now, the eCommerce assortment is still the same categories, if you will, that you find in stores, but you'll find exclusive styles and extended sizes. We think that we have a lot of opportunity with this new website and the ease of navigation and the upgrades that we've made to it to convert a lot more of the traffic that we're getting online and through the mobile optimized site for the balance of the year and beyond. We also think that the loyalty program, working back into the omni-channel capabilities, is going to be a big win, not only for our eCommerce, but also for in-store. And I think also the next kind of frontier on our eCommerce site is to figure out through some of this segmentation and some of the CRM work that we're doing, how to further engage mom and how to move from what is kind of a batch and blast mentality that we use now with our eCommerce customers to really understanding what it is they want to see from us and how they want to engage with us. And I think some of the segmentation work that I spoke about in my prepared remarks, as we move forward with that in 2014 to really understand what customers respond to -- which customers respond to what. I think that will also inform us, to your point, if there are other categories or opportunities we can move forward with online. Richard Ellis Jaffe - Stifel, Nicolaus & Company, Incorporated, Research Division: Just one more thought regarding online.

Sure. Richard Ellis Jaffe - Stifel, Nicolaus & Company, Incorporated, Research Division: Given the competitiveness of the online space and what appears to be the trend toward free shipping, do you see the marketplace going to free shipping, free returns? Is that something you guys are anticipating?

You know what, Richard, we see that a lot at the higher end because of the AUR structure. I think when you look at our business and you see what our AURs are and what the shipping costs are, I think that we would be hard-pressed to move to an overall free shipping model. I think we are always going to have some element of a minimum purchase involved there in order for it to make it work -- for it to work financially for us. We do continue to add incremental free ship days to the calendar based on competitive pressures, but I think a wholesale move to day-in and day-out free shipping would be difficult for us at this point.

And we'll go next to Brian Tunick with JPMorgan. Brian J. Tunick - JP Morgan Chase & Co, Research Division: I guess, Jane, did you see any major changes from the competitive landscape over this holiday, particularly the big boxes or the off pricers, a few the other kids retailers were calling that out? So just wondering if you saw anything there? And maybe, Mike, I guess 2 questions for you. Any earnings flow-through from the store closings that we should expect this year? And on the systems implementations, any improvements in 2014 that we can look forward to?

Sure, thank you. Well, Brian, from the competitive landscape point of view, I think to the first couple of months of the quarter in Q4, in November and December, I think that we really weren't surprised. We went in with the quarter with guidance that assumes an extremely promotional environment based on what was going on in Q4 and what we anticipated to go on. I think what we didn't anticipate was the last 3 weeks of January and how severely we would be impacted at least in the kids zone and other zones as well with the storms and with the weather. So I think what we did see from the competitive set was an even -- more heightened promotional cadence in the latter part of January that put a lot of pressure on the sector from an AUR point of view and from a margin point of view. But when you look at the competitive set right now, it really doesn't appear to offset those inventory issues. It's promotional, but overall, it appears that inventory seems to be under control and everybody looks pretty clean right now. I think really the question in the kids zone at least is when do we get a sustained break from the weather and start to see the traffic improve. And as we talked about, without a catalyst of an early Easter, we're not anticipating to see that until we get a weather improvement, which will probably be late March, early April. And then as we had said, our guidance pretty much assumes that the kids zone is going to be pretty promotional in the month of April, ahead of Easter.

And, Brian, from a store closure perspective, the stores we closed in 2013 were pretty P&L neutral for us. So if we see customer migration, we could see some upside. And we've made progress in terms of the stores that we had dents in terms of rent reductions. But a lot of that has been offset by the fact that we opened more doors in 2013 than we closed. So the occupancy rate is not really flowing through. From a systems perspective -- from an eCommerce prospective, a lot of that business is built in. We've had a good run with eCommerce, with double-digit growth over the last 7 years and continue to anticipate that as we are in 2014. As far as SAP, it's pretty early stages as we implement, but we are definitely looking at proof of concepts and hopefully some quick wins around that, that we can put into place for the second half of the year.

And we'll go next to Jay Sole with Morgan Stanley.

Yes, I have a question. Traffic is down 10%. Conversion has clearly become more important in the environment where traffic has been consistently down. Can you talk about the tradeoff between finding SG&A efficiencies? And perhaps maybe investing more in store employees to try conversion, maybe putting more than 2 employees in the store in some of your smaller stores?

Well, we've been looking at the models and looking at the traffic patterns across, and we definitely segregate our stores into volume groups and look at the coverage that's necessary. I think in the past, we did have occasions to put additional individuals on the store floor, and quite frankly didn't see the payback. So we went after it in 2013 and we feel good about the productivity levels of the stores.

Interesting. And then maybe, Mike, can you talk about the wholesale business? Going forward, how can you manage the wholesale business so it doesn't pose a risk to your own stores?

At this point in time, it's a relatively small business. But we're also using this wholesale business as an opportunity for customer acquisition, which we think is key. This is a different demographic than our current customer, and feel that if we can expose our product to more consumers out there, that we have a better chance of them actually crossing our lease line.

And we'll take our last question from Dana Telsey with Telsey Advisory.

Can you talk a little bit about the store closures that you've mentioned and, before it had been recapture potentially of 20% of those sales. Do you still see the opportunity on the recapture? And then on the wholesale side, what percentage of the business do you think you can get to and how does that impact the margin structure?

So, Dana, in my prepared remarks, I did make the comments that we saw customer migration. It was from a very small set of exposures that we did in the fourth quarter of 2012. But it appeared that the migration of those customers was actually a little greater than the 20% that we had modeled. So we're feeling optimistic about it. We think store closures is the right move for us. But at this point in time, we're not going to make bold predictions based on a very small subset of data. From a wholesale perspective, it's -- the jury is still out. We've gotten great response to our product. We're adding new customers. But at this point in time, we're not ready to make a big announcement in terms of what we think that volume could be.

And I'd like to turn the conference back over to Ms. Jane Singer for any closing remarks.

Thank you for joining us today. If you have any further questions, please call me at (201) 453-6955. Have a good day.

This does conclude today's conference. You may now disconnect, and have a wonderful day.