Good day and welcome to the Five Below First Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Christiane Pelz, Vice President, Investor Relations and Treasury. Please go ahead, ma'am.

Thank you. Good afternoon, everyone, and thanks for joining us today for Five Below’s First Quarter 2024 Financial Results Conference Call. On today's call are Joel Anderson, President and Chief Executive Officer; and Kristy Chipman, 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. In this presentation, we will refer to our SG&A expenses. For us, SG&A means selling general and administrative expenses, including payroll and other compensation, marketing and advertising expense, depreciation and amortization expense, and other selling and administrative expenses. Additionally, we will be discussing certain non-GAAP financial measures. A reconciliation of these items to US GAAP are included in today's press release. 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 first quarter 2024 earnings call. In the first quarter we delivered total sales growth of 12%, a comparable sales decline of 2.3% and adjusted earnings per share of $0.60. These results fell short of our expectations as we experienced a meaningful slowdown in sales during the back half of the quarter. Despite the sales shortfall, we delivered adjusted earnings at the low end of our outlook range. As we analyzed our first quarter sales performance, the following factors were apparent. First, our negative comp results were driven by a decline in comp transactions. Second, consumers were more discerning with their dollars, increasingly buying to need. We saw this in the types of products they purchase, choosing more items in our version of consumable categories such as candy, food and beverage, beauty and HBA. Each of these areas contributed positively to the quarterly comp. Additionally, declining sales and older merchandise trends led by squish models present a greater comp headwind than planned. Finally, we achieved positive comps in our higher income cohorts, suggesting some trade down of these customers seeking value at our stores. However, we saw underperformance in the lower income demographic that more than offset these results. The quarter solidified that consumers are feeling the impact of multiple years of inflation across many key categories, such as food, fuel, and rent, and are therefore far more deliberate with their discretionary dollars. While we are tracking this behavior and noted some pressures over the last several quarters, the degree to which it was affecting consumers at the beginning of the first quarter was masked by the noise created from tax refund timing and an earlier Easter. I would also call out that the slowdown we experienced was across all…

Thanks, Joel, and good afternoon everyone. I will begin my remarks with a review of our first quarter results and then provide guidance for the second quarter and the full year. Our sales for the first quarter of 2024 increased 11.8% to $811.9 million from $726.2 million reported in the first quarter of 2023. Comparable sales decreased by 2.3%, with a comp transaction decrease of 2.8%, partially offset by a comp ticket increase of 0.5%. The increase in comp ticket was driven by an increase in the average unit retail price, which was largely offset by lower units per transaction. We opened 61 new stores across 23 states in the first quarter compared to 27 new stores opened in the first quarter last year and continue to see new productivity in-line with our target in the mid-80s. We ended the quarter with 1,605 stores, an increase of 238 stores or approximately 17% versus 1,367 stores at the end of the first quarter of 2023. Gross profit for the first quarter of 2024 was up 12.2% to $263.5 million versus $234.8 million in the first quarter of 2023. Gross margin increased by approximately 20 basis points to 32.5%, driven primarily by lower than expected inbound freight costs, partially offset by higher shrink accrual that we mentioned last quarter and deleverage of fixed costs on the negative comp. As a percentage of the SG&A for the first quarter of 2024 increased approximately 150 basis points to 28.0% versus last year's first quarter, driven primarily by fixed cost deleverage as well as a non-recurring legal expense, higher pre-opening expenses due to more openings versus last year and a planned marketing shift into the first quarter. The non-recurring legal expense added approximately 20 basis points to SG&A as a percentage of sales. As a…

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

Good afternoon. Joel, I wanted to ask about the customer. You said they are becoming more discerning. And I wanted to ask like chicken versus the egg, if it's possible because of some of the price point increases and through Five Beyond, if that's causing it or not. And then the second part of it is this business hasn't really comped negative outside of that 2022 period. So how do you kind of forecast the dimensions on the downside now as you go forward, meaning, how do you know you've captured the current run rate appropriately or if it can actually get worse from here? Thank you.

Yes, Simeon, great question. As for the Five Beyond part of it, we've had Five Beyond, as you know, for a couple of years now, and we continue to do studies every quarter about the customers' reaction to Five Beyond. And we haven't seen any changes in those studies from -- when we started in 2022 to this final quarter here -- in the beginning of 2024 and the comments have been overwhelmingly positive and the quantifiable data has been overwhelming positive. So I don't think the -- that's really the answer to the customer. In fact, Five Beyond has performed the best in our lower household income stores. So I think that is another example that they really see the value the further they have to try and stretch their dollar. And then in terms of framing up, have we seen the worst. We saw a big decline in the second half of the quarter. And I think somebody even asked us on the last call if we were within the range of our guidance, and we were squarely in the middle of it. So Easter was disappointing, and then it continued into spring as well as then into May here. So on one hand, the decline we've seen has been very steady for a couple of months now. And it also -- as we get out of spring/summer and start to get into more need state with our customer, in other words back-to-school is a reason they have to come in our stores. And certainly, holiday, our entire store becomes a need store I think it will begin to moderate. But it's been pretty consistent since the Easter period. Thanks, Simeon.

Your next question will come from Seth Sigman with Barclays. Please go ahead.

Hey, everyone. Thanks for taking the question. I wanted to follow up on the sales performance. The decline in comps and the pressure you're seeing, I don't think it's unique to Five Below. We've obviously seen declines in discretionary demand at many of your peers. But is the change is up until this quarter, Five had outperformed a lot of those peers, and it does seem like that gap has narrowed a lot this quarter. Just any more perspective on that and why it seems like there's been a sharper slowdown here. And I know part of that is -- there is a lot happening within the box. Do you feel like there could be anything self-inflicted here? Thank you.

Yes. Look, Seth, in terms of self-inflicted, we're never perfect on that. What I would tell you, I think the one change that's happened is -- it's proven harder for us to lap some of the big trends from last year, namely Squish malls. And this relates to Simeon's question and how do we know we have seen the top. Squish mall penetration begins to moderate here in the back half of the year. So the front half -- first half of the year was much bigger than the back half of the year last year. And so I think that moderation will start to help as well. But I think that's probably been the biggest difference from last year's outperformance to this year being more in-line with those that have discretionary categories. Thanks Seth.

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

Hi guys. This is Kelly on for Paul. Thanks for taking our question. I just like a little bit more color on your pricing that you're testing currently, where exactly are you taking down price points but categories? And if you do see the reaction you're expecting from the pricing test, would we expect that to be rolled out this year and how would you kind of account for that in guidance?

Yes. You bet, Kelly. I've always said to all of you when I've talked at the last place we like to raise -- gain margin is through raising prices. And we've been consistent throughout the inflation years going to price increases last. Having said that, we did have to make several price changes throughout the last couple of years. The focus is right now is mainly on the front end of the store. So that we can continue to deliver low prices in the front. There are initial reaction -- initial price points. So obviously, seasonal is a big focus on that area. And yes, Kelly, if we do see positive increases that offset the price declines, we will look to start to roll that out. But at this point in time, it's a test. And like I said in my prepared remarks, we are going to play offense, we're not going to sit back. We know where the issues are, and we're going to really focus on some of those categories to see if we can change the trajectory and drive sales faster. Thanks Kelly.

The next question will come from Matthew Boss with JPMorgan. Please go ahead.

Great, thanks. So Joel, just given the macro backdrop that you laid out and the bifurcation that you're seeing across your income cohort, I guess how best to think about initiatives across worlds, and what's the timing that you see in order to stabilize comps?

Yes. Look, I think the prudent thing to do, Matt was provide the guidance that we did for all of you that really in order to beat those numbers, we really don't have to see any change. So between what Michael is doing in merchandising and the new product coming in, our pricing tests that I just talked about as well as marketing tests. Some of those are going to stick. No different than everything we did to turn around shrink. And so I would expect, by the back half of the year, we start to see some that we believe in that we can roll out. And then clearly, as we get past the election and in the fourth quarter, the pressure should start to subside from what we're seeing today. But make no doubt about it, Matt the lower end customer is really being stretched, and we got to deliver value. And we've got to really display that in how we go to market. And when you walk in the store, what you see, but all of that's in flight right now and expect to see some of those changes improve by the back half of the year. Thanks, Matt.

The next question will come from Scot Ciccarelli with Truist. Please go ahead.

Hi guys. Scot Ciccarelli. Joe, I know you've had some questions on self-inflicted wounds versus consumer behavior. But obviously, you guys have had a huge shift in behavior just over the last couple of months, I guess. And there's other companies you tend to co-locate with like the off-price retailers are actually performing well. Like is there any reason to better understand why that would be occurring? Is it just maybe your product has gotten a little bit stale, could it be some of the shrink mitigation efforts? I know some of it would be speculation on your part, but we love the kind of color.

Yes. That's a good question. And I think even the off-price a large percentage of their business is apparel. And apparel is still more in that need based and at incredible value. And I think, that's -- contributes there. We've seen positive trends in our apparel business as well. It's just not a big piece of our business. And then in terms of self-inflicted, I think the entire team is being dissecting every piece of their business to see which pieces of it they can improve. And then I think if you compare it to the dollar stores, both Dollar General and Dollar Tree called out the like us, they're seeing negative comps and discretionary categories. Hopefully, that gives you some help there, Scot. Thank you.

Thanks.

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

Hi Joe, two things. What type of mid-course corrections as Michael think is appropriate here in terms of -- I know you're kind of said for holiday, but bringing in new product that might be more value-oriented and/or maybe dialing back some inventory you had planned? And then obviously, we've got a reset labor for lower comps, how do you do that without impacting the experience for those who are coming in?

Yes. Look, it's a good question, John. And we have made some investments in labor and it has had a positive impact on shrink. And I think, we're going to get down that path because it seems to be offsetting shrink more. And then in terms of Michael, I think the real change you are seeing is historically, we've brought in new hot trends at [$5.55 or $5.95] (ph). And we're really focused to try and deliver those at Five. And it's just another example of trying to really dial up that shrink. I've had a precursor look into back-to-school, and it feels like we've really differentiated there this year. and it is a really good value. And as we move past this spring summer time frame, which like a couple of other retailers have called out, there's just been a little bit of a malaise there. And that obviously has been something we've seen since COVID. And we've talked about that a couple of years now. And I think, we now have to just assume that's going to happen in the spring-summer time frame. And so what Michael is really looking at is how to reinvent that space next year. But as we get past that, we should begin to start to see some improvement in sales. Thanks John.

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

Good evening. Thank you so much for taking question. Joel, why isn't the slowdown that you've been experiencing caused by simply increased competition, whether it's some new dollar store competitors or inexpensive Asian direct sellers or marketplaces that are gaining increased traction in the United States. And if you see a prolonged period of negative comps, how does this change you're thinking about the long-term margin potential for the business? Thank you.

Yes. No, look, it's a great question, Michael, and it's a question we've asked ourselves. And we ask ourselves in multiple ways. One of the ways we ask it is when we do our quarterly research. And one of the questions we ask is where do you go when you want fun, trend-right, high-value items. And we’re top of mind on that. And so that has not changed quarter-over-quarter. And we have not seen some of the retailers you just mentioned, move up the list on that. Secondly, I would tell you we have sliced our sales performance by where our competition is. And we're not -- and I mentioned this in my prepared remarks, this decline was broad-based. It was across all geographies. And so we didn't really see any trend that would need it to say when we're near these retailers or those retailers are closer to us and our performance was worse. So those are just two data points, both on a research and then also us just dissecting our sales here the last few weeks. And also, if it really was competition, the bifurcation we saw from the first half of the quarter to the second half would have never dropped off instantly because there wasn't an event that was competitive driven that happened in the middle of the quarter. This change we saw literally happened the week of Easter and then the back half of the quarter into May here. So all three of those lead to saying this is not a competition-driven change. This isn't something structural that we can overcome. Thanks Michael.

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

Hi, good morning everyone. Joel, I wanted to ask you a question about shrink. And the question I have is, are you confident that the adjustments that you're making the self-checkout have not impacted sales. And I asked that because I think the timing of moving to assisted checkout and the sales of [kind of work] (ph) somewhat similar. I'm just curious if you're confident around that. And then secondly, when do you think you'll begin to see some benefit coming through the gross margin related to recent [check improvement] (ph)?

Yes. Michael, let me add -- sorry, great question. And it is something we looked at a couple of ways ourselves. One, again this change in sales was a dropped off a cliff at that Easter week. So again, we put those self-checkout mitigations where we switch to associate checkouts more closer to the beginning of February. And then like I said, the sales trajectory changed more like the middle of March, late half of March. And then in terms of confidence of when we'll make changes and Kristy, please jump in. I think it would be more along once we complete our August physical inventories we're doing about.

Yes, we're doing about 750 inventories at the beginning of August. And so we will have time to reflect those results in our quarter two results. And we'll provide that feedback obviously as how it impacts the future quarters at that time as well.

So that would be the time when you begin to see the inflection point. Thank you.

Next question will come from Chuck Grom with Gordon Haskett. Please go ahead.

Hi. This is Eric on for Chuck. Thanks for taking the question. I just want to ask about your inventory, just sort of how you feel about the quality of inventory, the growth really accelerated versus last quarter and the spread to sales growth also accelerated. Just curious if you're taking any additional markdowns to get through some of this inventory? Or you think you can continue to get through without having it discounted over the course of the year?

Yes. Good question. The health of our inventory is still in great shape. The teams did an excellent job of managing down once we saw the change any of our categories that have limited lifespan like candy and food, those are actually the businesses that outperformed. So no liabilities there in terms of spoilage or anything like that. And then any areas where we were long, very easy to hold those items back in the distribution center. And as we add new stores, we can easily absorb that. So not a big concern there at all from our part. Our aged inventory level is pretty consistent to where it was a year ago looking forward. Thanks, Eric.

The next question will come from David Bellinger with Mizuho. Please go ahead.

Hi, thanks for the question. So Joel, it seems like certain parts of the store still track positive for the full quarter, where you had others drop off pretty meaningfully. Just absent some of the macro commentary from your prepared remarks, have you had any internal discussions around some merchandising, maybe flexing some space down in areas like apparel that are not specifically unique to Five. And maybe putting the core focus back on that younger demographic, kids product, toys, things of that nature. Is there anything we can expect before the end of the year and as we get into the holiday period?

Yes. Look, David I mean what's been unique about this box since the beginning of time and since I've been here for 10 years, we are always flexing the box and growing it. And so as we see those opportunities, we will flex the box. I think, a good example of where you are going to see that in the back half is Halloween is going to grow for us. That's a business we've seen really nice positive gains the last couple of years, and we think that's a business we can really grow and especially in this environment where the customer is looking for value there is not a strong value player in that space. And so that's just one example where you are going to see us continue to grow. But Michael and the merchants do a great job on that. The merchants bonus isn't based on how their department does. It's based on how the box does. So there's no territorial concerns about shrinking one department and growing another, but I'll just give you one example on as we see other opportunities, we'll do the same. Thanks, David.

The next question will come from Kate McShane with Goldman Sachs. Please go ahead.

Hi, thanks for taking our question. We wondered if you could talk to any impact from cannibalization this quarter and how that maybe compares to what we've seen in previous quarters and if that's having any kind of impact with this slowdown in the back half of the quarter.

Yes. Thanks, Kate. Look, our cannibalization rate has gone up, but it's been in the last couple of years, it's born more in the 80 to 100 basis points annually whereas pre-covid it was probably more in the 50 basis points. That's something we manage and we try and hold it to that number. I haven't specifically looked at cannibalization rate, first quarter '24 versus canalization rate of '23. What I would tell you and remind everybody is we opened a large majority of our stores last year than the back half of the year. So you aren't going to see as many new stores enter our comp pipeline as you would normally see. But as far as cannibalization goes, I don't expect that to be any contributing factor to it. Again, because front half of the quarter was one set of comps and second half was a very different set. So cannibalization wouldn't have played out like that. Thanks, Kate.

The next question will come from Brad Thomas with KeyBanc Capital Markets. Please go ahead.

Hi, thanks for taking my question. Just wanted to confirm that the outlook as we kind of back into it, it looks like your comp guidance is calling for the mid-single-digit decline to continue through both 3Q and 4Q? Just wanted to confirm that is what's based on your guidance? And then hoping you could talk a little bit about the margin implications, what you're assuming for the back half with those new comp assumptions? Thanks.

Yes. So we don't -- we're not going to guide for the back half. But on a full year basis, the down [3%] to down [5%] (ph). As you look to the Q3 and Q4 and just be implied there is probably closer to the lower end of mid-single digits. So you can use that -- and then your question on margin, specifically, was that for the -- I'm sorry, the full year?

Essentially, was what the implications are from the comp lines continuing as we go through the year? Thanks.

Yes. So what we shared last quarter with you was certainly, we would see on a full year basis, some op margin benefits. But the deleverage on the comp right now is really what we're looking at. And so when you look at it across the full year, we are expecting, as we said 9.8% at the midpoint or 90 basis points below. So and how that kind of plays out for the full year. This quarter is probably the heaviest burden at the 250 basis points, and then it moderates substantially through Q3 and Q4 as our cost optimization initiatives help offset a big part of the fixed cost deleverage.

All right. Thank you.

The Next question will come from Michael Montani with Evercore ISI. Please go ahead.

Hi, thanks for taking the question. Just had one question and then a follow-up. So just first, in terms of the margins that Kristy just outlined, can you give us some more color in terms of the gross margin trajectory versus SG&A? And then the follow-up was on the new store productivity front. I just wanted to see any incremental evidence there that gives you conviction to maintain kind of the robust opening schedule in light of the comp trajectory?

So I'll take the first part and then send it over to Joel for a little bit of commentary on NSP. So from a gross margin perspective, if you recall what we had shared last quarter, we had said we expected gross margin to be flat in Q1, Q2 and Q4 with a benefit in Q3 related to the reversal of the shrink accrual that we took in the prior year. And so as you look going forward now, again Q2 being the most difficult gross margin and declining about 130 basis points at the midpoint. And then you will still -- and again, that's all fixed cost deleverage coming because of the negative comp. And as you move forward into Q3, Q4, you are getting closer to what we previously guided, which was about 200 basis points of improvement in Q3 and then flat to Q4. And so that will generally get you from a gross margin perspective. We will see continued deleverage on the negative comp in Q2 again about 120 basis points. And then as you move into Q3 and Q4, Q3 has the heaviest -- carrying the heaviest burden on the negative comp with overall op margin being relatively flat, but the offset is coming in SG&A of over 200 basis points. And then when you look at Q4 again, some deleverage on the negative comp that we've moved to about 50 basis points in SG&A with full year margin being relatively up margin being relatively flat.

And then Michael --.

Sorry, that was fourth quarter margin being relatively flat.

Michael, in terms of NSP, yes, in terms of NSP, last year, I think the way you guys calculated, it was just above 80%, and we adjust for weeks, it's mid-80s. That's where Q1 was. You can see that's where the full year is based on the guide we just gave you at the midpoint. So we've seen our NSP, post-COVID start to really land in those mid-80s and that's what we're projecting, and we're pleased with that. And so as long as that continues in that, there is really no reason to pull back. In fact, if anything, that's probably the area that we haven't spent a lot of time talking about, but our new store pipeline is not only back hitting the numbers, but Kristy shared with you, we're back to that 50% in the front half of the year, which is really where we want to be going forward. This year is complete. Next year, we're largely done with already and starting to work on '26. So we feel really good about the pipeline, a lot of opportunities out there. And I think as we've continued to see some more retail bankruptcies, it will present [sales] (ph) with more opportunities to take advantage of. Thanks Michael.

The next question will come from Joe Feldman with Telsey Advisory Group. Please go ahead.

Great. Thanks for taking my question guys. I wanted to go back to something you said, Joel, about value and needing to just be able to keep delivering value. And I'm just curious what your, I guess, latest survey work with your customers or interactions or focus groups or however you speak with your customers, what that's suggesting about the perceived value? Has it changed, again given the push with the Five Beyond product in the stores? Maybe you could just chat about that for a minute.

Yes. It's great, Joe. And no, it hasn't changed. And it's more -- we really believe this was a macro-induced change. And for all the reasons I've shared with everybody. But too many retailers play defense. And certainly, we'll do that, cut costs and do some things. But we're going to play offense. And we're going to figure out a way to take market share in a time like this. and we're going to figure out a way to make our business healthier so that as the consumer backdrop improves, we're already a better and stronger company. As far as value specifically, Joe, one of the things we look at and we look at it every quarter is our NPS scores and our NPS scores have actually gone up this year over last year. And that is a really positive sign that customers are starting to really rely on us. We happen to be in probably the period of our year where we're the most discretionary, at least a number of reasons you have to go to a buy below. But that doesn't mean we don't look at self-inflicted wounds. We don't look at ways that our marketing can be stronger. We don't -- we need to look at ways our pricing can be sharper. And Michael and the merchants are definitely looking at new trends, chasing trends, finding new ways to drive footsteps. So I didn't mean to allude to any of you that I'm concerned about it. In fact, I think the biggest difference between a quarter ago and now is we have a lot more answers that we didn't have before. And we know how to bend the curve on shrink now. We know what the right level of labor to put in the store is. And that is a big change from where it was. We have a lengthy trend now line of knowing where the bottom is on sales, and now we build back from that. But we're not going to sit and wait until it comes to us, we got to go after it. So hopefully, Joe, that will give you a little background there. Thank you.

Yeah, that helps. Thank you. Good luck this quarter.

You bet. Yeah, thank you Joe.

The next question will come from CJ Dipollino with Craig-Hallum Capital Group. Please go ahead.

Hi everyone. CJ on for Jeremy Hamblin. Thanks for taking my question. I wanted to touch on shrink again. It seems like you've made some good progress in the 70 stores where you really stepped up shrink mitigation efforts. Curious on kind of like the timing on rolling that out to additional stores, if you're thinking about doing that? And when you might start implementing more labor and higher security measures in the rest of the store base? Thanks.

Yes. CJ, let me just clarify for you and the whole team on the call. We have implemented shrinker mitigation in the entire chain namely around the shift from self-checkout to associate-checkout. So that has happened chain-wide. In addition to that which is the 70 stores you were referring, we put in extra shrink mitigation like guards and receipt checking and more video cameras and that type of thing. So that's above and beyond. And those 70 stores saw even bigger declines than the stores that just had the associate checkout. So now we're looking at those 70 and seeing how the ROI works. Many of you always ask, does it labor cost you more than the shrink? In the chain wide, we've got that balance right. But in the extra 70, where you've got outside guard services and things like that -- that's a real focus on our highest shrink stores. So the team has just done an amazing job. You got to remember, this only showed up in our purview less than 12 months ago it was end of last August. So a really applied asset protection store operations and everybody here working on a task force to bend in the curve so quickly. So hopefully, that helps you understand the difference between the 70 and what we've actually done for the entire chain. Thanks CJ.

The next question will come from Brian Nagel with Oppenheimer. Please go ahead.

This is William Dossett on for Brian. Thanks for taking our question. So our quick question here is just on the efforts to optimize your cost structure. You've identified savings over the next 18 months to 24 months. And we just wanted to know the key areas of the cost structure in which you would realize these savings? Thank you.

Yes. certainly. So they are really across the board in both operating expenses as well as capital spending. So looking at everything from consumption to specs to distribution expenses on the last mile. So we are really -- we have really kind of peeled away every cost that we have with nearly every supplier, and we're going hard after in-year savings, as well as more significant savings that will be realized next year in our indirect procurement area specifically.

Look, I think just adding on to that, Kristy, the one thing this is where our growth has to work to our advantage. And as we look at everything that we haven't reviewed a contract on in a couple of years, it should have different terms to it. We're -- we went into COVID, a $2 billion company and five years later here, we are about a $4 billion company. So with that comes a basis point change and then that begins to add up significantly over the next two years. Thanks William.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Joel Anderson for closing remarks. Please go ahead.

Thank you, operator, and thanks, everybody. Look, I'd just end it by saying and repeating some of the things I said, our core customer they are clearly prioritizing needs over once, and that had a big impact on our performance in Q1. The guidance that Kristy shared with you, that reflects the entire year in this more cautious core customer. And as I said, we're playing offense. We're leaning further into value. We're going to ensure this value message is emphasized in all of our marketing. We're also focused on ensuring our assortment adequately reflects categories that are being prioritized by our customers. So we're really going to focus on growing those. As we do this, our focus on executing our store growth plans with actions is unwavering as is our commitment to managing the cost side of the business with a typical Five Below rigor. We’ve asked a lot of our teams as we navigate this current environment and implement processes and procedures to improve efficiency and manage shrink. And I just want to thank the entire crew for their hard work and commitment. Thanks, everybody, for joining us today, and we look forward to speaking again on our Q2 call in September. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.