Good day, and welcome to the Five Below Fourth Quarter and Full Year Fiscal 2020 Financial Results 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 note that this event is being recorded. I'd now like to turn the conference over to Christiane Pelz, VP of Investor Relations. Please go ahead.

Thank you, Cole. Good afternoon, everyone, and thank you for joining us today for Five Below's fourth quarter and fiscal year 2020 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 in Five Below's 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 Web site, at fivebelow.com. I will now turn the call over to Joel.

Thank you, Christiana, and thanks everyone, for joining us for our fourth quarter and year-end earnings call. I will review the highlights of our fourth quarter and fiscal year performance as well as share some thoughts on 2021 before handing it over to Ken to discuss our financials in more detail. Then, we will open the call up for questions. Before I speak to our results, I want to acknowledge what an unprecedented year 2020 was. At this time last year we have little idea how much COVID would impact our business and our lives. So many of our customers, crew and fellow citizens were and remain deeply impacted by the pandemic. Our thoughts and prayers remain with them, especially those who lost loved ones. I want to recognize and thank our customers, our crew, our vendor partners and others who came together during the pandemic enabling us to adjust to the realities of operating in this environment. I truly am impressed with how our associates pivoted and embraced the change, relentlessly solving problems for issues we have never faced before. Working back from the customer and creating new ways of offering the trend-right products and store experience our customers expect from Five Below. Although it was an extremely difficult period, Five Below became stronger as a company because of it, developing new muscle that will serve us well in what is sure to remain a very dynamic operating environment. We will continue to operate with the health and safety of our customers and crew as our top priority, while maintaining financial discipline we have historically demonstrated. Now turning to the fourth quarter, our Q4 results exceeded the guidance we announced in conjunction with our holiday sales release. Sales were strong leading up to that announcement and accelerated in January…

Thanks, Joel, and good afternoon, everyone. I will begin my remarks with a review of our fourth quarter and fiscal 2020 results, and then discuss fiscal 2021. Our sales in the fourth quarter of 2020 were $858.5 million, up 24.9% from the fourth quarter of 2019. We ended the quarter with 1,020 stores, a year-over-year increase of 120 net new stores or 13.3%. In addition, we remodeled 45 stores during the fiscal year. Comparable sales increased to record 13.8% for the fourth quarter of 2020, versus a 2.2% comparable sales decrease in the fourth quarter of 2019. The fourth quarter of 2019 was impacted by six fewer holiday shopping days. The comp increase for the fourth quarter was driven by a 15.9% increase in comp average ticket, partially offset by a 1.8% decrease in comp transactions. Our holiday comparable sales through the first nine weeks of the quarter, increased 10.1%, and sales accelerated in January, driven by the second round of government stimulus. Gross profit increased 17.9% to $340.9 million, from $289.1 million reported in the fourth quarter of 2019. Gross margin finished to 39.7%, decreasing approximately 240 basis points from the record 42.1% last year. As expected, the decrease in gross margin was primarily driven by sales mix impacted by customer preferences from pandemic-related items, which was partially offset by leveraging store occupancy costs from a higher sales. SG&A expenses as a percentage of sales for the fourth quarter of 2020, decreased approximately 120 basis points to 20%, from 21.1% in the fourth quarter of 2019, largely due to the intentional pullback in marketing, as Joel discussed. In addition, we leveraged fixed costs, while higher incentive compensation compared to last year was a partial offset. Operating income increased 17.7% to $169.6 million. Operating margin decreased approximately 120 basis points…

Yes. Thanks, Ken. In summary, we are very pleased with our performance overall in 2020. We played offense and acted quickly to position ourselves for success. We made difficult decisions while always keeping our customers and our crew at the forefront. The experience of 2020 has again demonstrated the strength of our proven model, with the inherent flexibility of our Eight Worlds and our unique merchandising approach. I'm pleased with how well we connected with our customers and communities, including providing for those in need to our Toys for Tots, Alex Lemonade, St. Jude, Chop Hospital and other donation programs. All of this has made us an even stronger company, and we enter 2021 with great momentum. We are well-positioned for growth and less than halfway to our 2,500 plus store target. We're really excited for 2021 to build on our progress, deliver on our customer promise and relentlessly raise the bar as we continue to grow our amazing company this year and beyond. With that, I'd like to turn the call back over to the operator for questions. But must remind you that we had a lot to share with you today, and we really need to stick to one question per analyst. With that, operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Simeon Gutman with Morgan Stanley. Please go ahead.

Hey, everyone, it's Simeon Gutman. My question is on incremental margins, and I guess EBIT margins broadly. In Q1, I was going to ask around incremental margins. It's hard to do the year-over-year comparison, but it looks like the implied EBIT margin is in the 8% to 8.5% range, which is considerably better than the 7% from Q1, I think of 2019. Can you tell us, because we can't really see what the incremental is? Is there anything in the 8% to 8.5% implied that's being conservative if there's anything that's holding you back in the first quarter in terms of flow through? And then bigger picture, is there anything that you see changing the comp leverage point of the business broadly? This is really beyond '21 or maybe even the back-half of '21. Because I think you've told us 3% in the past, so curious how that algorithm may change going forward?

Yes. Thanks, Simeon. I'll answer the second part of your question first around our leverage points as we move forward. As you mentioned, it is going to be an unusual year anniversarying 2020, but our impression and our -- what we see here from a leverage point, going forward, we have said before about a 3% comp, ex any meaningful investment for a year, and you should start to see leverage on the business. So, I think that still continues to be what we see and that holds true. Relative to the first quarter, again, as you mentioned, it's very difficult to make a comparison -- really hard to make a comparison up against Q1, '20, given the store closures, but I think you mentioned Q1, 2019, and what we're seeing at least right now versus Q1, '19, you would have -- for the most part, probably gross margins are relatively flat, and we see some meaningful lift in leverage over Q1, 2019 on SG&A, and that would really be the driver, you would call out an estimate of leverage with 2019, and we park [ph] that overwhelming majority that will be coming in SG&A.

Thank you.

Thank you, Simeon.

And your next question will come from Chuck Grom with Gordon Haskett. Please go ahead.

Hi, guys. Happy St. Patrick's Day. And my question is on new customer acquisition, particularly in light of the better traffic performance in the fourth quarter relative to the past couple of quarters. So, when you look at 2020, and those that chopped you for the first time for PPE or supplies, curious if there's a way to isolate that cohort and maybe compare them to the gains that you saw over the past five years with, say Rainbow Looms and the Spinner Craze? Thanks.

Happy St. Patrick's Day to you too Chuck. I got my green on here. I am looking at Ken, and I think it's a really -- this is great question you asked. [Indiscernible] the one you're really isolated, because unlike when there's other trends going on, it's pretty easy to isolate because it's really the only thing going on. But in addition to customer mix changes and costs associated with PPE and then just reopening times, and then shopping patterns and our closing times being off, I think there's just so much noise in it. And I think that's why rather than specific guidance on the year, we focus so much on making sure that the message got back to you that, we really feel like we're back to normal operating margins, and 2019 certainly a much more normalized year, but it's really hard to specifically isolate what you're asking for, Chuck, and I hope that helps you get a little clarity around that.

Yes.

Thanks, Chuck.

And our next question will come from Matthew Boss with JP Morgan. Please go ahead.

Thanks, and congrats on another great quarter, guys. So, Joel, as we think about the best back-half comps, I think, for the company in basically a decade, what do you attribute company-specific to the recent inflection and performance? And then as we exit the pandemic, I guess, how would you rank opportunities as we think about accelerating market share on the other side more? It goes back, I think the last couple of quarters you've talked about taking a more offensive approach. What -- maybe just elaborate on different opportunities you see to do that?

Yes, thanks, Matt. And I mean, clearly, we were very forthright about acknowledging both internal and external factors, and I think as you look at the nine-week period, the 10%-ish comp, that acceleration where the quarter ended at 13.8%, we attributed the overwhelming majority of that to external forces, the second stimulus. But if you work backwards to the holiday, and then as well as what we're seeing in the first quarter, I think what you're starting to see, Matt, is a lot of offense coming together to work, certainly Five Beyond played a very large piece of that. Our assortment, the merchants really pivoted nicely, and if you think of the pandemic as a trend, kind of a weird way to categorize it, but our job when something emerges is to move the merchandising mix, and I called out specific examples in both style and room, how the customers’ buying patterns change. And I think if we had stayed the same, we wouldn't have seen quite the lift we saw in the back half of the year. So, look these Eight Worlds continue to serve us well, Matt, and it allows us to pivot into wherever the trend may be, and this was emphasized in especially room as people stayed home, and there was a lot more room product bought than we’ve probably ever seen before. So, clearly the run up at the end was external, but the overwhelming majority of that first nine week holiday was us being nimble and reacting to trends we saw, and the merchant team continues to do a great job. The planners got back out in the market, and we rebought after cancelling hundreds of millions of goods. And I’ll tell you, the team Matt really operated on all cylinders to kind of salvage what started out as probably the toughest start to the year we've ever seen and we’ve finished ‘20 with momentum and we entered ‘21 now with great momentum as well. Thanks, Matt.

And our next question will come from John Heinbockel with Guggenheim. Please go ahead.

Guys, how do you think about phasing investments, right, in product and marketing, I guess, specifically through the year? You got the easy compares, you got stimulus, the same firepower and point things more towards the second-half by design and those type of investments. How do you sort of gauge the elasticity of either one product or marketing if you pointed them to the back-half the year?

Well, John, great question. I think specifically on the marketing one, what you're really seeing is, we believe we're kind of back to a more normalized marketing spend, which historically has been 2% to 3%. And, while we pull back in the back-half of last year, we’ve pulled back in the front-half of this year. But we'll shift that back into the back-half of next year. And I think it's somewhat become something that we can really use as needed. But, I think our base marketing remains two to three and we stay focused on that piece of it. On the product side, I'm not sure I'm following, John, what you're asking about that, that shift there.

Well, just is there more of a focus on new product introductions, and particularly Five Beyond in the back-half, to generate more buzz with profits [ph] than you may need in the first-half.

No, look, I mean, you know Michael and his team. And there's always product innovation. It tends to probably show itself more in the back-half of the year, craze is excluded, because we come out of holiday, we really see new things emerge, new buying habits, and then the merchants spend the front-half of the year chasing those, and really pivoting for the back-half a year. Now, if a craze emerges, like Spinner was one that we were in talking about on March 17. And that was more about us just operating the speed. But in general product innovations, Bugha is a great example of one. We read a lot, we observed the many new trends around gaming, and the buyers are back out in the marketplace buying now new product assortment, and just the cycle of it's largely going to show up in the back-half again. And I think that continues to kind of be the flywheel we see with the product innovations in general. Thanks, John.

And our next question will come from Michael Lasser with UBS. Please go ahead.

Good evening. Thanks all for taking my question. Can you break down the ticket growth you saw in 4Q, between UPT, and AUR? And what drove those pieces? And given those dynamics and the likelihood that retail traffic, it will likely improve over the course of the year, should we think about Five Below now having a structurally higher comp than a 3.3% if average from 2015 to 2019?

Yes. Thanks, Michael. Just on your ticket component question. I think I mentioned the increase we saw was just over 15%. When you dive a little bit deeper into that, it really is really from both UPTs and the average unit retail increases. And then the second part of your question, I didn't quite understand around the historical.

Yes. The second piece is should we think about Five Below having a structurally higher level of same store sales growth moving forward. Because it's clear that you figured out how to drive ticket growth. And as traffic returns, you'll be able to retain this growth in ticket. And that will lead to a structurally higher level of same store sales growth moving forward, that Five Below has achieved in the past.

Yes. I think from a longer-term perspective, and that's a difficult question to answer at this point. I think just going out into this year, I think the one thing just to recall, and I think Joel and I both mentioned in the content, our comments, just a significant challenge we're going to have in the back-half of the year, up against the record performance that we had last year. But again, as we look further out, we would expect a more kind of normalized part of the business. Where that comes from? It could be a combination of both, transactions and ticket. I mean, that's just something we'll have to see. But it's hard to really peg anything much longer and further.

Yes, I think, Michael that is a great question. And I think you just got to give us a little time in some more normal times to kind of see what that long range impact on things like Five Beyond are, where we can now change that growth trajectory. But we've got to get through this ambiguous period, consumer shifts back to services. And so some of that might just play a bigger play until we get beyond it. But what you're alluding to is exactly how we're thinking about the business. And I think that I call it play offense, many of those initiatives are really starting to come together, both in product and marketing, that e-commerce a lot of those that can potentially drive that. But we've got -- you need to give us a little bit more time to kind of watch what happens here and forecasts that out.

Got it. Makes sense. Thank you very much.

Hey. Thanks, Mike. Appreciate it.

And our next question will come from Scot Ciccarelli with RBC Capital Markets. Please go ahead.

Hi, guys. Good afternoon. You mentioned on the call, Joel that the densification of stores in certain states and now you're going to be in 40 states. Is there any way to quantify the benefit you guys get from that densification strategy, whether it's sales because of brand awareness, or maybe at the margin line, because you can better leverage expenses, like marketing and distribution? Just any color on that would be helpful just given the expansion process that you guys are going through?

Yes. It's really both, Scott. And, I mean, sorry about the ambiguity on some of this just because all the noise last year. But look, I think the one thing we are seeing is our brand awareness is something we've always been watching and it's been rather low. But what we've really seen year-over-year is our brand awareness in kind of markets anywhere open from two to seven years is moving up 3 to 100 to 500 basis points faster than it used to. And so I can't specifically, due to all the noise last year, tell you it's because of densification. We internally believe that. And we've shared with you, cannibalization closer to 100 bps a year. And we're not afraid of that, because I think the payoff's around awareness and picking up market share far outweigh the slight cannibalization from individual stores. But directionally, it's really impacting both, and we're seeing that show up in brand awareness. Thanks, Scott.

Thanks, guys.

And our next question will come from Paul Lejuez with Citi. Please go ahead.

Hey, thanks, guys. Curious if you can talk about anything noteworthy on the inflation front. If so, if you are seeing some inflation, which parts of the assortment and just what's the plan of attack? Thanks.

Right now, Paul, our overall inflation, we're feeling is relatively flat. I mean, there's certainly pressure on the supply chain side, but we're also seeing opportunities in the real estate side. And I think it all mixes out. We've through our scale and everything, we've been able to hold it relatively in check and hence kind of guide to relatively flat operating margin. I don't know, Ken …

Yes. Paul, I think Joel hit. There obviously are cost increases throughout the business, and whether it's supply chain products or otherwise. But we always go back to the scale benefit that we have to be able to offset and mitigate those, and even the way we operate, which is maybe a little bit different than some other retailers. And Joel has mentioned freight, and we all know about what's going on out there in freight and supply chain disruptions. And credit out to the team, getting out ahead of that from a negotiating standpoint and locking up our contracts earlier, both in a rate and capacity perspective. So although we are seeing increases, it's probably not as much as other businesses out there. So, really a combination of being nimble with our vendors, and negotiating and navigating all that combined with scale really help us to either offset or mitigate the increases that are out there.

Thanks, Paul.

Thanks. Good luck.

And our next question will come from Karen Short with Barclays. Please go ahead.

Hi, thanks very much. I just wanted to go to the comps in the quarter versus your comments on comps in the quarter to-date, pre closing for the pandemic. So I kind of get to January comp in like the mid to high 20 range. And then I think, can you comment on the comps pre closing, we're in the 12.3% range. So I guess what I'm wondering, is that kind of the right way to look at the spread or the impacts differently from the stimulus? And I asked that in the context that March stimulus will obviously be much more impactful dollar wise than January. And then the follow up I just had on that is, is there any way to quantify the impact of Five Beyond on comps? Thanks.

Yes. Thanks, Karen. Your math around your estimates around the comps are pretty reasonable. I mean, I think you could probably kind of do the math knowing that, where we were in total sales through the nine weeks and then what we provided in total sales for the quarter, and then the 10% comp for the nine weeks versus the 13.8% for the quarter. Yes, I think you're in a pretty reasonable range there. And again, the impact of stimulus payments they are always tough to measure and gauge, whether it would be the magnitude or the extent how long they last. And as we mentioned in the guidance that we gave for Q1 this year, it did include our estimate of a benefit from the third round of stimulus in the quarter, but I would say your estimates are relatively reasonable.

Thanks, Karen.

Thanks, Karen.

And our next question will come from Edward Kelly with Wells Fargo. Please go ahead.

Hey, guys, nice quarter. I want to just to follow-up on stimulus here. Ken, I'm just curious, within the Q1 guidance, what you are assuming for that stimulus benefit? And then, as a follow-up to that, how positive do you believe the increase in the child tax credit will be for you later in this year, given that it looks like it's coming in monthly payments this summer? I would imagine that I don't know the majority of your customers living in households with kids. Just kind of curious as to how you're maybe thinking about that as well?

Yes. Thanks, Ed. As I mentioned, and Karen asked the last question too around, our guidance does include an estimate for the benefit from the third round of stimulus. I really don't want to get into specific amounts in terms of what's embedded in that number at the end of the day. I mean, you know, how we guide in terms of the total number for the quarter and how we're seeing it. I can tell you that it's well less than what the consensus was prior to this call. In other words, what we reported and what the consensus from the analysts were. So it was well, well, less than that. With regards to the childcare credit, yes, I mean, those are the types of things that impact as Joel in his remarks had mentioned, there's always internal and external factors. And that's an external factor that if there's any change in policy, in mandates out there or benefits from taxes. We have seen historically that that could benefit our business to an increase, because normally, that's an increase overall traffic or spending. And we benefit in that, similar to what we've seen in the second round of stimulus, and currently in the third round of stimulus. So yes, if the rules change, that way, it could end up impacting our traffic during the summer time. Now, keep in mind, though, other things could be happening too. I mean, it's really hard to predict around the COVID-19 and the vaccines, and then where overall consumer spending goes, as entertainment and travel may start to -- spending on that, may start to increase.

Yes. I mean, Ed, it's clearly a tailwind for us. But it's also one that, we don't have a lot of data points on, why we felt important to be more directional on the year. And I do, but hopefully, everyone's taken away is, we provide you our new stores, which make up historically 80% of our growth. You know the cadence on them, how we're thinking about the bottom-line and growth rates. And so, it starts to triangulate it in a pretty predictable number. And now we have to add in the pluses and takes of some of these external events, but most of them seem to be tailwinds. But we also got to watch shift in consumer behavior the other way too. And we're controlling what we can control. And it feels great to be back to growth cycle again. And we're in a pretty good position going into the end of first quarter here. Thanks, Ed.

Thanks, Ken.

You bet.

And our next question will come from Chandni Luthra with Goldman Sachs. Please go ahead.

Hi. Congratulations on successfully navigating an extremely difficult year. If you could show some more colors on inventory levels, you exited the quarter down 13%. Would you say that hindered your ability to capture some sales in the fourth quarter, and you had to leave some on the table. And then what gives you confidence in managing that, especially given all the challenges going on globally, as you think about first half of the year and likely into the second-half as well? Thank you.

Yes. Thanks, Chandni. As I mentioned in the prepared remarks, we were down about 23% on a year-over-year basis from average store. And again, a couple things were going on there. One, you got to look at last year when we were up probably half of that related to the sales and then also we moved inventory in earlier, tariff related inventory to avoid some tariffs there. And then you kind of flip to this year when we oversold right and had some a tremendous sell throughs there in the fourth quarter. And then some delayed receipts. I think Joel mentioned the two where, we are seeing some delays related to that global supply chain disruption. But I got to tell you, the team is managing it very well. We don't see a material impact of that related to Q1, based on the guidance and the sales that we provided. I guess more to come on that as we move through the year. But right now, we feel like we're in pretty good position with that, and again, navigating that pretty well with our vendors, and then also with the to our supply chain.

Thank you.

And our next question will come from Lorraine Hutchinson with Bank of America. Please go ahead.

Thanks. Good afternoon. I wanted to follow up on some of the comments you made on Five Beyond, I think adding more frequent to WOW wall? Can you just talk a little bit about the strategy and if there's a chance that we will see those permanent pictures throughout the fleet at some point this year?

Yes. Great question. And let me just refresh everybody on where we're at with Five Beyond. Because there's actually two components at this point in time. There's the Five Beyond prototype, and then there's what we affectionately call the Wow Wall that's in the rest of the chain. And so, our go forward prototype for the class of '21 will -- for the most part, all new stores and remodels will now incorporate Five Beyond in the back of the store. And then the Wow Wall will be used at seasonal times, throughout the rest of the chain. I think it's less about it being in the rest of the chain all year round. And it's more about us continuing to convert and shift more and more stores to Five Beyond prototype. We're obviously pretty pleased with it. We like where it's going. But I also am very respectful who our customer is, what our brand stands for. And I want to walk really carefully with not violating that agreement we have with the customer, namely Five the World. And so, I think the feedback we've gotten from them is they love Five Beyond, they love the value, the Wow factor, keep delivering that, but also keep it separate and segregated. And so, we think we've found a nice, happy way to do that, with seasonal in and out Wow presentations, and yet moving ahead very quickly. I mean, 30% of our chain will now have the Five Beyond prototype at the end of year. And so that's the nice balance with it. We'll watch it. Could it change over time? Maybe. But I think we're on a pretty good path right now, moving towards this new prototype, and then dropping in some Wow from kind of the timing in the fleet. Ken, anything on this there?

No, I think you hit it.

Thank you. You bet.

And our next question will come from Anthony Chukumba with Loop Capital. Please go ahead.

Let me add my congratulations as well on a strong finish to the year. So my question, you talked about the fact that you fully eliminated your -- your paper circulars, and you pull back your marketing in 25% of your stores. I mean, obviously, this is sort of sort of an extraordinary year. But I guess what are your thoughts as you think about marketing going forward? I mean, I'm assuming you're probably not we're going to do paper circulars anymore. But I guess, how do you think about your TV -- TV ads going forward, given the fact you just did your best comping company history, when you did pull your TV advertising back, thank you.

Yeah. Hey, thanks for the support Anthony. And look, it we were already on the journey to reduce our dependence on paper. And clearly, the pandemic allowed us to accelerate that. We're not going back. We're pretty pleased where we're at. But I think what we also learned is where we were heading done a pretty strong path of national TV the consumer behavior shifted a lot. And we had much more success with some of our more targeted digital. And so, I think, as we sit here today pending consumer shift again, that'll be the path we will go down. We've seen the opportunity to not have to spend as much marketing, but I think there's still the opportunity for use of performance marketing and reaching into some of our social paid platforms. But as for right now, I mean, we're in a more normalized 2% to 3% and I think need another change, I think I'd kind of hold it towards there, to a reasonable number that gives us the right leverage. But we're certainly always looking for ways to be more efficient. I think the stuff we've taken out is setting us up nicely. Thanks, Anthony.

And our next question will come from Jeremy Hamblin with Craig-Hallum Capital Group. Please go ahead.

Thanks, guys, I’ll add my congratulations. I wanted to talk on Nerd Street and just with the vaccine really accelerating here and maybe coming a little sooner or maybe quite a bit sooner than people were anticipating several months ago, do you have a sense on how that may evolve here in the back half of the year in terms of maybe being a little bit more front and center for testing and expanding that initiative? Obviously, you provided the $0.06 drag to EPS for the year, but any additional color you can share on how you're looking at that rollout as it stands for 2021, or is that something you're kind of punting down the road to ‘22?

Well Ken was here in 1980 [ph], and I wasn’t. So he -- no, I am just kidding, Jeremy. You can just tell by our comments during the prepared remarks that we really tried to focus on what we can control and tell you how we're thinking about the business and quite honestly, how we think we're back to our growth algorithm. You just gave one great example. We could probably sit here and go to two or three other external factors and argue about whether they're tailwinds or headwinds. And I think they're going to play out. We're going to see some ups and downs. Net-net, I think overall there's probably more pluses and minuses out there. But I think what the message I want to leave with you and the rest of the analysts is, Five Below is getting back to what we can control and get back to more normal business. And we're going to keep playing offense and innovating this awesome concept and making it better than ever. So I hope that gives you enough clarity. But that's kind of how we're thinking about it.

Thanks, guys. Good luck.

And our next question will come from Paul Trussell with Deutsche Bank. Please go ahead.

Good afternoon. Just on stores, just a question on any metrics that you can provide as we think about your new store prototype regarding productivity or returns, relative to the rest of the base. And also with you kind of breaking ground on the digital center that are open next year, just curious what will be kind of capacity in terms of what you can support through the DC system in 2022?

Yes, thanks, Paul. Taking the back half of that on the D.C. side, in theory, when the next one is up, it certainly gives us the capacity to support all 2,500 stores. Now that doesn't mean you'll never hear us open another distribution center, because at some point in time, you also look at efficiencies and you want a smaller regional and say the Pacific Northwest or something. But our overwhelming heavy lift, multi-year investment phase to which we were honestly kind of behind them, we're now ahead. And so I think we feel pretty good at that as we get Arizona open this year and the Midwest next year. Store metrics are tough. I mean, obviously, stores getting more productive. We continue to see less in the remodels we're doing. So we expect those productivity gains to continue to grow. I'd ask for a little patience from you guys before we kind of give you specifics, because we've been trying to parse it out and the remodels we've done and there's just so much noise from closed stores, open stores, states having different levels of shut downs, stimulus money dropping in. But obviously, we feel really good about it as you're seeing us move forward with this prototype and remodels.

Thanks, Paul. And I think we're wrapping up here, and we'll end with Paul there. Really appreciate you getting on the call with us. Thanks everyone for joining. We look forward to speaking with you again on our first quarter call, which will be in early June. Have a good evening and appreciate everybody’s support [ph]. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.