Good day, everyone. And welcome to the Five Below Second Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please also note, today’s event is being recorded. At this time, I’d like to turn the conference call over to Christiane Pelz, VP of Investor Relations. Please go ahead.

Thank you, Jamie. Good afternoon, everyone and thanks for joining us today for Five Below's second quarter 2019 financial results conference call. On today's call are Joel Anderson, President and Chief Executive Officer and Ken Bull, Chief Financial Officer and Treasurer. After management has made their formal remarks, we will open the call to questions. I need to remind you that certain comments made during this call may constitute forward-looking statements and are made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and our SEC filings. The forward-looking statements made today are as of the date of this call and we do not undertake any obligation to update our forward-looking statements. If you do not have a copy of today’s press release, you may obtain one by visiting the Investor Relations page of our website at fivebelow.com. I will now turn the call over to Joel.

Thank you, Christiane, and thanks everyone for joining us for our second quarter earnings call. Before I begin my normal review of the quarter. I want to pause for a minute and start with some thoughts on tariffs. It's -- clearly, it has been business as usual with the various announcements. Our teams have done an amazing job managing through all of the complexities, and I want to thank them for their nimbleness and hard work and helping to offset the impact of the tariffs. I am just as appreciative of our vendor partners for all their efforts to help mitigate the impact on our customers. Our believes in the fundamentals of our core business and the commitment we have to our customers, our associates and our shareholders hasn't changed and we remain focused on delivering extreme value and wow to our customers day in and day out. Now I will review the highlights of the quarter before handing it over to Ken to discuss our financials and our outlook and then we will open the call for questions. In the second quarter sales grew 20% to $417 million driven by continued outperformance of our new stores and a comp of 1.4%. Earnings per share grew 13% to $0.51 or 19% growth adjusting both periods for the tax benefit of share based accounting. Sales were within the guidance range and while our comp performance was below expectations, strong new store performance enabled us to deliver earnings per share near the high end of our guidance range. Now I'll provide more color on our new store performance in Q2, as well as other drivers of our second quarter performance. During Q2, we opened 44 new stores which is four more than planned. We opened in diverse markets across 21 states, bringing…

Thanks, Joe, and good afternoon everyone. I will begin my remarks with a review of our second quarter results and then discuss our outlook for the third quarter and full year. As a reminder, we adopted the new lease accounting standard at the beginning of the first quarter of this year. This new accounting standard impacts our financial statements, but does not impact our cash flows. This new standard requires us to now record operating leases on our balance sheet and also requires us to expense certain architectural and legal fees, which we previously capitalized. Our sales in the second quarter of 2019 were $417.4 million, up 20% from $347.7 million reported in the second quarter of 2018. We opened 44 new stores during the quarter compared to 34 new stores opened in the second quarter of 2018. We ended the quarter with 833 stores an increase of 141 stores or 20% versus 692 stores at the end of the second quarter of 2018. Comparable sales increased by 1.4% driven by an increase in comp transactions of 1%. As I mentioned on our last earnings call, we expected approximately 20 basis points of operating margin deleverage in the second quarter. Operating margin for the second quarter declined by approximately 10 basis points over 2018. Gross profit for the second quarter increased 20.1% to $146.2 million from $121.8 million reported in the second quarter of 2018. Gross margin was 35%, which was flat over last year. Ramp-up costs associated with our Southeast DC combined with occupancy deleverage on the comp results were offset by the timing of certain merchandise costs which shifted into Q3. As a percentage of sales, SG&A for the second quarter of 2019 increased approximately 10 basis points to 26.4% from 26.3% in the second quarter of 2018.…

Thanks, Ken. As you can tell, it hasn't been just business as usual for the last 90 days. We are navigating through a very fluid situation with respect to tariffs. And while tariffs present additional complexity we are confident that our business model and the flexibility of our eight worlds as well as the strength and agility of our leadership team will drive continued success. I'm proud to lead an amazing team that everyday shows up committed to unleash their passion for our customers. We are excited for the opportunities to WOW our customers as we head into the fall and holiday seasons to innovation. We believe we are elevating our customer and associate experience which combined with our continued focus on providing extreme value we'll make Five Below and even stronger retailer and brand. With that, I'd like to turn the call back over to the operator for questions. Operator?

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from John Heinbockel from Guggenheim Securities. Please go ahead with your question.

Hi, Joel, can you hear me?

Yeah, I got you John. Good morning, Good afternoon.

Good Afternoon. So two things, when you - your pricing test on the $5 plus items in particular, but maybe all of them. What did you see happen to customer basket size and items per basket, it was a much impact in terms of either of those? And then in the event of tariff postponed then cancellation, what is the thought process? I assume you wouldn't there be some aspect of price rollback. I am just curious how you manage such a fluid process kind of up and down without damaging your price credibility with the customer?

Yeah. Thanks, John. Both - later questions exactly what we've been wrestling with the last 90 days and I think and hopefully you will appreciate as we do with everything we -- approach with pace and diligence. And I think we originally had planned to roll some of this out earlier and then with List 4 came on and then last week, some additional ones. We've approached this very slowly and make sure we get it right. So we aren't going up and down with the customer and we're sure exactly sure what we want to accomplish and specifically to your question you know the elasticity was really in line with our expectations and while there was a slight decline in demand, there was an overall lift in sales and it was right in line with what we expected. And so we'll continue to test that in fact we rolled out another test last week that as I said in my prepared remarks, expanded the number of items that we went beyond $5 on and a few other aspects. Just to make sure we've got this right. But what comes last is raising prices, what we've done, first is mitigate the cost and I'll tell you as I said earlier on was the vendor partners and with our merchandise team has done -- has been phenomenal and mitigating more than half of the overall tariff impact. Thanks, John.

Our next question comes from Charles Grom from Gordon Haskett. Please go ahead with your question.

Thanks, good afternoon. Can, just on the - on the third quarter you talked about 70 basis points pressure from the unmitigated cost from the tariffs. Just wondering what that would be in the fourth quarter or is it expected to be neutral because you're going to be raising prices I believe chain wide and you're just going to be able to offset it. Just wondering if you kind of just walk us through how it's expected to transfer during the balance of the year?

Sure. Yeah, as I mentioned, we're going to see about 70 basis points of net unmitigated tariff cost in Q3. Really a couple of things going on there, there is a piece of that that's going to be the actual tariff cost themselves that are up in cost of goods sold. And then there is preparatory costs for the price changes that Joel mentioned going taking place in the fourth quarter cost around associate training signage, things like that. So they're going to have a little bit in cost of goods sold a little bit down in SG&A. So the net of that amount that unmitigated amount we expect based on the pricing increases that we're going to put into place in Q4, as evidenced in the high end of our guidance range that we would mitigate those plus more obviously to put ourselves in a position from a full year position at the high end of guidance that we would fully mitigate all the tariff costs that we're experiencing.

Thanks, Joel.

Our next question comes from Matthew Boss from JPMorgan. Please go ahead with your question.

Great. Thanks. Joel, maybe as you look at the back half of the year in the holiday assortments, how would you rank the opportunities you see across your eight worlds versus a year ago? And maybe how best to size up the license backdrop in the position you think you're in today may be versus the last time we saw a licensing opportunity like this.

Yeah, Matt, I think for us, it goes back to the bigger statement as we've kind of explained crazes to everybody, and I think what I explain trends and one of them is crazes, one of them is license and the third one is relevancy and clearly what is shaping up for the back half of the year is a license trend, we saw a little bit of that emerge with a couple of the movie breaks this summer, Toy Story 4, Lion King, et cetera. But clearly I think everybody's anxious for Frozen 2, it's been six years since the last one, there'll be whole new set of customers that haven't been exposed to Frozen 2, unlike Star Wars, which is kind of comes out every year, this is a really unique opportunity. I think what's unique and different on top of that for us is six years ago in '13 when that came out and then spilled into '14 we were a much smaller company. And this year our buy for Frozen is much more planful and strategic. And so we're really excited about the impact Frozen -- potentially have on the back half of the year it impacts our toy business our create world, our tech world. So it's a pretty broad based impact on the business.

Great. Best of luck.

Thanks, Matt.

Thanks, Matt.

Our next question comes from Edward Kelly from Wells Fargo. Please go ahead with your question.

Yeah, hi guys, good afternoon. I just wanted to -- I wanted to ask you go about the cadence of the comp guidance, so two to three in Q3 and then an implied four in Q4, maybe can you just provide additional context around the acceleration, I know you're excited about the license part, but how much of this is holiday optimism versus the benefit that you might see from a pricing perspective given tariff indication and then if we were to annualized pricing action. Can you just help us understand the net impact on the comps that, that might have maybe into 2020?

Yeah, good question, Ed, and you know it's hard to speculate at this point in time when it all shakes out how much of it is the optimism, what I was just answering Matt's question on and how much of it is related to the tariff price changes. But clearly, the way we are mitigating the impact of tariffs and planned in Q4 is to raise some prices. So that will be a piece of it. I think the bigger and better way to probably go look at it that is, if you go all the way back to 2015 and you look at three year stack like '13, '14, '15 and you continue that all the way through '19, you will see a really, really tight range of no less than 3% and no more than 4%. And so this year's - if we hit this year's guy that probably indicates a 4.5%. So it'd be slightly above the range we've had you could probably attribute that to tariff mitigation. But that's a little speculative on my part, right now, and I would tell you, we're obviously excited about the lineup we see coming for our fourth quarter. And then the tariff piece will certainly move comp store sales, up from that aspect, but how it shakes out, we'll have a better sense exactly when we get to fourth quarter, but both probably contribute equally. Ken would you?

Yeah, just one other thing, Ed, I think you asked about potentially the full year impact of those price increases in the fourth quarter as you -- as you probably noticed from our guidance, our full year guidance, we are still guiding to an approximate three. So it's not a material impact. The least we're seeing at this stage of the game from a full-year perspective.

Thank you.

Thanks, Ed.

Thanks, Ed.

Our next question comes from Karen Short from Barclays. Please go ahead with your question.

Hey, thanks. A couple of questions just on the price increases. So can you maybe talk a little bit about the number of SKUs impacted by the one to four bucket? And then number of stores you tested it in and then I'd ask the same question for a number of SKUs at the $5.55. And then maybe any color on whether there is any meaningful difference in elasticity. And I guess in those two separate bucket?

Yeah. Can we - we tested the $5.55 and about 5% of the chain. And the one to four and a slightly less subset of that number. In both cases, you can see the price changes in cents not dollars. The going from $5 to $5.55 is 10% and then the $2 to $4 bucket it was even less than that on a percentage basis. So the price elasticity was about the same in both of those and we continue to look for ways to mitigate and but most importantly delivering value is the key and we have seen the customer respond favorably to each and everyone that we've done. And then just remember when it's all done and said the large majority of our SKUs will still be below $5 when all this is implemented in the fourth quarter. Yes. Thank, Karen.

Our next question comes from Paul Trussell from Deutsche Bank. Please go ahead

Good afternoon. I am just looking back it's pretty rare for you guys to fall short in terms of your top line guidance or at least the comp guidance. So just looking for any additional color on the shortfall was it entirely in the seasonal category or whether of their world that may be disappointed. And what I know you're not going to give specific kind of numbers maybe could you just help us understand the magnitude of the underperformance seasonal or maybe contrast the month of May and June versus what sounds like better trends coming out of the quarter and heading into 3Q? Thank you.

Yeah, there is a lot in there, Paul. And we tried to be really transparent and clear on our prepared remarks, in fact, I don't remember a quarter where we've ever actually commented on all three months in the same quarter. Clearly, the comment on July as weather normalized sorted our sales pattern. And then I also shared with everybody a call out to -- I think it was eight worlds outside of seasonal and outdoor that performed really well and drove comp. So it really was isolated to our seasonal related categories in that matter. And then I would tell you look we were clear - I mean it was disappointing to what we guided, but you know about every six quarters or so, we have missed on the comp. And I think this is also an opportunity to remind everybody, as I've said many times the engine that really has driven Five Below for the last five years and will continue to be for five plus years is these new stores. And so despite being on the low end of sales, we're at the top end on the earning side and 80% of our growth continues to come from new stores, and we continue to be pleased with the new store productivity and how strongly been opening another seven stores in our top 25. But I think that hopefully Paul gives you some good color on how we saw it, but outside of seasonal we felt really good. Thanks.

Thanks a lot.

Thanks, Paul.

Our next question comes from Paul Lejuez from Citi. Please go ahead with your question.

Hey, guys. This is Kelly on for Paul. I just wanted to go back to the $5 test for a minute just to understand it's a little bit better what the -- what happened in the overall store when you introduced that the higher price point on the $5 net of products? And then if was good -- would include the basket. Can you do you still keep strength in the $1 to $4 category. And then secondly just on the 10 Below! concept, you mentioned that you were going to be adding that to a store along with some of the $5 net tests. Is that something that you're -- a tool that you're going to utilize going forward to sort of offset some of these tariffs? Thanks.

Yeah, in the $5 test. I mean at the end of the day, three things happen. One, we had a elasticity learnings and those Kelly actually played out pretty consistent with what we expected, meaning there was a little degradation, but not a lot. Secondly, we really studied the customer response. And what we really heard is they still appreciated our value and could really see the value, and that's a good thing, all right. There is we have a wide gap of value and despite raising the prices slightly they still saw the value. The third was we had a lot of communication learnings and really what the customer said to us is be transparent with us and they really challenged us to eliminate the absolutes and bring the -- as world a social media. We got to bring the customer on the journey with us. And by absolutes, I mean things like everything, never ever. And so -- I think the medallion's a good example of that where we've started to modify that away from the word everything, but most importantly, the customer saw value and that is why the elasticity still fell within the range we expected. And as for 10 Below! I think what I was trying to say there is, look, we've been playing offense with the 10 Below! concept for a couple years now, we started work on that long before tariffs and it's -- it's through a lot of those learnings of the 10 Below! store within a store test that really amplified how much the customer appreciates our value. And so we will use that to look at the strategy as we used for communicating that value and we're kind of implementing that in these $5 plus test stores as we make sure we get it right with the customer. Net-net customer still loves our value. We've got a do an even better job on communication and the elasticity is such -- there is still an overall lift when we're done. Ken?

I think you covered it.

Thank you.

Our next question comes from Michael Lasser from UBS. Please go ahead with your question.

Good evening. Thanks a lot for taking my question. Given how the traffic timing is taking place. How much of the tariff actually hit in 2019, presumably that 70 basis points of impact in the third quarter is mostly going to come from at List one through three, so won't this extend through 2020 all else being equal? And Ken, how should we think about the assumptions that you made at the high end of your guidance versus the low end of your guidance, you said the high end is fully mitigated. What does that mean that you passed along pricing increases to fully offset the tariff impact and what would have to happen to be at the low end? Thanks. Bye.

Yeah. Thanks, Michael. Ken, what kind of to guidance there. I think on 2020, it's too early to be kind of forecasting all that I think the difference between '19 and '20 is provides our in and purchased as we head into '20, we still expect to mitigate more assuming the tariff stay as it is, but I think as we all know those are kind of changing weekly. And we're also migrating 10s of millions in the other countries. So 2020 is going to be a lot different game than '19 and I think the focus on our guidance has been on '19 and I'll let you kind of clarify that, Ken?

Sure. Michael, on the -- from a guidance perspective, the high end of our guidance and obviously what we've mentioned in the prepared remarks around the fluidity of the situation. The timing, the announcement that took place last Friday. We still need a little bit more time to navigate through some of this, but our high-end of the guidance assumes that we will mitigate the full impact of tariff cost in 2019. And as you could see we provided a wider range of outcomes from an EPS perspective than we have historical. If you look back, you'll see kind of the range we've done that incremental amount in the range is really the portion that we would feel would be not covered or the unmitigated portion of the tariff cost if we're unable to cover there. So I kind of gives an indication of where we are kind of high-end and low-end of guidance and what that means for 2019.

I think we tried to really ring-fence it and give you a good sense of the high and the low and you can see it's still relatively tight considering how big impacted is. And like I said in prepared remarks the teams, our vendor partners more everyone's just been great partners and helping mitigate this. Thanks, Michael.

Thanks, Michael.

Our next question comes from Simeon Gutman from Morgan Stanley. Please go head with your question.

Hi. This is Michael Kessler on for Simeon. Thanks for taking my question. So going back to the comp for the back half, and how the licensing trends will kind of play into that. So I'm curious if you give a sense of how much frozen and maybe benefited you guys five, six years ago and how or if not, how that compares to your expectations for the back half licensing trends this year. And then just on the Frozen itself, last year you took out I think some of the licensing in the store to move in the Toys. This year, are you planning coming out of a different area of the store, where you'll be kind of putting more licensing and how is that going to work and you're moving into this period of the year? Thanks.

Yeah. Thanks, Michael. I think it's certainly Frozen was impactful in 2014, despite the movie came out in '13. And I think the difference between '14 and '19 is we're in a much better position now to capitalize on Frozen were much larger company, Michael remains who has been here five years, he's got a season team. We're doing several exclusive items that was not the case at all back in '14 and so we really approach this one strategically and excited about what's to come -- as far as how to be presented. You're going to see a really strong Frozen presence in our stores as well as an overall Toy presence there is some overlap there -- there is a lot of Toy Frozen. But I thin - I know you'll see frozen pretty front in center as well as Toys. And so what's great about the flexibility of our eight worlds as we can contract worlds that aren't selling and we can dial-up ones that are, and this will be another case you'll see as it plays out here in Q3 and Q4. Thank you, Michael.

Our next question comes from Michael Montani from Evercore ISI. Please go ahead with your question.

Hey, guys. Good afternoon. Just wanted to follow up on tariffs, a little bit, if I could and I was wondering if you could give us some color given the most recent tariffs that have come out. How much of the mitigation, would you describe as kind of vendor leverage versus specific cost out initiatives versus the price increases that you all have been making? And would you be able to mostly are fully mitigate those costs into 2020, if you kind of held the run rate constant from 4Q?

Yeah, Michael, I don't know that I want to get into the specifics of it. I would tell you, a large majority has been between our vendors and factories. The reason it's hard to exactly quantify is lot of times it depends when the tariff goes in how long a lead time we have this last round literally had some items changing within weeks and where is List one, two, three we had months to prepare. So when you're talking weeks, you have zero mitigation because it's already on the water, it's already negotiated. So each implementation of a new round of tariffs has been different, but what shouldn't be lost in is we have a lot of levers to pull. And we've really been using all of those and have great partners that have been leaning in to help us and it's -- it's exact benefit of scale. And we feel really good and like I said at the very beginning, we're going to end with price increases and that will be our last resorts and that's the stage where now, but we're going to approach it with pace and diligence. Thanks, Michael.

Thank you very much.

Our next question comes from Brian Nagel from Oppenheimer. Please go ahead with your question.

Hi, good afternoon. Thanks for taking my question. So I apologize if I do want to ask question on tariffs the big topic here.

I can't believe it. I never thought anyone would ask me any questions on tariffs, but go ahead Brian.

So you've outlined in great detail here. The efforts you're undertaking in some of the near-term impacts on the business. I think you -- I think it was mentioned prepared comments about longer-term or over a longer-term working with vendors to move out of China. So my question is as we look at - to what extent is that a possibility. And how should we think about maybe the weather into 2020 or beyond. How would that further change, so the impact of the tariff situation?

Well, I mean there is a lot of speculation and answering that question what would tell you is we've had people in our sourcing team up to and including Michael already overseas in other countries sourcing product changes. There are certain categories that will be relatively easy and there is others where mitigation efforts within staying within China or probably the best short-term effort. But I can tell you that it's probably moving faster than I would have told you three months ago, and I think as the tariff escalates it'll probably move even faster. So I think a lot of that will be dictated out of Washington and - but at the same time, I think what you should be reassured and why Ken and I tried to be as transparent as possible with all of you and giving you a lot of detail on what we're doing. On one hand we're protecting the customer first and foremost. And on the other hand, we've got a whole host of teams who are working hard to mitigate this is close to 100% as possible and that's why while the range is widened it's still relatively tight range from best case to worst case and that's combination all of the above and, so I can't be specific on moving our China, but I would tell you it's accelerating not decelerating.

Got it. Very helpful. Thank you.

Thanks, Brian.

Our next question comes from David Buckley from Bank of America Merrill Lynch.

Hi, thanks for taking my question. As tariffs impacted how Michael and his team are looking at buying merchandise whether by focusing more on certain categories of price ranges?

Yeah, clearly it's had an impact on the merchandise team, it's had an impact on our vendor community, but look, we have a great relationship with the vendors, they've been very supportive and I think the fact that we have eight worlds gives us the opportunity to change classifications, flex up in a world that has less tariffs on it, it's very dynamic, very fluid and the teams are working very hard to mitigate these and but yeah it has changed how they are approaching it, that's for sure.

Okay. Thank you.

Our next question comes from Scot Ciccarelli from RBC Capital Markets. Please go ahead with your question.

Hi, guys. Scot Ciccarelli. Just so we understand the magnitude of your tariff mitigation process, what percent of your sales and comps are impacted by tariffs, so including with four, I think Ken you might have told us about 15% was previously impacted by this 1, 3 [ph] And then related to that, was there anything else going on with the average ticket. I guess I was expected a bit more strength in average ticket just given us the price increases that were implemented? Thanks.

The price increases really had no impact on Q2 Scot, that's why we really haven't seen any change there other than the markets we were testing it in, but that's a relatively small amount. As for List three, I think we shared earlier with all of you is relatively about 15% of our mid-teens overall buy from that.

I guess I'm curious what was the incremental impact from List 4?

Yes, Scott, we haven't quantified that out obviously with last week's announcement, we're still accelerating receipts in on the December impact and making a lot of changes to try and quantify everything that was announced last week, and we're just going to need some more time that was only four days ago five days ago.

Okay. Thanks a lot guys.

Thank you.

Thanks, Scott.

Our next question comes from Joseph Feldman from Telsey. Please go ahead with your question.

Yeah. Hey, guys. Wanted to ask, I think, Ken has talked about Q4, the operating margin. You mentioned some getting significant leverage Toys. Can you -- I may have missed why that would be. Could you just explain that again?

Sure, Joe, last year in Q4. If you recall with the Toys "R" Us store closings in the -- the customers that we garnered last year we did a -- a good amount of Toy business as you would expect, we had a Toy Island in the store and we took advantage of a good amount of opportunity product out there in the marketplace and great results in Q4 for us last year, we did have a margin degradation in Q4 related to Toys that we called out. So given where we are this year and what we see in terms of our buyers moving forward into Q4, we expect to turn that into a favorable this year. So that's why we're calling that out as a potential upside in the Q4 gross margin.

Okay. That's helpful. And I guess on the licensed product. Is that similar margin then to the - on the Toys, I guess is everything else like. So there is no issues with that?

Yeah, no, it's. I mean it falls within line with our plans that other product and we feel good about not only the product, but the margins that we should be able to deliver on that product. Yes. No major impact.

Thanks, Joe.

Thanks. Good luck this quarter guys.

Yeah. Thank you.

Thanks, Joe.

Our next question comes from Judah Frommer from Credit Suisse. Please go ahead with your question.

Hi, guys. Just circling back on some of your comments on elasticity with the price tests. Do you see any connection in the consumers mind between tariffs in the price tests? Or is there some decline in consumer confidence as far as you can tell? Or is there perhaps just some push back because the pricing model at Five Below is changing for them?

No, actually, we've done a lot of customer intercepts and the majority of customers do not connect price changes with specifically with tariffs. And like I said in my -- some of my other remarks they still responded very favorably to the value and the area where we've really dialed up our focus has been on our communication strategy and making sure we're more transparent with the customer and eliminating the absolutes and I gave you some examples of those. But, and we really haven't seen any pullback from the customer at all as like I said as soon as we get to the weather business back to normalized you start looking ahead of what we guide and everything there and I think it shows you we feel pretty strong about the back half of the year.

Okay. Great. And just a follow-up. Is it right to think about you guys versus, call it value competitors kind of all sizes. In terms of price gaps are you looking at similarly or similar product and price gaps relative to others and have those changed at all with the price test?

You know what we - we certainly did priced test -- price checks before we started the test and we saw large gaps as we complete these price tests in the chain will certainly be back out there again. But making sure we maintain value and deliver WOW out of the customer remains one of the key tenants of what this business was built on and that's not changing and we still continue to see the gap we expected.

Great. Thanks.

Thank you.

And our next question comes from Bob Summers from Buckingham. Please go ahead with your question.

Good afternoon. So I just want to clarify that the chain wide price increases you're talking about things that you've already tested, and that's what's really embedded in the current guidance. And if you could maybe characterize that in terms of percent SKUs or percent of sales that would be great.

Yes, we are talking about stuff that we've tested to be clear we -- especially with last week's announcements we've went and run another test where we've widened and the number of items that we've tested, but clearly when it's all done and said, Bob. The vast majority of our items will still be priced below $5. So, and when I say that -- I mean 90% number. And so it's a combination of working in the $2 to $4 range and a very small percentage of our overall $5 items.

And then just on the $5.55 price point it was very centralized category in the store that I was in. And I would argue it's one that has very strong value. So to me, it's not surprising that there was little demand destruction, but as you think about expanding that, would you do it in the same way in terms of blocks within the store would you be more product-specific?

I think we -- the combination of the two and I appreciate you calling that out, Bob, because that's exactly how we looked at it. And we really did focus on the areas where we thought we had the biggest GAAP and value. And I think as we expand we'll move into some other areas that we believe we have a large gap in price, but at the same time, I think doing it onesie, twosie all over the store is a little disingenuous and it's really hard for the customer to understand that. So it will be concentrated in blocks for sure.

Okay. Thank you.

Thanks, Bob. Appreciate it.

And ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.

Thanks everyone for joining us today. I know you had a lot of questions about tariffs and hopefully we've been pretty transparent on those and helping you understand where we're going. We look forward to speaking you again during the holidays and as always, I encourage you to get out there and visit our stores and let's go and have fun, appreciate the support of Five Below. Have a great evening. Bye.

Ladies and gentlemen, that will conclude today's conference call. We do thank you for attending. You may now disconnect your lines.