Good morning, everyone, and welcome to the Lowe's Companies First Quarter 2013 Earnings Conference Call. This call is being recorded. [Operator Instructions] Statements made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Management's expectations and opinions reflected in those statements are subject to risks and the company can give no assurance that they will prove to be correct. Those risks are described in the company's earnings release and in its filings with the Securities and Exchange Commission. Also, during this call, management will be using certain non-GAAP financial measures. You can find a reconciliation to the most directly comparable GAAP financial measures and other information about them as well as reference slides pertaining to first quarter results posted on Lowe's Investor Relations website under Investor Documents. Hosting today's conference will be Mr. Robert Niblock, Chairman, President and Chief Executive Officer; Mr. Rick Damron, Chief Operating Officer; and Mr. Bob Hull, Chief Financial Officer. I will now turn the program over to Mr. Niblock for opening remarks. Please go ahead, sir.

Good morning, and thanks for your interest in Lowe's. Let me start by expressing our sympathy for those impacted by the devastating storms in Oklahoma and throughout the Midwest and Plains. Our team members stand ready to assist the affected communities in the days and weeks ahead. And as we've done in the past when natural disaster strikes, Lowe's stores around the country as well as Lowes.com, will become official donation sites for the American Red Cross Disaster Relief Fund. Lowe's is contributing $1 million to the relief efforts through the American Red Cross and other partner organizations. Following my remarks, Rick Damron will review our operational performance in the quarter, and Bob Hull will review our financial results in detail. But first, one housekeeping note. For the first time, we're providing slides on our Investor Relations website to supplement our call. We encourage you to download the slides to facilitate your review of our results and to use as a reference document following the call. Now, for some highlights of the first quarter. Our plan assumed normal weather based on historical multiyear averages. But as you know, temperatures were cooler and precipitation greater than normal for much of the quarter, resulting in a delayed spring selling season. As a result, comparable sales for the quarter were negative 0.7%, driven by a decrease in comp transactions. The month of March was particularly soft with a roughly 10% comp decline, but April improved significantly resulting in positive comps of approximately 10%. We have maintained that positive comp momentum through the first few weeks of May, and I'd like to thank our employees for their hard work and continued dedication to serving customers. For the first quarter, 7 of 12 product categories had positive comps. But as you might expect, seasonal categories…

Thanks, Robert, and good morning, everyone. During my time, I will provide some additional product and geographic color surrounding our results, and update you on our additional investment in weekday selling hours and our Value Improvement Program. As Robert pointed out, our indoor products, accounting for approximately 2/3 of our first quarter business, comped roughly 1,000 basis points higher than our outdoor products. We performed particularly well in large decor products. Well-designed promotions, along with the introduction of the LG line drove strong comps and margin dollar growth in kitchens and appliances. Flooring benefited from strength in hardwoods, laminates and ceramic tile, which finished a Value Improvement reset last year, introducing trend-relevant designs, including larger sizes, rectangular formats and wood plank looks. We also saw solid positive comps in interior products within core categories such as plumbing, millwork, paint, tools, lumber, building materials, hardware and fashion electrical. Many products benefited from improved line designs and deeper inventory in key items after having completed their Value Improvement resets. Strength in these products is also consistent with strong performance in our ProServices business, which continued to outcomp our DIY business, especially within higher tickets as we continue to apply a particular focus on building stronger relationships with our largest Pro customers, both in-store and through our field-based ProServices team. While we had solid performance from our indoor products, our outdoor products did not meet our expectations. We were well prepared for the spring selling season, but we expected the season to be normal in terms of timing, precipitation and temperature. We built seasonal inventories earlier and deeper in our stores to be fully prepared whenever spring arrived, particularly in products such as mowers, string trimmers, grills and fertilizers. We also added seasonal labor to the stores and staged Spring Black Friday events…

Thanks, Rick, and good morning, everyone. Sales for the first quarter were $13.1 billion, which represents a decrease of 0.5% from last year's first quarter. Comp sales were negative 0.7%. Comp transactions were negative 3.7% while comp average ticket was up 3.1% to last year. As you heard from Robert, exterior categories were negatively impacted by weather early in the quarter but began to rebound as spring finally reached most of the country. In planning for the quarter, we expected a 300 basis point headwind associated with last year's great spring weather. However, we estimate that the cooler and wetter spring this year caused comps to be almost 200 basis points below our expectation. This cooler, wetter weather impacted our seasonal business, which was a driver of the negative comp transactions in the quarter. Gross margin for the first quarter was 34.8% to sales, a 10 basis point increase over last year's first quarter. The gross margin increase was driven by Value Improvement, which helped gross margin by approximately 25 basis points. Our estimate of the improvement nets the clearance impact of the reset against the benefit of the stabilized line. For the quarter, the percentage of resets completed increased from 30% to 50%, which was consistent with our plan, while the percentage of resets that reached stabilization increased from 20% to 30%. The progress in completing resets was greater than product lines reaching stabilization as a result of the delayed spring. The financial benefit of Value Improvement is greatest once we have reached stabilization. We are comfortable that with recent trends, the percentage of stabilized resets will improve and we will achieve the anticipated margin expansion for the year. This improvement was offset by our proprietary credit value proposition, which negatively impacted gross margin by approximately 20 basis points…

[Operator Instructions] Our first question will come from the line of Greg Melich with ISI Group.

I wanted to get a little more detail on the comp trend. You said it got better, and May was similar to the April numbers. Does that mean it was actually at April number or better or worse, or you just think the trend is such that you're going to get that acceleration for the full quarter?

Greg, this is Bob. The May trends to date are approximately the same as what we've experienced in April.

Got it. And then I wanted to follow up a little bit more on the margin side of the equation. Clearly, it looked like there was a little bit of delay in getting the Value Improvement in, but also some hit from mix and some of the weather issues. Could you help us understand that seasonal products that you missed, what does that do to the mix? Is it -- is lawn and garden higher margin because you own the inventory or help us out a little bit on that side.

Greg, I'll start. This is Greg with -- Greg Bridgeford with the val prop, that -- I mean the Value Improvement impact. We reset -- we completed the reset of about 80 categories in Q1. And as Bob detailed, that reset process brought us to over 50% of the categories. But with the weather impacts and a slow sales environment, many of those categories that are seasonally oriented did not reach stabilization, and therefore, moved through their clearance inventories so we could appreciate the margin gains from the new sets. And so with that delay in weather, we saw the impact of the clearance obviously hit our margin line without the benefit of having the lines reset and the margin accretion from the new cost structures and the new category set. So we certainly have seen that turn around as the weather turns around, so that gives us some confidence that we can -- we're going to achieve our 100 basis points improvement after stabilization in categories in the mid-single-digit comps.

And to follow on that, Greg, so we think about the mix of products. Mix had a slight negative impact on margin for the quarter, largely driven by lumber and the inflation that we're seeing in that category, resulted in it being a greater proportion of our business relative to Q1 last year. The seasonal products themselves have a margin rate consistent with the company average, so not really a mix impact. But as you think about the slowdown in March, created the delay in clearing through the clearance activity, therefore delaying the sale of products at full margin after the reset. So we estimate that a combination of Value Improvement about 10 basis points lower than our expectation and the value prop was another 10 basis points, resulting in gross margin coming in about 20 basis points lower than our expectations for the quarter.

Great. That's super helpful. And Rick, I just -- given the initiatives to put those extra labor hours during the week, did you at least get the close rate up as expected even if you didn't have the traffic given the weather?

Yes, Greg, I'll answer that in 2 ways. One, as we put the incremental staffing labor into the weekday teams, we approached that in the same way we did the Spring Black Friday events by going by climatic zones. So in the Southern markets where those hours were implemented first, we were able to get the teams on board, get them through the training required to be as efficient and effective as we like to see. We saw better results there than we did as we moved farther north later in the quarter with finalizing the implementation of those hours in early April in the Northern market. So as we progressed up the climatic zones, we did see improvement there. If you look at overall close rate, it was basically flat to last year due to a lot of the mix issues we saw with seasonal inventory typically driving a higher close rate in the spring selling months than our interior category. So while looking at that, I'm very comfortable with the results that we saw even though the close rate remained flat for the quarter because of the timing of those reset or the timing of the seasonal business and the close rates that historically come with those.

Again, let's put a little color, Greg, on Rick's remarks. When with seasonal business we do find that to be more of a destination shopper for items bedding plants, fertilizers, grass seed, soil amendments. And so that is you do see stronger close rates. So as the weather didn't improve in some of the northern regions that's where -- as Rick described, we didn't see the close rate improvement, but where we did see the weather improve, we're seeing improvement.

Your next question comes from the line of Matthew Fassler with Goldman Sachs.

Two questions, if I could. The first revolves around the resets, and that's just getting clarity on when you expect those lines to cross, i.e., the progress starting to outpace the disruption. And I guess related to that on this topic, you talked about a couple of categories that have been through resets like paint and millwork and you talked about a 500 basis point delta versus the company average. I think those comped more in line with the chain this quarter, so I'm not sure if there was anything in particular that weighed on those. Now that we have some categories done, just want to make sure that we can align sort of the expectation with reality and make sure that those sync up.

Matt, this is Greg. As Bob described, we -- our expectations post reset is 100 basis points improvement impact by category. So what we have seen, and this is really important, is as we've seen weather improve and we see some of these seasonal categories that were reset and completed the reset in Q1 but hadn't stabilized, we're beginning to see the impact of that. We're seeing the basis point improvement that we expected to see. And as Bob said, our expectation was 10 points higher from the impact of the stabilized categories from a margin impact. So that's our expectation moving forward. That's a sequential increase over where we have been seeing and that's the kind of progress that we're expecting to make as we move through to see more categories stabilize at roughly 30% right now, and we're seeing -- we expect to have all categories stabilized by the end of the year.

I would add one thing to Greg's comment as it relates to the sales aspect of the categories, particularly in paint. I think you look at paint with the same phenomenon as you did seasonal with the mix of interior and exterior paints making up a driver of the average performance. You see the same relationship in paint as you saw in the rest of the categories, with the interior paint categories far outpacing the performance of the exterior categories due to the unseasonable weather.

Got it, that's very helpful. So is it like kind of third quarter or fourth quarter when you actually start to see this being a firmer gross margin driver across the business?

Yes, so we do expect gross margin to improve throughout the course of the year. As we talked about, we're at roughly 30% stabilization. As stabilization improves, we'll see improved margins throughout the course of the year.

Yes, Matt, we expect to see the impact of clearance inventory taper down as we move through the third quarter into the fourth quarter.

And just a quick follow-up for Bob. We've seen a little bit of volatility on the depreciation line and I know it's not kind of a focus on the operating front, but the Q4 to Q1 move was pretty dramatic. What kind of number would you expect to see for the year that's depreciation on the P&L? Is this a good base to build off of or should that number still be bouncing around a little bit?

The movement you see in depreciation is largely just timing of assets brought on board. So depreciation from those. If you think about the shorter duration IT equipment adding some offset, and really more than offset, by assets becoming fully depreciated. If you think back to a number of years ago when we were opening up 150 stores and CapEx was north of $4 billion, we've got some of those assets becoming fully depreciated, which causes some of that quarter-to-quarter volatility. I think the run rate that we saw in Q1 are a little bit higher than that because of the assets being added this year is probably a good number to use.

So if last year the average through the year was something in the $375 million, $380 million per quarter run rate, we're at $350 million this quarter, it sounds like somewhere in between those 2 numbers on a quarterly basis?

I think that's right.

Your next question will come from the line of Scot Ciccarelli with RBC Capital Markets.

I guess my question is regarding some of the merchandise resets. What you've told us so far is that when merchandise is being fully reset and you're experiencing a mid-single-digit comp gain once all the old merchandise is cleared out, et cetera, can you give us an idea of what the range on these results are? I'm assuming it's not just a steady 5% kind of level. And then related to that, has the extra labor you've been adding to the stores been concentrated towards those areas where you've had the resets?

Scot, I'll start. This is Greg. It is quite a range. And I'll tell you in some of the categories, the hardlines category that we reset early on, we've seen strong response to new values especially as we've market assorted. And I guess there are categories within some of our paint departments, plumbing departments that are seeing double-digit comp increases. But included in the Value Improvement line reviews are categories like plywood and dimensional lumber. We're not seeing double-digit comp increases because in reality those categories are open market and you literally -- if we did see those kind of increases, I'd be very suspicious. So it is a mix and it is a range. And where we have had the categories stabilized, it takes -- it does take a while, depending on the traffic hitting that category, for the customer to encounter those values, to encounter the new ranges and the market assorting impacts, but we are seeing the impact.

Yes, Scot. This is Rick. I'll discuss the extra payroll for a moment. The thing to keep in mind as we talk about the incremental investment to the weekday teams was that was in addition to our normal seasonal build of temporary labor to handle the normal seasonal ramp-up. So the focus of the weekday teams is on the core categories, which is where the predominant number of the resets have taken place thus far through the program. So the seasonal temporary labor is still skewed to the outdoor lawn and garden department and seasonal departments. The weekday teams are focused on the interior core categories, which line up very well with the activity around the Value Improvement initiative.

So I guess my question -- I guess my follow-up question on that is just on the labor front, are you seeing any kind of direct correlation to sales improvement when you add the extra labor?

When you -- Scot, I think when you look at that, we talked a lot about the close rate into the first quarter performance. The thing to keep in mind with incremental labor, and I think we'll be able to provide you probably better clarity into the performance into Q2, is the impact of weather across the country when we talk about the incremental labor investments where we are. The thing to keep in mind, like I said earlier, is we rolled out that incremental labor not at onetime in the beginning of the quarter, but we staggered that reset to time better with when we thought the actual weather would be cooperative in adding that labor throughout the country. So we did it in 3 stages in the southern markets, the central markets and then the northern markets. So we treat it that way. The thing to keep in mind is the fact that in the southern markets where we first rolled the labor investment out, we have been pleased with the results that we've seen as the employees have become up-to-speed on training and through our orientation processes and got acclimated to the stores. And we're seeing the second tier perform better than the third tier. So a lot of it has to do with the timing that we brought the incremental labor hours on, as well as timing through the normal seasonal build process. So we'll be able to give you more clarity into the exact results hopefully at the end of Q2. But like I said earlier, we are happy and pleased we what we've seen as we progress through the timing of the incremental hours investment.

Just to add on that. As Rick said, the weekday teams primarily were focused on the interior of the store on core categories throughout the interior store. We did layer it on by climatic zone as traffic is starting to build. If you go back to my comments, I did reference that on our indoor product categories we saw a 3% positive comp; on exterior categories we had a 7% negative comp. Part of that's obviously due to weather, but I think obviously part of it is probably attributable to where we did have the weekday teams in place. As Rick said, they weren't there for the entire quarter. And to layer on Rick's comments, once -- as customers are in there and they're starting to see, I think, a greater level of service in the aisle, I think certainly that'll help with our close rate and will pay dividends for us in future quarters as those customers make return trips to the store. And also, we get those employees up the learning curve as we have to do with any new employees.

Your next question comes from the time line of Colin McGranahan with Bernstein.

Just in terms of 1Q, a couple of markets that maybe didn't have weather extremes, can you talk a little bit about what the performance looked like in those markets?

Yes, Colin, this is Robert. I think we talked about -- and I'll have Rick and the others chime in. We talked about, one, a couple of things, recovering markets. We also talked a little bit about the West Coast, and whether you're talking about California, whether you're talking about Florida, whether you're talking about Arizona, whether you're talking about Nevada, we saw nice strong positive comps in the majority of the stores in those markets out there.

And Robert, just to -- maybe I understand those are the markets that took the biggest hits during the housing and are fully in recovery mode, but is there any market you can point to that's kind of a more normal market that would reflect what the business looks like not in hard-hit markets and not in weather-impacted markets and I'm kind of scratching my head if that's like a Tennessee or something?

Yes, well, if you look at -- across our southern tier where we had better performance, better weather, we certainly saw much better performance. Positive comps across kind of the deep south southern tier when weather broke and we had more opportunity to capitalize on seasonal business across those markets.

Yes, Colin, this is Rick. I'd just add when you look at a lot of the markets, Tennessee as an example, was impacted tremendously by the weather swings. I would say the Gulf Coast is probably more reflective of more normalized markets that performed very well as far as the Southern markets go in comparison to the rest of the country. That gives us confidence in what we've seen from Value Improvement initiatives, as well as our investments back into store labor and inventory. As Robert said, California performed extremely well being our highest comping state for the quarter. And then we saw good performance across the other markets, particularly the West Coast and Florida as those markets continue to rebound.

And then in May -- and I'm probably thinking of this because it's obvious there's a lot of noise in the quarter, trying to understand what you're doing and how weather impacted it. But it May, how are the indoor categories performing or the non-weather-impacted markets?

Colin, this is Greg. We've not seen a fall-off in performance of the indoor categories. They're doing well. They actually benefit from the foot traffic that's brought in from the seasonal business. And as Rick was describing earlier, you see, actually see an impact. The penetration rates aren't as great, obviously, as you move from winter months into -- toward summer months. But in the interior paint categories, you see interior -- all the interior paint categories, sundry and accessories, benefit from the foot traffic that's driven in by the exterior categories that are now taking off as we've seen weather turn around from South to North.

Okay, that's helpful. Final quick question just on the credit proposition, 20 bps the margin impact versus expected 10, higher penetration. Are you getting a commensurate lift in sales and benefit to the comp, and are the returns what you expect at this point?

Yes, we still -- Colin, we still see improvement in top line so as we think about the 190 basis points, roughly 1/4 of that would be incremental and the balance of that would be tender shift, so we are seeing some incrementality. In addition, as we think about switching from other forms of tender, yes, we do have a 5% off on the proprietary credit that's in lieu of promotional financing that they might have taken us up on otherwise, so it's a reduction in expenses for the program. It's also a reduction of bank card fees that they might have -- we might have incurred. So we are pleased with the continued progress of the credit program.

Your next question comes from the line of Dan Binder with Jefferies.

You talked a lot about the labor add-back and the cadence of that. I was curious if you can give us a little bit of color on what kind of training you're putting behind the added labor if there is a bigger concentration on -- in-the-aisle training or online training? And how you're using that additional labor? I know it's 2 full-time equivalents, but is it being split up across different parts of the store so that you get 4 different bodies in there at different times? Any color on that.

Sure, Dan, this is Rick. As it relates to training, I'll address that first, we have very specific training for these individuals as they come on board in addition to our normal orientation training programs that we put them through. Our training is both in, out and online through our Lowe's learning courses that we do with the employees. The thing to keep in mind with these employees is the training is very concentrated. As we talked about, these employees are focused on the interior categories, so it could be very structural training such as paint, how to mix paint, how to engage customers in the paint aisles or in specific areas throughout the store that we have them assigned to. As it relates to how they work across the store, we take and have them focus on 2 very particular time frames that the stores are allowed to use these incremental hours and those time frames were based upon when we saw the highest concentration of customer traffic throughout the day. So they are scheduled either in mid-morning time frames or in early to late afternoon time frames to hit those peak customer traffic times throughout the day. And we also schedule them in ways to make sure that we're taking advantage of our sales planning processes, understanding where the business is being dictated, where the business is coming through so that we're able to schedule them in accordance to where we think we will be drawing traffic into the store and make sure that they're prepared and ready to engage our customers there. So it is a very holistic approach and the hours is not -- they're not being just disseminated across the store. It is very focused, very structured, which lines up to -- which enables us to train them more in depth and also allows us to target them into areas where we know the customer traffic will be more concentrated throughout the day and the week.

And as a follow-up, what is the next areas for the resets in the coming season?

Where the next area is, Dan, in terms of categories?

Yes.

We still have, from a reset standpoint, 1/2 of our categories to go, so there's about 100.5 left so it's quite varied. I mean, I think there'll be less obviously seasonal as we move into summer. They'll be more hardline focused and more -- probably more focused in some of the areas of plumbing, fashion electrical, some in millwork that I'm aware of. But it is spread across the store and as you get into fall, you'll see some more seasonal resets come back. And obviously as you move through towards the Christmas season, you'll see trim-a-tree.

Your next question comes from the line of Michael Lasser with UBS.

When you look back at the first quarter, why do you think that either you are more impacted by the weather than the broader home improvement category and your largest competitor, or alternatively maybe you didn't benefit as much from the strength in the indoor category as much in the market?

Well, my understanding is I think that both of us were certainly impacted by weather. And I think that was what they also said on their call yesterday. So I think it's not about being more or less impacted by weather on seasonal categories. I think part of it is, one, for example, we talked about the strength in the West Coast, particularly areas like California where we don't have as many stores. So to the extent that you have those markets that had favorable weather, yes, we benefited from the favorable weather, but as a percentage of our total base, obviously, we don't have as many stores there. And then the other thing, I think, I would point to is we don't have a strong -- as strong of affiliation as a percentage of our business with that professional customer. I think that would be something to look towards. I think if you look in the Hurricane Sandy market, we don't have as many stores in that immediately affected area as obviously they would. And then the last thing, Michael, I would point to would be just what we've talk about on the call today that we still have a lot of disruption going on as we go through the reset process, the transition of the lines, those type of things and selling through existing inventory. Even though we're getting good sell-through on that inventory and we're pleased with the margins we're getting on it compared to what we normally sell our nonproductive inventory through at, you're still selling units at less than what would otherwise be a full retail value. Obviously, you're selling unit and that's having an impact on your top line comp performance as well. So I would point to that as maybe some of the differences, not saying that weather impacted one of us more than the other.

No, that sounds --- I guess I was being a little too cute in how I was asking my question. And Robert, if the penetration of the Pro business is a little lower at Lowe's, how do you think you can -- will you be able to fully participate as that customer segment becomes fully reengaged in the business, and what can you do to increase your penetration there, and share?

Well, we've got a number of initiatives and I can have Rick speak to those as well. But once again, as you look at where recovery is taking place, in many cases it is in some of those -- the early recovery and rebuilding effort from, I'll say, new construction standpoint is in some of those markets, Florida, California, those places, Arizona where we're so heavily hit during the economic downturn. And once again, those are areas where we're out-stored. So we've got some things we're working on to try and obviously garner our share of business in those markets, but we've got some overall initiatives that we've got working on to -- in those markets and across all markets to be able to continue to improve our relationship with the commercial customer. Anything from the things like we talked about last year or so ago adding value prop to that commercial -- to what we offer to that commercial customer, to a lot of other things.

And Michael, I'll chime in, and Rick has some notes, too. But it's an important opportunity for us. As you have heard, and this is consistent in Q1, our sales to the Pro customer, the commercial customer outpaced our sales to the consumer from a growth rate standpoint and we need to take advantage of what the market will provide us. So from 2 critical points, as we restructure our lines through Value Improvement and you go into categories like hardware, rough electrical, rough plumbing as you address the opportunity in tools. And we've purposefully made sure that we, whether it was in particular brands and especially quantities and depth of inventory, we've reset those lines with that in mind. With the investment that Rick helped drive in inventory at the onset of the year, we've been able to provide much greater on-hand depth in some of those key categories as we reset these categories through Value Improvement. That's crucial, because with that customer time is so important. So that's -- we're seeing the benefit of that depth of inventory. We're seeing the benefit of lines that are structured against that opportunity, and Rick, you may have a few more comments.

Yes, Mike, this is Rick. I just wanted to highlight a couple of things, and Robert touched a few of those, that I think will add tremendous value to the professional customer as we continue to work toward building stronger relationships with that group. I think a couple of things that we need to talk about. One is what we're doing to showcase value to this customer differently that we have in the past. And as Robert mentioned, we introduced val prop, our value proposition, to the customer last year giving this customer the 5% off for all purchases on proprietary credit through our vehicles there. And we've seen tremendous adoption of that from a consistency point of view in what we're offering from a value perspective to those customers every day in every market. Second to that is also we've talked about last year changes we've made to our inventory investments as part of the Value Improvement initiative. Particularly in increasing targeted service levels across all items in the stores, which really help us build greater depth in key product categories that are relevant for our pros that shop us every single day, to make sure that we have that inventory available in stock across the store. Particularly focused on improving our depth of what we call job lot items, those items that pros need in multiple quantities every single day to be able to complete the jobs. And we've invested greater depth of inventory into those specific items in a very targeted way, to make sure that we're able to meet the demands across the store in those areas where we know they have particular quantity needs on a day-to-day basis, to invest in that area. The third component of this is what we've talked a lot about…

Our final question will come from the line of Dennis McGill with Zelman & Associates.

I was wondering if you guys could maybe talk a little bit longer term. Once you get past some of the investment you're making in the store payroll this year, and the resets and repairs and things that maybe fade away as the recovery takes hold. How would like us to think about fixed cost leverage or SG&A leverage with the rising comp environment in '14 and '15?

Dennis, this is Bob. I think the framework that we've provided in the past, which is basically 20 basis points of EBIT improvement for each 1 point of comp still holds true. Obviously, there might be some fluctuations quarter-to-quarter. But on balance beyond -- kind of '13 and beyond, that's what we would expect.

And is that inclusive of changes in D&A and gross margin as well?

It is.

Are you're assuming that's flat within that? So how much -- what would the SG&A component of that look like?

So the majority of it, the movement would be in SG&A as you think about fixed cost leverage. Similarly, we get leverage on depreciation as sales improve. And then once we get past the Value Improvement process, our expectations for gross margin improvement are modest, around 10-or-so basis points per year. So the majority of that is going to come from SG&A first, depreciation second and then gross margin third.

Okay, great. And then separately, if we were to look at the 7 categories that you flagged as being above average, I was wondering if you could put maybe some absolute numbers behind some of those? Were there any categories that were up, let's say, 4% or better in the quarter?

Yes, this is Robert, Dennis. Yes, we had categories were up that much. We're not going to go and give you the details category-by-category. But yes, we saw that wide of a spring -- that wide of a swing in categories.

Okay. And those will be led by where you've had more stabilized resets?

Well, it was, like I said, it's the interior categories that we said, overall, were up 3%. But yes, I mean, those that we would have some -- we've either invested the depth of inventory or we've had some of the reset activity certainly would have contributed to that performance. Okay, great. Thanks, and as always, thanks for your continued interest in Lowe's. We look forward to speaking with you again when we report our second quarter 2013 results on Wednesday, August 24 -- 21. Have a great day.

Ladies and gentlemen, this does conclude today's conference call. Thank you all for joining, and you may now disconnect.