Good day ladies and gentlemen, and welcome to Burlington Stores Third Quarter 2021 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded. [Operator Instructions] I would now like to turn the call over to David Glick, Senior Vice President, Investor Relations and Treasurer. Please go ahead.

Thank you operator, and good morning everyone. We appreciate everyone’s participation in today’s conference call to discuss Burlington’s fiscal 2021 third quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer; and John Crimmins, Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be transcribed, recorded, or broadcast without our expressed permission. A replay of the call will be available until November 30, 2021. We take no responsibility for inaccuracies that may appear in transcripts of this call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores. Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the company’s 10-K for fiscal 2020 and in other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today’s press release. Now here is Michael.

Thank you, David. Good morning everyone, and thank you for joining us. Our usual approach on these calls is to structure our remarks in a chronological order, starting with a review of the most recent quarter, then moving on to the next quarter and the year ahead, and finally commenting on the longer term outlook. Today, we're going to take a slightly different approach, rather than chronologically, we will cover these topics in order of their importance to our long-term shareholder value. I will begin with our longer term expectations. The timeframe for these remarks will be the next five years. Then, I will move nearer in and talk about 2022. We think that 2022 is going to be very unpredictable. That said, we believe it could provide the ideal setup for our business. Finally, I will comment on our Q3 results and the outlook for the rest of the year. Okay, the longer term. There are two aspects of the longer term that I would like to talk about. Number one, the macro economic and competitive environment. And number two, progress we are making on our Burlington 2.0 strategy. On the macroeconomic and competitive environment, let's start with the customer. For many years, there has been a growing consumer focus on value. It is possible that we are entering a period, a prolonged period of consumer price inflation across the whole economy. We believe that in inflationary periods, consumers trade down not up. In an environment of rising prices, we think shoppers will be even more attracted to the great value that we offer. Our business is a third bigger now than it was in 2019. One reason for this is that our value differentiation versus other retailers has grown. The delta between the price of an item at…

Thanks, Michael. And good morning everyone. I'm going to follow a similar approach to Michael. I'll start by talking about our longer term financial prospects. Then I will move in nearer in and make a few comments about 2022. And then finally, I will finish up with additional color on our Q3 results and our current expectations for the fourth quarter. On the longer term as Michael described, we are very excited to announce that we will be accelerating our new store opening program. We are now planning to open 90 net new stores next year. And then from 2023 onwards, we expect to open between 100 and 120. net new stores every year. Combining this faster pace of openings with a conservative comp assumption should generate average annual top line sales growth over the next five years in the low double digit percentage range. Over this period and with these sales growth assumptions, we also believe that we can achieve 200 to 300 basis points of operating margin expansion. We've made very good progress on margin expansion this year. But this has been masked by higher freight and supply chain expenses. We expect that some of these expenses will moderate over time. But we also believe that we have the opportunity to drive further leverage, especially occupancy costs and operating expenses. This combination of sales growth in the margin expansion should drive average annual earnings growth in approximately the mid-teens. This growth estimate does not include any additional benefit from using available cash flow to repurchase shares or to pay down debt, thereby reducing interest expense. The numbers I have described are annual averages for the five year period. We anticipate significant variability in these results year-to-year. In addition, as you know, we may not plan our business each…

Thank you, John. Before we open it up to questions, I would like to recap and reinforce some key points that we have made this morning. Firstly, we think that our longer term prospects are extremely bright. So we have decided to put our foot on the gas, and we are accelerating our new store program. Secondly, we believe an inflationary price environment could drive greater traffic to our stores. We need to see how this plays out. But we think that it could offer us the opportunity to take share, take up retails or to do both. Thirdly, we anticipate that 2022 will be very unpredictable. Our playbook is to plan and manage our business. So we can aggressively chase the very significant sales margin and supply opportunities that we believe might emerge. Finally, our Q3 trend remained very strong. We chased $218 million in sales above our original plan. But we still ended the quarter with in-store inventories and reserve inventories in great shape. We are very well positioned for the fourth quarter. I would like now to turn the call over to the operator for your questions.

Thank you. [Operator Instructions] Our first question comes from the line of Matthew Boss with JPMorgan. Your line is now open.

Great thanks and really appreciate all the color. So maybe first for Michael, on your long term unit growth prospects, Michael, Could you just speak to drivers behind the decision to accelerate this ramp of new store openings what gives you confidence to expand the program now?

Well, good morning Matt. Thanks for your question. As you know at the beginning of this year, we raised our long term potential store count to 2000 stores. And it's really since that time we've been looking at the pace of our new store openings, how many stores we should open each year. There are three factors that led into our decision to accelerate this pace, this the first is financial. I'm sure many of the analysts on this call, have already done the math, looking at our press release this morning, to estimate new store productivity. And what you see with those numbers is our new store productivity this year, has been extremely strong. And we know that this is partly due to the same tailwinds that have driven our comp growth or this year. But even if you adjust for those tailwinds and new stores are still running well ahead of our internal hurdles. As a reference point of the 100 or so stores that we opened this year, just over half are under 30,000 square feet. So this performance really gives us a lot of confidence in our new smaller store prototype. So that's the first reason, financial. Secondly, the second factor is strategic. I talked about this in my earlier remarks, so I won't, I won't beat a dead horse. But year-to-date our business is almost a third bigger than it was in 2019. That suggests to us that the customer is really responding very well to the great value that we were offering, and that we're taking significant market share. Again, it gives us confidence that as we open more stores, over the next few years, we'll be we'll be swimming with the tide, we'll be taking share. The other major off price retailers have two to three times the number of stores that we have. So this feels like a, an opportunity that's really unique to Burlington. The third factor in making this decision was operational. We earlier this year, we put together an internal cross functional team to look at, what would it take to significantly accelerate our store expansion, that cross functional team included real estate stores, supply chain, merchandising, planning, IT and other areas. And based on the plans and actions that that team developed, we feel very comfortable that we can support the faster pace of openings that we described in the remarks. Now, obviously with new scores, you have a pipeline of new locations that goes out over the next two to three years. So we can we can look at that pipeline and actually say we're very happy with the number and the quality of store locations that we see ahead of us. So you can tell we're very excited by this opportunity.

Great. And then maybe just a follow up for John. On the multi-year top and bottom line growth targets that you laid out on the call. Could you just share with us more of the building blocks to get to those levels of sales growth, margin expansion and EPS growth?

Good morning, Matt. Sure, happy to take you through a little bit more detail on that. The top line is pretty straightforward. Really, if you combine the new store program that we were talking about, with a conservative low single digit percent annual comp increase, this gets you to a low double digit percent annual sales growth that I mentioned the basis of our model. And we're confident that we can achieve this average annual growth. Moving on the margins, let's just kind of revisit what happened with margins this year. For the full year was expecting freight and product sourcing costs to delever by about 360 basis points. But as I just said in my remarks, we're projecting operating margin to be approximately flat versus 2019. So in other words, we've really driven 360 basis points with favourability and other areas. And that comes from higher merch margin driven by lower markdowns and higher leverage on operating expenses. Looking forward, there may be some additional merch margin opportunity. But because we've seen such a significant increase this year, we haven't assumed any further improvement there in our model. For store occupancy, we expect to capture additional leverage as we migrate towards our smaller store prototype. But we do see opportunities to drive further efficiency on store in supply chain expenses. We think that over time, freight expenses will decline from this year's historically high levels, though not necessarily all the way back to pre-pandemic levels. We're assuming that supply chain expenses will probably be a bit stickier. But they too will moderate to some degree as the seek flows become more predictable and reliable. When you combine all of these different factors together, we think that we can capture the 200 to 300 basis points of operating margin in the next five years that we called out. Of course, there could be additional headwinds that move against us, or there could be tailwinds that, that move in our favor, that could impact individual years during the period. But on average, we think these things should even out over time. And if we were to achieve significantly higher than the low single digit average comps we've modeled for this period, we would expect to drive more operating margin expansion. If you combine the low double digit projection for anyone top line growth, with a margin expansion of 200 basis points to 300 basis points for the next five years, then you get to the mid-teens earnings growth that I described in my prepared remarks.

Thank you. Our next question comes from a line of Ike Boruchow with Wells Fargo. Your line is now open.

A couple of questions, my first question is on supply chain. Can you just talk a little bit excuse me more about the issues and how they're specifically affecting your company? And then I guess, for example, what impact has it’s had on store level inventory levels? And then I have a follow up?

Yes, I'll take that. Good morning, Ike. I think that's a great question. I know there's been a lot of reporting and some concerns about inventories. So I think it might be helpful to draw a distinction, merchandise availability and supply on the one hand and the timely delivery of receipts on the other hand. Firstly, the availability of merchandise has been continues to be very good. Of course, there are certain categories and brands where there might be constraints, but that's always true. As an off-price retailer, we're not dependent on a single crack category or brand, we're very good at moving money from businesses where there's either a weak trend or poor supply to businesses where there's strong sales and good supply opportunities. That's off price. That's kind of what we do. I think the data for Q3 provides a pretty good illustration of this. In Q3, we chased 16% comp gross on an original plan of flat. That represents about $218 [Ph] million of ahead of plan sales. But our in-store inventory levels still ended Q3 ahead of plan. And at the same time, we were able to build up our reserve inventory. So we were very happy with supplying Q3 and we continue to be happy. We think there's a good chance because supply is about to get even better. So that's supply. But let me, let me move on and talk a little bit about receipts, specifically, the timely delivery of receipts. As I just described, when you look across the whole store, we really have not had an issue with merchandise availability this year. We found great merch spent how open to buy. Well there have been challenges, and we've had these challenges along with everyone else is in the timely delivery of receipts. In other words, with goods showing up late. This isn't the vendors fault. The problems are global and very widespread. But it has created inefficiencies in our transportation and supply chain network. Ironically, those headwinds become stronger, the more you try to chase the business and respond to the trend. So there's definitely been a challenge. And it's cost us money. But we've been able to get the goods that we need. And we've been very happy with the inventory levels in our store. So to recap, your merchandise availability and supply have been very good, and we think they're going to get better. But navigating the receipt flow has been an issue and frankly, it's been expensive, but we've done it. So that's how I would drive that.

Super helpful. Then this quick follow up on retail prices Michael, you were alluding to just, what do you see happening with prices across the industry? Do you think higher prices are sustainable? And then do you believe you guys can raise prices is this something the company has done in the past, just kind of curious how you frame all that up?

Yes, so it's a great question, Mike. I think this situation has really evolved over the last few months and actually continues to evolve. I see two things going on right now. Firstly, full price retailers this year have been getting much higher realized prices. And it's clear why that is, it’s because of much leaner inventories. Now, initially, I have to say I was sceptical on this. My view was that as soon as supply loosened up, promotions would come back. And then these higher prices would just come back down. But now, I'm not sure these retailers are clearly enjoying the stronger margins. So maybe, and I want to underline the word, maybe the environment will be less promotional going forward, maybe these retailers will control their inventories more tightly. So they can preserve the higher margins. But again, I'm going to repeat it. I'm underlining the word maybe. We really need to see what happens as supply constraints ease, do we go back to promotions or not. But if the environment really is less promotional going forward, I think that could be great for us. When we talk about value and offering value to customers, our reference point for value is the pricing at full price stores. So if that reference point moves up, if those higher realized prices really become permanent, then that that could be a huge opportunity either to drive sales or to drive margin or to do both. And frankly, that decision might depend upon a specific category that we're talking about. But I think we'll have plenty of opportunities there. If that reference product price is permanently higher. Anyway, that's one thing that's going on. The other thing that's going on, and this, this has really changed over the last few months.…

Thank you. Our next question comes from the line of Lorraine Hutchinson with Bank of America. Your line is now open.

Thanks. Good morning. I wanted to follow up on the freight and supply chain pressures. John, are you seeing any sign of easing here? And when do you think it's reasonable to see that or is it possible that this is a more permanent situation?

Well, good morning, Lorraine. Thanks for your question. Good question. Yes, you've heard me say in the last couple of calls. We think that this record breaking freight expenses that we've seen so far this year, are mostly temporary. We still believe that it's driven by an imbalance in supply and demand. And we think that over time it should correct itself. So, we think that's the case. But like everyone else, we don't really know when that's going to happen. And we certainly haven't seen anything yet, that would indicate that things are starting to improve. As we said previously, we think that some of the higher supply chain expenses that we've seen this year, particularly the wage rate piece are going to be more permanent. But we expect that the wage incentives and the operating efficiencies we've seen this year are going to get better. And as the supply chain situation improves, again, we just don't have good visibility into when any of this stuff is, is going to actually happen. But let's just consider the other side of it. Suppose it, it doesn't work out that way. Suppose that these higher expenses are mostly here to stay, but they become a permanent part of the expense base. We think the only way that happens is in an inflationary scenario. And so I'd refer to what Michael was, was just talking about. If costs are permanently higher than we would expect that prices would rise permanently across all retail, it's the only way that most retailers would be able to absorb the costs. And so that would certainly apply to us as well. In an inflationary burn, inflationary [Ph] situation, we'd certainly be able to raise prices, while continuing to maintain our value proposition. And in this scenario, that our value proposition would likely be even more important to our customers.

Thanks. And then you've been pretty proactive about paying down debt. But you added back the share repurchase this quarter. What should we expect in terms of capital allocation going forward?

John, I'll take that question. Thanks, Lorraine. That's a good question. Yes that we have paid down a considerable amount of debt over the last year. And I think it may be helpful to kind of provide kind of a recap of our debt pay down as well as our debt outstanding and leverage ratios. If you go back to the height of the pandemic, we borrowed 400 million on our ABL, and we raised about 1.1 billion and public market debt. But given our strong recovery over the last year, we have been able to pay down about 860 million out of the one and a half billion we borrowed during 2020. Now we pay down our ABL to zero. As you may recall, we executed a make-whole call on our high yield notes. And we recently repurchased in Q3 past quarter $160 million in convertible notes. So where does that leave us? We have about $1.6 billion in total gross debt, over $950 million on our term loan and a little under $650 million in our converts. And on a net debt basis, given the $1.2 billion and unrestricted cash we added in the quarter, that's about $400 million. So what all those numbers mean. I think it just leaves us in a much more comfortable place from a leverage perspective. And, if you look on a on a trailing 12-month basis, excluding capitalized operating leases, our gross leverage is down to 1.6 times gross debt-to-EBITDA and our net debt ratio is down to 0.4. And we would expect to continue to reduce those leverage ratios. So given that progress and reducing our leverage, we were comfortable resuming our share repurchases during the past quarter. We repurchased around $150 million of stock and that leaves us $250 million remaining on our authorization. So what do we do from here? We're going to evaluate it through the lens we always use. First and foremost, we're going to invest in our growth. And secondly, we'll utilize excess cash and the most accretive way for our shareholders and that's what we'll continue to do.

Thank you.

Our next question comes from a line of John Kernan with Cowen. Your line is now open.

Good morning. Thanks for taking my question. Michael, John, David, thanks for all the guidance through next year. It's quite a bit more than we're getting for many your peers across the sector. I guess John, new store gross now a bigger part of the narrative. Be helpful if you could provide just some high level modeling assumptions around new store productivity, particularly given the new store prototype? And then I have one quick follow up.

Thanks, John. Be happy to do that. So let's start with how you should think about sales volume for our new stores. On average, we expect new stores to have initial sales volumes that are around 70% to 80% of our chain averages they open up. Obviously, there'll be some variability for each individual store. But if you use this average, should be a reasonable assumption for modeling. Actually, this year, we're seeing a slightly stronger performance than that as our new stores are outperforming their plans. They are being driven by the same tail tailwinds that have helped help us deliver our strong comp store performance. So, from there, you should anticipate comp store sales growth for the new stores, that's faster than the chain for several years after opening, which would be consistent with what we've now seen to last several years. Across the next five years, you should expect more than 75% of our new stores will be less than 30,000 square feet, so really moving to the smaller store format and in a big way. In terms of profitability and capital returns, you can rely on what we've continued to say we've been saying in the past, that EBIT margins for each store are expected to be accretive to the company in their second year, and each store is expected to deliver return on invested capital, that's also accretive to the company's return on invested capital. In 2019, our average sales per store is about $10 million. With the growth that we've seen this year, our 2021 home average sales per store is going to be north of $11 million per store. If sales of a new store is 75% of our average, that means that the store should do over 8 million, and then comp…

Got it, sounds like productivity is planned to move significantly higher. I guess my follow up is just on Q4, a lot has happened since the last call in August. Could you just walk us through? What changed in the Q4 outlook versus the outlook you gave us on the last call? Thank you.

Okay, all right, John. Great, thanks. So for Q4, we said we're, we're comfortable with our sales forecast. We're actually running ahead of our low double digit sales forecast. But there's still, some risk and some really big weeks in front of us as we move into December. On the margin front, it just really comes down to wanting to be a bit more conservative on our EBIT forecast. Our implied outlook for Q4, we, if you look at what we gave last quarter, was down around 200 basis points. So now on a low double digit comp, we're forecasting down about 250 basis points. So I would remind you that we're still maintaining our flat EBIT margin forecast for the full year. The reason for this, the reality that we're dealing with is that the cost pressures in supply chain and freight and wages to some degree, along with the volatility or timing receipts, they are just really difficult to forecast with any precision. So we really wanted to recognize the difficulty forecasting these expenses and add a bit more conservatism just to protect against the volatility that we see.

Got it. Thank you.

Our next question comes from the line of Kimberly Greenberger with Morgan Stanley. Your line is now open.

Great, thanks so much. I wanted to follow up on Michael, in your inventory comments. You mentioned when you were talking to inventory that you think there's a good chance that supply is about to get better. I just wondered if you could expand on that for us?

Sure. Well, good morning, Kimberly, good to hear from you. Yes, so. So I feel like the congestion, and the delays in global supply chains and transportation systems have been have been fairly well reported. I've lost count of the number of ships that are waiting off the coast of Southern California at this point. But it seems like it just keeps hitting new records every day. And the containers, some of the containers on those ships have merchandise vendors, and retailers had ordered with the expectation that they would be delivered for the holiday period, the holiday selling period, or for the fall season. And it's clear that some of that merchandise is not going to get here on time. Frankly, if it hasn't landed by now, it's already too late. Then there is no point, for a retailer, there's no point in taking receipt of holiday merchandise in January, for example. So our expectation is that that merchandise should find itself to find its way into the off-price channel. And we think that's likely to be a big opportunity, especially for our reserve inventory. Now, I mentioned that we've started to see some early signs of that. It's too I think it's too early to project where that's going to lead. But our hunch is that the next couple of months could be could be a very good buying opportunity for off-price.

Fantastic, Michael. And it sounds like you feel really good about the inventory position here for holiday. I just want to make sure that I understand you correctly on that. And then I just wanted to follow up quickly if I could on the 30,000 square foot stores. It sounds like you're seeing well above plan results, in particular this year. And I wondered if you care to share how those stores in particular, those smaller stores as a subset of your new locations, how they're delivering on annual volumes this year. Thanks so much.

Okay, I'll take the first part of that, Kimberly on for the inventory levels and then I’ll let John respond on what we're doing with the prototypes. But on holiday inventory levels, at this point, obviously, we're sitting in the third week of November. So I'm in a good position to judge. I'm very confident that we will have the inventory in our stores, and that we have enough receipts on the way to stores to support our sales projection, that low double digit number. Now, if sales were to run well ahead of low double digit, then we might start to see some gaps in some very high trending businesses. But that just means that the sales in those businesses were very, very strong. So it's a high class problem. It's I think, the risk to us right now, in some ways is that sales outpace our expectations, not that we that we have an issue with, with inventory or receipts. And then John, do you want to talk about the smaller..?

Yes, sure. So first of all, as far as the performance of all of our new stores this year, not surprisingly, they're running well above the way that we had planned them as we underwritten them. Yes, I think everybody in retail has a strong tailwind this year. So that that's certainly a big part of it. But it also does give us some confidence to see the new stores, which include a large percentage of smaller stores, not as big as what we're moving toward. But they're all performing the way we would expect them to perform. Understanding that we have these kind of tailwinds behind us. Within the group of smaller new stores, we're very pleased with their performance. It's become less about the size and more about the strength of the trade area. If you're looking at individual stores, we've, got some of the smaller format stores that are really blowing it out of the water. And then there are others that are performing well. But overall, as far as proof-of-concept, we're very pleased with what we've seen from the smaller stores that we've opened so far.

Great to hear and thanks for all of the color on the long term strategic outlook, it's really helpful. Thank you.

You're welcome.

Our next question comes from a line of Michael Binetti with Credit Suisse. Your line is now open.

Hey, guys, thanks for all the detail today. I'll repeat the comments earlier, it's very, very helpful to hear you think through the 22 and longer term. Maybe this one's for John. But I think, important, it seems like you're drawing a pretty fine line, a pretty hard line between first half and second half next year. Is that really laughing stimulus and the costs rolling in such that obviously, we understand from your language today, the first half is really tough, the second half closer to that algorithm that you that you spoke to for the longer term? And then Michael, what really as you think about the AUR [Ph] and retails comment, what really is the governor to raising that to you. Today, I think one of your dollar store competitors said they're raising to $1.25, your price competitors are raising AUR as you point to the value in your stores being historically wide versus the full price channel? Do you need to be that wide? And how do you think about whether your share gains have come from continuing to widen that relative value spread versus the better operations we've seen from you in the stores moving, to higher traffic locations, operating the in-store inventories better? How do you gauge when you may have let that value spread widen too far, based on your comment that it's pretty wide right now?

Alright, so Mike, I'll start with the question on the kind of time and cost pressures next year. So, as I said before, we really, really don't have a crystal ball here. What we can see today is, we haven't seen anything that indicates that improvement, particularly on the freight side, yet has started. So, it's a modeling assumption that we're using, it's not something that we, that we have this inside information. But yes, so I, but I think it's a fair way to think about next year, that if you didn't see any improvement for the first half, and you start to see some improvement in the second half, that's really as deep as our thinking goes there. So and it's based on if that improvement does start to happen, that's, that's the impact that we've seen on our margins. If it doesn't start to happen, it goes back to the comments that we had, this may be more of an inflationary environment, and there may be more room to take price then we've modelled. So that's kind of the way we think about how we modeled the scenarios for next year.

Okay.

And then, Michael, your question on what's the what are the governor's on AUR [Ph] and taking up retails? I think it's a it's a really good question. And I think it's important, it's important to understand that an off-price, what really matters is sort of the reference points for price. And what I mean by that is, when the customer walks in the store, when the customer walks in the off-price store, they're walking into that store, because they're expecting a deal. They're expecting the values to be great. And actually, we encourage that. So when you look at a price ticket at Burlington, it shows our price, but it shows a compare act or a comparable price, and that compare our price is based upon the -- out the door price at another retailer. So we're saying look, you can buy at this price of Burlington, here's what it would have cost you had you gone to this other place. So that's kind of what off what the off-price customer proposition really is. So bringing that back to your question, then how should we think about the differentiation in our prices versus the competitors? If the competitors move up prices, that gives us an umbrella to move up prices to. There's no doubt about that. It’s where else is the customer going to go? That is the uncertainty that we have. And the reason we're being a little patient here is because those higher realized prices at full price stores, you've got to be sure that they are going to stay where they are. They are going to stay high before you start moving up your own prices. I've been in retail pretty long time. And I would say over the years, the department stores have been very,…

Thanks a lot for the help.

Thank you. Our final question will come from the line of Adrienne Yih with Barclays. Your line is now open.

Good afternoon and good morning. And thank you again, for all the detail. A couple of quick questions here. Michael, can you talk about the proceeds health of your core target customer, if you can remind us what the target household income is, knowing that, about 50% of U.S. households are under 75K. And then what percent of your customers are non-credit or cash buyers? And then my follow up is for John, it's on the structural wage inflation embedded in long range plan. Obviously, we're sharing of 15, minimum going to 17. And just some color there. Thank you very much.

Yes, Adrienne, I'll start with the first question. Our customer, we think our customer, we think our customer is very healthy right now. We think certainly when you look at our comps, throughout this year we feel very good about the trend that we've been able to sustain. The underlying, the customer is clearly responding very well to the values that we offer. Now, in terms of how our customer differs from other retailers customers, one thing we know about our customers is they shop at every retailer, because our customers the off-price customer cares more than anything about value. And the way they find value is they cross shop a lot. So we know that we have a huge overlap with other retailers, customers, which is why I say, if other retailers raise retails, we're probably going to have a chance to take market share, or raise our own retails because we know that, that there is cross shopping between us and other retailers. Now, to answer your question more specifically, our customers tend to skew younger, larger family size, more moderate income. And I think those customers right now, as I say, a pretty healthy and the spend the sales trend has been very strong. If I project forward to next year, and just sort of add a thought about if inflation really does take off in this economy, we actually think we may have a lot of new customers showing up, customers who are perhaps on slightly higher incomes, but they're getting squeezed by higher price inflation. So that's the reason why we feel somewhat optimistic that if there is inflation across the economy, consumers at different income levels are going to be more interested than ever, in the value that we offer.

Yes. Okay, so I'll take the wage part of your piece, your question, Adrienne. So first of all, just to reminder, we've used this kind of market by market analysis, where we make wage adjustments, as we see that they're necessary. We've been using it for several years. And we're pleased with the way that's been working. This year, turned out much different than the way we had had planned at the start of the year. We've made some very significant changes on the DC side to remain competitive, and ensure that we can attract the workers that we need to operate our distribution centers, most of which are in New Jersey in California, very competitive markets. So we've brought wages up quite a bit there. And that's the part of our supply chain costs that we refer to as being a little bit stickier, that's now a permanent part of our wage base. And, of course, it's included in our outlook this year in our modeling. On the storage side, it's been a little bit of a different story hasn't been quite as hasn't been nearly as competitive as the DC situation. Although in the second half of the year, we have seen it get a little bit tighter and we've had to make some adjustments, a little bit higher than what we had expected at the start of the year to remain competitive, but it's very different kind of market by market. So we're still very comfortable with our market by market approach. So I would say we've taken a bigger step forward than we would normally have in a single year as far as these five market adjustments. And then modeling going forward, we've modeled in what, an assumption for what we expect we’ll need to do to continue to remain competitive. And that's informed by you what we've learned about – this year.

Thank you. Great color and best of luck for holiday. Thank you.

Thank you.

This concludes today's question and answer session. I will now turn the call back to Michael Sullivan, CEO for closing remarks.

Before we hang up, I would like to take this opportunity to thank everyone at Burlington for their hard work in the third quarter, and throughout the year. I know that the entire Burlington team shares my sense of energy and excitement around the sales margin and supply opportunity that we see ahead of us. Finally, I would like to wish everyone on today's call a very happy and peaceful Thanksgiving. We look forward to sharing our fourth quarter results with you in March. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.