Operator: Welcome to today's Children's Place Third Quarter Conference Call. At this time, all participants are in a listen-only mode. Please note today's call is recorded.
It is now my pleasure to turn the program over to Jane Singer. Please begin.
Jane Singer - VP, IR: Thank you, Kevin. Good morning, everyone, and thank you for joining us today for a review of The Children's Place Retail Stores, Inc. third quarter 2012 financial results. Participating on this morning's call are Jane Elfers, President and Chief Executive Officer and John Taylor, Vice President, Finance.
Before we begin, I would like to remind participants that any forward-looking remarks made today are subject to the Safe Harbor statement found in this morning's press release, as well as in our SEC filings. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially. The Company undertakes no obligation to publicly release any revision to these forward-looking statements to reflect events or circumstances after the date hereof. After the prepared remarks, we will open the call to questions. We request that each of you limit yourself to two questions, so that we will be able to take as many questions as possible.
Thank you and now I will turn the call over to Jane Elfers for her opening remarks.
Jane Elfers - President and CEO: Thanks, Jane and good morning everyone. I'll start off with an overview of our third quarter results moving to review of sales by channel and an update on three of our key strategic initiatives and end with the discussion of the impact of Hurricane Sandy on our updated guidance.
Net sales increased 3% for the third quarter, adjusted operating income increased 4%, adjusted earnings were $1.60 per diluted share which exceeded our guidance range of the quarter, comp retail sales increased 1.1% driven by higher transactions, average transactions value and conversion which partially offset by 1% decline in AUR and our SG&A spending was well managed during the quarter with the rate deleveraging only 10 basis which exceeded our expectation of 60 to 80 basis points of deleverage.
Gross margin deleveraged 10 basis points which was a significant improvement over the first half of this year. However, we expected lower product cost would drive 50 to 70 basis points of growth margin expansion during the quarter on top of the 110 basis point of expansion we achieved last year.
I'll provide the detail regarding our sales results during the quarter and John will review margin in detail during his remark. Starting with our channel performance, e-commerce comp sales increased 12.8% driven by strong performance in the big kids business. U.S. outlets posted a 5.4% comp increase. Two-thirds of the assortment is now made for outlets. We're very pleased to see the strong increase in average transaction value driven by increased AURs and UPGs during the important back-to-school season.
U.S. Place comped down 1.6% for the quarter. The big kids divisions posted strong sales gains throughout the quarter. However, we were disappointed in the performance of the baby holiday dressing line. Canada stores comped negative 2.9% for the quarter similar to the U.S., the big divisions were strong while the baby holiday delivery struggled. Across our channels sales fluctuated dramatically by week as our customers continued by buy closer to need and when the weather was seasonally appropriate.