Good morning, everyone, and welcome to Lowe's Companies' Second Quarter 2017 Earnings Conference Call. This call is being recorded. [Operator Instructions] Also, supplemental reference slides are available on Lowe's' Investor Relations website within the Investor Packet. While management will not be speaking directly to the slides, these slides are meant to facilitate your review of the company's results and to be used as a reference document following the call. During this call, management will be using certain non-GAAP financial measures. The supplemental reference slides include information about these measures and a reconciliation to the most directly comparable GAAP financial measures. 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. Hosting today's conference will be Mr. Robert Niblock, Chairman, President and Chief Executive Officer; Mr. Rick Damron, Chief Operating Officer; and Mr. Marshall Croom, Chief Financial Officer. Joining during the Q&A session will be Mr. Richard Maltsbarger, Chief Development Officer and President, International; and Mr. Mike McDermott, Chief Customer 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. We delivered second quarter comparable sales growth of 4.5%, driven by improved transaction growth of 0.9% and a 3.6% increase in average ticket. We're pleased with our improved top line performance versus Q1 and the acceleration of our comp growth through the quarter as we built momentum with successful holiday events and enhanced messaging, driving traffic improvement to end the quarter with comp sales of 7.9% in July. Our U.S. home improvement comp was 4.6%, with broad-based project demand across product categories and geographies. We achieved positive comps in 13 of 14 regions and in all product categories. Appliances led product category growth with high single-digit comps, leveraging our investments in customer experience, both in-store and online. We achieved strong comps in lawn and garden as we capitalized on seasonal demand. We also continued to advance our Pro business, driving outperformance in rough plumbing and electrical and lumber and building materials. While we're pleased with our sequential comp growth through the quarter, we are disappointed with some aspects of our performance during the first half of the year. In the first quarter, we identified an opportunity to drive more traffic with improved messaging and an optimized promotional strategy. We amplified our marketing messages in early June, and we're pleased with our traffic growth. However, in the second quarter, comp growth was constrained as a result of disruption caused by changes to our store staffing model earlier in the year, which became more apparent with increased traffic. While we remain confident that the leadership model is right for our long-term growth, change brings certain short-term challenges. I'm proud of the way our teams are responding diligently to respond to these challenges, filling open positions, learning new roles and adapting to the new…

Thanks, Robert, and good morning, everyone. As Robert shared with you, we saw significant improvement in our Q2 comp sales as we drove increased traffic to our stores and Lowes.com. We successfully leveraged holiday events designed to take advantage of spring and summer project demand with amplified marketing messages, compelling offers and an integrated omnichannel experience. In fact, we built momentum as we moved through the quarter, reflected in our significant traffic improvement in June and July. Value perception was a theme we discussed in Q1, and I'm pleased to say that we made great strides this quarter. We took a surgical approach to selecting the right products and price points to message in the right media channels, successfully highlighting Lowe's everyday competitive pricing. In the second quarter, we achieved positive comps in 13 of 14 regions and posted positive comps in all product categories. We delivered a 4.5% comp, with balanced performance in both indoor and outdoor categories. As we capitalize on a supportive macroeconomic backdrop and customers' continued desire to invest in their homes with our project inspiration and expertise, events and targeted promotions, we drove above-average comps in categories such as appliances, lawn and garden, lumber building materials and rough plumbing and electrical. We drove high single-digit comps in appliances, leveraging our investments in customer experience, both in-store and online. We know that an omnichannel experience is critical for appliance customers as they gather information to give them confidence in their selection. In-store, we have invested in a best-in-class experience, with an extensive product showroom and a broad selection of leading brands, as well as expert associates, who can provide valuable advice, and appliance suites, which allow customers to visualize how their appliance purchase will look in their refreshed or remodeled kitchen. And online, we have continued…

Thanks, Rick, and good morning, everyone. Sales for the second quarter increased 6.8% to $19.5 billion, supported by total customer transaction growth of 3.1% and average total ticket growth of 3.5% to $71.40. RONA sales were approximately $1 billion or 3% of sales growth. As a result of the calendar shift from the 53rd week in fiscal 2016, this year's second quarter included 1 less week of spring and 1 more week of summer than last year. While this had no impact on comp sales, it did decrease second quarter total sales growth by approximately $285 million or 1.7%. Comp sales were 4.5% for the quarter, driven by an average ticket increase of 3.6% and improved transaction growth of 0.9%. RONA was included in the comp calculation for the first time in the month of July. Looking at the monthly comp trends. Comps grew 0.6% in May, 5.3% in June and 7.9% in July. As Robert and Rick indicated, we were pleased with our improved top line performance versus Q1 and the acceleration of our comp growth through the quarter as we built momentum with successful holiday events and enhanced messaging, driving traffic improvement in both June and July. During the quarter, we continued to capitalize on market opportunity as we opened 4 more new stores in the U.S., which drove 80 basis points of growth. Gross margin for the second quarter was 34.21% to sales, a decrease of 23 basis points from the second quarter of last year. The decline was primarily the result of promotional activity and excessive benefits from Value Improvement and 10 basis points of inflation. SG&A for the quarter was 20.16% of sales, which leveraged 101 basis points. In last year's second quarter, we recorded an $84 million loss on the settlement of a foreign…

[Operator Instructions] Our first question comes from the line of Peter Benedict with Robert Baird.

First, just on the store labor hour investment. Is that full time or part time? Is that weekend, weekday? Help us a little bit more about what you're going to be adding there.

Sure, Pete. This is Rick. We are primarily focused on adding the incremental labor to the weekend time frames as well as high-traffic area time lines during the week. The effort is to continue to retain our seasonal labor from our spring hires as those still have significant knowledge. And we're simply retaining those whereas historically, we would be moving down from a stack and labor standpoint into the fall from the peak of summer.

Okay, that's helpful. And then as you guys think about -- I know back in the December meeting, kind of the 3-year plan that was laid out had some benchmarks, 25 basis points of flow-through, around 50% OpEx growth as a percentage of the sales growth. Obviously, 2017 numbers aren't meeting those objectives. What -- curious kind of -- or do we need to rethink kind of the longer-term algorithm a little bit here? Or you assume a little bit more OpEx, a little less flow-through? Is that how we should be thinking about it? Just curious your thoughts here.

Yes, Peter, this is Marshall. We are maintaining our targets that we previously communicated back in December. Obviously, this year won't hit those targets, but productivity is still alive and well, and it's actually helping us offset the incremental investments we're making this year. And we know we've got more runway to go as we move forward. So the investments we're making from staffing, again we're leaning into it to take advantage of the increased traffic, leaning into optimize promotions and knowing that we've got opportunities to utilize price optimization tools, continuing evaluate improvement efforts and continuing to evaluate promotional effectiveness. And so longer term, we've got other productivity measures for optimizing labor, leveraging fixed costs, reducing indirect spend, lower depreciation and enhancing profitability in Canada.

Yes, Peter, this is Robert. As Marshall outlined, we're still holding to our 3-year guidelines that we gave last year and productivity is still a key focus that we're working on. We've seen actually a lot of benefits from our productivity efforts. As we've outlined, part of those is part of what Mike McDermott and his team did, is in amplifying and improving our marketing message, particularly when we look at opportunities in the digital space. We saw great results from that, including the improved traffic performance that we saw in the stores. I mean, we think we got a better opportunity to capitalize on that. So what Rick and his team are doing is saying, let's hold the labor that we normally would have been pulling back on, see if we can do a better job of capitalizing on that and see if we can drive incremental sales through the process. So that's what we're doing, is reinvesting on some of the benefits of productivity in what we feel is a strong macro environment, so.

Your next question comes from the line of Simeon Gutman with Morgan Stanley.

This is Joshua Siber on for Simeon. On gross margins, what's going to enable you to make numbers in the back half? Because it looks like gross is expected to be up. Just curious your thoughts there.

Yes, this is Mike McDermott. Obviously, as we communicated at the end of the first quarter, we needed to focus on improving our value perception and making sure we were amplifying our marketing reach with our customers. We did that by leaning hard into changing our anchor points and communicating critical values to customers. We're also continuing to improve our competitiveness, both on in-stock as well as special order items, and that's putting some level of pressure on gross margin. We've got optimization efforts in place, working closely with our vendors to make sure we're improving our first cost as well as pricing tactics, making sure that, from a head core tail perspective, we're competitive on head items, where required, and we're working hard on pricing tail items to make sure we're harvesting profitability to offset that investment. So we've got a lot of work under way in the merchandising team to balance the improvement of value perception with our cost position.

Okay. And then the long-term EBIT margin guidance of 11.2%, it's a pretty substantial expansion from what's expected to be in '17. So how do investors gain confidence in that margin opportunity? And do you think this happens in the back half or in 2018?

Again, just recognizing that those were 3-year targets, so it won't be all accomplished in 2017. So it'll be baked into the productivity opportunities we have moving forward, again leveraging the traffic driver with marketing optimization, again focusing on optimizing labor. As we move forward, that will continue to be an ongoing discipline. So even with the reinvestment in back half of the year, we'll still leverage payroll in 2017. And again, excited about the other opportunities we have from a productivity standpoint to drive towards that 11.2% EBIT growth, that target that we set. So -- and obviously, very excited with what we have in the Pro space with the Maintenance Supply Headquarters and opportunity to grow and expand that footprint and leverage back into our existing store base.

Your next question comes from the line of Christopher Horvers with JPMorgan.

Just curious, how would you think about the shift of the spring business in 2017 between the first quarter and the second quarter? And to play devil's advocate, we've heard others, such as Tractor Supply and Scott's, talk about a very strong July. So what gives you the confidence that July's strength is actually driven by your actions versus the weather working with you that month against the backdrop of what's been a pretty tough year otherwise?

This is Mike McDermott. I can lay some foundation there. Actually, I feel good as we take a look at our July performance was very well balanced across categories. And we certainly enjoyed positive performance across all products and outside and inside -- indoor categories. So it was not all isolated to just seasonal in the June and July time frame. At the same -- to that same message, we did enjoy an extended spring. It was clear our Lawn and garden business did perform above the average, and the team took full advantage of those weather conditions to really highlight the quality of our products. The merchants and the growers did a fantastic job on quality of live goods, and we feel really good about our performance of our private-label Sta-Green fertilizers, seed and soil products. So innovation as well as market events served us well.

And can you talk about your view on share in Pro and DIY? Obviously, you are stepping up advertising dollars. It sounds like dollars spent, not necessarily promotional level. And you're also stepping up the commitment on the labor hours. So is there something that you're seeing on the share side in either Pro or DIY that is causing you to step up these investments?

Yes, we continue to see both macro environment opportunities as well as favorability in both Pro and DIY markets. Pro out comped our average again this quarter, so we continue to feel good about that. We see an opportunity to continue to expand our penetration in that category. Pro represents about 30% of our sales and about 50% of the home improvement market. So again, a lot of the investments we're making and the actions we're taking, we think, will yield fruit. From a DIY perspective, we saw nice advancements in our DIY product categories, again both interior and exterior, giving us positive momentum going into the back half.

Your next question comes from the line of Eric Bosshard with Cleveland Research.

Two things. First of all, curious as you think about the investment that you've outlined today, what you expect or where you expect the payback from that to show up is the first thing I'd be curious.

Yes, Eric, I'll start. As we said, you saw from the comp trajectory in the quarter, May was not what we had anticipated. By the time we got through the month in the Memorial Day performance. Our incremental investments in marketing and the enhanced focus on digital had not been fully kicked in by then. As we saw that kick in and we saw the incremental traffic that we're driving into the stores, we were very pleased, obviously, with the trajectory through the quarter but recognized that we probably had an opportunity to have provided a better customer experience that even better capitalized on the trends. So our belief is that we'll hold on to these labor hours, that we've got people that are trained in the stores that Rick and his team have trained. As we get into the fall, we'll continue to monitor that as Mike and his team work to even further optimize our marketing message. And we hope to see that translate into better experience, continue to drive better in-store experience and better sales trajectory. We've put a lot of effort into our online experience here over the past year or so, as highlighted with a 43% growth in the quarter. We think there's an opportunity to improve our in-store experience as we head into the fall of the year, and we hope then that, that resonates into capturing additional sales from the traffic that the marketing team is driving into our stores.

So does that -- as you look at -- you affirm the full year comp guidance of 3.5%, does this investment -- should we believe or expect that this could create upside to that sales guidance if you get payback from this? Or is this more defensive of defending your ability to just get to that original target?

Yes. I think, yes, we're still early in the process. Obviously, we're excited about the trends that we're seeing, but we're investing because, one, first of all -- first and foremost, to deliver our guidance for the year for those. We've been just slightly short of that for the first half of the year, so it's a make up the shortfall. And to the extent that we execute well, hopefully some upside to those numbers, but we've not baked that in, so.

And then secondly, in terms of the point of emphasis, because we came into the year hearing the productivity focus, the 11.2% margin target and seeing you making decisions that seem more of profitability. Now it sounds like there's a little bit of a shift to balance more of driving sales and sales growth. Even Marshall's comments to the comments regarding price optimization and even labor optimization while labor is being invested here. Is, I guess, the central goal, Robert, or is the focus improving the sales growth? Or is the focus improving profitability?

I think it's both. So as I indicated, Eric, we've had actually great success from our productivity efforts. We still have a lot more work to do there. But we've said all along that productivity is not just about cutting costs. It's also investing back into areas that matter most to the customer. So -- and we think, as we said, with the -- we knew we had an opportunity with -- to improve our marketing as we've had new tools, and we'll continue to better optimize that. The team is working to even -- to get better leverage out of our marketing spend. We saw an opportunity there. We're pleased with the, like I said, the online performance, the traffic we're driving into our stores, and we think there's an opportunity to even capitalize further on that. So it's partially using that productivity savings to invest in a better experience and capture share in what we think is a robust market placing with that. And we think it allows us to achieve those 3-year targets that we laid out.

Your next question comes from the line of Alan Rifkin with BTIG.

Robert, you said that the second quarter comps were disrupted by the store staffing that you've outlined. Do you guys -- can you infer from the sharp acceleration in your July comp that you think those issues are largely behind you? And if so, why then has your comp and revenue guidance at the back of the year not been lifted?

I'll start and then ask others to jump in, Alan. But certainly, as we indicated, we do think there were some disruptions from the model. The further we get away from the change, obviously people are getting settled into their new roles. We've talked about some of the attrition with some of the prior department managers and them -- their attrition in into permanent roles has actually gone faster than we had originally budgeted. So we knew there was some disruption. But the further we move away from the change, people are getting settled into their new roles. I'm pleased with the way the team is responding. As we indicated, we're a little bit behind where we anticipated when we laid out our guidance for the year. Thus, the revisions in guidance. But more than anything, the work that we've done, as I've said, in -- from a marketing standpoint to sharpen our messages and the enhanced efforts, we're seeing the great performance online, and we're also seeing better traffic trends coming into our stores. So we're using that as an opportunity, if you think about the changes that we've made from a management standpoint, getting the right management structure in the store. It allows us to put more associate customer-facing hours on the floor of the store to take advantage of that opportunity. So we think that's going to drive additional sales, but we don't want to get ahead of ourselves from a guidance standpoint.

Yes. Alan, I would say that we're making investments, as Robert said, to capitalize on the traffic growth and better leverage the long-term benefits of the model that we have in place. The reality is our omnichannel environment today requires us to continually evaluate how we're meeting the needs of our customers, and that will continually drive change both in how we meet those needs. It requires us to be perpetually learning, training, ideating and getting better every single day, and I think those changes are beginning to pay off, and it shows in our June and July performance. Our teams remain extremely focused on serving the customer. Their dedication to serving the customer is second to none, and I'm extremely proud of what they've done and how they've led through that change throughout the year. And we'll continue to make sure that we support them with the resources and the training and the tools they need to be able to meet the needs of our customers every day in this environment.

Okay. And then a follow-up, if I may. With respect to appliances, you guys continue to put up terrific comps with high single-digit gains in this quarter. Obviously, with the recent news about Sears and Amazon, are there any changes contemplated in terms of marketing within this category?

Alan, this is Mike McDermott. Well, certainly, we don't take our #1 position in appliances or continued growth in market share in the category for granted. We've made significant investments over time to be the #1 player, and our customers continue to tell us that our focus on omnichannel engagement and experience is what they expect and what they desire. So we're very, very focused on continuing our leadership, from selection through enjoyment, through the service proposition, all the way through to retirement and making sure that our displays, our well-trained associates, our expansive brand and innovation portfolio continue to make a difference. Now in the second quarter, we grew at 3x the market in the appliance business. The operations team added inventory to make sure we could take advantage of the opportunity. I think Rick and his team increased staffing. We added delivery drivers, and we continue to take advantage of the market by providing great experiences. So from a marketing perspective, we're going to continue to lean into the category, as we have, and make sure that digitally, we've got great content online, fantastic navigation. And obviously, we're going to maintain our competitive posture from a pricing perspective. So I feel good about the appliance business. I feel good about continuing to grow our #1 position.

Your next question comes from the line of Seth Basham with Wedbush Securities.

My question is around conversion. I know you guys have been able to track conversion pretty well historically. Can you give us a sense of what the trends have been like lately? That'd be helpful in framing some of the changes you're making.

Yes, I'm glad to. As we look, and we talked about the increased traffic that our marketing efforts were driving into the stores, we saw an opportunity to continue to improve our conversion. Conversion is something that, quite frankly, we always want more of. No matter where we are, we always want more. And we're working -- our store operators are working essentially in making sure that our people in the stores and our associates in the store, that the times are there, the customers are there, that we're merchandise (sic) [ merchandising ] correctly and that we're executing the fundamental basics of the business inside the box. I'm extremely pleased with the progress they're making and the efforts they're taking. And we see that as an opportunity, thus the investment in labor into the back half of the year, to ensure that we continue to make sure that we meet the needs of the customers when they come in. So we feel good with where we are. We still know there's opportunity for us to continue to get better, and we're making the investments necessary for us to be able to do that with the teams.

The other thing I'd add to that from a dot-com perspective, we saw balanced improvement and strength actually in traffic, conversion and ticket across all product categories. So as it relates to the omnichannel experience, we really look at conversion, both in-store and online and to Rick's point. So we'll continue to invest there to make sure it improves.

And that's helpful. And just to understand, for the back half of the year, the primary improvement in sales trends that you're expecting is coming from conversion as opposed to improvements in traffic, right?

Well, we actually would anticipate a more balanced view of transactions and ticket as we move into the back half of the year versus the first half.

Your next question comes from the line of Seth Sigman with Credit Suisse.

I wanted to just clarify on the updated EPS guidance for the year. So there's no change in sales. Is the change just SG&A? Or did you guys lower the gross margin expectation also? I think at one point, you were expecting it to be flat for the year.

Yes. As we updated in our guidance, we're expecting about 10 more basis points of incremental gross margin pressure, driven by some of the actions that we're taking, leaning into the amped up -- amplified marketing that we are doing that's helping drive the traffic. So that's putting pressure on the gross margin line for the year. So it actually went from about 20 basis points of drag to about 30 basis points as you think about that from the year standpoint.

Okay, understood. And then -- so as a follow-up on the pricing strategy, it feels like the discussion around promotional activity, value perception, even marketing has escalated quite a bit over the last few quarters. Can you help us understand that trend a little bit better? What is causing that? What are you seeing in the marketplace perhaps? And how should we think about that in the context of what's been a pretty stable EDLP type of strategy in the space over time?

Yes, this is Mike McDermott again. We certainly saw an opportunity in the first quarter to get more competitive as it relates to our promotional strategy specifically around holidays. So obviously, that was seen in our value perception metrics. We leaned in there. We matched the competitive intensity of the marketplace in some of the select categories where we saw some expansion of aggressiveness. But for the most part, as we go into the back half of the year, our focus is really exposing the values that we've already had in our plan. So some of that's going to be -- some of that margin pressure is going to be mix oriented. But we feel good about our position. We got to focus on optimization to make sure that we're making the right investments. But a big focus on the macro environment strength and our ability to jump in and take advantage of that.

Our next question comes from the line of Mike Baker with Deutsche Bank.

I just want to clarify a little bit. This quarter, what happens? You said you're below plan year-to-date. And it seems like that sales are on plan. Correct me if I'm wrong. So is it that the gross margins were below plan year-to-date? Or expenses are above plan year-to-date? And if it's the expenses what I'm trying to reconcile, it sounds like you didn't have enough labor earlier in the quarter, I suppose, in May to drive sales. So I'm just trying to figure out how expenses overran. Is it really just because you ramped up so much in June and July?

Mike, this is Robert. I'll -- we started off in Q1, we indicated that we were behind. We missed our sales plan. We felt we'd make up over the next couple quarters. So we're still in the process of working towards that. As I said, we did -- as we talked about in first quarter call and Mike had indicated, we had an opportunity to, one, enhance our marketing message, things like making sure we're highlighting the price points at the lower end of the -- leveraging price points at the appropriate time. As well as, we also saw opportunity to invest more in digital, and that's part of what drove our online outperformance. We had great payroll leverage in the second quarter. We think there's an opportunity to invest part of that to capitalize on the traffic that the marketing team is driving in. And then from an SG&A standpoint, I'll let Marshall talk about it, we had -- he talked about some of the onetime drivers and some of the specific things, that we're above what we had planned in the quarter and for the back half of the year, so.

Yes. Well, we leveraged retail operating hours and did have the incremental advertising spend. And there were a couple of other items I alluded to, some of the pressure we'll see in the back half with casualty claims, worker's comp claims and costs there. We saw a little bit of that in the second quarter. And also, sort of being competitive in the marketplace from a client standpoint, a little pressure on delivery and fleet. But the bigger drivers are -- in the back half are leaning into the marketing message, reinvest in that and to try to capture more of the sales that we're seeing coming through to offset some of those back-half pressures.

Okay, makes sense. As a follow-up, you did slightly lower your store count outlook for the year. What's behind that? And how does that play into the guidance?

So we came in with a plan, I think, with roughly 35 stores. We since have went through and scrubbed and evaluated certain locations, and some of them we decided not to open at this time or we'll defer until a later point in time.

Yes, we have an approximate number, Mike. We had a couple that have slid into 2018. We've had a couple of sites that we chose not to move forward with, so we thought -- went ahead and updated guidance on that, so -- but didn't make any change to our sales guidance.

So were those big-box stores in Canada? Orchard Supply? Just curious what -- which ones are sliding.

So this is Richard. It was a relative mix primarily within the Canadian market in our Orchard operation is where we decided to either postpone and/or observe some of the changes that were making before we proceed. Or, as Robert said, we have taken a few sites where we've made different decisions than we approved those estimated last fall.

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

It's Michael Goldsmith on for Michael Lasser. The flooring category has been in line or above the company average recently, but this quarter was a bit softer. Are there any specific call-outs to explain the underperformance of this category?

Yes, flooring continues to be an important category for us. We were certainly positive, and the category actually posted very strong performance in carpet, vinyl and laminate flooring but saw some opportunity in floor tile as well as hard wood. We're in the middle of a significant reset in the floor tile category. It's obviously becoming more and more important as customers lean into the new and innovative styles. But we have felt disruption as we ramped down our existing assortment. That reset should be complete by the end of the month, and we anticipate to be back on a growth trajectory above average on the other side of that reset.

That's helpful. And then with regards to the incremental labor being put in the stores, is this broad based? Or is it focused on specific categories?

We're looking at it from a perspective of analyzing the data as we look at our marketing plans as we move into the second half of the year. We're investing in those hours against those categories where we're putting the additional weight from the marketing investments that we're making. So it will be more -- most of it will be spent into those categories.

Our final question comes from the line of Matt Fassler with Goldman Sachs.

My first question relates to juxtaposing the recent results and the guide for this year against your reiterated long-term guidance. So your productivity initiatives have been under way for a period of time. And the profit growth and the margin trajectory that you're generating in absolute terms are quite solid. Is it possible that looking for the kind of incremental margins that the guide, the long-term guide, calls for is ambitious in an environment where you need to invest? In omnichannel, you're facing wage pressure. Not many retailers are putting up operating leverage, just as we think about the appropriate forecasting context for 2018 and beyond.

I just think, Matt, this is Marshall, at this point in time, we're comfortable with reconfirming the guidance as we lean into the back half with some of these incremental investments. Again, we have better line of sight to not only productivity efforts that we're driving this year but in '18 and '19, above and beyond that, and also looking at what we're leveraging from '17 into '18 and '19 from capability builds, how we're leveraging Pro, continuing to take a look at our office staffing complement and how we're trying to match labor to drive traffic that we're seeing and fixed costs, indirect spend I've mentioned earlier. So again, at this time, we're comfortable with those longer-term targets and the productivity at this point in time, if we have better line of sight to revise that. I will provide that on an upcoming call.

And...

And then -- oops, sorry.

And Matt, this is Robert. I would just say also keep in mind that we've made quite a few changes this year, both with our store labor model, that will settle in over time as they settle in within new roles, the incremental lifts within -- from a marketing standpoint as we continue to refine and get better at that. So I think there's opportunity for additional leverage against those things as we settle into the new cadence there. And then keep in mind that Marshall took you through some onetime items, the [ IDNR ] and other stuff that he talked about, credit losses. And we think moderate -- those things don't necessarily repeat as we get into the next 2 years of that 3-year guidance.

And then by way of my follow-up, just a couple cleanup items on the P&L and on the guide. The impact of the -- of Canada on the different line items this quarter. And also, if there's any -- what kind of buyback is embedded in the guide? And that's all I have.

Basically, for the year, we just talked to 15 to 20 basis points impact to operating margin. And then for...

Canada.

For Canada.

Yes.

Right.

And so...

And what about in the quarter? Because I think you've given that out in prior quarters.

It was roughly about 20 basis points for the quarter. And then share repurchase, yes, again, we'll target $3.5 billion this year in '17.

Thanks. And as always, thanks for your continued interest in Lowe's. We look forward to speaking with you again when we report our third quarter results on Tuesday, November 24 -- 21, I'm sorry. Have a good day.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.