Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to today's Vera Bradley Fiscal 2014 Third Quarter Results Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the call over to Stacy Knapper, Vera Bradley's Vice President and General Counsel. Please go ahead, ma'am.

Thank you, Rebecca. Good afternoon, and welcome. We would like to thank you for joining us this afternoon for Vera Bradley's Fiscal 2014 Third Quarter Results Conference Call. Some of the statements made on the conference call during our prepared remarks and in response to your questions may constitute forward-looking statements made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from those that we expect. Please refer to today's press release and the company's Form 10-K for the fiscal year ended February 2, 2013, filed with the SEC for a discussion of known risks and uncertainties. Investors should not assume that the statements made during the call will remain operative at a later time. The company undertakes no obligation to update any information discussed on the call. We understand that this is a busy period for reporting and intend to keep today's call to 1 hour in length. [Operator Instructions] I will now turn the call over to Vera Bradley's Chief Executive Officer, Rob Wallstrom.

Thank you, Stacy. Good afternoon, everyone, and thank you for joining us for Vera Bradley's third quarter 2014 earnings conference call. With me today on the call is Kevin Sierks, our Interim Chief Financial Officer; and Roddy Mann, our Executive Vice President of Strategy and Business Development. Let me begin by saying how excited and honored I am to be joining such an exceptional company in the Fort Wayne community. Vera Bradley is unique in so many ways. It has a rich history rooted in the desire of 2 women, Barbara Baekgaard and Patricia Miller, to bring feminine and highly functional travel bags and accessories to the American market. Over the years, the Vera Bradley brand has established a highly loyal customer following built upon a distinct product offering as well as a unique go-to-market approach consisting of gift shops and boutiques. Mike Ray, my predecessor, along with Barbara and Patricia, understood the need to evolve from a company based solely in the specialty gift channel to a multi-channel business in order to realize the full potential of the brand. And I would like to thank Mike for the work he did in helping Vera Bradley begin this next stage of evolution. For those of you who don't know me, I have 30 years of experience in retail, starting in the department store industry and spending the last 18 years with Saks Fifth Avenue. At Saks, my first 12 years were in the full-line division and most recently as the President of Saks OFF 5th. And throughout my career, I've developed extensive experience in brand positioning, product development, operations and retail expansion. And during my tenure with Saks Fifth Avenue, I had the privilege of being the group Senior Vice President and Director of the New York City flagship and…

Thanks, Rob, and good afternoon. I will begin my remarks with a review of our fiscal 2014 third quarter and then provide you with our outlook for the remainder of the year. Our third quarter performance delivered top and bottom line financial results at or above our expectations. Net revenues for the third quarter decreased 6% to $130.1 million compared to $138.3 million in the prior quarter. In the Direct segment, net revenues increased 7% to $68.9 million. The revenue increase resulted primarily from the opening of 20 new full-price stores and 4 outlet locations during the past 12 months. The Direct segment accounted for 53% of total net revenues in the third quarter versus 46% in the prior year. We ended the quarter with 84 full-price and 15 outlet stores. Comparable store sales decreased 6.5% during the quarter as we continue to see lower traffic levels. This was due in part to a difficult retail environment, including soft mall traffic, as well as the overall product assortment performing below our expectations. E-commerce sales decreased $2.2 million or 8%, in line with our expectations, primarily due to lower traffic and lower average transaction size. We completed a few things during the third quarter that are expected to improve our website for the customer over the long term. First, we began to segment our emails between our full-price and outlet customers in order to improve full-price selling and conversion rates over the long term. Second, we migrated our site to a responsive design in order to provide a better shopping experience for our mobile customers. This new design provides an optimal viewing experience regardless of the device she uses to shop. Traffic from mobile devices was nearly 50% of the traffic for the third quarter, an increase of over 10% compared…

[Operator Instructions] Your first question will come from Mark Altschwager with Robert W. Baird. Mark R. Altschwager - Robert W. Baird & Co. Incorporated, Research Division: Rob, welcome and look forward to working with you. Just starting out, Rob, I was hoping you could talk about what drew you to Vera Bradley. And then I know it's early, but what is your initial assessment of the business and what are key opportunities that you've identified so far?

Well, thank you, Mark. First of all, in terms of what drew me to Vera Bradley, really, I would break it down into 4 primary reasons. First of all, it's really the brand. The brand is so iconic and unique and has such a strong customer loyalty. It has a great foundation. And I believe it's really positioned long term for significant growth as we look into future years. There's a lot of expansion opportunities. And then third, really, the opportunity to work with Barb. As I got to know her more and more, I just think that she is an extraordinary design talent. She has an amazing eye for design and pattern and truly just exceptional drive and a great entrepreneur herself. I thought that was a great opportunity. And number four was really the Vera Bradley culture. It's a great organization and a great team. I think it's really positioned for a lot of future success. I think the second part of your question was really in terms of maybe what are some of the go-forward opportunities and obviously, what I've been doing right now is, having been on board for about 30 days, has really been immersing myself in the company, spending a lot of time throughout the company, speaking with various people, visiting our customers, visiting our stores, visiting key accounts and really kind of taking it in and learning a lot. And right now in terms of laying out the specific plan, it's obviously a little bit early to do that. But as I talk to everybody, I just continue to be so excited about what the future growth is. We obviously have a few short-term headwinds that you see in the fourth quarter guidance, but I do believe that the long-term opportunity here is very significant. Mark R. Altschwager - Robert W. Baird & Co. Incorporated, Research Division: And just to follow up, could you maybe address the department store channel specifically? I mean, you bring a unique perspective given your background. So just wondering if there is an opportunity for Vera to focus more on department store retailers, including maybe bringing new partners to the table.

I think it's a great question, and it is definitely something that we are talking about as part of the strategic review. We have not made any decisions. But what I can tell you is one of the first places I did get the chance to go was down to Little Rock and speak with Bill Dillard and really spend some time with his organization. And it was very exciting to hear their enthusiasm for the brand, and I believe that they're really an incredible partner and a partner that we can leverage so that we can continue to maximize the department store channels. So we'll obviously, be making those decisions going forward in terms of the role of the department stores. But we do believe that starting with Dillard's, it's been a very solid success and a great foundation that we'll look at as we go forward.

And then if I could interrupt real quick, I think I was told I misspoke during the call, and I want to correct. The tax incentive related to the distribution center expansion occurred in 2012, not in 2002. So I just want to make sure everybody knew that.

And next from KeyBanc Capital Markets, we'll hear from Edward Yruma.

This is Luke in for Ed. Rob, welcome. Good to have you. Wanted to just kind of maybe follow up a little more on the strategic plan. I know it's a little early to give specific color there. But what types of things or characteristics are you kind of looking for as you parcel out the business, Direct, Indirect, E-comm. Any specific type things that make you more excited?

Well, Luke, thanks for the question. I think, again, obviously it is clearly and it's hard to give a lot of specifics in terms of where we're going because I want to make sure that even though I might have initial thoughts, I want to make sure that I fully vet them before going forward. But I think if you look on a macro level, obviously, things like e-commerce are a significant opportunity. It's really the entry point into our brand. So that is obviously an area that we're focusing on. And I do believe one thing that's important to keep in mind is that Vera Bradley from an Indirect standpoint, the gift channel that we talk a lot about, is a strong part of our heritage, almost 2/3 of our customer experience the brand through the gift channel. So it's definitely a channel that we want to focus on stabilizing and really get higher productivity out of our key accounts there, and we believe that that's important as well as our expansion of the Direct part of the business will continue as we go forward.

Great. And then just following up on the Indirect channel there, is there any other thoughts as the company's kind of been going down the road of looking to rationalize that channel over the last year, any additional work or more -- whether it's cutting or different maybe viewpoint as to how you think about the rationalization of that channel?

Yes, in terms of talking about the rationalization, what I would say is a couple of things. One, it will always be critical for our brand to have the right presentation to our consumer. That will always be critical to us, and that's something that we will be looking at. But at the same time, we want to work with the channel, work with our key partners, figure out how we can maximize the business. And that is one area that I think is really under strategic review in terms of how it all fits together. But as I said, it is an important foundation of our business. It's very important currently to our business, and we want to develop a very solid plan for that channel as we go forward.

And next, we'll go to Oliver Chen with Citigroup.

Welcome, Rob. Regarding the promotional heightened activity in the marketplace, what's the nature of the incremental promotions you're having to offer? And is there a contrast between the trends you're seeing in the outlet versus full-price? Also, Rob, if you could speak to your longer-term vision for the product in terms of how you think the patterning strategy may evolve and also, what you think about the brand with respect to lifestyle and product extensions?

Okay. Thank you, Oliver. A few -- a couple questions.

Yes, maybe I'll start with the stores with regards to what we're seeing in the outlet stores versus the full-price stores. We're seeing traffic come down a lot in our full-price stores, and traffic tends to be up a little bit, especially in Q3, just a few percent in our outlet stores. So that's kind of the difference there in terms of traffic. In terms of the promotional environment, definitely heightened in Q3, and we're predicting it to be even more so in Q4, especially given the holiday period and what we've seen out there during Black Friday and over the holiday weekend. So that's kind of what we're seeing. And what we're also seeing in our outlet stores is we're doing a lot of the similar promotions this year compared to last year, but we're getting a little less out of them. So in order to get the revenues, we're actually promoting a little deeper and it's taken that in order to drive conversion. So we're seeing it be very much a promotional environment out there and we're having to compete for that business.

Are you offering promotions on whole store percentages off? Is that a strategy that you're doing now? And is that -- what kind of rate are you guys offering when you do that?

Yes, it's a good question. With regards to our full-price stores, we really don't do that in our full-price stores. We typically have promotions to specific styles or patterns. In the outlet stores, we've done 2 different types of promotions this year. We've done some tiered promotions, where we'll have actually a clearance section where we're moving some of our slower moving inventory. And then we'll also have some other products in the store that's a certain percentage off.

And then I'll go ahead and talk to a couple of your other questions in terms of patterns. And I think obviously, the patterns are so important to our business, and the company's been doing a lot over the recent history in terms of working with biometrics and other ways of really continuing to focus our pattern development. And I do think that there's an opportunity for us to continue to learn more about our customer, continue to be more customer centric and really look how certain patterns respond -- different segments respond to different patterns. So I do think that there's some work to be done around how we bring the patterns to market was probably the right way to talk about that, and that's something that we're taking a look at. Your second point, I think, was really around the lifestyle. And one thing that's really been interesting as I've dug more and more into the Vera Bradley business and really the success is really the very unique heritage and success that the company's built on, what I'd really call the casual bag business. Starting out as a travel company between the duffels, backpacks, totes, really pretty extraordinary results in those categories. In that whole casual bag category, Vera Bradley has a very strong position. And I do think there's an opportunity to leverage that, as well as maybe to fill out a little bit broader in terms of to not only be strong in the casual bag business but potentially to find a way to appeal more strongly to a career customer. And that is something that we're taking a look at as we build the strategic plan.

And next, we'll go to Ike Boruchow with Sterne Agee. Tom Nikic - Sterne Agee & Leach Inc., Research Division: This is actually Tom Nikic on for Ike. I'm not sure if you gave this or not, but did you say what your store opening plans were for Q4?

No, we didn't talk about our store openings for Q4. We have opened 23 stores to date. So the most recent one was opened in October of this year, and we don't have any plans to open any in Q4. And so the next stores that will be opened will be in fiscal '15. Tom Nikic - Sterne Agee & Leach Inc., Research Division: Okay. And have you thought about your sort of real estate expansion plans for 2000 -- fiscal '15 and beyond? Or you've been opening at a pretty rapid pace. Do you think that will sort of rein in beginning next year?

Yes, we're still in the midst of discussing which stores will open next year. We do expect to be kind of within our normal range of 14 to 20 doors next year in terms of store openings. But nevertheless, we're still in the middle of our operating plan, and we're still taking the executive team through that.

From Wells Fargo, we'll go to Evren Kopelman.

Regarding your guidance for next year, I think for the Indirect channel you talked about a mid-teen decline in sales. Maybe talk about what's assumed in there in terms of the number of doors. Maybe you can share where you will be in terms of the number of doors at the end of this year and what's assumed in that number for the end of '14.

Yes, as far as this year, we're down about 175 doors from where we started this year, and we expect to be down about another 225 doors as we exit this year. So about 400 doors is what we plan to be down at from this year, year-over-year. And then as we look to fiscal '15, we're being a little bit more particular about which doors we open in the Indirect segment. But we do plan to continue to open doors to the extent they're right for the brand and they have a certain volume. But nevertheless, we're still in the process of determining how many doors we'll have in fiscal '15.

Okay. So would you say then that the decline that you've guided to for next year is primarily a decline in, I guess, existing doors?

Yes, so if you look at this year, Evren, let me start with this year, fiscal '14, the majority of the reduction in our sales is really existing doors. It's not due to our 175 doors being down this year. That's playing into it. But more than anything, you can think about it as the comp doors being the majority for that reduction this year, year-over-year.

Right. Okay. That makes sense. The other question was on your gross margin guidance for next year. First off, I wanted to make sure I heard it right. Did you say it's an increase of 135 to 145 basis points?

No, Evren, that 135 to 145 basis points, keep in mind, that's the gross margin contraction we're expecting for fiscal '14, which is the year we're in. So we're not providing any guidance for next year.

Oh, got it. Okay. Then how should we think about next year given, obviously, the decline this year? I mean, could gross margin be up next year?

I still feel like with our inventory position, still having too much retired inventory on our balance sheet, I still feel like gross margins will be challenged into fiscal '15. I think I stated maybe on the last call, we thought 12 months out we'd definitely be challenged from a gross margin perspective. To the extent sales continue to be soft, that puts more pressure on margins because we'll have more retired inventory and we'll have to move that through our outlet channel. And our outlet channel obviously comes with a lower gross margin than our full-price channel. So I continue to expect there to be some pressure on margin as we look to next year.

[Operator Instructions] From JJK Research, we'll hear from Janet Kloppenburg.

Welcome, Rob. I had a couple of questions. Rob, I wondered if you had the time yet to take a look at the Indirect channel. Kevin, I don't know what -- I know you're down about 400 accounts on the specialty -- in the specialty gift channel. I'm wondering if Rob's had a chance to consider what the optimal number maybe for this channel. And when thinking about the department stores, adding department stores or other national specialty chains to compensate the decline with the smaller gift retailers, I'm wondering if Dillard's has any restrictions there, Rob, and that maybe they would like the -- an exclusive relationship as opposed to having the brand shared across the country. So I'd love your perspective on that channel and also about the opportunity to grow beyond Dillard's. And then Kevin, if you would for me, with respect to the inventories, I think you said they'd be about $160 million at the end of the year versus, I think, last year, about $130 million. But am I to think that really, adjusted, it's more like $137 million because that $23 million is a product that came in early. And if you could just discuss the proportion of aged inventory at the end, what you expect it to be at the end of the fourth quarter and when you think you'll be clean of that.

Let me start with that. Your numbers were pretty close. So $160 million. If you take out the $23 million and compare that to last year, that's a very fair comparison, Janet. With regards to retired inventory, we don't break out the aging of our inventory, externally anyway. But as far as our retired inventory levels, they kind of hit their high at the end of Q3. We expect them to come down in Q4, which makes me feel a little better. But we still have too much inventory on our balance sheet. We still want to find ways to move through it a little quicker because it does put pressure on margins. With regards to the Indirect channel, and then I'll turn it over to Rob, the 400 doors that I referenced in the prepared remarks is related to year-over-year. So as we exited last year compared to how we'll exit this year, we'll be approximately 400 doors down.

From where though? What was the number?

The number last year was about 30 -- almost 3,600 or about 3,500. And we expect to be around 3,100 at the end of this year, just to give you roundabout numbers.

Hey, Janet, to answer your question in terms of how much have I had a chance to develop a point of view on what is the optimal door strategy in the gift channel, I have not come to any conclusions there, first of all. But I have had the opportunity to meet with some of those retailer partners, also had conversations with a few and really trying to get my arms around that channel and really understand how that fits with our strategic plan going forward. But I believe it does. I think that part of the trick is that the gift channel is unique. I think it's unique in terms of the customer who's entering our brand through that channel. It also is different in terms of really what the customer's looking for in terms of merchandise assortment. So I think there's an opportunity to look at our different channels slightly different and really modify the product assortment to be appropriate for the customer. I think that this idea of customer-centric product assortment by channel, by pattern, is really a great opportunity for us going forward, and it's something that we're going to be diligently working on and why it's also very important for us to get our Chief Merchandising Officer on board and really help through that process. But I do believe that the specialty channel, like I said, I think is a strong heritage. I think it's helped us build a very unique customer base, a very unique customer loyalty. And it's definitely something that I think is important as we go forward. Your second point was regarding Dillard's and the department store opportunity. Obviously, Dillard's is a very special partner to us. The relationship we have with them, I think, is very unique. We consider them a big partner. And as we go forward and we look at this channel, we're going to keep that in mind as we think about what's appropriate in terms of expansion, but it's not that we have any type of formal agreements or restrictions. But we really want to maximize our business with each of our partners. We want to -- we will be a great partner, and we will work with them as we move forward with this channel.

How should we be thinking about the timing of bringing on the Chief Merchandising Officer?

Well, that search is underway. But we don't have a time yet. We just began that process just a little while ago. So we're moving quickly, and I believe it's a key hire, but I don't have a date that I can discuss.

And we have one question left in the queue, and that will come from Steve Marotta with CL King. Steven Louis Marotta - CL King & Associates, Inc., Research Division: With regard to the 20 full-price stores that have opened over the last 12 months, can you talk a little bit about their productivity either versus planned or versus the previous 20 stores, for instance, that have opened? Is there a delta there that's directional or more impacted by the decline in the business? Again, if you could just talk about the productivity to the new doors, that would be helpful.

Yes, those stores are opened at a little softer than our expectations as well. So you saw that our comp was down 6.5% for the quarter. And as we look at those stores, we've also opened that aren't in our comp base yet, they're still opening soft and at the low end of kind of our range of expectation or even slightly below that. So it's not that the existing or the class of older doors is necessarily performing poorer than the newer doors. Really, we have some really good doors in each class that we've opened the doors, and that goes for the comp base versus the non-comp base. Steven Louis Marotta - CL King & Associates, Inc., Research Division: That's very helpful. And then one other question regarding patterns that were tested and rolled out in Q3 and Q4 versus patterns that have been tested and are planned to roll out in Q1 and Q2 of next year. Is there any delta between those 2 testings, or is everything running roughly in line with one another? In other words, trying to gauge whether you'd be more optimistic regarding patterns in Q1 and Q2 of next year than actuals of Q3 and Q4 this year.

Hey, Steve. This is Roddy. I'll answer that the -- I think you can pretty much think of them generally in line. There's not -- it's like there are some higher patterns typically. There's some that perform well or test well and some that test less than well. Generally speaking, I think the business is facing some headwinds that all of the patterns, even ones that are performing well, Canterberry Magenta is one example of that, which is not quite enough to overcome the challenges we're facing.

And seeing no other questions at this time, I would like to turn the conference back over to Rob for any additional or concluding remarks.

Thanks very much, Rebecca. Despite the current challenges, I continue to be excited about the future potential for Vera Bradley. Over the next several months, I will continue to evaluate opportunities and work with the team to position us for the next stage of growth. I look forward to sharing my thoughts on our progress with you as we make this journey. Thank you.

And ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.