Greetings and welcome to the Ulta Salon, Cosmetics & Fragrance, Inc. Fiscal Second Quarter 2012 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laurel Lefebvre, Vice President, Investor Relations. Thank you. You may now begin.

Thank you. Good afternoon and thank you for joining us for Ulta's Second Quarter 2012 Conference Call. Hosting our call are Chuck Rubin, President and Chief Executive Officer; and Gregg Bodnar, our Chief Financial Officer. Also joining us today is Bruce Hartman, who becomes our CFO tomorrow. Before we begin, I'd like to remind you of the company's safe harbor language. The statements contained in this conference call which are not historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those projected in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC. We may make references during this call to the metric free cash flow, a non-GAAP financial measure defined as cash provided by operating activities, minus purchases of property and equipment. With that, I'll turn it over to Chuck.

Thanks, Laurel. Good afternoon, everyone. I'm pleased to announce that we delivered better-than-expected results for the second quarter. To recap the numbers, strong momentum continued on the top line with 22% sales growth. Same-store sales increased 9.3% on top of double-digit comps in Q2 in both 2011 and in 2010. We expanded gross margin and leveraged SG&A, resulting in 180 basis points of operating margin improvement, and earnings grew 42% to $0.54 per share. We delivered these numbers by continuing to focus on the 5 components of our multi-year growth strategy: accelerating store growth; introducing new products, services and brands; enhancing our loyalty program; broadening our marketing reach; and increasing our digital focus with ulta.com. As done in the past number of quarters, successful execution of these strategies in Q2 allowed us to once again gain market share in the beauty industry across all of our categories. I'd like to update you on each of the 5 elements in this strategy in terms of what we accomplished in the second quarter and what's on deck for Q3. First, store growth. Our plans to add approximately 100 new stores and grow square footage 22% this year are on track, with 22 new stores opened in the second quarter. We ended Q2 with 489 stores in 45 states. Our new stores continue to perform very well and we've been very happy with our new store productivity. New stores are contributing sales above plan, partly because we're seeing good efficiencies in our construction process, allowing stores to open slightly earlier than anticipated, but mostly because sales out of the gate are better than planned and better than previous year's new stores. While we've ramped up new store openings this year, we also completed 9 remodels during the second quarter and are very pleased…

Thanks, Chuck. Ulta's second quarter results were once again driven by strong sales growth and margin improvement. Total sales grew 22.1%, with strength across all categories. Same-store sales increased 9.3% on top of an 11.3% comp in Q2 of last year. Traffic remained the dominant driver of comp, representing about 6 points of the 9.3% comp, but average ticket grew about 3% compared to last year. We are very pleased to continue to deliver strong traffic growth, particularly as we were comping over an 11% traffic increase in Q2 of last year. Gross profit dollars increased 24.8% to $168 million, with gross profit margin up 80 basis points to 34.8%. This improvement was driven by 70 basis points of leverage and fixed store costs on our strong comp and an increase of 30 basis points in merchandise margin as we continue to benefit from our merchandising and marketing strategies. These gains, as planned, were partially offset by about 30 basis points of supply chain investment with the start up of our new Northeast distribution center. SG&A expenses increased 16.8% to $106 million, down 100 basis points as a rate of sales to 22%. We leveraged operating expenses on a strong comp and consistent execution of our margin expansion strategies. Preopening expense was up slightly at $4.1 million compared to $3.8 million last year, as we opened 22 new stores, remodeled 9 stores and relocated 1 store in the second quarter compared to 21 new stores and 15 remodels during the second quarter of 2011. All in, operating margin improved by 180 basis points to 11.9% versus 10.1% in Q2 of last year, as we continue to execute well and maintain our disciplined investment and cost management strategies. Our tax rate was 39% versus 39.5% last year. The modest improvement in…

Thanks, Gregg. Before we begin the Q&A, I'll comment about our CFO transition. Today is a very bittersweet one, as it is Gregg's last as CFO. I'd like to express my deep gratitude to Gregg for his tremendous contributions to Ulta over the past 6 years. Gregg's been a great partner to me and has developed a very strong team here at Ulta, from finance, to supply chain, to the IT organization, which have all been instrumental in the execution of our strategy. This team's hallmark is its analytical approach to growing and improving the business. Gregg and his team have made significant contributions to Ulta's expense management discipline, our very healthy balance sheet and the consistent and rapid improvement in our financial results. While we are truly disappointed that Gregg is stepping down, I'm very pleased to welcome Bruce Hartman to the Ulta team. As you saw in our announcement a couple of weeks ago, we are thrilled that Bruce will take the helm as Chief Financial Officer as of tomorrow. Bruce has an excellent track record of driving growth and profit improvement throughout his career and has valuable and relevant experience as a CFO for a specialty retailer with the national and international footprint, as well as real estate and consumer product companies. The entire management team met Bruce during the interview process and while we will miss Gregg greatly, we know Bruce will build upon our success to date and help Ulta achieve even greater things. We're also very pleased that Gregg will remain with the company through the transition and will partner with Bruce to ensure a smooth handoff. Gregg, so many thanks to you, and Bruce, welcome to the team. Bruce?

Thanks, Chuck and Gregg. I'm delighted to be part of this team and part of this vibrant industry. I spent a lot of time with the entire leadership team throughout this process and conducted a lot of research on the company and the industry. I can't think of another retailer that has as much opportunity ahead as Ulta does. I'm looking forward to getting to know all of you in the coming weeks and months and working with you in the years ahead. Gregg?

Welcome, Bruce, and thank you, Chuck. I will certainly miss my partnership with Chuck in working with the entire leadership team. I step down as CFO extremely confident in the strength of the business model and proud to know that business is in the capable hands of a great team, even stronger now with the addition of Bruce. Bruce and I will work closely together over the coming weeks to ensure a seamless transition. I would add it has been a pleasure working with all of you and I look forward to watching with great pride and satisfaction as Ulta's incredible growth and success story continues to unfold in the coming years. Chuck?

Thanks, Gregg. Finally, I'd like to finish by thanking our 15,000 passionate associates for making Ulta the place where our guests are increasingly choosing to shop. Or team's hard work and commitment to great service are the foundation for our steady market share gains and our strong financial performance. With that, let me turn the call back to the operator to open up for your questions. Operator?

[Operator Instructions] Your first question comes from the line of Neely Tamminga from Piper Jaffray.

So my question here is one, at a very high level on Clinique, and I do want to ask a little bit more about ulta.com, if I may. First on Clinique, you guys have had the privilege of testing this for a little while within your organization. And you said, you have 13 stores now. Just wondering, as you look forward to the 30, 35 boutiques, will there be some meaningful changes to the size, scope and SKU on density of where you've been in the tests and where you're headed? Some contextualization around that would be really helpful. And then on ulta.com, I was just wondering, Chuck, if you could talk a little bit about maybe the dynamics of the dot com business in beauty. How big can this be, if you're willing to talk about that? Or just give us some sense of how big it is now and where you think you guys can take that particular growth initiative? That would be helpful.

Sure, Neely, and thanks for your kind comments. Talk about Clinique first. We're pleased with our business that we've seen with them. We're pleased with the addition of these stores. In terms of the size and the scope, I don't want to go into too much detail on that because we're still in the process of getting these things put into our stores. But I would expect that they're going to look and feel similar to what we've done thus far. We highlight boutiques through the store as a whole. We've got other brands that are highlighted as well and we think that our guest really appreciates the ability to find some of those key brands in easy to shop kind of environment. So expect that it will look similar to what we've done thus far. As far as ulta.com, no we're not going to go into a lot more detail in terms of its current size. What we have said is it's small. It's too small. The way we think about this is along the digital front. And I've talked about this in a number of forums before. Digital has 2 parts of its -- 2 responsibilities, if you will. One is clearly to conduct more commerce and that's where ulta.com can deliver through e-commerce. But the second that digital has to do is support the brand as a whole and whether that's through allowing commerce to be conducted or whether that's communicating something about our products, or our services, or our locations, or stores, the test today, as you know, wants to interact with a retailer in a way that she wants to interact, whether it's going to a store or going online. So we need to have our digital assets continue to expand and that will manifest itself in significantly higher ulta.com sales, but it will continue to support the brick-and-mortar as well. The advantage that we have in our business, as you know, is this is an experiential business. We have that unique advantage of product and service in an environment that really is unique in the retail marketplace. So we think brick-and-mortar, we're big believers in brick-and-mortar and unlike some of the pipes of retail. But we know digital is a key component that will only grow in importance for us to reinforce Ulta as a whole.

Our next question comes from Daniel Hofkin from William Blair & Company.

I will echo Neely's comments across the board, just a great quarter. And Gregg, terrific to work with you all this time and Bruce, looking forward to working with you going forward. Just regarding a little follow-up on Clinique. If you can at this point, share with us a little bit about kind of the genesis of how you kind of got over to the next level with them, if you can describe that at all. And any learnings in the first year from Lancome that you think might be brought to bear? And then I have a follow-up question.

Yes, Dan, it's Chuck. We're going to get to the follow up pretty quickly, because we're not going to get into details about each step of our relationship with Clinique. What I can tell you is that it's the same thing that I've said before. Our relationship with Clinique, as our relationship with all our brands and we carry, I don't know, close to 500 brands throughout the store, is really good. We're a fast-growing retailer. We have a great relationship with our guests. Our brands know that. They think that we are executing well, they support our strategy and that's true of Clinique, as well as Lancome, as well as every other brand that we do business with. So we are very pleased to be adding Clinique in these additional stores. We have gone out and specified the number of stores just so you all don't get carried away as you start to see these things showing up in stores. And as I said in my prepared comments, we think that Clinique and Lancome and Bare Essentials and Benefit Cosmetics and Urban Decay and Tarte, they blend together to really create a very powerful offering in the market. And when you throw in our services and then our service in the store as a whole, that is the core of what our business model is all about. And that's why we feel so bullish about the long-term growth potential for this company. So really happy to be adding stores with Clinique, but it's just one part of the equation.

And then I guess my follow-up, on the gross margin in the quarter, were there any aspects that were different than you thought going in? Obviously, the sales coming in higher than you expected would tend to benefit the margin. Were there any things within the components that you described that were different one way or the other?

No, nothing significant, Dan. We've been very pleased to be able to add 80 basis points of gross profit improvement, 180 basis points of operating margin expansion, particularly when you think about this time last year, what we were stepping over. We added over 300 basis points of operating margin expansion in the second quarter of last year, about 1/2 of that coming from gross profit, 1/2 of it coming from SG&A. So now overall, very pleased with the performance.

Our next question comes from Matthew Fassler from Goldman Sachs.

My questions relate to Prestige. You're now going to have, it sounds like close to the same number of Clinique and Lancome stores up and running. I guess some more Lancome still. But are you finding that these programs have been launched in identical stores and there's a concentration of Prestige in a number of stores and markets? Are they spread throughout the chain in a way that would suggest kind of broader acceptance by the consumer?

Matt, welcome to the group. The stores for Lancome and Clinique, we haven't released which stores those are because we're still in the process of putting them in and we, just from a competitive standpoint, think that we should hold off on that. There is -- Lancome in the first 29 doors, rolled out into those doors on a market-based approach. And I think for the most part, with the additional stores that we're adding in Clinique and Lancome, you will see that occur as well. It provides some additional efficiencies from an advertising standpoint and a staffing standpoint. So it's not completely congregated into a handful of markets, but for the most part, it is. And again, I would reinforce that as really happy as we are to be having these stores with both Lancome and Clinique, it is one part of our overall Prestige offering and our growth over this past, especially our accelerated growth over these past couple of years, has been fueled by the breadth of our existing Prestige offering, whether that's in cosmetics or in skin care.

And if I can please follow-up, investments that you're making in the buildout that you've made at this point and the buildout of the Prestige boutiques, the 400 or so stores, do those stores now have the capacity to absorb brands like this of this magnitude with no incremental or little incremental investment?

Well, the 400 stores that we did some work in were not heavy capital intensive projects. We added fixturing of our existing fixturing type. We expanded some space. It provided more flexibility to us. We are committed still to not being bigger than our 10,000 square foot box. We do have great flexibility in that store format for adding brands, clearly depending upon the significance of the boutique that we build in the future, that could cost more money versus other efforts that we've put forth in expanding some secondary brands that cost less. So there's no real one answer that fits all scenarios. But the important thing is I think, from our viewpoint very important, is our store is very flexible. And to be adding these boutiques doesn't require heavy capital investments to reconfigure the store, as you might find in other store formats. So while the boutique may cost money, the store doesn't need a full redo.

Our next question comes from Brian Tunick from JPMorgan.

Just to repeat what I said last quarter, we're going to miss you Gregg and also welcome aboard, Bruce. So I guess -- I know guys don't comment on any intra-quarter trends, but there seem to be some worries out there regarding the category in May and especially June. So just wondering, if at all, your quarter was choppy or if it was just market share up for grabs. And if you saw some competitors doing anything from a promotional standpoint. That's the first question. And the second one, I guess, is on your stores. Just trying to understand maybe how your more mature stores or more mature class of stores are comping versus the chain average. And do you see upside to that 20% four-wall margin? I think you've said before that your more matures peak at. And then finally, also, should we be thinking next year as an absolute number of stores, like 100 again next year, or more of a growth rate, somewhere 18%, 20%?

Brian, you're getting your money's worth with 3 questions now. I'll take maybe the first and the third and I'll let Gregg talk to the second one. On the first part, yes, we're not going to comment on the inter quarter trends. What I'll tell you is, as we've said before, it's one of the beautiful aspects of our business model is we have Mass [ph] products, we have Prestige products, we have hair care. All different price points, all different categories of product, all different brands. So we have a lot of levers that we can pull. And clearly, in this past quarter, we pulled lots of those levers as we do every quarter. So we're very pleased with how we did. We know we gained a real significant market share across the board. As far as competitors, yes, there are a lot of competitors out there. We're not a vertical retailer. We carry things that other people carry, so we compete with a lot of different players and some of them are doing quite interesting things. But whether it's Mass [ph] to Prestige, or specialty, or online, there's a lot of players out there that clearly are trying to gain in this business. But we have defined a very good strategy. We've executed it incredibly well throughout the organization and that's what's allowed us to stay ahead of other players. As far as your third question on new stores, what we've said long term is that our goal is to grow our square footage at 15% to 20%. This year, we will end up growing faster than that because of the opportunities that were available. And as you've seen, we've said repeatedly that we are after quality above quantity and clearly with our new store performance, you can see that we've been able to get both. I would expect next year, that, that long term of 15% to 20% will be along those lines unless we find some opportunities that are very attractive. And I do expect that we'll give you more color on this on our next earnings call, but we are very, very pleased with both the quality and quantity that we're seeing for 2013's new stores.

And Brian, just the older stores, I kind of characterize those as 6, 7-year-old stores that are kind of off the new store model that we run after 5 years. We're very pleased with the performance of those. They are trending with the 9% to 10% comp that we've been running. They are certainly trending above that model that we have out there, so very pleased with that performance. There shouldn't be any surprise because you think about a lot of the strategies that we're talking about that are driving the business, they not only benefit the performance of a new store, but they have the greatest benefit in the performance of some of those older stores because we're growing the loyalty club customer base. We're adding assortment, newness. We're using the loyalty program. We're developing a CRM strategy. All of those things benefit those stores, quite frankly, that are some of that older vintage because they have the most mature customer club base. And that's the heart or part of our strategy, certainly from a communications standpoint. As far as long-term, four-wall operating margin, we believe that there is longer-term runway in operating margin expansion as a company. We said in the next couple of years that we'll get to that mid-teen operating margin. We're obviously making good progress moving towards that this year. I think continuing to demonstrate credibility. We're less than halfway built out. As we continue to drive the productivity of those old boxes, the older boxes, 5, 6, 7-year-old stores, I expect there's more runway there. And I think that's also evidenced by the fact that you see, as we're accelerating our square footage or we're bringing all these younger stores into the store base, that our overall company sales productivity is continuing to move up.

Our next question comes from Erika Maschmeyer from Robert W. Baird.

On the loyalty program, you're now talking about 10 million club members. Fairly recently, you talked about 9 million. It seems like the growth there accelerated. Is it a new program? Do you think the biggest factor there, or some of what you're doing on the marketing side or improved POS? I guess any sense there and kind of the rate you expect to see that accelerate or extend going forward. And then could you talk a little bit about the benefits you're seeing from the new loyalty program? Are we really -- are we seeing the benefits from that currently? Or I know you mentioned is a longer-term driver, do you expect it to be more of a back half in 2013 and after a type of benefit? And then just a quick follow-up on ticket. The contribution from ticket accelerated a little bit from last quarter and I guess anything to call out there besides mix?

We'll take each one of those. So everyone's getting 3 questions, I guess, today.

Sorry, the first 2 really are sort of together.

I think you were on maternity leave last call, so you get a bonus question this time. So loyalty -- our membership is accelerating because our business is accelerating. We're seeing more people come through. I don't think I'd necessarily connect it to the loyalty conversion in the central part of the country for us. But we're seeing more footsteps as we continue to have better comp business and we continue to grow our new stores that is more footsteps coming through. We are very pleased with that. It will continue to grow. We haven't talked about that goal to next year but clearly, we have high expectations of what this number will get to. I would remind everybody, because every retailer puts a different parameter on it, our 10 million members are 12-month active customers. So they've shopped within the past 12 months, which is a very rich file. The benefits of the loyalty program are very attractive. The conversion, we're encouraged by customer feedback, but that's going to -- the converted part of the country is going to take a little bit of time to materialize in terms of customer shopping behavior. But the longer-term component for the loyalty program throughout the company, which is ultimately to get to one program which will make it more efficient for us to market. But the advantage for the guest is very real. They have advanced notice of our events, they have promotions, advance notice of the promotions. There really is an incentive for her to continue to shop with us. That's the incentive for her. For us, we capture all of her shopping data, what she's buying, when she's buying, where she's buying it. And for us to be able to mine that data, which as I've talked about before is not the easiest thing in the world to do, but it is a very rich opportunity and we're making good progress on it. But it's a long-term opportunity for us, that's the really significant benefit for us. And we've seen benefits on our mining of the data thus far. We'll continue to see it accelerate in 2013 and it will continue on for years to come. That's one of the reasons that we went down this path on the CRM solution that we're starting the implementation on in the third quarter.

And on the ticket front, Erika, it was driven by average selling price and units per transaction, a little bit more biased towards average selling price. As I said in the prepared remarks, we were stepping over a virtually nonexistent growth in average ticket last year versus the double-digit growth that we saw in traffic. So it's our strategies continuing to work. A little bit easier comparison on the ticket growth side, a little tougher comparison on the traffic side. Yet, still really, really strong growth on the traffic side this quarter.

Our next question comes from Joe Altobello from Oppenheimer & Co.

Just to stay on that ticket collection, just so I understand, it's not as if consumers are moving from one higher-priced point category to another. It's that they are moving up in terms of price points within categories. Is that fair to say?

Our strategy has continued to be, as we talked about this, is driving Prestige Color Skin. Certainly all the categories in the business, those are our primary focus. Average selling price is a little bit higher. There are multiple dynamics in this business as we drive customers into the store and sometimes that will benefit average selling price a little bit. And depending on some of the marketing and merchandising promotions during that quarter, could also benefit units, Joe. So it's a function of all the strategies that were driving the business. It's not a sea shift in the way the customer's shopping.

On that point again, it sounds like you guys have not seen any major change in the way your consumers are shopping over the last 3 to 6 months or so.

No. We're continuing to drive very healthy growth in traffic into the stores, very healthy overall comp performance. The new stores are performing extraordinarily well. I'm very pleased on both fronts.

Just lastly, in terms of the strategy mix, and Gregg, when you guys first went public, one of the more attractive aspects of the story was the whole master class sort of offering, Mass [ph] to Prestige across the board. It sounds like over the last 6 to 12 months or so and maybe even before that, that the strategy has shifted or started to shift a little bit more towards Prestige and I imagine part of that is due to a response on your part to the Prestige consumer being a little bit stronger than the Mass [ph] consumer. Is that a fair assessment? And is that where the strategy is going a little bit more up market?

I don't think I would put it that way, Joe. The foundation of our strategy is to carry Mass [ph] through Prestige, along with professional products. The mix of that has shifted more towards Prestige over time, but we're very proud of our Mass [ph] business. It's a very healthy part of our business, as we've talked about before. Most of our Mass [ph] business tends to be at the upper end of the Mass [ph] range. So it's not the very low entry point that many other retailers play out. So we tend to spend more time talking about the Prestige part of our business. But that's to the investment community. Internally, we spend a lot of time, we do a lot of work on the Mass [ph] side too. But the long-term part of our business is very much grounded in continuing to offer a Mass [ph], a Prestige, a Salon service and a Salon product component to our business. That is the unique secret sauce of what Ulta is that distinguishes us, along with our service experience, that's what distinguishes us in the market and there's no plan to shift away from that.

Just remember, Joe. We know the way she shops, what Chuck describes is exactly the way the consumer shops. She shops across price points. She shops across categories, high to low.

And again, the reason that we're so bullish about this business long term is that we have those levers to pull and we can react in terms of space allocation in a very flexible store model. We can change our advertising. We can change our offering, because we do offer that full breadth of the beauty market.

Our next question comes from Jill Caruthers from Johnson Rice & Company.

A question on the boutiques. As you further expand this initiative, could you provide any details around the incremental list that these boutiques add to stores, whether it's on sales or profitability front?

No, Jill, we won't go into that. What I can tell you is that obviously, for third quarter, our guidance reflects all that we see, not just from these boutiques, but throughout our business. I did call out that like anything else in our business, whether it's a new store, whether it's a new brand of product that we offer, whether it's even a new product within a brand, there's traditionally a ramp time to that and we expect that here as well. Obviously, we are pleased when we add a new brand to a store, whether it's an iconic brand or whether it's any other brand, there's an anticipation that it will be accretive to the store and beneficial to that guest experience within the store. And clearly, with things that we talked about today, whether it was Clinique, whether it was Lancome, whether it was Juice Beauty, whether it's Vichy or La Roche Posay, we expect those things to be accretive to the store and be better performers than anything we may have to reduce from the store.

And then just last question, you talked about the Salon business. Could you maybe talk about some of the other services that you provide? I know you've kind of been expanding your brow bars and the new -- the gel manicures and what. If you could just touch on those, I'd appreciate it.

Yes. Well, as far as the offering, you just touched on a few of them. Obviously pretty much anything to do with hair; cut, color, perms, straightening, we do all of that. We do offer gel nail service in all of our stores now. It is kind of a modified manicure. We have facials, skin treatments, mini facials in all of our stores. We have been testing microderm abrasion in a handful of stores and I'm pleased with the initial results on that. So the service part of our business is very critical to our overall experience that we're trying to create. And I mentioned in my prepared comments that our guests come in to solve, for a solution, or to find something new, or to just enjoy themselves for the afternoon and our service part of the business is part of that enjoyment and part of that experience that we want to provide. We'll continue to test new things in the Salon as well as we have in the past year. We don't talk about them all on this call because some of them are small and some of them, quite honestly, like any test, we'll try it and may not work. But the things that was called out here, we feel good about and we think they complement the overall experience, both service and product at Ulta.

Our next question comes from Evren Kopelman from Wells Fargo.

I wanted to ask about -- given the acceleration in the store growth this year, are you going to have more stores entering the comp base next year? How significant of a benefit can that be to the overall comp, assuming the younger stores comp better than the chain average?

Evren, I wouldn't specifically quantify that. Obviously, it is going to provide some benefit because we do have a younger group of stores. But also keep in mind that as you think about this year headed into next year, some of the stores that we open this year, particularly in the first half of the year, will fall into the comp base. The 52 stores that we're opening in the third quarter this year, obviously will start to fall into the comp base in the third quarter next year. The biggest benefit’s going to come in the back half of the year next year.

And then 2 more, if I can. One of them is the new product innovation that's been pretty vibrant in the industry. As we begin to lap some of the strong growth numbers, do you think the pace of growth can be maintained? Are you seeing more new products, innovations coming in the pipeline? And then lastly, any update on your plans for the smaller 5,000 square-foot format?

And Evren, just before Chuck answers, one other point you have to keep in mind too, which is built into our store model, keep in mind that every program, annual program, we are always opening stores in new markets and existing markets as well. And to a large degree, a lot of the -- any of the cannibalization, which we have a great deal of precision around, occurs in the existing markets. And it tends to also be in some of those older stores. Stores that are 5 or 6 years old. And that's the other reason why we're also very pleased with the performance we're seeing in some of those older stores that I mentioned in Brian's question earlier.

Just to answer your other questions. On smaller stores, no, we have nothing to add on that. Clearly, with the amount of stores that we're opening right now and the boutiques, our focus has been on our 10,000 square-foot format. So as we -- at the appropriate time in the future, we'll talk more about that, but there's nothing to report on that right now. As far as on the new products, it's a big offering that we have. We have 20,000-plus products in a store and close to that online. There are always trends and when you look at an individual classification of products, sometimes comping against that trend may be difficult. So we have -- this past quarter, we went against Shatter nail polish from last year, which was huge. So the increases we saw in some of nail this year were more conservative. Like given the breadth of what we offer in skin care, in hair care, in color cosmetics and services, there's always something new and it's how we blend all of that out. So you can see, even though we went against Shatter nail polish last year, a big trend, we still delivered a 9 3 comp in the second quarter because we have this other newness. As far as newness going forward, I think what we see out there, I mentioned some of it in my prepared comments about what's coming for the third quarter, what we see tangibly in the next quarter or 2 looks exciting and what we've seen or discussed with vendors for 2013 also sounds exciting. So I don't think there's a shortage of new product in the pipeline.

Our last question comes from Jason Gere from RBC Capital Markets.

Most of the questions have been answered, but I guess the one thing I was going to ask, you were talking about, in the fourth quarter, that there's an extra week. And I think you tried to quantify the sales of $35 million. Can you just walk me through? Like how does that impact the comp versus I guess what would be kind of new store sales? Maybe if you could just provide a little color and what does that come out to an EPS basis, that extra week? Is that like $0.05? I'm not sure if you mentioned that.

So in our prepared remarks, we did mention that. I'll hit the last piece of that question first. It's $0.03 per share. It's about $35 million in extra sales volume. And simply what you do, a normal fourth quarter has 13 weeks. This year, our fourth quarter is going to have 14 weeks. When you add that extra week on the end, you will pick up an extra comparable week for the prior year and you will set that on in the denominator. So you're still going to have 14 weeks over 14 weeks and will have no impact on the comp other than the comp in that specific week.

I'll now turn the floor back over to Chuck Rubin for closing comments.

Thank you, operator. Thanks, everyone, for participating on the call. We will look forward to speaking with you on our next earnings call, if not before then. So thanks again very much.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.