Greetings, and welcome to Grocery Outlet’s Fiscal Third Quarter 2024 Earnings Results Conference. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christine Chen, VP of Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to Grocery Outlet's call to discuss financial results for the third quarter for the period ending September 28th, 2024. Speaking from management on today's call will be Eric Lindberg, Chairman of the Board and Interim President and Chief Executive Officer; and Lindsay Gray, Interim Chief Financial Officer and SVP of Accounting. Following prepared remarks from Eric and Lindsay, we will open the call for questions. Please note that this conference call is being webcast live and a recording will be available via telephone playback on the Investor Relations section of the company's website. Participants on this call may make forward-looking statements within the meaning of the Federal Securities Laws. All statements that address future operating financial or business performance or the company's strategies or expectations are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. A description of these factors can be found in this afternoon's press release, as well as the company's periodic reports filed with the SEC, all of which may be found in the Investor Relations section of the company's website or on sec.gov. And now I will turn it over to Eric.

Good afternoon, everyone and thank you for joining us. Before we get into the review of the third quarter, let me just acknowledge that we are reporting our results in a transitional moment. Last week, we announced that RJ. Sheedy agreed to step down from the President and CEO positions and from the company's Board of Directors. I want to thank RJ for all of his contributions over the last 12 years. RJ has played a critical role in scaling and evolving our business, helping to set our foundation for the future. I have returned to Grocery Outlet full time serving as Interim President and CEO. This is my first week in the role and I can honestly say that I'm really excited to be back. I am working closely with the Grocery Outlet team and our independent operators again. The board has retained the leading Global Executive search firm to begin the process of hiring a permanent President, and CEO. Until then, I'll be fully engaged in the business, plan to make significant progress on the priorities, which we’ll share more details on during this call. As I told our team and our operators last week and I'll reiterate to you today, we have made it leadership change, but we are not changing our underlying strategy or commitment to what is differentiated us for almost 80 years. Grocery Outlet delivers unbeatable value, a unique treasure hunt shopping experience and amazing customer service through our best-in-class opportunistic buying model an independently operated neighborhood grocery stores. We have proven over many years that when we execute, our value proposition resonates across demographics, geographies and almost any macroeconomic environment. This transition is about refocusing on strong, execution, and doubling down on that differentiated value proposition. I'd like to share my perspectives on…

Welcome back to Eric and good afternoon, everyone. Net sales increased 10.4% to $1.11 billion during the third quarter due to new store sales and a 1.2% increase in comparable store sales, which represents 7.6% comp growth on a two-year basis. Comp transaction growth of 2% was partially offset by a 0.7% decline in our average basket. Comps during the summer months were challenging, but accelerated in September to 3.8%. Our third quarter gross profit increased 9.2% to $344.9 million. Gross margin rate of 31.1% was 10 basis points ahead of our expectations and a 20 basis point sequential improvement from the second quarter. SG&A expense increased 9.5% to $304.6 million, compared to the third quarter of 2023. Net interest expense increased 52.4% to $6.4 million, driven by higher average principal debt to enable share repurchases and other cash outlays to support the continued growth of the business after the acquisition of the United Grocery Outlet earlier this year, Our effective GAAP tax rate during the quarter was 28.6%, an increase over the effective tax rate in the third quarter of 2023 of 18.6%, primarily driven by lower excess tax benefits related to the exercise of stock options, non-deductible acquisition and integration costs related to the acquisition of UGO and lower pre-tax book income. GAAP net income for the third quarter was $24.2 million or $0.24 per fully diluted share. Adjusted EBITDA increased by 6% to $72.3 million for the quarter and our adjusted EBITDA margin was 6.5% of net sales, 10 basis points ahead of our expectations and a 50 basis point sequential improvement from the second quarter. Adjusted net income was $27.9 million for the quarter or $0.28 per fully diluted share. Turning to our balance sheet. We ended the quarter with $68.7 million of cash. Inventory at…

Let me close with this. I'm very confident in our business fundamentals, and our ability to realize our long-term growth potential. We are a unique specialty discount retailer with a long history of consistent growth. We need some time to get back to the basics, focus on execution and a small set of prioritized growth initiatives, while enabling our passionate independent operators to serve their communities. We'd like to now open up the call for your questions, operator?

[Operator Instructions] The first question is from Krisztina Katai from Deutsche Bank. Please go ahead.

Hi, good afternoon, and welcome back Eric. I wanted to start with sales. Do you think you comp was largely in line, September was solid, but you took your 4Q outlook down. It sounds like some of that is conservative, and considering the October commentary, but Eric, you talked about the need to execute better. So what are some of your first priorities to get execution under control? How much pressure are you still seeing from the system integration issues at this point? And how should we think about a realistic timeline for that to be fully behind us?

It’s a heck of a question. Hi, Krisztina. Let me take the first part of that and then, Lindsay can jump in. So, I said doubling down on value. When the customer needs us, most we need to be there for them. So we made a ton of progress, but we're not quite done. So we're going to continue to pull the lever on price, particularly with opportunistic to make sure the while is there. We are going to support and make sure that the relationship with our IOs is intact. We just need to provide them with tools, so they can run their business a little bit more efficiently. I want to put, the systems transition work in the rearview mirror. Frankly, I don't want to talk about this next year. I want to hear about all the great things it's doing for us, not all the things that we can't do because of the system. So that's on the list. And then I'd say, really looking closely at all the priorities that we have on our list and making sure that we narrow that down. I know we win when we're focused on short listed things that matter the most. So that's what we're going to do over the coming weeks is make sure that list is right on.

And Krisztina, this is Lindsay, I can follow-up a bit. So, yeah, so our Q4 guide. So we feel good about the trends that we saw in September and October. October trends were similar to September, but it did reflect a slight slowdown in tier basis. So, also at the same time we're facing difficult comparisons if we forecast to the fourth quarter. So with all that said, we took a step back and we just really felt it was prudent to be a bit more cautious in our outlook for the full year in the fourth quarter and we revised our guidance accordingly. So, we're still working to get our value prop where we want it and as we expect price competition, coupled with the holidays and whatnot. That's everything that went into the Q4 guide for comps.

The next question is from Robbie Ohmes from Bank of America. Please go ahead.

Oh. Hey Eric. Nice to talk to you again. My question is, I was hoping we could just get more color on RJ's departure and also what type of CEO you're looking to replace him with. And may be related to that, just to clarify the systems, where is the system's disruption right now? Is it is it behind you or is there still risk to the first half of next year related to that?

Yeah. Hey Robbie. Good to talk to you again. Thanks for the question. So let me start first with the CEO transition. You all know, this last year has been really difficult it’s been an operational challenge year from the systems transition. We have not executed like we want like our expectations and like our history. And that's been super challenging. I’d say because of the relationship that we've all enjoyed, working with RJ for many, many years, we were patient. We felt like that was the right thing to do to be patient. And but I can tell you the same way that you all might be feeling about our performance we were feeling that internally as well. So, we finally got to a point after the last Board Meeting where, we sat down. We had a frank conversation and we had an agreement to move forward. So, I really want to make sure everyone knows that, we didn't have any major disagreement. There's no new finding that you guys have learned about later there is no shoot or drop. This is just a little bit of inconvenient timing. And sort of a function of how things played out nothing more. The question on systems kind of where are we today? I'll repeat a little bit of what I've said. I'm still digging into it, still getting up to speed. Let me say this the system is fully functional. We're still working on enhancements. We're still working on efficiency which are words that just say it's not quite working to the speed that we expect. I would say full stabilization has been a bigger undertaking than we originally anticipated internally that just translates, it's been more resources, it’s taken more time. But I would say that we're making a lot of progress. I'll give you a couple of examples of things that I'm looking for that may address sort of your timing. The biggest thing to be is for the operators, is having their real-time order guide and their new arrival order guide back. There it sounds like tactical things. But as a merchant being able to order off of our system and be able to look at a live inventory be able to tap into the system and pick what you want in your store, that's kind of nirvana in a in an opportunistic model. And so, we have not had that tool. It's not back yet and we get that back I think we’ve sort of rounded towards home and the system will be finished. It's working, the tool is working, but it's not doing for us what we need it to do completely. So, really look forward to getting it, again as I said sort of in the rear-view mirror.

The next question is from Anthony Bonadio from Wells Fargo. Please, go ahead.

Yeah, thank you for taking the question. So just wanted to dig in a little bit on margins. Taking a step back and thinking about your EBITDA margin. We've now seen some pretty sizable swings since the pandemic began, that was obviously exacerbated even more recently with the systems issues, and now some more uncertainty as you rework guidance again. So, I guess, maybe just at a high level, can you talk about how we should think about the appropriate margin profile for the business over a longer time frame? And then just as a follow-up, you mentioned pulling back from some strategic priorities to focus on less, can you just talk about specifically what items you are referring to there?

Yeah. Anthony, this is Lindsay. I can take the first part on margin. So, our long-term algorithm for margin, since we started talking with you all has been 30.5%. And we still believe that's a great place for us to be. We love reinvesting the dollars that we have back in the business and that continues to be a priority. So that is our long-term algo that we still have. That's why we wanted to - I wanted to emphasize it in the call, as well. Just because that's what we want to orient everyone to. Margins definitely fluctuate here at GO, based on assortment and a variety of other matters. Definitely admit it's been a rocky few quarters with things going up and down. Just a reminder, last year we saw a really high margins. Assortment was great at that time. We are delivering, great value as well to the customers. So it really just changes quarter-to-quarter. So just long-term, 30.5 is what we want to orient you into and for 2025 is where you can think of that. And then I'll hand it over to Eric.

Yeah. Hey Anthony, yeah, day 5, not quite ready to tell you what we're thinking off the list or adding to the list or putting higher on the list. We’ll be doing that work in the coming weeks. It's really clear to me being back in shorter time that we're trying to do too much and we're not doing it all well.

The next question is from John Heinbockel from Guggenheim Partners. Please go ahead.

Hey Eric, two quick things. One, I know you're talking about a 6% EBITDA margin next year because you want to reinvest back into pricing value. I mean, Eric do you think that are you being conservative with the low-single-digit comp, particularly in this macro, right? And then secondly, what are you looking for in a new CEO characteristic-wise, right? Because you've got a very unique culture and business model. And I assume that you are not a candidate for the job permanently.

Yeah, let me take the first part of that. Hey John, didn't catch up with you. Yeah, I’ve been pretty clear, we are going to search for a new CEO, not in a hurry. I'm here and I'm prepared to say as long as it takes, this is a unique place, you've known it for a long, long time. We've got a really good search firm. She has been very successful in other placements. She helped out, President, CEO with Sprouts, and she did some work with gap and some others. So we feel very confident in the calibre that we're working with. Our goal is to land a terrific new leader. Full soft. If I had to go down my list of things, I'm looking for some public company experience, obviously important proven track record, someone who scaled a retail model, which is certainly what we're doing and what is in front of us, some retail, some fresh. And then someone that's really excited about this model. This is not for everyone. It's not conventional retail. It's very unique. It's very differentiated. So we need to find someone that looks at it and says, I get it and I see it and shares that vision. So a lot of that is around culture that you mentioned. A lot of that is about we do things a little bit differently. But those are those are sort of the top 4, 5 qualities that we are looking for.

Hey, this is Lindsay. John, thanks for the question. So I'll just chat with you a little about your question on guidance. And so, yeah, so the 1 to 3 comp percentage is what we're targeting and what we continue to target. I think what your question was just the adjusted EBITDA margins of 6%. So, if you look at our historical levels, the approximate 6% is really where we've landed on average over the last five years or so. Of course, it's gone up and down quarter-to-quarter a bit. But we really feel like that's a good place for us to be and what we continue to shoot for. Definitely still have some systems cost to work through though as Eric mentioned. And it’s taking a little longer to stabilize and we want to get it right and we want to get the tool working, as well as possible. It's fully functional and everything. We're just doing a lot of enhancements. But that said, as we think about, 2025, that long-term algorithm of the 6% is what we shoot for, but kind of building towards that if you will throughout the year.

[Operator Instructions] The next question is from Mark Carden from UBS. Please go ahead.

Good afternoon. Thanks so much for taking the question and welcome back. Eric. So, on the UGO acquisition, how was it going well with your expectations? How much is it been impacted by some of your recent execution challenges? And then, with the leadership changes are you thinking any differently about timing for moving new stores over to independent operators? Thanks.

Yeah, hey Mark, nice to hear your voice. Yeah it’s going UGOL is pretty new and it’s going right as we thought. We did not have a very aggressive transition schedule. In fact, we did not plan to convert those stores until much later actually after 2025. Initially, the biggest opportunity we see is to get them into the fold of reporting. Second is to make sure that the products that we have that they don't have, they can have. They have quite a few items, less items scanning to their stores and we do. So we see some immediate sales opportunities to infuse them with some of the products we have. We have tried a few one or two refreshes of their store. So, coming in with some of the things we've learned from data that help sell product better inside the store from a merchandizing standpoint. It's very good lean back on those initials. So, we'll do some of that next year, call it 5, 6, 7, 10 stores. And then, ultimately, conversion to IO and conversion over to GO brand will come later, not in a hurry to do it. We want to make sure that we hit some of those other initiatives first and then, we can transition them over we've done that before.

The next question is from Corey Tarlowe from Jefferies. Please go ahead.

Great. Thanks and good afternoon. I was wondering about, unit growth. How do you think about the complexion of unit growth going forward whether it's the acquisition or organic growth? And what's the right rate for the business? I believe you previously targeted 10% in the past, but just curious, Eric, if there's any change in thinking there? And then, just on the Investments that you've made in the value proposition and I think that you're planning to continue to make? Is there any way to put into context the magnitude of the investments that you're making now versus in the past? And what the impact could be? Thank you.

Yeah, hey Corey. Let me take the second question first. I'd say the value prop we are making investments. I would not say they are from my estimation, any different than what we've had to do, 2, 3, 4 times I can recall and recount. We get slightly off every once in a while and we're getting back. So we told you how we measure and let me just walk through those measurements, again, the 40% and the 20% basket. So 40% savings over conventional check, 20% savings there were discount check. Take a basket of 100 commodities. These are the frequently bought items. They need to be priced to parity versus discount check. The last one, that's not quite a check. That we're working on is the excitement drivers, right. Our operators will say, yeah, the order guy looks great, but there's not enough excitement drivers. So, we need to inflect on that. I would not say that the margin we have to put into that is extreme, but we don't know we haven't done that work yet. So, we want to make sure we have plenty to invest if we need and make sure that when we get there, we know, we're there and we've got it to keep. So, second is on unit growth. Yeah, it's a good question. I would say that, traditionally our acquisition ideas have been very opportunistic, where we find someone that kind of fits into the culture and the geography, we might jump into that. I wouldn't say you'll look for a whole bunch of that in the future. I would say from a new store perspective, the 10% is not at risk. We have the stores. We have the capacity to do the stores. Think back two, three years ago, post-COVID, a lot of delays. It created havoc with supply chain. All that’s behind us. The deal-makers have done and the construction team has done an amazing job in the last year. So setting up 2025 really well. So I think we mentioned 50 stores or so that are signed. That is for 2025 we're actually working on 2026. So, no concerns of issue there and I wouldn't say that we wouldn't do another acquisition, but I wouldn't say we're going to go look for another acquisition. Thanks for the question.

The next question is from Oliver Chen from TD Cowen. Please go ahead.

Hi, Eric, and Lindsay. As you think about the challenges and opportunities ahead, I want you to rank them Eric, what are the key priorities in terms of the bigger challenges that you see? Also, any context on thinking in a nearer term versus medium term in terms of some of the issues? And interrelated, you have great relationships within the operators. Wondering your thoughts on what it will to continue to foster those as well? Thanks.

Yeah, hey Oliver. Thanks for the questions. Look, I'd say first on my list, and in my mind and I'd say on the mind of everyone here is, let's make sure that we go deep in our core value. We get that momentum back a bit like a flywheel once you start rolling it’s really, you get it keep rolling. I think we did ourselves some damage frankly in Q1 through Q3 and pricing for margin versus pricing for value, and we're paying the price of that right now. We are getting it back and we're feeling good about it. There's a lot of energy and there's a lot of momentum But I think we've got one of the best offerings for Thanksgiving meal and our product offering in an opportunistic rural can sometimes be challenging, but we are really well set up for that. So I feel good about it and we're going to focus on that. And then, as we're successful, we're going to start to lay out some of the other initiatives. Relative to IOs, look, these guys have had a tough, tough year. It has been um flying a little bit blind. Things not working. Things coming back online not being fast or quick. We're done in efforts and activities in stores, inefficiencies, frustration. We heard it all. We were with the operators in Dallas at our Annual Meeting for four, five days, three or four days in September. And I would say, read the mood as very positive. They are a graceful group of people. They give us a lot of room to try things and sometimes we make mistakes and this has been one of our biggest. And so, they are supportive as long as we communicate with them and as long as we tell them the truth and share with them what the timing is and what the fix is, which is what we're doing. So I'll leave Thursday, we'll go through Thursday, Friday, Saturday. We'll see about 70 operators. We'll do it again next Thursday, Friday. Saturday. We are seeing another or 70 or so. And then Gray and I will take a trip out to the East and see some more operators around Thanksgiving time. So, they need to know that we care. They need to know that we are listening. They need to know that we're working hard to address their issues. And, they are patient and they're forgiving. And we are super lucky to have that relationship, but, you can tell by the timing of probably my seventh or eighth day back. I'll be out with a bunch of operators taking questions like this and sharing with them kind of what we're doing. So, super important to us and we take that incredibly seriously.

The next question is from Joe Feldman from Telsey Advisory Group. Please go ahead.

Yeah. Hi guys. Thanks for taking the question. Eric, wanted to just ask you when you’ve talked about execution and I apologize if I missed it, but what are some of the things that you'd like to execute better and like where are the maybe a project or two that you think could get a little delayed if you could share any color on that initially? Thanks.

Yeah. Look, let me just talk about all the things that we are trying to do, make an acquisition wrestle the project we call SAP, launch private label run an App and some new marketing tools, manage a workforce that’s not always here all the time. Just the challenges of this business when the tools are not working for you has been a little bit more difficult than we ever thought and whatever want. So, again, early on. We're going to lay up all of the initiatives with the team and decide what stays? What delays? What goes? And I wouldn't say any of the things that I’ve mentioned are off the list, but my example of UGO, we don't need to go do a whole bunch of work on UGO right now to work on UGO right now because they are running. They are operating. We get them some products they're going to be fine to do a little bit of reinvestment back in the stores. They are going to be fine.

The next question is from Leah Jordan from Goldman Sachs. Please go ahead.

Good afternoon. Thank you for taking my question. So I understand your system visibility isn't fully back to where you want it. But it has improved over the last year or so. I'm just curious why your 4Q guide suggests we aren't really getting any growth margin left from lapping that initial disruption last year. Just curious where that all went? Is it all competitive pressures? And I guess I'm also curious why you aren't getting the benefit from some close-up competitors going away, as well.

Hey Leah, this is Lindsay. I can speak to that. So, yeah, so, just, I'll address just a couple the pieces comp and margin, as well. So, we're still facing some, some issues with the system as we talked about. Data visibility, you're right. We brought it back in a great way earlier in the year. What Eric mentioned though as well is that while we've made a lot of progress and the system is functional and operating. It's taking the teams and the operators, a lot longer to be some of the tasks they did before. And frankly it’s just still very inefficient. And so, as we think about how nimble we are and how we love to be, we've been really hampered by these tools that we are trying to improve. So we are continuing to do that. So given you that flavor kind of leads into comp and so, we - there's a couple reasons on comp. So even though we saw recent trends, facing some difficult comparisons for Q4 and we want to be prudent as well as we really hope our guide is conservative and proved to be conservative, but just given all the reasons we’ve laid out, we really wanted to make sure that we were laying out the comps that we feel is achievable. And then with gross margins, same thing there, as well. So, stubs are toe a bit with earlier in the year. We are trying to get some margin dollars and we lost some value. And that's really just plays into coming out of that in Q3. Feeling like we still have a bit of a drag with some of the system inefficiencies, nothing material in Q3 or Q4 as I just stressed. It’s kind of a little bit everywhere that just are a drag on margin. And so why I would say is, we're not seeing anything like we saw back in the early days with the adverse material impacts that we walked you all through from Q3 of last year through Q2 of this year. But we just still have some value to work through for our customers and some margin improvements. So, getting back to your question, did we get it all back or not? I think that we are in a much better position on last year, but we are not fully back. So, again, thinking about all that and then also layering into conservatism is really we are laying out our guidance. And like I said, we hope it’s really conservative. But that's where we're at right now.

Hey Leah, I’ll jump on the second part of your question, we are getting, a pretty good benefit from the 99 big announcements. That’s been flowing through, sort of since last year and through this year. I’d say, our operating is really strong right now. Definitely we are picking up and both from what we are buying penetration of what we are shipping to the stores, the increase in margins, so that’s all I would say that good column. We need to make sure the value, and we measure value in a lots of different ways people are really taking notice of those best deals at the stores. So that's where heads down.

[Operator Instructions] The next question is from Michael Baker from D.A. Davidson. Please go ahead.

Okay. Hi, my one question will be on the buying environment if I could, so relative to the peak in 2023 was I think margins peaked at about 31.3, now you are targeting 30.5 though which is your long-term plan. Is it that you are reinvesting more back or is that that buying environment post-COVID when there was so much supply chain disruption, was just so strong that it’s unlikely to repeat again. I guess, that has always closed out and you never run out of products. But it was just – it’s better to say which is as good as kind of get post-Covid because of all that supply chain disruption.

Yeah, hey, Michael. Let me just walk you back a little bit on history and talk a little bit about buying margins. So through call it 20, 25 years of paying attention here, we've operated within a very narrow band. Some can't believe how narrow, sort of call it 30% to 31% and delivered a 5% comps on average and positive comps of 20 of the last 21 years. That's been delivered while we've introduced massive changes in the business as changes are things like MTO or more low margin fresh products or the acceleration of produce or meat, introduction of new categories. And I'd say, while we've taken lots of lots of intrusion from market competitors. So, this model for those of you who can't quite get your heads around it or appreciate it, it's very, very different. We have the ability to price something this week that will sell next week. And that's half of our assortment. So, we can pay attention and watch really closely and so I would never say that we'll never see these margins again. I would say, the contrary we roll between the band of sort of 30 and 31, maybe call it 30 and 31.5 and have gotten very, very comfortable being in that band. And that’s with anything that's happened to this market. Right now product is healthy. When you see more and more opportunistic coming in you should think margins are going to be better unless we choose to invest those which is what we're doing right now to make sure that we’ve got the customers. So that's a little bit of how it works, and how it has worked for a long time.

The next question is from Simeon Gutman from Morgan Stanley. Please go ahead.

Hi everyone. Hey Eric. This is definitely beating a dead horse. I wanted to ask again about your systems issues creating a weaker value proposition. So, I get you may not have had visibility on the buy and that could have affected what you were selling prices were on the shelf. The IOs know where relative value I would think sits in certain goods sell at certain prices. So, if you think about that logic, the safeguards not being in place to know that like, can you talk us through that how these things weren't caught and then frankly how systems issues led to that value just not being there for a certain period of time? Thanks.

Yeah, no, you got it. We did this to ourselves. I am going to take ownership for that. We price for margin. We did not price for value consistently. Upon reflection and looking back at it, it’s pretty easy to call that, right, armchair quarterbacks however is there were really good reasons why we did that. We'd had a pretty scarring first quarter. We thought margin was well within our control and same time people were taking prices down, we took prices up. Okay? So we are where we are. Right about the operators, they have the ability to price things up and down, but they allow us to price, call it. 99% of the time. We asked operators to be right on micro market adjustments that they need on a few items. We don't ask them to be us and try and price. We have a much better ability to see the broader lens of competitiveness and to set the price, right? And you got to keep in mind, we share gross profit margin. So operators are focused on margins sometimes will fall like we are. So, that's a bit of the explanation. Did systems cause it? It's really the visibility that occurred with the lack of proper systems that caused it and then our reaction is again to weigh in on now. I think it’s probably improper.

The next question is from Jacob Aiken-Phillips from Melius Research.

Hi. Thanks for the question. So I'm wondering, you said that the part of it is, this is some transition was not being able to like have the visibility or inventory, and then part of it was fixing competitive pressures with the pricing. So can you help us contextualize like, what that means to comping over that in 4Q and in 2025 because I don't know I would have expected a better 4Q giving you kind of 200 BPS from last year. And then I got, separately you don't seem to be planning to reduced unit growth at all. So, how do we think about new productivity like in the coming years?

Yeah, hey Jacob. I can take the first part of the question. So, yeah, definitely tough comp guide. I get it. The Q4 was tough and again, after seeing the positive trends in September and October. But if you look at a two year basis, it's showing a slight slowdown. And again, we're progressing through the fourth quarter, where we still had some difficult comparison last year or even given the systems impact. So, again, we really wanted to be prudent. And a little more cautious on our outlook for the full year, and the fourth quarter in the comps. And that's why we guided adjusted our guidance down. And everything that Eric talked about too, as well. We really are trying to rebalance our value proposition and get that back to the customer um and we look at it all together the whole package and it’s comp and it’s margin. And hitting all of those how the ballparks so to speak where we can. But with comps, it's just, - it's really being prudent. There's a lot going on right now, and we've got holidays and we've got a few things going on and frankly, we just really wanted to make sure that we were reading the competitive pressures, right in and the guide. And then for ’25, again, not commenting formally on guidance, but just reiterating our long-term algorithm definitely stands 1 to 3 comp is what we think is a very strong performance for this business, along with GM at 30.5 and EBITDA at 6 as I mentioned. So, again, that's really what we're trying to orient 4Q for ‘25 as Eric said, we really don't want to be talking about these systems next year. We hope we're not and so we really just want to make sure that everyone's oriented to those long term algos as we head into ’25.

Hey Jacob, yeah, I think you asked about new store growth. I don't see any problem with the ability to open the 50 plus stores. Next year we've got we’ve got these assigned. Team's done a really nice job of setting those up. So, I'd say that that number feels good.

[Operator Instructions] The next question is from Jeremy Hamblin from Craig-Hallum. Please go ahead.

Great and Eric, welcome back. I wanted to just ask about, some of the systems costs are involved here that you noted. You noted some, some internal, as well as external costs presumably some consultants. But can you quantify what the magnitude of that is on a quarterly runrate? And then what portion of that is likely to be ongoing as we move through these issues in ‘25 versus more temporary cost here over the next quarter or two?

Yeah, hey, Jeremy. I don't think we're going to quantify that. It is going to be somewhat ongoing in Q1. Maybe Lindsay, you can. We're not going to quantify all of that.

No, yeah, Jeremy. We haven't quantified that but, let me just give you a little context around that, because it sounds general just kind of systems – and so, we think about everywhere where we're spending some higher levels of SG&A than we have previously forecasted. A lot that goes into maintaining and improving systems infrastructure. So system infrastructure first of all super sophisticated system with SAP and a lot of other ancillary systems we put into place, as well when we went live. Just the infrastructure that we need, the cloud, the GPT and whatnot? All higher runrate than what we expected and grew more than we thought. Second, resources, you're totally right. So, during this transition period, where we're trying to continue to further stabilize the system and do enhancements. You've got internal resources. You've got external resource. You have some overlap as you're transitioning those resources internally. We've made some great hires internally with SAP knowledge, which is fantastic. But then you have the overlap where you're rolling consultants on. And we really want to make sure we get this right and we remediate things correctly. So resources is a large part of this, as well. And again, definitely a transition time and temporary. And so, Jeremy, if you're thinking of ‘25, what I mentioned is, where we want to see is, each down around 6% in ’25, but really building to that for the full year as we go through the year just because we only have seven weeks left and we really - we're going to be working on this as we have been as hard as we can. But we expect some of these transitionary costs to continue into 2025.

We have time for one more question. The next question is from Bill Kirk from Roth Capital Partners. Please go ahead.

All right. Thank you, thank you for sneaking me in. So, in the industry, the availability of like e-commerce options keeps increasing, whether it’s the broader assortment or wider delivery radius, maybe more manageable fees. So I guess the question is what are your IOs seeing in terms of new competition that might not have existed before that they now have to go up against as the availability of e-commerce options has increased?

Yeah, hey Bill. I would say not a lot at the value in. All of those delivery options come with a cost, which is a higher price. So, for now, people are reverting to value. It's super convenient to order things and have them delivered. But we're getting a lot of engagement from customers on the prices. And I'd say that treasure hunt in store is still really strong. It's well worth the trip. We hear that the feedback and surveys all the time. People are finding that, that treasure hunt a little bit more difficult online. We don't mean to, pass any sort of shade at those that are perpetuating that model. But for us, it's a minor part of what we do and the major part of what we do is the treasure hunt. And, but we're continuing. We've got all of our platforms up and we're continuing to explore e-com. But it's not a major part of our strategy today.

This concludes the question and answer session, I would like to turn the floor back over to Eric Lindberg for closing comments.

Yeah, thank you guys. It's good to be back. I'm excited to be back with the people, the operators and the team. Really bullish on the business and so appreciate you all giving us some time and having a lot of interest in our business. So, thanks for the time today and we'll talk to you in a few minutes. Look forward to it. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.